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spk07: Good day and thank you for standing by. Welcome to the fourth quarter 2023 Humanities Corporation's earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there'll be a question and answer session. To ask a question during the session, you'll need to press star one one on your telephone. You will then hear an automated message advising you your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker today, David Trink, Investor Relations. Please go ahead.
spk04: Good morning, everyone. Thank you for joining us for Humanetics' fourth quarter fiscal 2023 conference call and webcast. I'm joined today by Chris Simon, our CEO, and James Durecka, our CFO. This morning, we posted our fourth quarter fiscal 2023 results to our investor relations website, along with our fiscal 2024 guidance and the analytical tables with the information that we will refer to on this call. Additionally, we provided a complete P&L, balance sheet, summary statement of cash flows, as well as reconciliations of our GAAP to non-GAAP financial results and guidance. Unless otherwise noted, All revenue growth rates discussed today are organic and exclude the impact of currency fluctuation and strategic exits of product lines. As in the past, we'll refer to non-GAAP financial measures throughout this call to help investors understand Hemanetix's ongoing business performance. Please note that these measures exclude certain charges and income items. Please refer to this morning's earnings release for details on excluded items including comparisons with the same periods of fiscal 2022 and a reconciliation to our GAAP results. Our remarks today include forward-looking statements, and our actual results may differ materially from the anticipated results. Factors that may cause our results to differ include those referenced in the Safe Harbor Statement in today's earnings release and in our other SEC filings. We do not undertake any obligation to update these forward-looking statements. And now, I'd like to turn it over to Chris.
spk03: Thanks, David. Good morning, and thank you all for joining. Today, we reported organic revenue growth of 17% in fourth quarter and 21% in fiscal 2023. We reported adjusted earnings per diluted share of 77 cents in the fourth quarter and $3.03 in fiscal 23. increases of 18% and 17% respectively. For the first time, Humanetics eclipsed a billion dollars in annual revenue, a milestone in our transformational growth journey. Despite the challenging macroeconomic environment, we are delivering and building momentum by creating essential value for donors, patients, and caregivers around the world. Our consistently strong performance throughout fiscal 2023 marked an outstanding start to our long-range plan. Three value drivers are fueling our success. First, plasma volumes from unprecedented collections recovery coupled with the benefits of our successful technology upgrades. Second, accelerated vascular closure U.S. account penetration and performance in hemostasis management aided by improving budgets and staffing in hospitals across the world. operational excellence providing agile and resilient supply, capacity to meet robust demand, and greater productivity to offset inflation and fund our growth. We anticipate these unique value drivers will continue to distinguish Humanetics and drive our success moving forward. We are realizing transformational growth of our company and our businesses. Let's turn to our business unit results and revenue guidance. Plasma revenue grew 31% in the fourth quarter and 43% in fiscal 2023, driven by volume growth and price benefits. North America disposables represented 85% of our plasma revenue in fiscal 2023, growing 33% in the fourth quarter and 46% in fiscal 2023. It was a historic year as plasma fractionators strove to replenish safety stocks that were dangerously depleted during the pandemic. As a result, we saw record collection volumes throughout the year, and we don't expect any abatement of this trend in the near term. We also retain the majority of CSL US disposables business, which grew at a rate comparable to our overall US disposables business. Our global CSL business accounted for approximately 14% of our reported revenue in fiscal 2023. We increased production and strengthened our supply chain to meet heightened demand for plasma devices and disposables. These investments will also create meaningful operational efficiencies over time as demand normalizes. Nexus with Persona is enabling our customers to safely meet end market demand and lower their cost per liter. We are encouraged by their unrivaled successes and we will continue to advance and develop the Nexus platform as the industry standard. Hospital revenue grew 19% in Q4 and 18% in fiscal 2023, primarily driven by