Haemonetics Corporation 2027 Q1 Earnings Call

Please go ahead. Morning, and thank you for joining us for Haemonetics' first quarter fiscal year 2027 conference call and webcast.

I'm joined today by Chris Simon, our CEO, and James D'Arecca, our CFO. This morning, we reported first quarter fiscal 2027 results and raised our fiscal 2027 guidance. Our earnings release, supplemental presentation, and related materials are available in the investor relations section of our website. First quarter results are reported under the new reportable segment structure announced on June 5, 2026. Additional information, including historical recast financials and the presentation describing the changes, is also available on our investor relations website. 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 FX and the exit of Liquid Solutions. Our fiscal year 2027 guidance is also adjusted for the impact of the fifty-third week.

We'll refer to other non-GAAP financial measures to help investors understand Haemonetics' 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. 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 other SEC filings. We do not undertake any obligation to update these forward-looking statements. With that, I'd like to turn the call over to Chris.

Good morning, everyone. Thank you for joining. We started FY 2027 strong with broad-based execution driving another quarter of profitable growth. First quarter revenue was $339 million, increasing 6% reported and organic, while adjusted earnings per diluted share increased 4% to $1.14. Investments we have made to enhance our portfolio, improve our operating model, and strengthen commercial execution are fueling consistent growth and strong cash generation. All three of our core platforms contributed to our performance this quarter, demonstrating the breadth of our business and reinforcing the confidence in our ability to deliver sustainable long-term growth. Before discussing our business results, I'd like to welcome Dr. Martin Madaus to our board of directors. Martin has built a distinguished career leading global healthcare businesses through transformation, strengthening execution, and creating long-term value.

His strategic perspective and operating experience will be invaluable as we continue executing our strategy, and we're delighted to welcome him to the board. Now, let's discuss our business results. MedSurg's revenue increased 6% year-over-year reported and organic to $148 million, with growth across both franchises. Blood management technologies grew 8% organically, with double-digit growth in hemostasis and transfusion management, partially offset by slowing cell salvage capital upgrades. Hemostasis management is the definition of durable growth, with mid-teens disposable growth in the quarter driven by higher utilization across the installed base and continued share gains. The ongoing success of the HN cartridge underscores our ability to innovate, expand the clinical applications of viscoelastic testing, and further strengthen our leadership position, creating a longer runway for sustainable growth. Transfusion management also continued to build momentum with another quarter of strong software implementations.

Faster customer activations are expanding our recurring revenue base and enhancing the durability of revenue growth for this franchise. Interventional technologies returned to growth, growing organically 3%. Vascular closure grew above market, increasing in the low double digits year-over-year, and low single digits sequentially. Performance reflected contributions from all geographies led by renewed momentum in the U.S. with VASCADE MVP and VASCADE MVP XL and electrophysiology more than offsetting softness in peripheral and coronary procedures and esophageal cooling. Three factors are driving our vascular closure outperformance. First, the re-acceleration of access site growth following the stabilization of PFA in AFib procedures. Second, stronger commercial execution resulting from the investments we've made in sales and marketing. Third, the momentum created by the VASCADE MVP XL expanded indication up to 17 French in outer diameter.

Higher utilization, account wins, and the expanded XL use case are driving broader adoption and positioning the franchise for resurgent growth. We continue to strengthen the clinical evidence in large bore venous closure with the largest real-world study of VASCADE MVP XL to date. The study, conducted at Emory University in more than 1,600 patients, demonstrated rapid hemostasis, greater than 92% same-day discharge, and an excellent safety profile in large bore sheath procedures like PFA and LAAC. Together, the expanded indication and growing body of real-world clinical data further strengthen our competitive position and provide the foundation for broader physician adoption. MedSurg is reemerging as a driver of Haemonetics' long-term growth, with two growth-oriented franchises supported by strong innovation, expanding adoption, and improving market fundamentals. Solid first quarter performance reinforces our confidence in delivering mid-single-digit MedSurg growth in fiscal 2027.

