Haemonetics Q2 2027 Earnings Call Transcript

Haemonetics (NYSE:HAE) reported second-quarter financial results on Thursday. The transcript from the company’s second-quarter earnings call has been provided below.

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Summary

Haemonetics Corporation reported strong fiscal Q2 2027 results, with 10% organic revenue growth and adjusted EPS of $1.35, reflecting a 6% increase.

The company expanded its CSL partnership, secured regulatory approvals and launched new MedSurg products, which are expected to drive long-term growth.

Haemonetics raised its fiscal 2027 revenue outlook to 6%-9% organic growth and 8%-11% reported growth, supported by strong plasma and Apheresis performance.

Significant investments were made to support future growth, particularly in manufacturing capacity and new product launches, impacting operating margins.

Management remains confident in maintaining high-20s operating margins in the future, driven by scaling operations and cost efficiencies.

Full Transcript

OPERATOR

Hello and welcome to Haemonetics Corporation second quarter 2027 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. To withdraw your question, please press star 11 again. I would now like to turn the call over to Olga Gayette.

You may begin.

Olga Gayette (Investor Relations)

Good morning and thank you for joining us for Haemonetics second quarter fiscal year 2027 conference call and webcast. I’m joined today by Chris Simon, our CEO, and James DArecca, our CFO. This morning we reported second quarter and first half fiscal 2027 results and updated our fiscal 2027 guidance. Our earnings release, supplemental presentation and related materials are available in the Investor Relations section of our 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, the exit of certain liquid solution products, and our fiscal year 2027 guidance is also adjusted for the impact of the 53rd week. We’ll also 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 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 SEC filings. We do not undertake any obligation to update the forward-looking statements.

And now I’d like to turn it over to Chris.

Chris Simon (President and CEO)

Good morning everyone. Thank you for joining us. We delivered a strong quarter and first half with growth across plasma, blood management and interventional technologies. Organic revenue growth was 10% in the second quarter and 8% in the first half and adjusted earnings per share was $1.35 in the quarter and $2.49 in the first half, growing 6% in both periods. Beyond these strong results, we reached several important milestones that position us for future growth.

We expanded our CSL relationship, secured key regulatory approvals and launched innovative MedSurg products. These achievements reflect years of investment in our technology, our customer relationships and our execution. Let’s discuss our business results. MedSurg delivered a solid quarter of broad-based growth, increasing 6% organically in both the second quarter and first half. Blood Management Technologies grew 7% organically in the quarter and 8% in the first half. Within BMT, hemostasis management growth was driven by greater account penetration and higher TEG utilization and continued share gains. The TEG 5000 capital upgrade cycle is winding down, but durable growth is being driven by mid-teens recurring TEG 6s disposables growth.

Transfusion management revenue grew well into the double digits in both periods, becoming an increasingly meaningful contributor to the franchise. With our evolving portfolio, we are building our high margin recurring revenue base while giving customers greater flexibility to adopt integrated software solutions that improve workflow automation, transfusion safety and traceability. This growth was partially offset by cell salvage. Interventional Technologies grew 3% organically in both the second quarter and first half, sustaining the return to growth established in Q1. Vascular closure led performance with Vascade MVP and MVP XL growing in the low double digits in electrophysiology in both periods. Strong demand and improved commercial execution are driving greater utilization and share gains as the underlying market stabilizes. Vascular closure momentum was partially offset by a challenging prior-year comparison in esophageal cooling.

We also advanced our growth strategy through several important milestones. We extended Vascade MVP XL globally with initial CE Mark certification and Japanese regulatory approval for the expanded indication. We launched the PacePro Guidewire, broadening our structural heart guidewire portfolio with a solution designed to improve procedural efficiency within familiar physician workflows, and we received U.S. FDA approval for Curcoseal Elite, extending our vascular closure offering into large-bore structural heart and endovascular procedures.

While these initiatives are not expected to materially contribute to FY27 revenue, they leverage our existing commercial infrastructure to broaden our market reach and strengthen our runway for sustained long-term growth. Strong first half execution, improving momentum in Interventional Technologies and new product launches reinforce our confidence in the business’s growth trajectory and significant long-term opportunity. However, we remain disciplined in our outlook, relying on demonstrated progress to inform our guidance. Therefore, we are reaffirming our fiscal 2027 MedSurg organic revenue growth guidance of mid-single digits.