growth in vascular closure and hemostasis management. At the beginning of fiscal 2023, We guided 16 to 19% hospital growth for the year. In August, we raised that guidance to 19 to 22% after a strong Q1 in vascular closure. The COVID outbreak in China in Q3 negatively affected hemostasis management and self salvage revenue such that we did not meet our upwardly revised forecast. Trends improved globally in Q4, including significant improvements in hospital staffing and easing budgetary constraints. The hospital business unit had its first $100 million revenue quarter in Q4, and we are optimistic that these trends will continue in fiscal 2024. Hemostasis management revenue grew 22% in the quarter and 11% in fiscal 2023. North America, our largest market, delivered double-digit growth in Q4 and in fiscal 2023. Global growth was driven by strong adoption and utilization of PEG disposables in both periods. Vascular closure revenue grew 31% in the quarter and 35% in fiscal 2023. We realized this growth by opening new accounts and driving penetration to gain share in the top US EP hospitals. International commercialization of ASCADE is underway. utilizing hybrid sales models and leveraging existing back office infrastructure. We expect our first sales in Europe in Q1 fiscal 2024. Transfusion management revenue grew 8% in the quarter and 19% in fiscal 2023. Growth in the quarter and fiscal year was driven by expansion of our sales force and software implementations in the US and UK. Self salvage revenue grew 4% in the quarter and 3% in fiscal 2023. Fourth quarter benefited from one-time orders in North America. Fiscal 2023 benefited from strong capital sales and favorable order timing among EMEA distributors. The benefits in both periods were partially offset by large stocking orders in Japan last year. Blood center revenue declined 4% in the fourth quarter and 2% in fiscal 2023. Aporesis revenue was flat in the quarter and declined 4% in fiscal 23. In the fourth quarter, we grew Egyptian plasma collections and achieved red cell collection share gains in the U.S. that were offset by lower convalescent plasma revenue when compared with the prior year. Whole blood declined 9% in the quarter due to unfavorable order timing among APAC distributors and customers reducing safety stocks built during the pandemic. For fiscal 2023, whole blood revenue grew 5%, driven by share gains in North America as our resilient supply chain enabled us to serve customers when competitors could not. Now turning to fiscal 2024 revenue guidance. We are confident about our momentum going forward as we pursue opportunities to deliver our short and long-term goals. We expect total company organic revenue growth of 5% to 8% in fiscal 2024. We are enthusiastic about the opportunities in our plasma business and anticipate plasma revenue growth of 3 to 6% in fiscal 2024, with price and volume both contributing meaningfully. After exceptional recovery and growth in fiscal 2023, our plasma business forecast, excluding CSL, is in line with the mid-teens growth rate that we expect over the next several years as communicated in our LRP. Regarding CSL, we expect our share of their plasma business to decrease in the second half of fiscal 2024. Our guidance for fiscal 2024 includes a minimum purchase commitment from CSL under our non-exclusive supply agreement that is slightly in excess of $100 million. We expect that CSL will continue to provide a meaningful contribution to our plasma business revenue in fiscal 2025. We remain committed to providing CSL and all of our plasma customers with the highest level of service and support. We are excited about the future of hospital as a long-term growth driver for our business. Our clinical and commercial strategies are working, and we are tracking ahead of our long-range plan. In fiscal 2024, we expect the hospital business to deliver revenue growth of 16 to 18% driven by strength in vascular closure and hemostasis management. Our blood center revenue guidance is a year-over-year decline of 2% to flat. The pacing of revenue in this business is back-end loaded with unfavorable order timing impact in the first half of the year when compared with fiscal 2023. In summary, this is a very exciting time for hemonetics. and we are enthusiastic about our prospects for the new fiscal year. We are strengthening our competitiveness and capitalizing on opportunities in plasma while accelerating our pivot to higher growth, higher margin, innovative hospital-based opportunities, and improving productivity through operational excellence. We are using our momentum to sustain growth, improve margins, and advance our industry leadership, taking evolutionary steps to deliver revolutionary results. Now I'll turn the call over to James to discuss our financial results and earnings guidance.
