Haemonetics Corporation

Hello, and welcome to the Q4 2026 Hemonetics Corporations 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 Olga Goyet, Vice President of Investor Relations and Treasury. Please go ahead.

Good morning, and thank you for joining us for Humanetics' fourth quarter fiscal year 2026 conference call and webcast. I'm joined today by Chris Simon, our CEO, and James Dureka, our CFO. This morning, we released our fourth quarter and full fiscal 2026 results and issued fiscal year 2027 guidance. The materials, including our earnings release and supplemental earnings presentation, are available on our Investor Relations website and also in this morning's press release. Before we begin, I'd like to remind everyone that we will use both reported and organic revenue growth rates that exclude the impact of effects, the divestiture of the whole blood product line, and the exit of certain liquid solutions products. Organic Growth Act CSL also excludes the impact of the previously disclosed transition of CSL's U.S. disposable business. Our fiscal year 2027 organic revenue guidance is also adjusted for the impact of the 53rd week. We'll 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 the anticipated results. Factors that might cause our results to differ include those referenced in the Safe Harbor Statement in today's earnings release and in other SOC filings. We do not undertake any obligation to update these forward-looking statements. And now, I'd like to turn it over to Chris.

Thanks, Olga, and good morning, everyone. We delivered fourth quarter revenue of $346 million, up 5% reported and 9% organic ex-CSL, with adjusted EPS of $1.29, up 4% year over year. For the full fiscal year, revenue is $1.3 billion, and adjusted EPS was $4.96 per share, with improved adjusted earnings higher adjusted margins, and stronger free cash flow than in the prior year, despite 153 million of non-recurring revenue from portfolio transitions. Our performance reflects the strength of our core platforms, with Plasma and TAG driving momentum, margin expansion, and reinforcing our leadership in attractive end markets. This foundation enabled targeted investments to position interventional technologies to contribute to growth in fiscal 27 and beyond. At the same time, we advanced our innovation agenda with U.S. FDA clearance of Persona Plus, the expanded indication for Vascade MVP XL, a submission to expand the Vascade label in Japan, and the acquisition of Vivashore. Moving on to our business unit results. Hospital revenue was $160 million in the fourth quarter and $588 million for the full year, growing 8% in the quarter and 4% for the year, or 7% and 4% on an organic basis, respectively. Results were supported by strong performance in blood management technologies, partially offset by interventional technologies consistent with trends we've discussed throughout the year. Blood management technologies delivered a record quarter, with broad-based performance driving revenue growth of 21% in the quarter and 14% for the year. Hemostasis management grew in the high teens, fueled by sustained strength in TAG6S, higher disposable utilization, continued capital placements, and strong European momentum following the HN cartridge launch. Transfusion management delivered outsized growth in the quarter, contributing nearly half of the franchise growth as we continue to gain share through the adoption of our integrated solutions that enhance hospital safety and efficiency. In interventional technologies, revenue declined 10% in the quarter and 9% for the full year. Vascular closure was down 8% in the quarter, reflecting 6% decline in MVP and MVP XL in electrophysiology, and continued softness in lower growth coronary and peripheral procedures. Performance in EP was affected by share loss in the first quarter of fiscal 2026 and evolving procedure dynamics. Sequentially, EP grew 8% and sensor-guided technologies returned to growth, partially offsetting the continued impact of PFA on esophageal cooling. Over the past year, we strengthened our commercial organization. equipped our teams with better tools, and advanced our product portfolio. Q4 was our strongest quarter of fiscal 26, and we have renewed confidence in the trajectory of IBT. Importantly, the headwinds that drove approximately 80% of the decline in fiscal 26, first, OEM-related softness and sensor-guided technologies, and second, PFA impacts on esophageal cooling, have now been lapped. or reduced to a non-material base. With the expanded MVP XL label and the anticipated release of Perky Seal Elite, we are strengthening our competitive position and re-energizing the business as we enter fiscal 27. Turning to plasma and blood center, plasma momentum continued with another quarter of growth driven by category leadership, differentiated innovation, and strong market fundamentals. The franchise delivered $130 million in revenue in Q4, up 3% reported and 13% organic ex-CSL as we annualized the last of the discontinued CSL U.S. disposable supply agreement. Full year revenue was $524 million, down 2% reported, but up 20% organic ex-CL above our revised guidance range of 17% to 19%. Market fundamentals remain highly attractive, supported by resilient immunoglobulin demand and continued global expansion in plasma collections. Our share of US plasma collections grew in the high single digits in