Haemonetics Corporation

Good day and thank you for standing by. Welcome to the second quarter 2026 Havenetics 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 1 1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1 1 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Olga Gayet, Vice President, Investor Relations and Treasurer. Please go ahead.

Good morning, and thank you all for joining us for Humanetics Second Quarter Fiscal Year 2026 Conference Call and Webcast. I'm joined today by Chris Simon, our CEO, and James Durecka, our CFO. This morning, we released our second quarter and year-to-date fiscal 2026 results and updated full-year fiscal 2026 guidance. The materials, including our earnings release, Form 10-Q, and supplemental earnings presentation, are available on our Investor Relations website and through this morning's press release. Before we begin, I'd like to remind everyone that we will use both organic and reported revenue growth rates. In case of organic growth rates, those exclude the impact of effects the divestiture of the whole blood product line, and the exit of certain liquid solution products. Organic Growth Act CSL also excludes the impact of the previously disclosed transition of CSL's U.S. disposable business. 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. A full list of excluded items Reconciliations to our GAAP results and comparisons with the prior year periods are provided in our earnings release. Our remarks today include forward-looking statements, and our actual results may differ materially from 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 SOC filings. We do not undertake any obligation to update this forward-looking statement. And now I'd like to turn it over to Chris.

Thanks, Olga. Good morning, everyone, and thank you all for joining us. Second quarter revenue was $327 million and $649 million year to date, each reflecting a 5% reported revenue decline driven by $48 million and $101 million in last year's portfolio transitions, respectively. Excluding these transitions, organic growth XCSL was 9% in the quarter and 11% year-to-date. Adjusted EPS increased 13% in the quarter and 11% year-to-date to $1.27 and $2.36, respectively. Our results reflect disciplined execution, delivering strong core product growth, record margin expansion, and solid earnings that convert to cash, while advancing our portfolio and company transformation to sustain this momentum well beyond our long-range plan. The focus on Nexus, TEG, and VAScAID continues to advance our leadership and fuel growth. We are gaining plasma share through best-in-class collection solutions. We are reinforcing TEG leadership in visoelastic testing, and we are executing targeted vascular closure initiatives to strengthen performance and return interventional technologies to growth. Turning now to our individual business performance. Hospital revenue was 146 million in the second quarter and 285 million year to date, up 5% on a reported basis and 4% organic in both periods. Strong blood management technologies performance offset softness in interventional technologies, underscoring the resilience of our diversified portfolio and multiple drivers of performance. Blood management technologies delivered strong growth, up 12% in the quarter and 13% year-to-date, driven by sustained strength in hemostasis management. Growth was fueled by higher TEG disposable utilization and the ongoing rapid adoption of the global heparinase neutralization cartridge. In October, we reinforced our global leadership in visoelastic testing by launching the HN cartridge in EMEA and Japan. The broader portfolio also contributed to growth with transfusion management achieving double-digit growth supported by heightened demand for transfusion safety and efficiency. Interventional technologies declined 5% in the quarter and 6% year-to-date, reflecting softness in the esophageal cooling against accelerating PFA adoption. While modest in size at approximately $3 million in revenue in the second quarter, Esophageal cooling remains a disproportionate driver of near-term underperformance. Vascular closure grew 2% in the quarter and 3% year-to-date, led by MVP and MVP XL and electrophysiology growing 4% and 5% respectively. These gains were partially offset by continued softness in legacy vascage concentrated in lower growth coronary and peripheral procedures. We remain confident in the strong clinical and economic differentiation of our vascular closure portfolio, and we are taking decisive actions to strengthen execution to accelerate growth. We are also making solid progress with Savvy Wire in the U.S., delivering consistent double-digit growth as we build its foundation and broaden our relevance in structural heart. We are updating our hospital revenue growth guidance to 4% to 7%, both reported and organic, reflecting sustained double-digit growth in blood management technologies and little to no contribution from interventional technologies. This outlook reflects our focus on taking the steps necessary to drive long-term value creation with interventional technologies expected to play a larger role in accelerated growth and margin expansion beyond FY26. Moving to plasma, revenue was $125 million in the quarter and $255 million year to date, down 10% and 7% on a reported basis respectively, reflecting the CSL transition. Excluding CSL, organic revenue grew 19% in the quarter and 23% year to date. Second quarter results were driven by share gains, robust growth in U.S. collections, and ongoing benefits from innovation. Our plasma business is stronger than ever, delivering revenue growth and margin expansion enabled by best-in-class solutions that help improve customer performance to drive our share gains. Based on customer forecast and strong sentiment from PPTA, we have renewed confidence in the sustained, robust growth of the plasma therapeutics market, particularly immunoglobulins. Our second quarter results reinforce that view with U.S. collections growing in the high single digits and European collections continuing to grow double digits. Given stronger than anticipated first half performance, we are raising our full year reported plasma revenue guidance to a decline of 4% to 7% or 14% to 17% organic growth XCSL. Second quarter collections growth was very encouraging. However, our guidance remains grounded in the factors we can control, primarily share gains. Blood Center reported revenue decline of 18% in the quarter and 21% year to date, reflecting the impact of the whole blood divestiture. Organic revenue grew 4% in the quarter and 5% year to date, driven by resilience in our core apheresis business. We are raising our full year blood center guidance to reflect this performance. Now expecting reported revenues to decline 17 to 19% as we fully anniversary the whole blood divestiture and our grant growth to be approximately flat. Overall, revenue momentum remains strong, underpinned by growth and expanding profitability across our businesses. Despite $153 million in last year's portfolio transitions, two of our three growth franchises continue to deliver outsized organic growth while we strengthen our commercial execution for renewed, sustained success in IBT. Reflecting better-than-expected first-half performance across more than 80% of our portfolio, we are raising full-year revenue guidance from a reported decline of 3% to 6% to a decline of 1% to 4% and organic growth XCSL from an increase of 6% to 9% to an increase of 7% to 10%. Over to you, James.

