Q2 2027 Haemonetics Corporation Earnings Conference Call - GLOBAL MED TECHNOLOGIES INC

Financial Performance:

• Second quarter organic revenue growth was 10%, while first-half organic growth was 8%.
• Adjusted earnings per share (EPS) were $1.35 in Q2 and $2.49 in the first half, representing 6% growth in both periods.
• Adjusted gross margin increased 140 basis points to 61.9% in Q2 (up 60 basis points to 61.2% in the first half), driven by tariff refunds, favorable mix, and offsetting FX headwinds.
• Adjusted operating margin was 26.3% in Q2 and 24.9% in the first half, down 40 and 50 basis points respectively due to higher operating expenses.
• Operating cash flow grew 40% year-over-year to $180 million in the first half; free cash flow increased 57% to $143 million.
• Free cash conversion was 166% in Q2 and 111% on a trailing 12-month basis.
• Cash balance stood at $261 million with net leverage of approximately 2.5 times EBITDA.
• Adjusted effective tax rate was 24.7% in Q2 and 25.2% in the first half.

Guidance and Future Outlook:

• Fiscal 2027 total company organic revenue growth guidance raised to 6–9% (previously 4–7%); reported growth guidance raised to 8–11% (previously 5–8%).
• Fiscal 2027 adjusted operating margin expansion guidance revised to 0–50 basis points (previously 50–100 basis points) due to investment ramp-ups and cost pressures.
• Fiscal 2027 adjusted EPS growth expected to align with reported revenue growth (8–11%).
• Fiscal 2027 MedSurg organic revenue growth guidance reaffirmed at mid-single digits.
• Fiscal 2027 Apheresis organic revenue growth guidance raised to high single digits (previously low to mid-single digits).
• Second-half growth expected to be weighted heavily toward Q4 due to contractual economics and CSL center conversion timing.
• Long-term goal to achieve operating margins in the high 20s or better as volume scales and transitory costs normalize in FY28.
• Full rollout of Nexus PCS with Persona Plus to all CSL U.S. centers expected by end of calendar 2027.

Business Segments and Product Lines:

• MedSurg: Organic growth of 6% in Q2 and first half; Hemostasis management drove growth via higher TAG utilization and share gains; Transfusion management grew well into double digits.
• Interventional Technologies: Organic growth of 3% in Q2 and first half; Vascular closure (FASCADE MVP/XL) grew in low double digits in electrophysiology.
• Apheresis: Organic growth of 14% in Q2 and 10% in first half; Plasma segment grew 18% in Q2 driven by Persona Plus adoption and share gains; Other apheresis was flat in Q2.
• New Product Launches: Received U.S. FDA approval for Percocel Elite (large-bore structural heart closure); launched PACE Pro Guidewire for structural heart; received CE mark and Japanese approval for expanded VASCADE MVP XL indication.
• Persona Plus: Rollout is ahead of schedule with substantial adoption; increases plasma yield, center productivity, and lowers cost per liter.

Market and Competitive Landscape:

• Global plasma collections grew in the high single digits; U.S. collections trending mid-to-high single digits, while OUS tracked in double digits.
• Percocel Elite targets a $300 million global large-bore closure market opportunity; expected to capture significant share via unique bioabsorbable sutureless patch.
• Market stabilization in vascular closure expected to drive growth resumption alongside PFA adoption.
• Expanded CSL relationship validates technology superiority and provides multi-year growth runway; CSL will utilize the full Persona Plus suite and software offerings.
• Competitive landscape in vascular closure remains active but Humanetics reports improved share gains and commercial execution.

Risks and Challenges:

• Cost Pressures: Elevated freight, fuel prices, and inflationary pressures impacting margins; expedited shipments required to meet CSL demand.
• Investment Ramp: Transitory elevated production and capital expenditures expected as manufacturing capacity and device inventory are built ahead of CSL volumes.
• Market Volatility: Guidance excludes second-half plasma collection volume growth to avoid accountability for external market dynamics; potential for temporary collection slowdowns as some fractionators utilize yield gains to reduce collection frequency.
• Execution Risk: High-performance-based compensation creates transitory operating expense increases.
• Cybersecurity: No direct impact reported from recent cyber attacks on European plasma centers, though the threat environment remains a concern.
• Regulatory/Commercial: New product launches (e.g., Percocel Elite) face a risk of cannibalization or failed launches, mitigated by phased education and training.

Management Commentary and Tone:

• Tone is confident and optimistic regarding the growth trajectory, particularly the multi-year runway provided by the CSL partnership and Persona Plus adoption.
• Management emphasizes discipline, noting that revised guidance reflects necessary investments to secure the future rather than near-term profitability constraints.
• Strong emphasis on cash flow generation and balance sheet flexibility to fund organic growth and maintain shareholder returns (stock repurchases remain an option).
• Acknowledged challenges in short-term margin expansion but projected significant improvement in FY28 as economies of scale are realized.

Analyst Questions and Answers:

• CSL Economics: Management declined to disclose specific contract economics or customer forecasts due to confidentiality but confirmed the deal drives high 20s margin potential long-term.
• Margin Phasing: Operating and gross margin expansion expected to be heavily weighted to Q4 FY27; FY28 margins expected to expand as transitory costs (performance comp, freight) normalize.
• CapEx Requirements: Elevated CapEx expected over the next two years for manufacturing line extensions, warehousing, and additional device procurement to support CSL volume ramp.
• Product Differentiation: PacePro guidewire positioned to avoid cannibalizing SavvyWire by addressing specific physician preferences and LV pacing needs.
• Blood Management: TAG 5000 upgrade cycle winding down, but durable growth driven by mid-teens recurring TAG 6S disposable usage; transfusion management now 20% of BMT revenue.
• Capital Allocation: Priorities remain organic investment (CSL rollout), balance sheet strengthening (debt repayment), and shareholder returns; no immediate M&A planned.

Other Key Points:

• First-half free cash conversion was 166%, reinforcing the quality of the business model.
• Revenue growth in transfusion management is becoming a more meaningful contributor to the MedSurg franchise.
• Performance-based compensation increased significantly due to outperformance against the annual plan, contributing to the temporary operating margin compression.
• Tariff refunds provided a 200 basis point benefit to Q2 gross margin.
• Management reiterated that FY27 is a year of investment and progress, with long-term growth runway extending well beyond the current fiscal year.