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spk02: Good day and thank you for standing by and welcome to the second quarter 2024 Hamanetics Corporation earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Olga Gayet, Senior Director, Investors Relations and Treasury. Please go ahead.
spk01: Good morning, everyone. Thank you for joining us for Humanetics' second quarter and first half fiscal year 2024 conference call and webcast. I'm joined today by Chris Simon, our CEO, Stuart Strong, President of our Global Hospital Business, and James Durecka, our CFO. This morning, we posted our second quarter and first half fiscal year 2024 results to our Investor Relations website, along with our updated fiscal 24 guidance. Before we begin, just a quick reminder that all revenue growth rates discussed today are organic and exclude the impact of currency fluctuations. We'll also refer to other non-GAAP financial measures to help investors understand Humanetics' ongoing business performance. Please note that these measures exclude certain charges and income items. For a full list of excluded items, reconciliations, or gap results in comparison with the prior year periods, please refer to our second quarter and first half fiscal year 2024 earnings release available on our website. 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 SSE filings. We do not undertake any obligation to update these forward-looking statements. And now, I'd like to turn it over to Chris.
spk07: Thanks, Olga. Good morning, and thank you all for joining. Today, we reported organic revenue growth of 8% in the second quarter and 14% in the first half of fiscal 2024. as our momentum continues to build and we advance our leadership in plasma and hospital. Adjusted earnings per diluted share in the second quarter was 99 cents, 19% growth over prior year. We are raising our fiscal year 2024 total company organic revenue growth guidance from 7% to 10% to 8% to 10%, which represents an increase of 50 basis points at the midpoint of this updated range. Our performance speaks to the transformative impact of our growth strategy focused on establishing leading positions in high growth markets to generate superior financial returns. We are delivering revenue and earnings growth ahead of our long range plan, while broadening our global presence and industry leadership by investing in innovation and taking impactful steps to support growth in our plasma and hospital businesses. Our operational excellence program continues to drive our focus on efficiency and productivity, contributing to improved operating leverage and margin expansion. We continue to scale and rebalance our portfolio by investing in attractive growing markets where we can add value through unique enabling solutions. In October, we announced a definitive agreement to acquire Opsense Inc., a medical device manufacturer of optic sensor technology for use primarily in interventional cardiology. Expanding our hospital portfolio with OpsSense's products creates exciting growth and diversification opportunities, while providing immediately accretive financial benefits. Additionally, as part of our growth strategy and in consideration of increased regulatory requirements, we have made the decision to rationalize parts of our portfolio, including the ClockPro Analyzer, system and whole blood inline collection products and the associated manufacturing operations. We are committed to working closely with our customers through these transitions. Plasma revenue grew 11% in the second quarter and 22% year to date, delivering another quarter of double digit growth on top of the 50% plus growth we experienced in the same periods last year. North America disposables grew 9% in the quarter and 23% year-to-date, disproportionately driven by growth in volume and price amongst our customers on nexus with persona. Software revenue grew 38% in the quarter and 32% in the first half due to additional upgrades to the latest Nextlink software and market share gains as we advance our leadership as the only provider of end-to-end plasma collection solutions. In the U.S., the collections environment continued to be favorable, notching an eighth consecutive quarter of growth exceeding historical seasonality. Our volume growth was slightly below U.S. collection levels due to unanticipated supply interruptions with one of our vendors, resulting in enhanced inventory management measures necessary to support a strong rebound in plasma collections and our leading market share. Our customers remain focused on attracting and retaining donors and achieving higher operational efficiencies. Nexus is the industry standard helping them deliver against these priorities. With over 21 million procedures on persona, we enable our customers to collect 1.5 million liters of additional plasma in just two years. This is equivalent to the average annual volume from 33 mature plasma centers, but without the real estate overhead staffing and other associated plasma center costs. Limited market release of our new collection bowl and Express Plus technology is underway. These enhancements increase procedure speed to further optimize door-to-door times, enabling higher plasma center throughputs and improved donor satisfaction. With multiple ongoing initiatives in our R&D pipeline, we are