Turning to Apheresis, organic revenue grew 14% in the second quarter and 10% in the first half. Within that, plasma grew 18% and 13% respectively, driven by prior share gains, strong underlying collections and the rollout of Persona Plus. Second quarter global plasma collections grew in the high single digits. Continuous long-term investment in our technology and our service delivery has helped us to gain share and accelerate adoption of our integrated platform.

Persona Plus strengthens our offering by increasing plasma yield, improving center productivity and lowering customers’ cost per liter. The rollout is on schedule with substantial adoption across our customer base. Our expanded CSL relationship further validates the superiority of our value proposition. We are scaling capacity to supply CSL while supporting continued strong demand across our customer base. We anticipate completing the rollout of NexSys PCS with Persona Plus to all of CSL’s U.S. plasma centers before the end of calendar 2027. Continued Persona Plus adoption and additional share gains create multi-year durable growth with benefits extending beyond the initial implementations.

We remain committed to advancing our technological advantage by investing in new capabilities that improve customer economics and the donor experience. Other Apheresis was flat in the quarter and down modestly in the first half as strength in red cell collection was offset by order timing and continued portfolio rationalization. We are raising fiscal 2027 Apheresis organic revenue growth guidance to high single digits from low to mid single digits reflecting stronger first half performance, Persona Plus adoption and formally confirmed CSL center conversions through Q3 partially offset by a modest decline in other Apheresis. Consistent with our prior outlook, we have not factored in any incremental revenue contribution from second half plasma collections growth and we expect our second half growth to be weighted towards Q4 reflecting certain contractual economics.

We anticipate additional CSL share in our fourth quarter. However, we will wait until specific rollout plans are confirmed to incorporate that into our guidance. Our total company revenue first half results and greater visibility into customer commitments across our business support an increase in our fiscal 2027 revenue outlook. We now expect organic growth of 6% to 9%, up from 4% to 7%, and reported growth of 8% to 11%, up from 5% to 8%. We enter the second half with multiple catalysts for PAL revenue growth ahead of our markets and the potential to accelerate earnings growth. As we capture these opportunities, we are focused on executing customer conversions, advancing new product adoption and scaling to meet growing demand.

We are turning durable growth into lasting value. Over to you, James.

James DArecca (EVP)

Thank you, Chris, and good morning everyone. The momentum Chris described is increasingly evident in our financial performance. Favorable portfolio mix, growing recurring revenue and strong cash generation reinforce the quality of our business model. With multiple growth catalysts ahead, we see a compelling opportunity to turn sustained revenue growth into stronger earnings power over time. Starting with profitability. Second quarter adjusted gross margin increased approximately 140 basis points year over year to 61.9%. This included a roughly 200 basis point benefit from tariff refunds, partially offset by a 60 basis point foreign exchange headwind. Excluding these two factors, gross margin was essentially flat as a more favorable portfolio mix coupled with recent innovation offset higher manufacturing and supply chain costs. For the first half, adjusted gross margin increased approximately 60 basis points to 61.2%.

Favorable portfolio mix and the second quarter tariff refund more than offset additional inflationary pressures and the margin impact of prior-year software licensing revenue. Second quarter adjusted operating expenses increased 15% to $127.6 million and first half expenses increased 11% to $253.2 million. Three factors drove the increase. First, investments to capture future growth including VivaSure commercial readiness for new product launches and regulatory approvals combined with higher research and development costs as we continue to strengthen our technology.

Second, higher personnel-related expenses including self-insured medical claims and performance-based compensation reflecting significant outperformance against our original annual plan, and finally, higher freight expense driven by increased volumes, higher fuel prices and expedited shipments as we prioritize supply readiness to meet strong demand for our products. Adjusted operating margin was 26.3% in the quarter, down 40 basis points year over year, and 24.9% for the first half, down 50 basis points.

For fiscal 27, we now expect adjusted operating margin expansion of 0 to 50 basis points compared with 50 to 100 basis points previously. This reflects investments ahead of plasma share gains, higher performance-based compensation and continued cost pressures. Our priority is to build the capacity and supply reliability needed to execute the CSL rollout while serving strong demand across our customer base. We are committing manufacturing and distribution resources before the associated volumes fully materialize.