Thank you, Chris. And good morning, everyone. We delivered another strong quarter of profitable growth. Our results highlight the benefits of our strategic portfolio transformation, ongoing productivity initiatives and disciplined approach to cost management, contributing to continued improvement in margins and earnings growth. Adjusted gross margin reached 60.5% in the second quarter and 60.6% year to date, up 380 and 460 basis points, respectively. The expansion was driven by the continued adoption of our persona technology, price initiatives across the portfolio, and favorable product mix, all of which are expected to continue to support margins in the second half. Software license fees in the first quarter contributed roughly 100 basis points of gross margin benefit year to date. Adjusted operating expenses in the second quarter were $111 million, a decrease of 1.5 million, or 1%, The decline reflects lower freight costs coupled with disciplined expense management and continued focus on efficiency across G&A, while prioritizing targeted investments to support innovation and long-term growth. Adjusted operating expenses year-to-date were $229 million, slightly up from $227 million last year, predominantly due to the timing of certain R&D investments. The strength of our core portfolio and our ability to drive margin expansion is evident in our results. Year to date, we've absorbed $101 million of revenue impact from last year's portfolio transitions, all while growing our adjusted operating income. This performance reflects the strength and higher profitability of our base business and disciplined cost management, holding G&A flat and delivering additional productivity savings that help offset continued strategic investments in growth initiatives that strengthen our long-term trajectory. Adjusted operating income increased 5% in the second quarter to $87 million, with adjusted operating margin expanding 250 basis points year over year, to a new record of 26.7%. Turning to the segment level performance in the second quarter, in hospital, adjusted operating margins expanded by 370 basis points, predominantly on continued strong momentum in blood management technologies and higher operating leverage. In plasma, adjusted operating margin expanded by 190 basis points, driven by prior technology upgrades, share gains, and the full transition of our legacy US PCS2 business, partially offset by additional investments into innovation. Blood Center adjusted operating margin expanded 320 basis points, driven by the whole blood divestiture, a stronger core apheresis mix, and continued productivity gains from the ongoing portfolio rationalization. Adjusted operating income for the total company year to date was up 7% to $165 million with adjusted operating margin of 25.4% and improvement of 270 basis points versus the prior year. We expect continued margin expansion in the second half and reaffirm our total company full year adjusted operating margin guidance of 26% to 27%. The adjusted tax rate was 24.7% for the quarter, compared with 25.1% in the prior year. Year to date, the adjusted tax rate was 24.8%, and we expect it to remain consistent for the remainder of the fiscal year. Adjusted net income rose 5% to $60 million in the second quarter and 4% year-to-date to $114 million. Adjusted EPS increased 13% to $1.27 in the quarter and 11% year-to-date to $2.36. The combined impact of share repurchases, tax, interest, And FX provided a $0.06 benefit to quarterly adjusted EPS and a $0.05 benefit year to date. We are raising our full year adjusted EPS guidance to $4.80 to $5 a share. At the midpoint of our revised fiscal year guidance, we assume approximately $35 million in interest and other expenses, generally comprised of net interest expense, and foreign exchange hedge contracts, and approximately 47.6 million in diluted shares outstanding at year end. Turning to cash flow and the balance sheet, we continue to enhance working capital management to optimize value creation, generating $111 million in operating cash flow in the second quarter, up 128% year over year. Year-to-date operating cash flow was $129 million, a six-fold increase when compared with the same period last year, primarily due to improved inventory management, including the build-out of Nexus devices, which impacted our cash flow in the prior year. Free cash flow was $89 million in the quarter and $91 million year-to-date. with the free cash flow to adjusted net income conversion ratio of 147% and 80% in the quarter and year to date, respectively. Our ability to generate cash remains strong, supported by disciplined execution and renewed focus on cash efficiency. We are raising our full year free cash flow guidance to $170 to $210 million. and reaffirming our expectation for the free cash flow to adjusted net income ratio to be in excess of 70% for the full fiscal year, underscoring our commitment to performance, cash discipline, and capital stewardship. Turning to the balance sheet, we ended the quarter with $296 million in cash, down $10 million from the beginning of this fiscal year. primarily reflecting $75 million in share repurchases and additional strategic investments partially offset by higher net income translating into an even stronger cash flow. Our capital structure remains unchanged, with total debt of $1.2 billion, no borrowings under our revolving credit facility, and a net leverage ratio of 2.5. as defined by our credit agreement. This positions us well to meet near-term debt obligations, fund operations, and pursue value creating opportunities, including additional share repurchases when appropriate. Before we begin Q&A, I'd like to close with a few thoughts. We continue to execute our plan with strength and discipline, delivering profitable growth expanding margins across all segments, and translating our adjusted earnings to cash. Despite $153 million in last year's portfolio transitions impacting this fiscal year, most of which are now behind us, we remain on track to achieve our updated guidance for the year and meet all our long-range plan targets. Our growth and profitability are anchored in the success of our three core products, Nexus, TAG, and Vascular Closure, supported by company-wide initiatives that continue to drive productivity and operational excellence. Margin expansion remains a hallmark of Hamanetics, and with plasma and blood management outperforming and progress underway in interventional technologies, we are building a strong foundation for continued margin expansion beyond fiscal 26. Across the company, our results reflected discipline execution and a high performance culture. And when combined with strong cash generation and a solid balance sheet, this positions us to further enhance long-term value creation. For fiscal 26, our priorities remain focused on meeting debt obligations returning excess cash to shareholders via buybacks when appropriate, and advancing targeted investments in our growth products. Thank you. Operator, please open the line for questions.

Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our first question comes from the line of Rohan Patel of JP Morgan. Your line is now open.

Hey, thanks so much for taking the question. I just wanted to start off with some of the revenue drivers. You had a nice quarter in Plasma and are raising the guidance. And you mentioned high single-digit collections growth in the U.S. So just want to ask what you're assuming in the second half for collections versus share gains versus pricing. And are you seeing any meaningful kind of recovery in collections intra-quarter? And how should we reconcile that with – the strong XCSL growth maybe with your longer-term sustainable outlook in plasma?

Hi, Rowan. It's Chris. Thank you for the question. Yeah, we had a really stellar quarter with plasma, stellar first half. And I think you see that in the organic results. The second quarter was propelled by three things in order of priority. Share gains, as we continue to pick up additional centers on our devices. The benefits of innovation pricing, you know, premium pricing first, what is a superior product? And now, collections volume growth. We had always predicted volume growth in the back half of the year. It started early in the second quarter. And that's a powerful trifecta. To be specific about the volume growth we experienced, high single digit in the U.S., double digit growth in Europe. And We see that as a return from the normal cyclicality that has defined this industry for a very long period of time. So we remain really bullish on the end market demand for IG-derived therapies, and you see that in our customers' earnings discussions as well. So plasma goes from strength to strength. We're very optimistic about its continued success.