spk02: Thank you, Chris, and good morning, everyone. Our adjusted gross margin was 51.8% in the fourth quarter and 53.2% in fiscal 2023, a decrease of 180 basis points and 70 basis points respectively when compared with the same periods of the prior year. Adjusted gross margins continued to be affected by inflationary pressures in our global manufacturing and supply chain, increased depreciation expense due to the nexus conversion completed earlier in the year, and foreign exchange, partially offset by volume and price benefits. Price had a positive impact on margins, predominantly driven by nexus and persona conversions. As a reminder, pricing benefits related to the U.S. nexus conversions will fully annualize by the end of the second quarter in fiscal 2024. Adjusted operating expenses in the fourth quarter were $103.6 million, an increase of $8.3 million, or 9%, compared with the fourth quarter of the prior year. As a percentage of revenue, adjusted operating expenses decreased by 200 basis points to 34%. Adjusted operating expenses for fiscal 2023 were $403.6 million, an increase of $54.9 million, or 16%, compared with the prior year. As a percentage of revenue, adjusted operating expenses decreased by 60 basis points to 34.5%. In the fourth quarter, Higher operating expenses were driven by performance-based compensation, investments in sales and marketing and R&D, and a return to normal spending activities partially offset by improving freight and operational excellence program savings. In fiscal 23, higher operating expenses were driven by performance-based compensation, higher upfront investments in operations to meet unprecedented demands in plasma collections, along with manufacturing cost headwinds, such as higher freight costs within our network and expedited outbound shipping costs. Contributions from our productivity savings helped offset some of the cost increases both in the quarter and in fiscal 23. Fourth quarter adjusted operating income was $53.9 million, an increase of $7.3 million, or 16%. And adjusted operating income for fiscal 23 was $218.4 million, an increase of $31.3 million, or 17%, compared with the prior year. As a percentage of revenue, adjusted operating income margin was 17.7% in the fourth quarter and 18.7% in fiscal 2023, up 10 basis points and down 10 basis points, respectively, compared with the same periods in fiscal 2022. The impacts of the macroeconomic-driven inflationary environment upon our adjusted operating margins in fiscal 23 were broad-based. including freight, raw materials, and labor. We incurred approximately 390 basis points impact from inflationary pressures on our adjusted operating income margin in fiscal 23 compared to approximately 300 basis points impact in fiscal 2022. In addition, we incurred higher performance-based compensation in fiscal 23 than in the prior year. Our operational excellence program is an important lever in our efficiency and ability to create savings. In our fiscal 2023, this program delivered $26 million of gross savings, freeing up resources to fund additional investments. Since the inception of this program, we have generated $96 million in cumulative gross savings, slightly ahead of our plan. We also had positive contributions towards operating margins from vascular closure. As this business grows, we can expect higher leverage positively impacting our margins. We are excited about the opportunities in vascular closure and will continue to allocate investments to fund its growth in both new and existing markets. The adjusted income tax rate was 23% for fourth quarter and 24% for fiscal 23. compared with 22% for both comparative periods of the prior year. The adjusted income tax rate in fiscal 23 was higher due to jurisdictional earnings and executive compensation. Fourth quarter adjusted net income was $39.2 million, up $5.7 million, or 17%, and adjusted earnings per diluted share was 77 cents. up 18% when compared with the fourth quarter of fiscal 2022. Adjusted net income for fiscal 23 was $155.7 million, up $23.1 million, or 17%, and adjusted earnings for diluted share was $3.03, up 17% when compared with the prior year. Changes in the adjusted income tax rate Higher interest expense, NFX, had a negative 7-cent impact on the fourth quarter and a negative 19-cent impact on the full-year adjusted earnings for diluted share when compared with the prior year. Cash on hand at the end of the fourth quarter was $284 million, up $25 million since the beginning of the year. Free cash flow before restructuring and restructuring-related costs was $190 million, compared with $117 million at the end of the last fiscal year. During fiscal 23, Hamanetics benefited from increased operating cash flow, partially offset by $75 million in share repurchases. Additionally, the company paid $32 million of earn-out payments related to previous acquisitions and made a 30 million euro investment in Vivashore Medical. Moving on to fiscal 2024 earnings guidance. We expect fiscal 2024 adjusted operating margins in the range of 20% to 21%. In fiscal 2023, unprecedented growth in plasma created atypical operational pressures. To ensure that we continued to fulfill our customers' needs, we were required to purchase components and other manufacturing inputs at spot prices, which negatively affected our margins. We expect these inefficiencies to persist in the near term, but to start to abate in the second half of fiscal 2024. Therefore, our operating margin guidance is back-end loaded, with first-half margins expected to be below our full-year guidance range before growing in the second half. In addition to an improving manufacturing environment, we will continue to benefit from a favorable sales mix and improving the profitability of our hospital business. We expect our operational excellence program to deliver additional gross savings of approximately $20 million, $6 million of which are net savings benefiting our bottom line, with total cumulative savings reaching $116 million by the end of our fiscal 2024. Despite the additional near-term operational challenges, the margin expansion goals we presented in our long-range plan are on track. Our adjusted earnings per diluted share guidance for fiscal 2024 is a range of $3.45 to $3.75, representing a 14% to 24% growth rate when compared with fiscal 2023. And lastly, our free cash flow before restructuring and turnaround expenses in fiscal 24 is expected to be $80 million to $100 million as we ramp up production of Nexus PCS devices in the U.S. to support plasma customer growth requirements. Our capital allocation priorities remain unchanged. and we will continue to allocate capital to prioritize organic investments, followed by inorganic opportunities and share repurchases. Before we open the call up for Q&A, I'd like to conclude with a few closing thoughts. First, fiscal 2023 was a great initial installment in our long range plan, thanks to stellar performance by plasma and hospital. Our plasma business is a powerful value driver fueled by strong end market demand. The base business is in line with long range expectations and will continue to deliver growth as the robust recovery experienced in fiscal 2023 gives us compelling momentum to start fiscal 2024. Hospital continues to be strong on the heels of a record revenue quarter. Penetration and utilization in top accounts along with strategic business investments will further strengthen our leadership and expand our share. Second, we are committed to making investments to support our customers' needs along with investments as part of our operational excellence program to set ourselves up for further growth and opportunities. We plan to achieve the remaining $19 million to $29 million in target savings by the end of fiscal 2025. These investments, as the macro environment further stabilizes, will create additional efficiency benefits and will continue to expand our margins. And finally, the strength of our underlying business, coupled with the steps we've taken this year, will enable consistent expansion of our capital capacity. With the capital allocation priorities being unchanged, we will be disciplined with allocating capital to high impact, high ROI projects that accelerate growth and value creation. Thank you. And now I would like to open up the line for Q&A.