committed to providing our customers with the tools necessary to win in this competitive market. Encouraged by the continued strong plasma market momentum we are helping to enable and with confidence in our ability to work through temporary supply challenges, we are raising our organic plasma revenue growth guidance from the range of 8% to 11% to 10% to 12%. Blood center revenue declined 5% in the second quarter and was flat in the first half. Apheresis revenue grew 3% in the quarter and 4% in the first half, driven by strong plasma and red cell collections, coupled with strong capital sales across the portfolio. We started to realize increased utilization benefits from the recent installation of Nexus plasma collection systems in Egypt. We are excited about the opportunity to collaborate with our Blood Center customers worldwide to boost the global plasma supply. Whole blood revenue declined 25% in the quarter and 11% in the first half, driven by the voluntary product recall we announced last quarter and the strategic decision to rationalize parts of this portfolio. In Blood Center, our focus remains on capitalizing on the growth opportunities within our apheresis portfolio and limiting margin and revenue growth dilution as a result of challenging market conditions in whole blood. We update our fiscal 24 revenue gut decline guidance for blood center from minus 2 to minus 6% to minus 2 to minus 4%. Now over to Stu to discuss our hospital business.
spk00: Thanks, Chris, and good morning, everyone. I'm excited to join Chris and James to talk about our hospital business performance. and our recent business development efforts. Let me begin with our second quarter and first half hospital business results and fiscal 2024 guidance. Total hospital business revenue increased 14% in the second quarter and year to date, disproportionately driven by our growth in vascular closure business. Vascular closure grew 30% in the second quarter and 29% year to date, driven by new account openings both in electrophysiology and interventional cardiology. We continued to see improving product utilization rates fueled by our clinical education efforts and by increased procedure volumes in the U.S. hospitals. Internationally, our products are swiftly gaining recognition in Germany and Italy, and we had a strong start to our commercial launch in Japan toward the end of the second quarter. Hemostasis management revenue grew 8% in the quarter and 11% year-to-date. Growth in the quarter and year to date was driven by strong utilization of tech disposables in the U.S. and benefits from price, partially offset by lower new capital deployment as we saw increased pressure from budgetary constraints in U.S. hospitals after some improvements in the first quarter. As you heard from Chris, as a part of our strategy to focus on products that are best positioned to sustain revenue growth and margin expansion, we have decided to end-of-life our ClotPro analyzer system. We will work with our customers to offer our TEG6S system as an alternative to ClotPro. The rest of the hospital portfolio, which includes transfusion management and cell salvage, grew 3% in the second quarter and was flat year-to-date. Strong performance in transfusion management was driven by continued market share gains in North America and Europe. Cell salvage had a strong performance in the US as we continue to see increasing utilization in US hospitals. These benefits were diminished by differences in order timing among distributors outside the US. As we look at the remainder of the fiscal year, we expect an acceleration of revenue growth in our second half, which will be driven by growth in hemostasis management and vascular closure. For the full year, we expect our revenue growth to be consistent with the revenue growth we delivered last year or in the range of 16 to 18%. Now let me add additional color about our plans to acquire Opsense, an interventional cardiology focused medical device company delivering innovative solutions based on its proprietary optical sensing technology. This is a very exciting milestone for us as we continue to expand our hospital business with procedure enabling technologies in high growth areas like interventional cardiology and electrophysiology. With our total hospital addressable market of about 3.7 billion today, OpsSense adds about another $1.1 billion in additional market opportunity, creating additional avenues for growth and diversification, while being relevant and synergistic to customers already using our vascular closure products. OpsSense core products include OptiWire, a pressure guide wire that aims to improve clinical outcomes by measuring fractional flow reserve in a vessel to aid clinicians in the diagnosis and treatment of patients with coronary artery disease. And Savvy Wire, the world's first and only sensor-guided three-in-one guide wire that provides left ventricular pacing and pressure sensing during TAVR procedures. In fact, we attended TCT in San Francisco last week, where two live cases were broadcast featuring Savvy Wire, and additional data was presented from the SAFE TAVI trial published in the Journal of the American College of Cardiology, highlighting the safe and effective use of SAVIWIRE in TAVR procedures. Additionally, OpsSense manufactures a range of fiber