both the quarter and full year, with double digit growth in Europe as customers increasingly rely on our platform to drive efficiencies. Persona Plus is the next step in our innovation cycle, further strengthening our competitive position by enhancing percent yield by mid-single digits on average, supported by a large randomized clinical trial of over 30,000 donations and underpinned by our proprietary patent-protected technology. It has been met with strong customer enthusiasm with multiple adoptions underway. Blood Center also contributed positively to the fourth quarter, generating $56 million in revenue, up 1% reported and up 6% organic. For the full year, revenue was $221 million, down 15%, reflecting the whole blood divestiture, but up 5% on an organic basis. Performance was driven by continued strength in global plasma demand and stable and growing U.S. red cell collections, despite our ongoing portfolio rationalization efforts. For the full year, total company revenue declined 2% reported due to portfolio transitions, but grew 10% organically XCSL at the upper end of our guidance. We expect growth to continue in fiscal 27 with projected revenue growth of 4% to 7% reported and 3% to 6% organic adjusted for the extra week and FX. In hospital, we expect mid-single-digit growth with both franchises contributing. We anticipate continued expansion of the TEG 6S installed base and increased HN cartridge utilization in blood management technologies. In IVT, we are ending the year with a stronger commercial organization, improving market dynamics, and a more competitive portfolio supported by the MVP XL label expansion. With most headwinds now behind us, we are focused on translating these improvements into consistent growth. Our guidance excludes any contribution from Percocil Elite, which is currently undergoing FDA review. In plasma, consistent with our FY26 approach, our mid-single-digit growth outlook is grounded in controllable drivers, share gains, the rollout of Persona Plus, and modest collection volume growth, while retaining upside if collection trends remain strong and or adoption accelerates. We remain confident in the durability of growth and our ability to further extend our leadership in this attractive market. In Blood Center, strong plasma-driven demand and customer relationships will continue to support performance. However, ongoing portfolio rationalization remains a near-term headwind, and we expect revenue to decline in the mid-single digits. We're encouraged by our progress, and we remain focused on consistent execution to deliver growth and sustainable value for our customers and our shareholders. James, over to you. Thank you, Chris, and good morning, everyone. We close the year with strong execution and meaningful progress in strengthening the quality of our earnings, expanding margins, improving cash flow, and further aligning our portfolio with higher growth, higher margin markets that will continue to support our growth aspirations in the long run. Adjusted gross margin in the fourth quarter was 59.7%, down 50 basis points year over year, primarily reflecting the absence of the prior year CSL shortfall payment and the impact from tariffs enacted earlier in the year, partially offset by a structurally higher margin portfolio. For the full year, adjusted gross margin expanded 280 basis points to 60.3%, driven by portfolio transformation, strong volume growth in plasma and blood management technologies, and continued strong demand for our market-leading innovation. Adjusted operating expenses in the fourth quarter were $122 million, up 5% year-over-year, largely driven by the addition of Vivashore, and the impact from tariffs, coupled with higher than expected costs from the self-insured portion of our benefits plan, higher performance-based compensation, and a deliberate step up in targeted investments to strengthen our commercial capabilities. Together with the adjusted gross margin dynamics in the quarter, this resulted in an adjusted operating income of $85 million. an adjusted operating margin of 24.4%, down 50 basis points year over year. Adjusted operating expenses for the full year were $465 million, up 2%, driven by continued investment in R&D and selling and marketing, the acquisition of Vivashore, and higher performance-based compensation. Adjusted operating margin for the year expanded 140 basis points to 25.4%, reflecting structural improvement from portfolio transformation even as we continued to invest for future growth and absorb macro cost headwinds. The adjusted tax rate was 24.8% in the fourth quarter in fiscal year 26 compared to 22.2% and 23.2% in the prior year, respectively. Adjusted EPS increased 4% to $1.29 in the fourth quarter, inclusive of a modest benefit from share count, which was more than offset by higher interest, tax, and FX. For the full year, adjusted EPS was $4.96, up 9%, demonstrating the strength of the underlying business and disciplined capital allocation that helped offset the impact of portfolio transitions, which are now fully behind us, partially offset by higher interest and tax. Now turning to the balance sheet and cash flow. Cash generation continues to be a defining strength of the business and a key source of strategic flexibility. With our major device investments and productivity initiatives largely behind us, the business has returned to a strong and