spk07: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.
spk06: Please stand by while we compile the Q&A roster. Our first question comes from Anthony Patron with Mizuho Securities.
spk07: Your line is open.
spk05: Thanks, and congratulations to a strong fiscal 22. and a good start to the year here on the calendar basis. Maybe, Chris, to start out a little bit on plasma, maybe just a recap of the CSL comments there. Is that 14% of plasma revenue or total revenue? Just looking backward just to clarify that. And then, you know, sort of when we think about going forward, you know, the estimate for 100 million minimum, And then extending into fiscal 25, you know, maybe just a little bit on the dynamics there is, you know, how that flows in through the year. Is that just on an as-needed basis? Is it back-end loaded? And then I'll have a couple of follow-ups for Jim on margin. Thanks.
spk03: Hey, Anthony. Thanks for the comments and for the question. Yeah, we had a banner year across the board in plasma. growing 43%. CSL participated fully in that in helping drive that recovery. So feel great about CSL and all of our customers and our ability to serve them throughout fiscal 23. The 14% number that were in our prepared remarks is a global corporate wide number. So it includes not only the U.S. disposable volume, but also Europe and software where we offer it. So That's the aggregate number. As you peel that back, obviously the U.S. agreement's an important part of that. As we said in our prepared remarks, we retain substantially all of CSL's volume in FY23, and that's a big part of our delivery there. What we communicated, and again, there's a lot of sensitivities around this that both parties need to recognize and uphold. But we have a minimum commitment that is slightly in excess of $100 million for FY24, and we anticipate meaningful revenue coming through in FY25 as well. And I think the way you should think about that from our perspective is we're doing our part to deliver for them. There's value, and we've essentially orchestrated a smooth transition ramp down over effectively a three-year period. And that gives us a lot of confidence in our broader ability to grow plasma and the corporation through this period.
spk05: Very helpful. And then, Jim, just on margins here, you mentioned that we still have some inflationary spot inputs working through the conversion cycle through the first half and then expect the ramp in the second half. Can you give us an idea just how gross margin sort of trends throughout the year? Is the fiscal 4Q sort of margin profile what we should be thinking for the first half? And then when the inflationary inputs sort of roll off, what should we be expecting in terms of a shift upward in gross margin? Thanks again.
spk02: Yeah. So, you know, Anthony, we don't really guide on the gross margins, but let me see if I can help address some of the questions. First, yeah, you're right. The inflationary pressures and what I referred to as the temporary inefficiencies previously, those will continue into the first half of fiscal 2024 for us. It will take us that long to to have that flow through and then to re-enter into arrangements which are more commensurate with our demand. So you will see an uptick. So we had almost 400 basis points of manufacturing headwinds and other macro pressures this previous quarter, and I'm sorry, for the full year. And my sense is that you'll definitely see a decent portion of that, not all of it, but a fairly decent portion of that abate as we get into the second half of next year. And that will put us in a position then to really expand both at the gross margin level, but more importantly for us at the operating margin level as we move forward through our LRP. Thank you.
spk06: Thank you. One moment for our next question.