optic sensing solutions used in medical devices as part of their OEM business and other critical industrial applications. In recent years, our focus has been on bolstering our commercial and clinical teams in electrophysiology and interventional cardiology, resulting in a four-fold expansion of our commercial footprint, and in strengthening of our R&D capabilities that will continue to enhance our products and expand our reach into more procedures and geographies. With a commercial strategy set on targeting the top 600 U.S. hospitals, we've been steadily increasing our market share and strengthening our relationships with the top accounts performing about 90% of all procedures for EP, more than 80% of all TAVR procedures, and nearly 60% of PCI procedures. We estimate by the end of our fiscal year 2024, we'll be in approximately 80% of these target hospitals and able to accelerate access to OpsSense products in this group. Outside of the US, our global reach combined with OpsSense success internationally will allow us to create additional synergies including opportunities for cross-portfolio pull-through. We plan to build on this acquisition and further expand our portfolio of enabling technologies within these markets. Over the past several quarters, we've made strategic investments in other enabling technologies that would further complement our product portfolio and increase our reach and relevance. These investments include Vivasure Medical, a company that has developed a large-bore vessel closure device called PercuSeal, which is advantageous for procedures like TAVR and EVAR. Enrollment for the US IDE trial is underway with an estimated completion date by mid-calendar year 2024. Organically, our business expansion efforts also include an extensive R&D pipeline focused on advancing our TEG6S thromboelastography system with new assays. and expanding our Vascaid vascular closure portfolio to address new emerging interventional technologies and procedures requiring either venous or arterial access. We're very excited about the future of our hospital business and the incredible opportunity we have to improve the standard of care with our procedure-enabling technologies. Now, I'll turn things over to James to discuss the rest of our financial results and fiscal year 2024 guidance. James?
spk06: Thank you, Stu, and good morning, everyone. I'll begin with our business results and some additional updates to our fiscal 2024 guidance. Second quarter adjusted gross margin was 54%, an increase of 30 basis points compared with the second quarter of the prior year. Adjusted gross margin year-to-date was 54.1%, a decrease of 30 basis points compared with the first half of the prior year. Both second quarter and year-to-date adjusted gross margins benefited from price, volume, and favorable geographic and product mix as we continued to experience strong momentum in plasma and hospital, particularly in the U.S. These benefits were reduced by upfront investments and operations needed to meet the unprecedented demand for our products, higher depreciation expense, and a $6.5 million one-time adjustment due to a voluntary product recall in our whole blood business, of which $3.1 million impacted our gross margin in the second quarter. Adjusted operating expenses in the second quarter were $103.6 million, an increase of $5 billion, or 5%, compared with the second quarter of the prior year. As a percentage of revenue, adjusted operating expenses decreased by 70 basis points. to 32.6% when compared with the second quarter of the prior year. Adjusted operating expenses year-to-date were $202.1 million, an increase of $4 million or about 2% compared with the prior year at 32.1% of revenue. The increase in adjusted operating expenses in the quarter and year-to-date was related to higher organic growth investments. partially offset by lower freight expense and savings from the Operational Excellence Program. Adjusted operating income was $68.3 million in the second quarter and $138.6 million in the first half, representing increases of $8 million and $33 million, respectively. As a percentage of revenue, the adjusted operating margin was 21.5% in the second quarter, and 22% in the first half, up 110 basis points and 310 basis points, respectively, when compared with the same periods in fiscal 2023. We are enthusiastic about our first half results and the momentum we continue to experience in our business. As we look at the second half of this fiscal year, we acknowledge a challenging macro environment, volatility in foreign exchange, and an anticipated impact from changes in geographic and product mix. We are updating our adjusted operating margin guidance to approximately 21% to better reflect higher leverage in our first half results. Our updated guidance also includes $20 million in target gross savings from the Operational Excellence Program, or about $6 million in net savings, generating additional efficiency across our business. The adjusted income tax rate was 23% in the second quarter and 22% year to date, compared with 22% and 23% in the same periods of the prior year, respectively. We expect our fiscal 2024 adjusted income tax rate to be 23%. Second quarter adjusted net income was $50.7 million, up $8 million, or 19%, and adjusted earnings per diluted share was $0.99, also