As volumes scale and logistics become more efficient, we expect the near-term costs to moderate, supporting stronger operating leverage. Our adjusted effective tax rate was 24.7% in the second quarter, generally consistent with the prior-year period. The first half rate was 25.2% compared with 24.8% last year. Our strong operational execution delivered 6% adjusted EPS growth to $1.35 despite a challenging prior-year comparison and higher interest expense, as the benefit of a lower diluted share count was largely offset by unfavorable foreign exchange. First half adjusted EPS also increased 6% to $2.49.

For fiscal 27, we now expect adjusted earnings per diluted share growth in line with our increased reported revenue growth guidance of 8% to 11%. Turning to cash flow and the balance sheet, our strong cash generation continues to provide significant flexibility to fund our growth opportunities. Through the first half, operating cash flow increased 40% year over year to $180 million driven by higher earnings and strong working capital performance. Free cash flow increased approximately 57% to $143 million. Despite higher capital expenditures to support growth, free cash flow conversion was 166% in the quarter and 111% of adjusted net income on a trailing twelve-month basis, demonstrating the underlying cash-generating strength of our business.

For fiscal 27, we now expect free cash flow conversion in excess of 80% of adjusted net income inclusive of higher inventory, capex and other investments supporting our near-term growth opportunities. We ended the quarter with approximately $261 million in cash, an estimated net leverage of approximately 2.2.5 times EBITDA as defined in our credit agreement. Our revolver balance remains at $200 million with no additional changes to our debt structure beyond the $50 million revolver repayment in our second quarter and the $100 million repayment year to date. Our capital allocation priorities remain clear: fund our highest return organic growth opportunities, continue strengthening the balance sheet and preserve flexibility for shareholder returns through our existing repurchase authorization.

Let me close our remarks with three key takeaways. First, fiscal 27 is a year of meaningful progress and investment in our future. We are delivering growth across our core businesses while preparing to execute the CSL rollout, support strong customer demand and commercialize new technologies. These investments position us to capture the opportunities we have earned and sustain our leadership. Second, our growth runway extends well beyond fiscal 27.

In plasma, share gains and broader Persona Plus adoption provide recurring revenue benefits that extend beyond the initial conversions. In MedSurg, sustained TEG utilization, strong transfusion management growth and new regulatory and innovation milestones in Interventional Technologies create additional avenues for growth across procedures and geographies. Third, we have the opportunity and financial flexibility to translate that growth into greater shareholder value.

As volumes scale and our investments become more productive, we expect stronger operating leverage. Strong cash generation and our balance sheet give us the flexibility to fund these opportunities, strengthen our financial position and return capital to shareholders. We are building on our fiscal 27 momentum to deliver sustained above-market growth and stronger earnings power for years to come. Our focus is clear: execute for our customers, invest to lead and turn that progress into lasting shareholder value. Thank you for joining us today.

OPERATOR

We will now open the call for questions. Thank you, ladies and gentlemen. As a reminder, to ask a question, please press star one one on your telephone, then wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of David Restcott with Baird. Your line is open.

David Restcott (Analyst)

Oh, great. Thanks for taking the questions and congrats on the strong results here. I wanted to ask maybe first about CSL more broadly. I know we have some reference points for kind of the size of what that business used to be, what the margin profile of that business maybe used to be. So curious if you can again level set us on what we maybe should be anticipating. When you think about the moving pieces around price, around some of the prior contracts that were in place with PCS2 and what kind of the setup here again from both a contribution perspective on the top line and margin looks like more broadly, as well as what’s contemplated in this outlook in the second half of the year.

Chris Simon (President and CEO)

Good morning, David, it’s Chris. Thanks for the question. With regards to CSL, it’s a significant growth opportunity for us, clearly, and we think it creates a multi-year runway for both accelerated revenue and earnings growth. First and foremost, the expanded relationship helps validate our technology leadership and the value that we’re delivering, both through higher yield and improved center productivity and also dependable execution. We do think the growth is going to extend beyond the annualization of this initial rollout, with converted centers contributing recurring disposable use and providing a base for innovative product upgrades still to come. We really appreciate and understand the push for quantification and clarity of timing. However, for confidentiality and competitive reasons, we cannot disclose customer-specific economics and plans. We will continue to communicate the expected impact of the transition through our apheresis and total company guidance updates as more information becomes available.

For here, what’s included in our FY27 guidance update is commitments and execution that’s already well in hand. So for ’27 the outlook includes the already completed center conversions. We did pilot work together across a number of centers in September and began full-scale conversion in October. That continues as we speak. So that’s included as well as what we’ve been formally notified of through the end of our fiscal Q3, which is December 31. We do expect additional conversions in fiscal Q4 as this rolls forward in earnest, but we’ve not included them in guidance.