Great. And then also just turning to hospital, maybe if you can provide an update on some of the commercial work to get IVP back on track. I appreciated the additional color and disclosure you provided in that business. And also just it seems from your disclosures that the hospital business actually drove a lot of the incremental margin benefits in the quarter. So maybe if you could just talk about some of the levers you're pulling to drive operating margin and how you're balancing that with any of this additional commercial spend to get those products back on track. Thanks.

Sure. Again, thank you. Yeah, hospital was the single largest contributor to what continues to be really robust margin expansion. We're trying to provide more detail to be as transparent as possible. As we calculate the segment P&Ls, the hospital operating income expanded 370 basis points in the quarter. And to your point, that's mixed, that's volume, and increasingly now, that's operating leverage, which we're really keen to see. Obviously, there's two parts to hospital blood management technologies continues to excel, which is allowing us to put the appropriate focus and resources on driving IVT. And so, you know, IVT is defined by vascular closure. You saw the numbers in the quarter. Happy to go through as much detail as you want on that. But we remain confident in both the clinical and the economic differentiation of our vascular closure portfolio. And we're taking the right actions. We're being decisive to regain growth momentum in the latter part of this year and into FY27.

Great. Thank you.

Thank you. Our next question comes from the line of Marie Thibault of VTIG. Your line is now open.

Good morning. Thanks for taking the questions and congrats on a nice quarter. Wanted to follow up there on Rohan's question about the IVT commercial efforts. You've mentioned some of the progress underway. Can you give us a little more detail on what exactly is happening? Some of the, you know, green shoots that you're starting to see, just any more detail on that turnaround?

Yeah, thanks, Marie. Good to hear from you. So I'd summarize it this way. I am highly confident in our team. They're taking the right actions in the right way, and they're fully resourced. And so the things we are highlighting, you know, that commercial leadership group, you know, from first-level sales supervisors on up to the business president, many of them are new. They come with the exact right background experience and relationships that to excel, particularly in electrophysiology, but also interventional cardiology. You know that at the beginning of the year, we bifurcated our field force. It's an 80-20 split with 80%, of course, going to vascular closure. That gives us over 200 personnel in the field driving the product. We feel that's quite appropriate for the opportunity set. We've put a number of tools in place to drive Salesforce excellence, and I won't drag you through the details, but we're closing vacancies. We've upgraded our training. We have a new set of tools to track and monitor. The quotas have been aligned. The incentive comp is state of the art, so we feel quite good about Salesforce excellence. The other part of this is we've meaningfully strengthened our corporate accounts group that will help us with IDNs and increasingly with the ASCs as those become an important driver for the market where we think our value proposition is even more distinct. We have successfully completed the MVP XL trial and we're able to make a timely submission to FDA prior to the shutdown. So that should bode well as we get here later in this fiscal year and next in terms of stronger clinical evidence and an opportunity to leverage that trial outside the U.S., particularly in Japan. And then, you know, we've gotten very targeted in our competitive response. And I know there's concern about, you know, is this going to meaningfully diminish your gross margins? It will not. We think we can actually maintain excellent margin and execute well to hold, to regain, and to expand share across the board. Thanks.

Very good. Yeah, very helpful, Chris, and thanks for all that detail. Sounds like things are improving for sure. And then I wanted to follow up here and talk about blood management technologies. Again, very, very strong performance. Help us think about the sustainability of that over the next few quarters. How should we think about, you know, the cadence of launches that you've recently put out, the length of kind of the rollouts and some of the benefits that you tend to see, again, sort of growing above historicals? Thanks again.