up 19% when compared with the second quarter of fiscal 2023. First half adjusted end income was $104.3 million, up $31 million, or 43%, and adjusted earnings per diluted share was $2.03, up 44% when compared with the first half of fiscal 2023. The combination of the adjusted income tax rate, interest expense, net of interest income, changes in the share count, and FX had a $0.04 favorable impact in the second quarter and a $0.07 favorable impact year to date when compared with the prior year. We're excited about our performance in the first six months of our fiscal year 2024. We are updating our fiscal 2024 adjusted earnings for diluted share guidance to be in the range of $3.75 to $3.95, or approximately 27% growth in our adjusted EPS at the midpoint of our guidance range, which includes a two cent negative impact from the below the line items I just discussed as we anticipate an unfavorable impact from foreign exchange and interest expense in our second half. Now let me add more detail about the portfolio initiatives that Chris discussed at the beginning of our call. We are excited about our definitive agreement to acquire Opsense and expect this transaction to be immediately accretive to revenue growth, adjusted gross margins, and adjusted earnings per diluted share. That said, due to the expected close of this transaction by the end of January 2024, we expect minimal impact on our adjusted fiscal 2024 results. Additionally, with our focus set on high growth, high margin products, we are moving forward with several portfolio rationalization initiatives. We've initiated the end of life process for our clot pro analyzer system. In whole blood, we plan to rationalize the low margin whole blood inline collection products and keep the rest of the portfolio, including whole blood products for efficient cell processing and hospital bedside transfusions. The rationalization of parts of the whole blood business will be executed over multiple years as we right-size our manufacturing footprint and work with our customers on transitioning them to alternative products. Due to the size and timing of these portfolio changes, we don't envision them affecting our fiscal 2024 adjusted results. Over time, we anticipate improvements in our gross and operating margins. Turning now to select balance sheet and cash flow highlights. Cash flow from operations for the six months was $118 million compared with $129 million last year, primarily attributed to higher nexus PCS inventory levels which more than offset higher net income this fiscal year. As a reminder, we continue to work on replenishing our inventory of Nexus PCS devices and expect our device inventory to continue to increase throughout the year. Free cash flow before restructuring and restructuring related costs was $89 million in the first half of this fiscal year, compared with $66 million at the same time last year. primarily due to changes in working capital and less capital expenditures. We are confident in our ability to generate free cash flow, and we are increasing our guidance for free cash flow before restructuring and restructuring-related costs to a range of $170 to $190 million to better reflect benefits from changes in our working capital and capital plans, some of which were understated in our previously issued guidance. Our financial position continues to provide us flexibility to operate our business and execute our disciplined capital allocation strategy. At the end of our second quarter, we had $351 million of cash on hand, up $67 million since the beginning of this fiscal year. We also had $420 million of untapped revolving credit facility providing additional liquidity to fund growth initiatives. We plan to utilize the majority of our U.S. cash balance, potentially coupled with a small drawdown on the revolver, to fund the acquisition of Opsense and expect our leverage ratio to be around 2.1 times adjusted EBITDA after the close, allowing us to remain opportunistic with additional M&A and organic investments both in the short term and in the long run. To conclude, I'd like to summarize some key takeaways from today's call. Our first half results were strong, and we remain confident in our ability to deliver sustainable growth and market expansion in the mid to long term. We are accelerating our momentum through additional portfolio transformation and growth-focused investments throughout our business. In plasma, we are enthusiastic about continued plasma collections momentum. We are taking the steps necessary to support the demand for our disposables and reinforce our market-leading position with additional innovation that further reduces the cost per liter. Our hospital portfolio is evolving and helping us create new opportunities for growth and diversification. We are committed to further augmenting our scale and broadening our presence in interventional cardiology which will further accelerate our revenue growth and margin expansion. And lastly, we remain committed to value creation for all our stakeholders. As our capital capacity continues to grow, we plan to put it to good use throughout our long-range plan to accelerate top and bottom line growth through additional M&A, organic growth investments, and opportunistic share buybacks. Thank you. And now, I would like to open the line for Q&A.