And again, for confidentiality and for competitive reasons, we’re not going to share the customer forecast until we have absolute confirmation and specific dates, at which point we’ll update accordingly. Thanks.

David Restcott (Analyst)

Okay, that’s helpful. Maybe asking about this, thinking about this operating margin updated outlook, I guess first it sounds like at least in plasma, maybe there was not a contribution from CSL in the first—or sorry, in the second—quarter. But maybe a big chunk of the revised operating margin outlook might account for some investment in building out capacity ahead of some of the contribution from the CSL side in the back half of this year. I know there’s some headwinds on the fuel side and some other pieces there.

So maybe could you help us think about what that revised operating margin outlook contemplates relative to CSL? And then again, just wanted to confirm that this quarter you just reported did not have any contribution from CSL and therefore the 18% growth was purely market and share capture. Thank you.

James DArecca (EVP)

Yes, hi David, it’s James. And yeah, I can confirm there was minimal, de minimis CSL in the quarter. It didn’t affect us really at all. Maybe on the operating margin question I can take that first with a little bit of explanation as to what happened in the quarter and then jump to the outlook. So, I mean, overall operating margins were broadly in line with our expectations and, excluding the 200 basis points of tariff refunds, gross margin was essentially flat year over year after absorbing some FX headwinds.

And we view that as a good outcome since our favorable portfolio mix fully offset higher net manufacturing and supply chain costs, including some of the ramp ahead of the CSL conversion. Now, operating margin was down 40 points year over year. And the story here is operating expense growth driven mainly by three factors. First was higher personnel-related costs, including some self-insured medical claims, but more importantly higher performance-based compensation tied to our outperformance against our original plan. Secondly, there were higher freight costs. I think that’s pretty obvious given the situation, but in our case it’s driven by volume, of course, fuel prices, and then expedited shipments as well.

And then third was more just an investment in the business, including Vivasure and our two interventional technologies launches. So, as I mentioned in my prepared remarks, we now expect operating margin expansion of 0 to 50 basis points for fiscal ’27. That revision reflects our investment ahead of plasma share gains that you were asking about in manufacturing, warehousing, expedited freight, higher performance-based compensation, and continued inflation in freight, energy, and materials. Now, just in terms of the way this rolls out, some of that aforementioned elevated production cost—those are capitalized in inventory and flow through COGS in the second half as product is sold.

So gross margin will carry part of the pressure, not just operating expenses. So you’ll see it in both lines. And then finally, just maybe a word on phasing: we expect second-half margin expansion to be weighted towards the fourth quarter, consistent with our revenue cadence, including the contracted economics, as Chris mentioned. So the expansion, when it comes, should be much more fourth-quarter weighted. Thanks.

OPERATOR

Thank you. Please stand by for our next question. Our next question comes from the line of Marie Seiboldt with U.S. Bancorp BTIG. Your line is open.

Marie Seiboldt (Analyst)

Good morning. Thanks so much for taking the questions. Just want to ask one very brief follow-up to David’s question on CSL. Understand that you can’t tell us much about the contract. I did want to just confirm, I think I heard that the contract includes Persona Plus, which is the latest platform that will help us just sort of understand margin contribution. So I just wanted to confirm that point with you.

Chris Simon (President and CEO)

Yeah, Marie, that’s absolutely right. They’re going to take the full suite of Persona, Persona Plus, and our updated software offerings.

Marie Seiboldt (Analyst)

Okay, very helpful. Thank you for that, Chris. And then a follow-up here on PerQseal Elite. Wonderful to see that FDA approval here in the arterial side recently. Just want to hear a little bit about launch plans, any feedback. And then obviously complementary to the TAVR accessories with PacePro and SavvyWire. So maybe if you can detail for us the difference between those two guidewires and how you think about launching all of these products together into the TAVR call point.

Thanks so much for taking the question.

Chris Simon (President and CEO)

Thank you, Marie. Yeah, we’re excited. We just came back from TCT. I think it was a really great opportunity to unveil both products, PerQseal Elite and PacePro, which are in the very, very early stages of launch. PerQseal Elite is our entry into large-bore closure both for TAVR and EVAR-type procedures. We estimate that to be a $300 million global opportunity growing in the high single. Probably two-thirds of that’s here in the U.S., so we’re really excited.