Yep. Thanks for the question. I think blood management technologies continues to be an under-sung hero in the portfolio, grew 12% in the quarter and 13% year-to-date. That's, I don't know how many quarters now, in a row of double-digit growth. We feel from the launch of the global heparinase neutralization cartridge that that franchise is has hit a new inflection point, and we think that double-digit growth is absolutely sustainable for about as far as we can see. It's driven by a combination of capital equipment, disposable utilization, and of course the adoption of that heparinase neutralization cartridge. I called out and prepared remarks that We were pleased to launch the cartridge both in Europe and Japan here in October. And we think that, you know, helps us, again, go from strength to strength for a business that's, you know, it's a market that the team helped create. And, you know, we have the leadership share, 70% plus, and we intend to build and expand upon that. Fortunately for us in the quarter, blood management technologies was also benefited from transfusion management growing double digit, which is, you know, it's a smaller line of business but one that is really attractive on many dimensions and continues to contribute positively. So we're excited about the prospects for blood management technologies going forward.

Very good. Thank you so much.

Thank you. Our next question comes from the line of Mike Mattson of Needham & Company. Your line is now open.

Hi, everyone. It's Joseph. I'm from Mike. Could you just touch on blood center growth a little bit? Just, I guess, why was it so strong? I think 4% organic. Can you talk about some of the growth drivers there, the, you know, what you benefited from in the quarter?

Yep, happy to talk about it, Joseph. Yeah, blood center. Again, that's the real unsung success story here, I guess, and it's meaningfully benefiting from focus. As you know, at the end of last calendar year, we divested the whole blood franchise and some of the supporting products, liquids, et cetera, that were really a drag on our margin and a distraction from a focus area. So with those behind us, we've really been able to focus on what is increasingly plasma apheresis done in blood centers, often with our Nexus device. And you see that growth, you know, 15, 1.5% of the corporate revenue, but it's a solid source of EBITDA and return on invested capital and free cash flow, as you see from our numbers in the quarter. The operating income in that business on a standalone segment basis, we estimate expanded its operating margin by 320 basis points. Again, benefiting from the divestiture and an ongoing effort to rationalize that portfolio. We talk about the regional and market alignment program. That's the focus there. So that gave us a lot of confidence to raise the guidance. And now on an organic basis, we expect that business to hold serve and finish flat for the year. Okay, great.

Yeah, it's very clear you guys are benefiting from the rationalization. And then I guess two more unrelated, but they're quick. I'll just ask them together. How much did the share repurchase add to the EPS in the quarter, or sorry, the EPS raise for fiscal 26? And then I guess just on, and VivaSure, are you still committed to the large four market and are you still planning on proceeding with that acquisition of VivaSure?

Yes, it's James here. I thought I'd jump in on the first question on the share buyback in the quarter. It was a few cents and it's included in the six cent below the line item that I gave earlier.

And just jumping over to VivaSure, large bore closure, we are very committed to consummating that acquisition. I would describe that as near final successful submission to the FDA if anyone has an opportunity to attend. The most recent TCT, you would have heard about some really impressive results coming out of the patch trial, just in terms of, you know, reduction in vascular complications, medium time to hemostasis, near instantaneous. Really, really exciting. We think that, you know, it'll be an FY27 event, just given the timing of FDA release, but that's a, you know, $300 million event. high-growth market for large-bore arterial access in TAVR and EVAR. The product's meaningfully differentiated. It's fully absorbable, sutureless, implant-free. Really, as we look at it, you know, from the submission to FDA, it was a best-in-class safety and ease of use. And for us, it's highly synergistic. It is a closure product, which is our primary focus in IVT. And it goes against structural heart, which will have call point synergy with our SavvyWire business. So, yep, we're excited. A bit more work to be done, but we'll have more to say about that, I think, later this year.

Okay, that's a great thing to hear, and congrats on the quarter. Thank you.

Thank you. Our next question comes from the line of David Rescott of Baird. Your line is now open.