sustainable cash flow profile. In the fourth quarter, we generated $45 million of free cash flow, bringing the full year free cash flow to $210 million, with a free cash flow to adjusted net income conversion ratio of 89%. While free cash flow in the quarter was down versus last year, mainly due to the timing of income taxes paid and accounts receivable, full year free cash flow increased by $65 million, largely driven by better working capital management and less CapEx. We ended the year with $245 million in cash. after deploying $175 million to repurchase over 3 million shares, investing $61 million in the VivaSure acquisition, and continuing to fund organic growth, reflecting a balanced capital allocation approach that supports both organic growth and shareholder returns. We enhanced capital structure flexibility and positioned the business for continued deleveraging be supported by strong cash flow. While total debt remained unchanged at $1.2 billion, we refinanced $300 million of convertible notes with the revolving credit facility, ending the year with $700 billion of convertible notes due in 2029, $239 million of term loan aid debt, and a revolver balance of $300 million. with a net leverage ratio as defined in our credit agreement at 2.73 times EBITDA. On that note, let's move on to discuss the rest of our fiscal year 27 guidance. Consistent with the strong foundation and momentum Chris outlined, we expect fiscal 2027 revenue growth of four to 7% reported and three to 6% organic. We expect continued margin expansion with adjusted operating margin improving 50 to 100 basis points year over year driven by continued strong momentum across our growth franchises, innovation, and operating leverage as we begin to scale IVT. Also included in that expectation is a full year of dilution from the VivaSure acquisition with no associated revenue in our fiscal year 27 guidance. additional impact from tariffs, ERP-related costs, and continued investment in targeted high-return growth initiatives. At the earnings level, we expect adjusted EPS to grow broadly in line with revenue, as improvements in operating leverage and mixed benefits are assumed to be largely offset by higher interest and tax, which is expected to be higher by about 100 basis points than in fiscal 26. Importantly, the business is expected to continue to demonstrate strong earnings quality supported by a highly recurring revenue model and disciplined capital deployment. We expect free cash flow conversion of approximately 80% reflecting a disciplined approach to working capital that preserves flexibility to manage inflationary and tariff pressures and invest in growth. while enabling organic investment, deleveraging, and opportunistic share buybacks. With that, I'll turn it back to Chris for closing remarks. Thanks, James. I want to share a few closing thoughts about our journey over the last four years. Fiscal 26 marked the culmination of our long-range plan for transformational growth, whereby we fundamentally repositioned humanetics into a more focused, higher quality, and more resilient company with significantly stronger growth margins and cash flow. We evolved and rebalanced our portfolio. In Plasma, we drove broad adoption of Nexus and Persona while advancing the next wave of innovation with Express Plus to reduce procedure times, Persona Plus to further improve yield, and Device 360 to digitize and streamline center operations. we rationalized our blood center portfolio, including the divestiture of whole blood, to drive margin expansion. We broadened the clinical utility of TEG6S with the HN cartridge, extending it to high acuity settings, such as cardiovascular surgery and liver transplantation, and advanced international expansion with CE mark certification. We strengthened the Vascaid platform with MVP XL for larger sheath procedures, enhanced our clinical evidence, scaled commercially, and expanded into large bore closure with Percocel Elite. We also revamped the operating model of the company, advancing operational excellence, scaling and automating our manufacturing and supply chain capabilities, progressing our ERP digital transformation, and building the commercial and clinical infrastructure required to sustain growth, including a robust nexus capital cycle to support ongoing global share gains. The results, low teens compounded average organic revenue growth XCSL, high teens adjusted EPS CAGR, low 60s adjusted gross margins, 660 basis points of adjusted operating margin expansion, and $636 million of cumulative free cash flow. Results achieved while investing for growth, navigating dynamic markets and macro environments, and overcoming 153 million of non-recurring revenue from portfolio transitions. With the transitions behind us, we expect growth to re-accelerate and become more consistent. supported by a structurally more attractive mix of recurring revenue from high growth, high margin platforms. Our priorities for fiscal 27 are clear. Continue to win in plasma, extend our leadership in TEG, and reinvigorate growth in vascular closure while driving greater operating efficiency. Quality earnings growth will further strengthen our balance sheet and create opportunities for value creation through disciplined capital allocation, including organic growth, delevering, and opportunistic returns of capital to shareholders via buybacks when appropriate.