It’s the first bioabsorbable, sutureless patch that does not require any pre-close preparation activities. So we think it will be quite meaningful in the market. We’re going to take our time. There’s been some failed launches in that segment already that we’ve learned from and we’re learning from. So we’re going to take a stepwise progression with a heavy emphasis on physician education and training and build as we go. But we think we’ve got a really good opportunity to disrupt that market quite significantly with a product that over time will grow to be quite a meaningful contribution for us.

PacePro is essentially a workhorse TAVR guidewire. It’s cleared for LV pacing, so we can use it on the RV side. And we think that’s a nice offering to the market. It’s highly complementary to SavvyWire—very early days—but what we’re experiencing is that it plays a different role and it taps into physician preference in ways that should avoid it being overly cannibalistic of our existing SavvyWire business. And it just makes, you know, the combination of PacePro, PerQseal Elite, SavvyWire just helps our teams be all the more relevant in structural heart, which is really a great opportunity to get that IVT business back firing on all cylinders.

OPERATOR

Thank you. Our next question comes from the line of Joanne Winch with Citi. Your line is open.

Anthony (Analyst at Citi)

Hey, good morning. This is Anthony on for Joann. Thanks for taking our question. Back on the plasma market, I think I heard you said global collections grew high single digits. Are you able to share what that was in the U.S. and then what you’re seeing in the market and then your expectations for U.S. collections in the back half of the fiscal year? Thank you.

Chris Simon (President and CEO)

Yep, that plasma business continues to fire on all cylinders, Anthony. We’ve had both meaningful collection volume. Our largest driver is the annualization of our prior share gains, and then we’re really moving quite nicely with our Persona Plus adoption at or ahead of schedule there as well. Going forward, we didn’t include any collection volume growth in our updated high single-digit guidance, and it’s not because we think the market’s falling off a cliff or something, but rather that we don’t control it and so we don’t want to necessarily be accountable for that in our forecasting.

What we saw through the quarter and through the first half, U.S. collections have trended into mid to high single digits, and our OUS collections have been tracking well into the double digits. How that continues we’ll have to watch and see. We’re certainly prepared to accommodate continued robust demand, but again, our guidance doesn’t include collection volume as a primary driver in the second half. Instead, we’ll look to share gains both with CSL and our other customers and the accelerated adoption of Persona Plus.

Anthony (Analyst at Citi)

Thank you.

OPERATOR

Thank you. Our next question comes from the line of Anthony Bocconi with Mizuho Financial Group. Your line is open.

Anthony Bocconi (Analyst)

Thanks, and congratulations here on the progress on both operating segments. Maybe a follow-up on CSL, maybe just on the CapEx side. I know that on the manufacturing side of the equation for plasma there was consolidation a few years ago as CSL left the building. CSL is back in the building. So do you need a growth CapEx cycle here to fund bringing them back into the fold? And then a quick follow-up just on plasma: there was a cyber attack in Paris and it was targeting certain plasma and blood banks.

Just wondering if there’s any impact, either positive or negative, as you head into the back end of the year.

James DArecca (EVP)

Yeah, Anthony, it’s James on CSL CapEx and, yes, your instincts are right there. I would look at it really in two dimensions. One, we are going to have to expand manufacturing capacity. We were going to have to do that anyway since it was growing so well. So we will have to invest in line extensions and adding additional lines, and packaging and so forth, warehousing—all the things that come with higher volumes of business. The second aspect of it is devices, and those flow through our cash flow statement in a different way in that when we buy the devices they show up in inventory and when we place them they show up in

Chris Simon (President and CEO)

Capex. But we will have to buy additional devices. So that will ignite a new Capex cycle for us where over the next two years you’re going to see elevated capital expenditures as we move forward, but the return on those investments, it’s one of the best uses of capital that we have. Anthony, on the cyber attack in Europe, just another unfortunate example of the type of things that are going on in that environment. We haven’t talked about it publicly, but we were very fortunate and excited about re-engaging with EFS, the major collector in France, and that transition to our product line there is underway. Fortunately, we haven’t been involved and we’re obviously in discussion with EFS around all of this, but fortunately we’ve not been affected by the cyber attack.

We have safeguards in place. I don’t know that anybody’s truly safe in this environment, but we pride ourselves on our ability to respond. In this case, fortunately, we haven’t had to. It’s not directly affecting us in any way.