spk02: Thank you so much, presenters. Now, ladies and gentlemen, as a reminder, to ask a question, you will need to press star 11 on your telephone. So, if there are questions, please star 11 again. Please limit your questions to one and only one follow-up, and please stand by while we compile the Q&A roster. Your first question comes from the line of Anthony Petroni of Mizzou Group. Your line is now open.
spk03: Corey here, and also the recent Onsen's acquisition. Maybe, Chris, I could start with a little bit on plasma and just some of the moving parts there. You did announce a few months ago the rollout of a new system. Um, so wondering in terms of the drivers, if you can maybe bucket between just this continued inventory catch up by the fractionators, you know, being one driver, we still have some persona upgrade opportunities. So how much did that contribute? And then lastly, was there any benefit from the rollout of the next generation plasma system? And then I'll have a couple of follow-ups.
spk07: Good morning, Anthony. Thanks for the questions. You know, with regards to plasma, we remain very bullish near intermediate and longer term, right? This is yet our eighth quarter of double digit growth above seasonality, historical seasonality, and the momentum continues there. I think that's closely related to what the industry is estimating is potentially as much as 20 million lost collections through the pandemic that As robust as the collection environment is today, our estimates are that our fractionators are doing everything they can. However, they're probably just keeping pace with end market demand. That did not in any way slow through the pandemic. So there's a meaningful gap. They're keen to close that gap. We're doing our part, particularly through Nexus with Persona to help them close that gap. And I think you see that in our results year-to-date and certainly through the second quarter. With regards to the enhancements we've made, both the Express Plus and upgrades to the device and the bowl itself, we are now in limited market release. It's performing as advertised, and we're really excited about the additional benefits in procedure time and ultimately door-to-door time in the associated donor SATs. So On plan, making good progress, we are taking a stepwise approach because it's a meaningful set of changes, and we want to make sure that we're collaborating real time with our customers who are in the process of updating this. The supply issues were a challenge, and I'll elaborate on that in just a moment.
spk03: We have multiple suppliers for these issues on the court. Maybe just one on P&T02, the opportunity there you saw in the polarity. I was just wondering if you could provide an outlook on P&T02 versus the expectations and the market sizing that Novartis has out there.
spk01: Anthony, are you still online? This is over.
spk03: Oh, thank you. Thank you, Chris. And then lastly, and I'll hop in queue, is Do you have any update you can provide just on CSL contribution in the quarter? And as we look over the next couple of years, where they may sit in the mix? Thanks again.
spk07: Yeah, Anthony. Let me pick up on a point that I was making earlier, which is the challenges we had in the quarter were specifically related to supply for one of our ingredients. And in that regard, we have multiple suppliers. One of them had a real issue. It happens to be the largest of the suppliers that we rely on. We've worked our way through that, but it did require us to put in place a set of measures that included taking our inventory levels down and some of our customer inventory levels down as well. We don't believe we've lost any collection volume in aggregate. It's just a timing issue in the second quarter versus the second half of the year, probably more so in the fourth quarter, the way we estimate it. But that'll come back In terms of CSL, they're doing their part to close this gap, as all of our customers are, and their growth in our portfolio was proportionate to our other customers.