spk07: We have a question from Larry Schlolo with CJS Securities. Your line is
spk08: Great. Good morning, guys. Maybe just give us an update on that, Chris, on the 15% sort of LTL long-term growth for Plasma. I imagine it's a mix of, for you guys, a mix of volume and price. Can you just kind of update us on the pricing part? Is that driven by mostly persona, kind of where we stand there, and where is persona today in terms of penetration of your customers?
spk03: Thanks for the question. When we think about plasma, it's definitely volume and price and perhaps a bit of mix as well. On the volume side, the conversations we're having with customers, the accelerators to the floor with no abatement in sight. They are doing their part to meet end market demand. Most of our customers are telling us they're not building inventory. Everything they're collecting is is being fractionated and put in the market to treat patients real time. So unless and until we see inventories begin to build, we don't anticipate a slowdown in the aggregate demand. That's a real positive for the business. When we think about the price component, it's all tied to the technology upgrade. So as you know, the next link upgrade on the software, largely an enablement, which was done a year ago last December, We completed Nexus in last fiscal year, FY23, in the fall, late summer, early fall. We'll get to a point where we lap Nexus upgrade and the pricing associated with that. And we are at least midway through upgrading procedure volume to persona. And so, you know, that's ongoing. The customers that have not yet adopted are all neck deep in discussions, trials, working through the required changes on their systems to be able to adopt it to get the yield enhancements that come with it and that are unique to our system. So feel quite good about the pace of that and the progress. That'll be an important contributor as we work our way through FY24 and beyond.
spk08: Okay, great. And just switching gears to BASC-AIDs, And Cardeva, I think, you know, last year at the annual thing, you shared some pretty good stats on, you know, penetration of large accounts, top hospitals. Clearly, you know, the growth there has been, you know, phenomenal since you guys acquired it. Could you give us just, you know, just a high-level outlook kind of where you stand and, you know, maybe what anything you stand in just penetrating these top accounts? Because it feels like you got a lot of, you know, maybe, you know, still low-hanging fruit for growth both in the U.S. and internationally.
spk03: Yeah, fully agree with that, Larry. It's a real success story, and that team continues to hit it hard to deliver the uptake in the product, and it is a combination of opening new accounts. All this is U.S.-based today, opening new accounts well into the second half of the top 600 U.S. electrophysiology hospitals, and then once in those accounts, expanding our presence and really making vascular closure, Vascaid, the standard for closure. And so we see that it's predominantly driven by the MVP product in electrophysiology, although with the Salesforce expansion and the additional clinical support we've put in place, we're now seeing meaningful growth in the other 20% of the market, which is more interventional cardiology based. So we'll continue to run that playbook. There's a good ramp from where we sit to succeed in the U.S. And then, as we mentioned in our prepared remarks, we're getting ready to take the product global. And Europe will be the first stop there. And with the approval in hand, we feel good about the potential to truly globalize this new standard of care for vascular closure.
spk08: Great. If I could just squeeze one more in, just on the operating margin goals. I know you guys don't sort of guide to gross versus operating expenses, but can you help us just sort of bridge sort of the to jump up from, say, you get to low 20s, even 22 as you exit this year, to sort of that high 20s goal you shared for fiscal 26. Are you sort of reaffirming that? I mean, maybe it's still targeted. That's a nice 600 BIPs improvement over two years, I guess, plus that.