Anthony (Analyst at Citi)

Thank you.

OPERATOR

Thank you. Our next question comes from the line of Alan Gong with JP Morgan. Your line is open.

Alan Gong (Analyst at JP Morgan)

Hi, thanks for the question. I just wanted to touch back on a question that was asked earlier just in terms of the potential margin contribution from CSL. Understand you don’t want to give away the specifics of the deal, but just curious, given, you know, the margin profile of your core plasma business and the implications of having this deal lined up, how much of a contributor that could be in 2027? Calendar 2027, I suppose.

Chris Simon (President and CEO)

Yeah, Alan, it’s Chris. Thanks for the question. James can give you the breakdown, but let me just address it at a higher level because I want to be crystal clear. While we took that guidance down in the near term to accommodate the growth and some of the inflationary pressures we’re dealing with in the moment, we’re still very confident that this is a business that can deliver high-20s operating margins or better as we scale. And that scaling will occur on both of our operating groups.

To your question, within plasma, it is the definition of operating leverage. And I think as we add what will be approximately 50% more volume to that business, we have the ability to capture real operating leverage. And you should fully expect that from us going forward when we get on the other side of these transitory costs. With regards to MedSurg, I continue to believe that’s the place where we have the opportunity to surprise positively. We talked about the new product launches. Certainly there’s costs that come with that, but they were all factored in previously in our annual guidance. So I think as that business scales and comes into its own, that will be the big driver that you see. And I think the combination of both operating segments will contribute to that high-20s aspiration.

James DArecca (EVP)

Yeah, and it’s James. On the CSL contribution, that’s more of a fiscal 28 and beyond, for the reasons I talked about earlier in that we are ramping up. And I think it’s important just to note that the ramp-up costs, we expect those to be transitory and those will be largely eliminated as our operations normalize. There’s really two pieces of those. There’s the ones that are associated with increasing production, in this case by over 40%. Those costs, once we’re through them—through incurring them—should be eliminated.

The second piece of it is higher performance-based compensation. We pay for performance, and the CSL contract is contributing to this year’s outperformance. That incremental expense is also transitory. So next year the performance baseline will reset. So, as we exit FY27, the transitory costs go away. And then once we get into fiscal—maybe just a word on economies of scale—as our production normalizes after the ramp up, we can spread our fixed manufacturing costs over much higher volumes. So the real margin expansion opportunity comes from both the elimination of the transitory costs I just spoke about and then, of course, much better fixed-cost absorption as volumes build.

OPERATOR

Thank you. Our next question comes from the line of Michael Patuski with Barrington Research. Your line is open.

Michael Patuski (Analyst)

Hey, good morning, Chris. I was just wondering if we could talk a little bit about vascular closure and sort of your competitive response in EP, you know, a few quarters ago and how you—I mean, it appears that it’s worked. But I’m just curious what you feel like has worked, maybe some opportunities still there that you guys haven’t fully taken advantage of. I’m just curious about an update on that issue. Thanks.

Chris Simon (President and CEO)

Yeah, thanks, Mike. I think I would characterize it as this: I believe we’ve laid the groundwork for success. We now need to live into that success. And, you know, the first half results are fine. Second quarter was definitely affected by order timing. We’ve already seen that correct. So we’re cautiously optimistic about where we go from here. We talked earlier in this call about PacePro and Perclose Elite. They’re important contributors over time.

Here and now, MVP and MVP XL carry all the water. And what we’re seeing both on the regulatory approvals in Europe and in Japan, coupled with really leaning in and getting the full benefit of the changes we have made—I still believe there’s a three-part equation here: which is a much stabilized market; on the other side of PFA adoption, we see a resumption in growth in the number of access sites. We’re clearly benefiting by that now. High single-digit growth is kind of the baseline there.

We add to that a much-stabilized field force. We’ve fully resourced appropriate quotas, forecasting, targeting, and a team that’s got the right tools and the right focus to really be able to deliver there. And I wouldn’t take anything away from our competition, but I do believe that the value prop—with the additional clinical data, the expanded indications, et cetera—our value proposition and the superiority of it with regards to innovative closure has come to the fore.

And our team’s ability to commercialize against that, I think cautiously optimistic, but we’re looking for meaningful growth acceleration in the second half of this fiscal year and beyond.