Oh, great. Thanks for taking the questions and congrats on the progress here. Two questions from us and I'll ask them both up front. First, on the plasma side, you know, it seems like a pretty substantial step change in the U.S. collection volumes that are going out. I know you've talked in the past and have remained committed to the fact that there's ebbs and flows in the market and had expected it to get better in the second half of the year. It's clearly coming sooner than expected. So I'm curious on what you're seeing on the ground level as to why, again, a multi-quarter kind of low single flat growth number has now stepped up to this, you know, high single-digit level in the U.S. And just interested to hear on your confidence that, you know, maybe this isn't just a one-time thing. You know, should we expect the cyclicality on a quarterly basis maybe to even step back down and step back up as this multi-year, you know, return to high single-digit plays through? That's the first question. And then second, on the Vascade business, I know there were some comments around some of the competitive nature in that market last quarter. You know, you're focusing on getting the Salesforce initiatives realigned here. You know, just curious to hear if you could parse out maybe the benefits you've seen from the work that you've done versus the overall market acceptance versus some of the things on the competitive side that, again, give you the confidence that, you know, you can continue to progress here through the year. Thank you.

Thank you, David. So, first on U.S. plasma collections, again, high single-digit volume growth on top of the pricing benefit from the technology advancements, and ongoing share gain. We're very bullish that the cyclicality of this market, when we talk to our customers, when we walk the floor at PPTA and see the association's forecast, we think what we observed in the quarter is absolutely sustainable through the second half of the year and beyond. We're benefiting because our customers are taking share in the end market, enabled by Nexus and the outperformance there. The guidance that we put forth, right, because we grew 23% through the first half, the guidance we put forth is more modest. And we don't control collection volume. While we have every confidence that they continue and grow from here, Our guidance reflects what we can control, which is share gains and the annualization of those prior technology rollouts, which are happening this quarter, third quarter. So from our vantage point, we'll guide to what we control. We have continued share gains at hand, and we feel great about that. And so that's what you see in our forecast. With regards to VASCADE and the competition, it is a competitive market. We clearly woke up both of the direct competitors we faced there. But when we look at the trial data coming off of Excel, when we look at the actual head-to-head in accounts, we are very confident that we can regain share. We have green shoot examples of that as we speak. And we think that we go from strength to strength there. You'll know and you'll see our progress in the upcoming results. It'll be first and foremost with FASC-AID in electrophysiology. Savvy Wire is an important contributor, much smaller, but Savvy Wire will be, you know, is the second priority for that team, and we expect continued double-digit growth, XOEM. And then, you know, when I spoke a minute ago about Percucil Elite coming in from Vivashore, that'll be a third priority when we get into FY27. So the guidance there is more modest. We felt like the right path was just to be prudent. And so, you know, we've narrowed and lowered that range. We don't expect a meaningful contribution this year, but the green shoots we are observing tell us that, again, right team, right actions being done in the right way to reestablish growth in that category going forward.

Okay. Thanks for the questions.

Thank you. Our next question comes from the line of Travis Steed of B of A Securities. Your line is now open.

Thanks. This is Enja on for Travis. I want to ask on Biscayde, understand the competitive discounting environment and lapping the Japan launch. Do you think the Salesforce changes really get you back to market, above market growth? And when should we expect the Japan label expansion? How significant would that be?

Thank you. Yep. We absolutely have confidence that the changes we've made will return us to, you know, above market growth rates and beyond. And so it's a really good product, clinically, you know, economically differentiated, in the right hands. There's a lot of upside potential, particularly with MVP and MVP XL in electrophysiology. With regards to Japan, historically Japan, this fiscal year, was an important growth contributor for us. The launch of PFA changed the dynamics, but PFA looks meaningfully different in Japan, as you would hear from some of the folks behind that. It's a much more... modest uptake in part because I think the Japanese market prioritizes safety first. So we see a slower adoption curve, and then the mix within that adoption is much more evenly split between the lead players, which is important for us because they've accepted MVP XL into the market, and we have reimbursement on the base label. And that's important because we're now indicated for so many more of those procedures, in fact, all but one modality at this point, That gives us confidence that the second part of this year and beyond, Japan becomes an important contributor. They've also agreed to accept the U.S. data as part of our submission for regulatory approval and release for the larger access site indications. So there's more to be done. I don't want to call the timing on that because we don't control it, but as we get both the approval for the expanded label and the that reimbursement, which has been very favorable for MVP and MVP XL and their base indications. We have a lot of confidence, particularly in the distributor we're using there. There'll be some movement quarter to quarter, order timing, et cetera, but Japan will be a source of growth for us going forward.