spk02: All right. Thank you so much. And your next question comes from the line of Sarisolo of CJS Securities. Your line is now open.
spk05: for Larry this morning, and I'll try not to ask any Novartis questions. Just two quick ones related to your margins. I guess it sounds like you did a pretty good job going through the reason for the margin decline in the second half versus the first half, as implied in your guidance. If I look out to the long-term goals of getting to the high 20s margins, Can you help us bridge that gap through a combination of just the end-of-life stuff that you talked about and then the addition of the acquisitions and some of the leverage you're seeing there?
spk06: Yeah, sure. Hi, it's James. Yeah, so overall, you're right. You know, the longer-term play for us really is leverage, I would say, and that is, you know, Just as simple, our revenues or our operating income has to grow, you know, more quickly than our revenue. And it's driven really, I would say, by three things. You know, one is favorable mix towards the more profitable hospital products, and certainly OpsSense is a part of that moving forward in the future. The second part is, you know, continued focus on, you know, our cost of goods and improving, whether it's through volumes or through our, you know, operational excellence program, the, you know, the margins, the gross margins that we have. You know, we have a target there, too, of high 50s, low 60s. So that will certainly help us. drive it as we move forward. And the third one really, you know, is the volumes, you know, being pushed through. Those three things combined is what gets you to the higher 20s. And yeah, I'm glad you brought up OpsSense. We're excited about that one. And certainly that will help contribute as we move forward.
spk05: And then just looking at your new free cash flow guide, obviously a nice increase there. It sounds like There was a little bit of conservatism on your part as it related to working capital. But can you kind of go through the revised CapEx guidance and how much of that is just lower expenses versus timing and push-outs to next year?
spk06: Yeah, sure. So overall cash flow, very strong for the quarter. We had $351 million in cash, almost $90 million in free cash flow for the first half of the year. Our initial guidance was, I would say, understated by the combined effect of having too much CapEx, so an overestimate on CapEx, and then an underestimate on some working capital sources of cash, some benefits. And so we took the opportunity to correct that and update that here with our disclosures. I think that was more, I wouldn't say there's anything really changing for us in terms of the underlying capital plan, you know, longer term. You know, our CapEx should remain, you know, fairly consistent. And I feel like the cash flow generation of the business is a real strength for us that we'll utilize going forward.
spk05: Sounds great. I'll hop back into queue.
spk02: Thank you so much. Your next question comes from the line of Andrew Cooper of Freeman James. Please go ahead.
spk09: Thanks for the questions. Maybe first just hoping you can give a little more context on sort of the supply disruption on plasma and maybe from a dollar basis what that meant because like you mentioned, optically it does look like the revenue growth was a little bit slower than the typical seasonality, but you're calling out end markets that were a little bit better. So just if you could help us bridge the gap on a numbers basis, that would be wonderful.
spk07: Andrew, what I would say about that is we had advance notice on part of this, and some of it was just in the moment, our response. What we were able to do is ramp up production from other suppliers, which is what gives us confidence. This is very situational and very temporal. We don't expect this to be a problem in our second half or beyond, so You see that in our guidance and why we had confidence to raise guidance for plasma revenue specifically. In terms of where we were, we were required to take our inventory levels down. We typically hold something north of 30 days inventory for that product. We are below that now. In the field, our customers don't have real storage capacity across the 1,200 collection sites that we serve. So they typically have two to three weeks. In many cases, we've cut that in half as a result of this. And then we've gotten into a focus, a micro focus on how to make sure that we don't turn those reductions into stockouts. So we're in the process of it. At the end of the day, I can sit here and tell you with confidence that we will ship every bowl we make over the second half of the year to meet the growing demand. Third quarter is, and then we forecast that this is always our most robust quarter of the year. If we get any reprieve from demand in the fourth quarter, we'll use that to rebuild inventories, first our customers and then our own. So the effect, the net effect, to answer your question directly, is reflected in our guidance, and we have a lot of confidence that we can make up for it in the second half.