Michael Patuski (Analyst)

Okay, great. And if I could get a quick one in just, I guess, around CSL, the impact of CSL, the win back there on capital allocation in particular. I guess I’m asking about, you know, the last couple conference calls. It feels like you have sort of made fairly definitive statements that, look, we’re not going to really explore any serious, you know, needle-moving M&A during this time. But, you know, since then, you obviously get the CSL win. I could see how that actually could cut both ways on potential external growth exploration.

And also curious how, you know, the CSL win obviously gives you a greater amount of flexibility. Does that mean you take deeper dives into sort of R&D innovation-type investment? Just curious about capital allocation post this CSL win and the impact that will really start to impact 28 and beyond. Thanks.

Chris Simon (President and CEO)

Yeah, we’re excited about the CSL win. We think it speaks volumes to our technology and competitive advantage across plasma. It does not change our capital allocation priorities near or intermediate term. Our highest priority is investing in organic opportunities like CSL. James has walked through this: the device production, the disposable capacity expansion, the distribution readiness, the expedited freight. Because all this is occurring at a time where we’re experiencing high-teens growth in the base plasma business to boot.

So there’s a lot to focus on there. That is our absolute priority. Yes, the cash flow continues to be incredibly robust. That’s not going to back off anytime soon. Gives us the opportunity to strengthen our balance sheet and that creates flexibility. You saw through the first half we repaid $100 million on our revolver. With interest rates where they are, my guess is we’ll look opportunistically for more to do there. And obviously the stock’s had a nice move. But as we get traction on our long-term plan and some of that becomes obvious, I wouldn’t take repurchases off the table.

We still have $325 million remaining on our existing authorization from the board. So capital allocation priorities are really first, second, and third: deliver on the opportunity right in front of us and make sure the execution is every bit as precise and as professional as it needs to be.

Michael Patuski (Analyst)

Okay, sounds great, thanks.

OPERATOR

Thank you. Ladies and gentlemen, as a reminder to ask a question, please press star one one on your telephone. Our next question comes from the line of Andrew Cooper with Raymond James. Your line is open.

Andrew Cooper (Analyst)

Hey everybody, thanks for the questions. Maybe just asking one more. If you could give a little bit of kind of sizing or quantitation around the operating margin guide in terms of what are you seeing that is the performance comp versus the cost pressures that won’t necessarily alleviate versus the intentional investments to support the growth in plasma. When we think about that 50 to 100 going to 0 to 50, if you could just size some of the moving parts, that’d be great.

James DArecca (EVP)

Yeah, sure. Andrew, it’s James. So I would say the biggest piece of it is probably related to performance-based compensation. If you’re sizing after that, then it’s more, I would say, these elevated production costs and some of the effects that we’ve seen from the higher price of oil—probably, if I had to go, maybe like a 60/40 type allocation there. But those two headwinds are meaningful to us along with the associated inflation that’s out there.

But again, as I said earlier, we are expecting the elevated production costs to be transitory and those will diminish over time, which really sets us up, I think, nicely in FY28 and beyond.

Andrew Cooper (Analyst)

Perfect. And then I’m going to sneak two kind of different questions into one here if I could. But just on plasma volumes, are you seeing any slowdown relative to the Persona Plus rollout like you did with Persona, where, hey, some of the fractionators can look and say I’m capturing more in a lower number of collections? Is that something you’ve experienced to date in the rollout? And then secondly on blood management, just—you mentioned the conversion cycle kind of winding down.

We’ve had hep neutralization cartridges that are certainly at a higher spot from a penetration perspective. So how do we think about sort of what’s next and the growth cycle for the TEG platform and blood management overall, whether we’re talking about a year or two and, frankly, longer term, what the right growth profile should be?

Chris Simon (President and CEO)

Yep. Thanks, Andrew. It’s Chris. With regards to Persona Plus, we are really pleased with the yield, the actual yield attainment that our existing customers [are seeing], and we now have the majority of our collection volume on Persona Plus here in the U.S. The product is performing at least as well as advertised, maybe a tad above that. And some of our collectors, yes, will take that as an opportunity in the near term to back off. If we’re giving them 5% or 6% incremental yield per collection on average, they’ll take that and book that to meet their near-term demand.