spk03: Yeah, Larry, let me take a first cut at that, and I'll invite James to weigh in, in addition to what he's already said in the prepared remarks. Thanks. Look, we look at FY23, right, where we grew our operating income, EPS, 17%. And we look at our guidance for FY24, which, you know, top-line growth of 5% to 8%, with bottom-line growth of 14% to 24%. And we feel like, in tandem, they're an outstanding, you know, 1-2 into that, you know, four-year long-range plan. So we feel quite good. about where we are and the progress we are making. It's not lost on any of us that we still have a sizable opportunity for margin expansion over the remainder of this plan. So that's not lost upon us. But the way it's manifest is meaningfully different than we could have anticipated even last June when we put this plan out there. And so let me give you a couple of few highlights on it, some of which is in the script, some of which is additional. but we faced the same macroeconomic challenges that everyone else did, foreign exchange, inflation, the supply challenges that we were successfully able to mitigate, but they came at a cost, right? We had that in addition to unprecedented demand. Plasma volume alone grew 43% last year, and obviously there was price in there as well, but the sheer volume uptick was tremendous, and we needed to incur sizable expediting costs as James has highlighted, in order to meet that demand. And we're proud of the fact that we were able to rally and do so. But again, it came at a cost. I think there's a third part of that, which is mix. And I think this gets a little bit lost in the margin story, which is, you know, we're very excited about the ability to grow our top line this year, 21% for NFY 23. That meant a lot more plasma as a percent of our total revenue, for example, versus hospital, which of course is much higher gross margin business. Within plasma, it was a lot more, you know, PCS2 in addition to the Nexus with Persona than we would have anticipated when we wrote the plan because of the retention there. So the combination of, you know, more plasma and more plasma going out, you know, on the old technology did meaningfully change the complexion of that gross margin profile as the macroeconomic factors abate. As demand normalizes and as the transition occurs, you're going to see a threefold effect that will drive those margins. When we back test this, we're very comfortable that we'll be at or ahead of plan when we look at the macro drivers. The only question mark from where we sit is the overall productivity. And again, we have a lot of confidence in what we can do and what we can control. There's obviously some things going on that are broader than the company. that we'll pay close attention to as we work our way through FY24 and beyond. But, you know, from our perspective, you know, it's very different than we would have forecasted perhaps even a year ago. But when you look at the overall growth in earnings, right, to put up, you know, 17% and then the current guide, you know, just on a sheer earnings volume, we feel great about where we are at this point in the plan.
spk08: Great, and I appreciate that, Paula.
spk02: Yeah, I think I would add to Chris's comments, too, is the other tailwind that we'll get on the margin side really is the increase in volumes over time. That will help us make us more efficient at the manufacturing level and then our OEP savings as well. So add that to Chris's explanation, and that's what gives us the confidence that we're you know, we're going to get there.
spk08: Excellent. Thank you.
spk07: Thank you. One moment for our next question. We have a question from David Turgley. We're from JMP Securities. Your line.
spk01: Great. Good morning. Can you hear me?
spk10: Yes, Dave.
spk01: Thanks. Chris, I'd just love to get your updated thoughts. I know I've asked this in the past, but given what we're watching play out here, what do you think is happening with Rika? Are they in centers? Are there manufacturing issues? What are you hearing out there about that product and its rollout?
spk03: Yeah, Dave, I don't really want to comment about competitors or individual customers. I can tell you this. Nexus is delivering on all basis, right? We've, you know, the volume increase that we've been able to help our customers who are on Nexus with persona achieve, right? Individual center, kind of same store sales, if you will, just off the charts from where they were even pre-pandemic. And I think, you know, as that value proposition plays forward, we go from strength to strength. I said in the prepared remarks that One of the things we're doing, it was certainly contemplated in the plan, and the forward lean that James and I have been talking about just creates that much more free cash flow and funding to invest behind the platform, behind our product development roadmap, and taking what is already the industry standard to the next level. And I think we'll have more to say about that this summer and this fall, but we're really excited about the platform. and what it's delivering for customers.
spk01: And then based on your comments for the contractor or for 2025, is there a minimum in place and would meaningful suggest something sort of north of half of what you're looking at in 24 from them? Dave, you want the 25 guide. We just gave you 24.
spk03: We want it all. Us too. What we'll say now is we feel very good about our ability to serve all of our customers, CSL included. And I think the smooth ramp down that is anticipated is going to be good for our shareholders too. Thank you.
spk06: Thank you.
spk07: Our next question comes from Joanne Weintz. From Citi, your line is open.
spk10: Good morning. This is Anthony for Joanne. Thank you for taking our question. I think the last quarter you gave sort of a breakdown of where new plasma centers versus established ones are on volumes versus pre-pandemic. Can you just give us an update? Are the established centers back to pre-pandemic levels or are they still trying to catch up?
spk03: Anthony, thanks for the question. No, the established centers are not back to their pre-pandemic levels, and I think there's an ongoing debate of whether they can get to that level. They continue to chip away at it, which is positive, and we know our customers are doing everything they can to get full productivity across the network. They've, in a very positive way, opened so many new centers. The new centers continue, as we've said throughout to track very consistent to the long-term fit model that we have around what a center does in its first six months, in its first two years, et cetera. So those models have held. The mature centers are chipping away. I think the ones on the border, for example, are doing outstanding and seeing unprecedented growth. In some of the other markets around the country, a little less so, and that could potentially be because there have been so many new centers opened in towns or cities where they're in close proximity to some of those mature centers. That's a structural aspect that we and our customers are still studying. But from our vantage point, we obviously want it all, but we care mostly about individual devices and device turn rates because it drives our return on invested capital. So the total number of centers, mature versus new, important. But the real factor that propels our growth and our profitability is what's the turn rate on the individual devices. And that's something we're getting a lot of support from customers to manage and optimize so we can succeed with or without the full recovery. And clearly, our results are showing that.