spk09: Okay. That is super helpful. Maybe just one more sticking with Plasma. You mentioned in the preparative marketing share gains on the software side. Wondering if you're seeing anything or there's anything to report on sort of the collection device side as well. Anything you're hearing or any potential to take share, especially now that you go to market with at least some talking points on Express Plus and eventually a full rollout there. Just wondering if anything changing in the competitive landscape from that perspective.
spk07: Yeah, we continue to be very bullish on our competitive advantage. We're absolutely convinced, as I said in the prepared remarks, that Nexus is the industry standard, the fully integrated collection, the bi-directional communication, the superior donor response to a quiet, well-functioning system. And so we feel quite good about that. The upgrades, the software were a meaningful tailwind for us in the quarter, and that's great. In terms of the actual device placements, Actually, when you go through our inventory, in some regards, we've slowed the pace of placement, not because of any drop in demand, in fact, the opposite, but with our customers, we're becoming very focused on fleet optimization, getting more done with the existing devices. So we've got active programs there. So device counts, not the right metric on this. We continue to look at turn rates, which continue to go up, particularly, and this is a real driver for growth for us in the quarter, Our customers with persona outperform the rest of the field meaningfully, driving our growth. So not only are they collecting more per donation, but they're actually kind of pushing the front edge of that. And I think that's a reflection of their ability to recruit and retain donors. So again, quite bullish on the system. And with regards to the Express Plus and the SpeedUp, that's in the market. We've purposely done a limited market release. working with a handful of customers to make sure there's no disruption. But it is in the market. The feedback today has been outstanding.
spk09: Great. I appreciate it. I'll stop there.
spk02: Thank you so much. Your next question comes from the line of Mike Matson of Needham & Company. Your line is now open.
spk04: Good morning. Just a few on the options deal. So I guess first, are you you know, more excited about their SFR opportunity, kind of traditional SFR with OptiWire or the SavvyWire TAVR opportunity. And then are you going to sort of, I assume they have some sort of sales force. So I guess that would get integrated with your existing kind of faster closure sales force and you'd have a single group selling both product lines.
spk07: Yeah, Mike, thanks for the questions. I'll start and I'll invite Stu to comment. We are very optimistic about the deal. have to recognize that we're in an interesting period where they are in the process of soliciting shareholder approval. So we'll be somewhat guarded in what we say just because we want to be respectful of that process. In terms of the assets, right, we actually define it in three parts. We're very enthusiastic about SavvyWire. We think what SavvyWire can do in the TAVR space and more broadly in interventional is super exciting and we are in the very very early innings of that for sure opti wire and opti monitor are the second piece um great guide wire real real you know interesting potential and support there uh so we intend to lean in uh let's do talk about that specifically to help you know make that product everything it can be there's a third piece which is their oem business which We're typically not an OEM manufacturer, but in this case, when you're talking about the blue-chip companies that make up their customer base, we're excited to lean in. We're going to secure those relationships and build upon them where we can. We think it's a really attractive market, and the underlying economics of that business do not look like your traditional OEM business. They look much more like the core portfolio. So, candidly, all three aspects of Opsense and what they've been able to achieve are on a standalone basis are exciting to us and we think we can add real leverage to. Stu?
spk00: Yeah, Mike, thanks for the question. It's Stu. I would just add that what this really does for us is it really expands our portfolio in interventional cardiology, complements the success that we're already having with the vascular closure portfolio. So there's some really nice call point synergies there. And you've heard us talk about it before. We've targeted the top 600 centers across the U.S. that drive about almost 90% of all EP procedures, it's equally concentrated in procedures like TAVR, where that top 600 also drives over 80% of all TAVR procedures. So we think there's really nice synergies there, and the acquisition of OpsSense gives us that sort of reach and relevance to leverage the sales force that we also have, but also complement the team that they have as well. Um, so we're really excited about it and really starts to underscore the commitments that we have to this space and the growth that we're looking forward to in it.