It meaningfully lowers their cost per liter, as we’ve discussed previously, and that’s all very positive. I think others will use it as an opportunity to build inventory and take end-market share. But we want to be mindful of it. It’s one of several factors that led us not to include collection volume growth in our guidance going forward. So remains to be seen; there’s definitely that possibility. If that’s the case—and it looks like what we experienced with some collectors in the original Persona rollout—as it annualizes, they tend to get back at it and growth resumes accordingly.

So we’ll watch and see. We think we’re protected on the downside there, but certainly a possibility. With regards to Blood Management, that’s a really healthy business, as you know. Over the last five years, Transfusion Management alone delivered mid-teens growth. We leaned heavily on that business when we needed them in the fourth quarter of last year; they took advantage of the HEP neutralization cartridge and the technology cycle upgrade, and they delivered fully for us. We expected a bit of a pullback in the first quarter, and they powered right through that.

What we saw in the second quarter, probably a little bit of a hangover from that push as well as some order timing. And so we remain very confident that BMT can continue to be the durable growth engine that it’s been for us over time. What’s really exciting us within that business now is that Transfusion Management, which is now fully 20% of the BMT revenues and some of our highest-margin product, has joined the party, and they continue to deliver high-teens and better growth.

And we think changes we’ve made to that business and amongst that team are going to power that for continued growth. We view that as very sustainable. So, a little slowdown in the quarter for sure on BMT. We think it’s time-bound, and we’re expecting good things from BMT in the second half for sure.

Andrew Cooper (Analyst)

Great, I’ll stop there. That’s very helpful. Appreciate it.

OPERATOR

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

Joseph (Analyst)

Yeah, thanks so much. This is Joseph on for Mike. Maybe just a question on TEG. Sounds like TEG is going to be increasingly more of a recurring revenue. Just wondering maybe if you could talk about the margin contribution there, just shifting towards more recurring revenue, and maybe you could talk about the gross margin cadence for the rest of the fiscal year.

Chris Simon (President and CEO)

Yeah, Joseph, thanks for the question. TEG is an 85:15 split now, where disposables—the TEG cartridges themselves—are the 85% of what we do. In fact, while it’s only 15%, some of the capital slowdown from the conversion cycle is what plagued us with a slightly reduced growth rate in the second quarter. One of the things that team has done really powerfully here is, as we’ve positioned the product more as a site-of-care device in or immediately adjacent to the operating room or the trauma wards, we’re seeing a doubling of the revenue per device.

The device itself is fine; it’s a profitable product, but the actual disposable uses has more than doubled, and that’s a growth trajectory we’re going to continue to lean into. We think that’s probably the single biggest driver of margin expansion and growth for that product line. So we continue to invest. Delighted to have it on a global basis now. So there’s important contributions coming from Europe, and over time we think Japan as well. It’s still predominantly a U.S. market, but we think that when we look at that TAM well in excess of $400 million, we have the lion’s share for sure.

But our biggest opportunity is to continue to drive utilization. We think there’s healthy runway for that product going forward. And yes, it will contribute to our gross margin expansion over time.

James DArecca (EVP)

Yeah. And on the margin phasing for the rest of the year—I think you asked about the gross margin—I commented earlier about operating margin. And we expect second-half margin expansion to be weighted more towards the fourth quarter, consistent with our revenue cadence, including the contractual economics that Chris spoke about in his remarks. I would say gross margin would follow that type of cadence as well. So the two would be consistent.

Joseph (Analyst)

Okay, great. Yeah, it makes sense. And then, appreciate all the color you guys have given on CSL, but maybe I can try and get one maybe a little bit more qualitative—and hopefully you already haven’t detailed this. But just in terms of the ramp, whether framing it as a calendar 2027 or fiscal 2028, do you see the ramp as more of a linear ramp, or is maybe one half a much larger ramp cycle than the other?

Chris Simon (President and CEO)

Again, it remains to be seen exactly how that plays out. Joseph, for certain we’ll be done by this time next year. And between here and there, we’ll move as fast as CSL is prepared to move, provided we believe collectively we can do so in a seamless fashion. That’s been the experience in the early conversions, and we have every intention to make sure that’s the case going forward. We want these converted centers to meaningfully step up their performance and their contribution from day one onward, and that’s a commitment we have between the two companies to make that a reality.

Joseph (Analyst)

Okay, great. Thanks so much and congrats on a strong quarter.

Chris Simon (President and CEO)

Thank you.

OPERATOR

Ladies and gentlemen, I am showing no further questions in the queue. That concludes today’s conference call. Thank you for your participation. You may now disconnect.

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