spk10: Got it. That's helpful. And then on Vascade, I think you said commercialization in Europe starting this fiscal quarter. Can you share maybe what is embedded in guidance from contribution from Europe?
spk03: The guidance we've put forward for VastGate is almost exclusively new account penetration and utilization here in the U.S. That's what our original deal model was predicated upon. That's what our long-range plan is predicated upon. And that's what our FY24 guidance is focused on. And we're excited to have the CE mark approval. We're excited to take the product internationally. And we will definitely lean into it. We're making the investments there. It'll be a hybrid model where we'll use a mix of direct selling resources, most of which didn't exist six months ago, coupled with distributor markets and our own back office. It'll be a ramp. It'll be a more modest ramp. If we can accelerate that, we'll look for every opportunity to do so. But our plan this year is almost entirely dependent upon success in the U.S., which we're confident in. We feel great about what's happening there.
spk10: Great.
spk03: Thank you very much.
spk06: Thank you.
spk07: And Our next question comes from Mike Madsen with Needham & Company. Your line is open.
spk09: Good morning. I guess I wanted to start with one of your customers, Gripples, reported recently, and they talked about cutting donor payments by 25%. You know, I guess there's different ways that can be interpreted, but, you know, how do you interpret it? Is it a good thing? Is it a bad thing for plasma volumes?
spk03: Mike, don't have a lot of firsthand visibility into the remuneration rates that are, you know, to the individual donor. We obviously track it. We pay close attention to it. I think there's a variety of different philosophies at work here. What we are seeing in the aggregate, as we said earlier and in the prepared remarks, is unabated demand for more plasma. And That's manifest in the number of new center openings, and it's manifest in the amount of reimbursement that is out there. All that said, this macroeconomic environment for all the challenges it's created for us and everyone else is on balance a positive in terms of motivating donors into the center. And if over time, you know, our customers use that as an opportunity to pull back on the reimbursement, that's, you know, Historically, we've seen some of that. It's not the norm at this stage, and we'll see how that plays forward. From our vantage point, in many ways, this all relates back to cost per liter, which is a metric they focus very closely on. It's another reinforcement for our platform, because I think we've got unequivocally the best, most superior ability to reduce cost per liter. you know, from our vantage point, driving adoption of Nexus with Persona is the answer to that question.
spk09: Okay, thanks. That was helpful. And then just on the VastGate launch outside the U.S. and in Europe in particular, I know sometimes in some of these cardio markets there's some different competitors over in that region. is, you know, how does the competitive landscape look for vascular closure there? Is it similar to the U.S.? Are there any products there maybe that you're not competing with here? And then I guess the second part of the question would be, you know, I know that those markets are also a lot more kind of cost sensitive. So, you know, is the price of Vascaid potentially going to be a barrier to adoption?
spk03: Yeah, Mike, they're all relevant points, right? We like the global applicability of in what is a global market for electrophysiology. It's a fast-growing market throughout the MEA and Japan as well. And we think the product is an outstanding fit for those markets. But each of them are different. What we'll do to be successful in Germany will look different than what we do in the UK, etc. And so that's the planning and the uptick work that's underway. There are different reimbursement rates and there are different standards of care And so some of the health economic arguments of the product that have been so powerful here in the US may play out differently. And we'll do our part in helping evolve those markets because at the end of the day, we think this product is one of those that hits the trifecta, right? It improves the standard of care. If you had your choice, you'd use this for closure versus compression or suturing. It's just a better approach. It is health economically viable because it drives same-day discharge, particularly for the EP ablation procedures, and gets patients home where they heal better and are more comfortable, and it reduces system-wide costs. And not for nothing, on both of those fronts, we have the data to back it up. The markets are at different starting points. It's why you may see a very different ramp in those countries. We've got some folks on the ground working hard to make sure we understand that ramp and are maximizing it where we can.
spk09: Okay, got it. Thank you.
spk06: Thank you.
spk07: We have a question from Drew Ranieri with Morgan Stanley. Your line is open.