spk04: Okay. Got it. Thank you. And then just in the plasma business with express plus, um, can you just remind me, are you getting a price premium for that technology?
spk07: So Mike, we haven't broken out specific expectations there. What I would say in general, And I think we're living into this quite specifically. We have superior technology. We aspire to compete on innovation. And we, of course, would expect a premium for that innovation. But in all cases, we translate it to a specific benefit, not just features and attributes, but an economic or a donor satisfaction benefit. that manifests for our centers. Express Plus is certainly part of that, but we haven't broken out any specific expectations there.
spk04: Okay, got it. Thank you.
spk02: Thank you so much. And your next question comes from the line of Michael Patusky of Barrington Research. Please go ahead.
spk08: A couple questions. I guess first starting with the expected acceleration in hospital is, I guess, First, anything you can share in terms of traction in terms of the vascular closure in Europe? And is sort of a pickup there a material part of the acceleration you expect in the second half?
spk07: I'll let Stu take that directly. Thanks, Mike.
spk00: I would say, Mike, thanks for the question. Most of the material growth that we're going to see is going to continue to come out of the U.S. We've launched, as I said in my prepared remarks, we've launched in Germany and Italy, and we're starting to see accounts coming on board in those two countries. And we also just had a launch that started in Japan. On September 28th, we did our first cases in Japan. We got reimbursement in Japan starting at the end of September, so we're really excited about what we're doing in Japan. But I would say for the year, the material growth that's going to come from that portfolio is still driven disproportionately by the U.S.
spk08: And then switching over to plasma, Chris, I'm just wondering, so I think roughly a couple of quarters ago you said, hey, we think we have a minimum order commitment from CSL of slightly above $100 million for fiscal 24, and then I think you termed it a meaningful commitment for fiscal 25. And I guess my question is, Is the expectation you guys had a couple of quarters ago, is that still the case, or is that in any way shifted? Thanks.
spk07: Mike, your recollection is exactly right, and there's been no additional developments there. We're working collaboratively with CSL and all of our customers to meet their accelerated demand. So, as I said earlier, they're participating fully in the growth that we're experiencing this year, and we're We expect, as we communicated before, a substantial contribution again in our fiscal 25. But we'll have more to say about that when we guide for 25 in May.
spk08: Okay, great. And then I just want to clarify on the rationalization of the products in blood center. and I guess the hope for transition. Do you guys expect, and I understand it's going to take place over multiple years, but do you guys expect any sort of net revenue loss at the end of this? I mean, how much revenue are we actually talking about in terms of current contributions?
spk07: Yeah, it's an interesting dynamic for us, right, because we've taken a micro look at this code by code, SKU by SKU, We are definitely influenced, as we said in the prepared remarks, by the product recalls and challenges that have arisen as a result of that, the increased regulatory burden that these products would face for CE mark and other approval via MDR or IVDR. So we've kind of put that all in the mix and taken a hard look and said the best path for us is to end-of-life those specific codes. Longer term, not this year beyond what's in our guidance, but longer term, there will be a dampening effect on the overall revenue from that portion of the portfolio. It's a modest portion of the blood center portfolio, which is the smallest of our three businesses, as you know. We do not expect any negative effect on the overall contribution, our actual margins, in fact, our or margin percents, will increase as a result of delisting these products. But more on that when we guide for 25.
spk08: Okay, great. Thanks a lot. Nice quarter.
spk02: Thank you so much. And there are no further questions at this time. This includes today's conference call. Thank you for participating, and you may now disconnect. Everyone, you have a great day.
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