Great. Thank you.

Thank you. Our next question comes from the line of Joanne Winch of City, your line is now open.

Hey, good morning. This is Anthony on for Joanne. Thanks for taking the questions. Could you maybe characterize a bit more, I know it's early, but just how the launch of the HN cartridge is going in EMEA in Japan and if it's tracking similarly to how the U.S. launch was in the first few months?

Yeah, so it'll look different in those markets because the markets, you know, their visoelastic testing is really different. The product gives us broad base application and what we see in the U.S. holds true. We're just seeing a far higher number. The dollar revenue per device is meaningfully increased with the heparinase neutralization cartridge here in the States. We expect that part of the launch will be very similar. But it is a different starting point. We don't have nearly as many tag 5000s the predicate product in the market in either of those places so Less opportunity for that conversion. They are smaller markets. But again, we have the ability to lead and Our teams are excited. They are that those markets reflect a more of a hybrid approach. Some of them are direct for instance the UK Germany and in parts of Japan. Others are through distributors. So there'll be a lag time as those distributors come up to speed on the new product, new cartridge, and get established in the market. But long term, it's an important source of sustainable double-digit growth for that business and that franchise.

Great. Thank you. Thank you.

Our next question comes from the line of Andrew Cooper of Raymond James. Your line is now open.

Hey, everybody. Thanks for the time. Maybe starting, you know, I think, Chris, you said a couple of times Vasquez was economically differentiated. Can you just give a little bit more color on sort of what you mean by that versus the competition? And then talk a little bit about how pricing and your approach to the market there has evolved competitively. Have you made changes to price? And do you feel like from here we're in the right spot where it's going to be a little bit steadier? I know you said margins would hold in there, but just would love any thoughts on the top line and the price component.

Sure. Thank you, Andrew. Yeah, the product, you know, when you look at the metrics in terms of time to ambulation, you know, time to discharge, it is at or above anything else in the marketplace. The real benefit, and I think you're seeing this with a heightened focus even in a post-PFA environment, is the improvement in workflow productivity. As a center adopts MVP and MVP XL, their ability to really move quickly with these patients, get them closed, get them ambulated, and in almost all cases, send them home the same night, really powerful. The other factor, and you hear this in the verbatims from the clinicians repeatedly, is it's a pain-free solution. Suturing works, and suturing has a reasonable profile, but it hurts a lot and often comes with the use of narcotics, which have their own complications. We eliminate all of that. And so the speed in the workflow, the absence of pain medication, and just a much better patient verbatim helps a lot. As I said earlier, as this market increasingly moves to the ASCs, that difference will be all the more powerful. And so we're enthusiastic about it. And with regards to pricing, as we've dug into this, we look very carefully now with the account level detail that we have at where we're gaining, where we're losing, it's almost never about the actual price of the product. We may have needed to be more flexible with regards to initiation trials or other work done jointly with VACs to get those remaining accounts converted. But in the head-to-heads that we're observing, very modest degree of flexibility on price tends to be driving the desired outcomes. And you see that, again, I just go back to the hospital operating income margin was the primary driver of our overall margin growth at 370 basis points of OI. So from our vantage point, and to be clear, both BMT with TAG and IVT with Bascade were equal contributors to that gross margin expansion. So what you'll see going forward is, as we layer on the volume, is increasing operating leverage. So we don't have any worries. The investments have already been made in OpEx, and the price concessions are modest at best. And so from our vantage point, our margin expansion and the growth that we're anticipating, top and bottom line, are absolutely achievable.

Great. And then I wanted to ask one more on blood management as well, just given the traction there. Not to jump too far ahead of ourselves, but it's clear that the HN cartridge has done a lot for driving that growth. When you look into the future from an innovation perspective, are there other menu items to add that could be similar in magnitude? And if so, can you give any color on what they might be or maybe when we could think about more of that menu expansion to continue driving penetration with TEG?