Turning to apheresis, revenue grew 5% on a reported basis and 6% organic to $191 million. Plasma revenue grew 8% organic, reflecting double-digit growth in disposables globally, partially offset by a difficult prior year software comparison. Growth was supported by share gains, strong plasma collection trends, and the rollout of Persona PLUS. Collections among our U.S. customers increased in the high single to low double digits, including favorable ordering patterns, reinforcing continued IG demand and strong market fundamentals. Persona PLUS is delivering meaningful economic benefits to our customers and reinforcing the unique value proposition of our integrated plasma collection platform. Through a simple firmware upgrade, Persona PLUS helps our customers increase plasma yield, improve center productivity, and lower cost per liter. The rollout is progressing ahead of schedule, and early adopters are achieving yield improvements in excess of 5% compared with our earlier Persona offerings.

Other apheresis revenue declined 3% organic, reflecting portfolio optimization and order timing. Following a strong first quarter, we are raising our fiscal 2027 apheresis revenue guidance to low to mid single-digit growth. The increase reflects first quarter outperformance, while our expectations for the rest of the year remain balanced and largely unchanged, supported by share gains, Persona PLUS adoption, and modest market growth assumptions. Our first quarter performance reflects the strength of the overall business. Consistent execution across plasma, blood management technologies, and interventional technologies demonstrate that our growth is becoming increasingly durable. Accordingly, we are raising our full-year reported revenue growth guidance to 5% to 8% and organic growth guidance to 4% to 7%. We remain confident in our outlook while maintaining a disciplined approach to guidance for the rest of the year.

James, over to you. Thank you, Chris, and good morning, everyone.

Chris highlighted the continued strengthening of our business and our financial results reflect that same story. Broader base growth, improving revenue quality, favorable portfolio mix, and an earnings algorithm that continues to strengthen through disciplined execution. As our portfolio continues to shift toward higher margin recurring revenue and differentiated technologies, we're beginning to realize the operating leverage from the investments we've made over the past several years. First quarter gross margin was 60.4%, down 40 basis points from the prior year. The comparison was impacted by upfront software license revenue recognized in the first quarter of fiscal 2026, which benefited prior year gross margin by approximately 200 basis points. Excluding the software benefit, adjusted gross margin expanded, driven by favorable product mix, continued Persona PLUS adoption, pricing actions, and strong commercial execution.

Operating expenses increased 7% to $126 million, primarily reflecting higher personnel costs, including self-insured benefit plans, the Vivasure Medical acquisition, and higher freight expense. Adjusted operating margin was 23.4%, down 70 basis points year-over-year, but expanded meaningfully after normalizing for the prior year software benefit. Sequentially, margin declined 100 basis points, primarily due to lower MedSurg revenue following a strong fourth quarter and external cost pressures, partially offset by Persona PLUS and disciplined execution. We remain confident in delivering 50 to 100 basis points of our adjusted operating margin expansion in fiscal 2027. Our outlook incorporates sustained external cost pressure, which we expect to more than offset through revenue growth, favorable mix, Persona PLUS adoption, productivity, and tariff recovery. The adjusted tax rate was 25.7%, compared with 24.9% in the prior year period, primarily reflecting lower tax benefits associated with equity compensation.

Adjusted earnings per diluted share increased 4% year-over-year to $1.14, reflecting strong underlying operating performance. Earnings growth was achieved despite higher interest expense, unfavorable foreign exchange, and a higher tax rate, with those headwinds largely offset by the benefit of a lower diluted share count resulting from last year's share repurchases. Looking ahead, we expect adjusted earnings per diluted share to grow broadly in line with our increased reported revenue growth guidance for fiscal 2027. Now turning to the balance sheet and cash flow. Strong earnings once again translated into strong cash generation, reinforcing both the quality of our earnings and the durability of our operating model. Over the last 12 months, our cash earnings exceeded our P&L earnings, with free cash flow conversion reaching 106% of adjusted net income.