spk00: Hi, Chris and James. Thanks for taking the questions. Just maybe three quick ones on my end. But first on plasma centers, kind of the guidance for down 2% to flat, I think is one of the better guidance outlooks that the company has posted for the past few years. So can you maybe just talk about really kind of what the improvement you're seeing in the businesses in fiscal 2024, maybe versus historical trends to start? And then I had a couple other follow-ups. Thanks.
spk03: Yeah, Drew, thanks for the question. I'll just clarify. So the minus two to flat for blood center for the year is a combination of apheresis and whole blood. There are very different stories within those. We've worked hard with a focus on apheresis. It's continually evolving to more plasma apheresis. Blood center is collecting plasma in some cases for medical purposes and other cases as part of fractionation. Both are attractive to us. Nexus has a role there. We talked a bit about the success we're experiencing with one of our customers in Egypt, as an example. That's a great one where the line between blood center and plasma is blurring. Nexus walks that line and does an outstanding job for all those customers. So that's a big part of what's driving it. In the near term, we've had real success in the U.S. with our whole blood filter products. Some of our competitors have been unable to supply the market. It's a market that's waned for us over the years, and I think what we're seeing here, and certainly over the last three or four quarters, and we expect that to continue into FY24, is us taking back share because we're able to supply filters when the market cannot. And so, yeah, it's We'll see how long-lived it is, but we're delighted to be there for those customers as we are with all of our customers, and that's certainly helping the guide for Blood Center in 24.
spk00: Got it. Thank you. And on plasma, just a couple follow-ups here. But, I mean, if we kind of adjust out a stocking order from the prior year period, I mean, plasma looked like it was up 40%. in the quarter, but is there any stocking orders that you experienced in this quarter as you're thinking about fiscal 2024 and CSL? And then second, when we do think about the CSL contribution for fiscal 2024, should we think about the incremental margins being the same as you've previously laid out? And then third, on persona, I think you mentioned that you're midway on procedure volumes for persona for collections, but are you embedding any additional contract wins in fiscal 2024? I just wanted a little bit more clarity on that. Thanks for the multi-parter here. Thanks.
spk03: Let me see if I can do justice to the question, Drew. Yeah, and you are right. There are always vagaries one quarter to the next, one year to the next. The reality is most of the talk is just about the U.S., In the main, our customers don't have the ability to hold inventory. And given how hot we've run on demand, we're not holding much inventory either. When you look at our working capital, you'll see. So we think what we are reporting is organic demand. It's going into the market and being used usually in the next two weeks, three at the most. So not a lot of puts and takes there. FY23 versus FY24, what we're seeing is organic and quite real. On the CSL margins, I think that's a safe assumption. Just use what we've put out there historically. There's no reason to change that. And then with persona, yeah, we're leaning into that. There are changes that our customers need to make in order to be able to drive the broad-based adoption. And it's been our norm. We're really hesitant to include sizable gains even from technology upgrades unless and until they've been contracted. So we tend to take a more conservative stance on that. We expect to be successful, and we've reflected some of that in our plan. But in the main, when you're thinking about price as a contributor, you should think about what we've put out and the fact that for Nexus and for the existing persona contracts, we'll lap them over the course of this year. If there's more to say about that as the year progresses, we'll be happy to update accordingly.
spk00: Thanks for taking the multiple questions.
spk06: Thank you. One moment for our next question. We have a question from Michael Patusky from Barrington Research.
spk07: Your line is open.
spk11: Hey, guys. Great, great, great finish and guide. So I guess a couple questions. One, I don't know if you guys have disclosed this at any point, but I am curious. If you exclude CSL, what percentage of your installed base still uses PCS2?
spk03: In the U.S., none. Okay.
spk11: All right. All right. Very good. And then... I was wondering, you know, put some takes here, and again, I may have missed this as well, but the cadence of the EPS in terms of, you know, first half, second half in 24, any help? Or if I missed that, I apologize.
spk02: Thanks. No, so we basically said that the first half would be – We basically said that the second half would be a bit better than the first half as the manufacturing inefficiencies begin to abate, and I talked about it in the context of the operating margin line.
spk11: Yeah, I heard that, and that's been the commentary around plasma. I'm just curious. I mean, is it like 55-45 weighted to the second half? I mean, any help you can give there in terms of adjusted EPS?
spk02: Yeah, it's probably weighted to the second half. Yeah, it's somewhere in and around that range, maybe even a little bit less than that.
spk11: I think that's all I've got. Thanks, guys.
spk02: Thank you.
spk07: Thank you. Thank you. And that's all the questions we have. This does conclude today's conference call. Thank you for participating. You may now disconnect.
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