Yeah, Andrew, we absolutely see additional opportunity for the growth of visoelastic testing. We target, for example, in the U.S., you know, a T700. nearly half of them have not adopted visoelastic testing. We have 70 shares of the market. Obviously, we intend to retain and grow that, but our biggest opportunity is taking visoelastic testing to the other sector of the market that doesn't have it. Hep neutralization helps do that because it gives you a broader spectrum of testing, but we also have additional indications that we are pursuing and additional applications of the product that... We'll talk about more probably in the spring when we do our next Investor Day. We'll pull back the veil a bit and talk more about the really exciting portfolio pipeline that we've got going behind TAG.

Okay, I'll leave it there. Thank you. Thank you.

Our next question comes from the line of Michael Patusky of Barrington Research. Your line is now open.

Hey, good morning. So, Chris, I will admit I missed it. There's a ton of companies reporting this morning, and I missed part of your prepared remarks. So, I'm just curious. That's good closure. If you're looking at over the last 12, 13, 14 weeks since, you know, we last talked on a conference call, and, you know, you put in all these initiatives to try to sort of turn the business, and I'm sure you're looking at this, if not day by day, certainly week by week. I mean, are you, I certainly heard the green shoots commentary, but, you know, are you seeing progress, you know, week by week, even, even through, you know, the end of the quarter into where we are now, like, are you seeing enough evidence to say, yeah, we've, we've bottomed, we've turned this, it's, it's, it's, it's not an overnight back to where we were, but we've, we've turned this or at least now we're trading punches as opposed to just taking punches. Like where, where, what are you seeing and where are you sort of in, in, you know, if you're, you know, calling it a sort of a comeback story, hopefully, uh, you know, where are you in that? Thanks.

Yeah. Thanks, Mike. I appreciate the question. And, uh, yeah. And I appreciate the interest on this. We are absolutely anticipating a comeback story, right? Um, And I think this one's going to be exciting and interesting to watch as it develops. We are confident that the actions that we have taken year to date have stabilized this performance. And so we don't expect any further deterioration in performance. We see green shoots with new account openings. We see green shoots with new greater utilization. We see green shoots with competitive win-backs or just, you know, healthy head-to-head that we've come out on top on. So, we do expect meaningful growth going forward. However, we're going to be prudent in our guidance. And at this point, the guidance for IBT writ large, and it's important, we didn't talk about this probably enough, but that franchise is unfortunately dragged down by esophageal cooling. And I'm happy to come back and give some more specifics there because I'm not including cooling as part of my commentary. I'm talking specifically about closure. In closure, we put very little in for the second half, but that's us being prudent because it's a tough market, and I'd rather be on the conservative side of that. We've heard that loud and clear from the market to call it when you see it, but not before. Our results from here will speak for themselves.

Okay? Okay. All right. Great. And just a quick one for James. James, obviously, you guys have been aggressive here recently with share repurchases. You just sort of think I guess, longer term, not looking for specific guidance for next year or longer term, but just generally speaking. I mean, would you expect the share count to sort of remain sub 50 million over the next over the next few years? Like, are you guys going to continue to be pretty active in share repurchase as you think about, you know, capital allocation beyond fiscal 26? Thanks.

Yeah, thanks. Thanks, Mike. So there's there's roughly, you know, 47 million-ish shares outstanding now. So I think a lot would have to happen to get above that 50 million mark. So the thought process here is that certainly we would aim to keep dilution in check for sure. And then let's face it, one of the benefits of having a strong balance sheet you know, is that we do have, you know, some optionality on capital deployment. So, yes, that includes, you know, buying back shares, also debt paid down and so forth. But, yeah, for the foreseeable future, you know, lower than 50, pretty good bet.

Yeah, Mike, it's Chris. If I could just pile on there, you know, from a capital allocation perspective, exactly as James just highlighted, we're going to focus on paying down our debt being opportunistic with the share buybacks. We'll make targeted organic investments, as we have, to advance new technology into the market. But again, we feel we've fully resourced from an OpEx perspective. You see that. You see that in our leverage, and obviously you see that in our robust cash flow and a really healthy free cash flow to net income conversion ratio. But we're focused on what we have. We're focused on making the most of the portfolio, As I've said repeatedly, we'll do Vivashore when the final set of milestones are hit and we're ready to go there. Beyond that, M&A is off the table until we have IBT exactly where we need it to go.

All right. Very good. Thank you.

Thank you. I am showing no further questions at this time. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.