Haemonetics Corporation (HAE) Q1 2026 Earnings Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call highlights strong organic growth, optimistic guidance, and strategic initiatives to address market challenges. Despite temporary softness in certain segments, the company is taking proactive measures, such as hiring new leaders and reorganizing teams, which instill confidence. Strong gross margins and a positive outlook for plasma and hospital segments further support a positive sentiment. However, the lack of clear guidance on plasma collections and competitive pressures in vascular closure warrant cautious optimism. Considering the market cap, a positive stock price movement of 2% to 8% is anticipated.

Key Financial Performance

Revenue $321 million, down 4% due to the anticipated $52 million impact from portfolio transitions, but up 13% organically ex CSL.

Adjusted EPS $1.10, up 8% year-over-year, driven by strong growth in the base business, margin expansion, and share buybacks.

Hospital Business Revenue $140 million, up 4% reported and organic, driven by strength in Blood Management Technologies (14% growth) and offset by temporary softness in Interventional Technologies.

Plasma Revenue $130 million, down 4% reported but up 29% organic ex CSL, driven by prior technology upgrades and a one-time revenue benefit from a renegotiated software agreement.

Blood Center Revenue $52 million, down 22% reported due to the divestiture of the whole blood business, but organic revenue grew 4%.

Adjusted Gross Margin 60.8%, up 550 basis points year-over-year, driven by technology and price initiatives, favorable product mix, and a one-time benefit from license fees.

Adjusted Operating Income $78 million, up 9% year-over-year, representing 24.1% of revenue, driven by share gains in plasma and cost discipline.

Adjusted Net Income $53 million, up 2% year-over-year, despite a higher tax rate.

Free Cash Flow $2.5 million, a significant improvement from a $17 million cash outflow in the same quarter last year, driven by improved working capital management.

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Operating Highlights

NexSys, TEG, and VASCADE: These three core products drive 85% of total revenue, with strong growth in the U.S. NexSys technology upgrades and share gains reinforce global leadership in Plasma. TEG 6S adoption fuels growth in blood management technologies. VASCADE shows mixed performance but is expected to regain momentum with new leadership and initiatives.

Plasma market: NexSys delivered $130 million in revenue, up 29% organically excluding CSL. The company holds an 80% market share in plasma DMS software, supported by NexLynk integration. Growth is driven by prior technology upgrades and a renegotiated long-term software agreement.

Hospital business: Generated $140 million in revenue, up 4% reported and organic. Blood Management Technologies grew 14%, driven by hemostasis management and TEG 6S adoption. Interventional Technologies declined 7% but is expected to recover in the second half of FY '26.

Operational efficiencies: Adjusted gross margin reached 60.8%, up 550 basis points year-over-year, driven by technology and price initiatives. Adjusted operating income increased 9% to $78 million, with disciplined cost management and productivity initiatives contributing to margin expansion.

Portfolio transformation: The company divested its low-margin whole blood business and streamlined its apheresis portfolio to focus on higher-growth areas. Strategic investments in plasma and TEG are driving growth and profitability.

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Risk or Challenges

Portfolio Transitions: The company faces a $153 million planned portfolio transition, including the divestiture of the whole blood business and the exit of liquid solution products, which could impact revenue and operational focus.

Interventional Technologies: Temporary softness in Interventional Technologies, with a 7% decline in the quarter, is attributed to tough comparisons, OEM destocking, and PFA-related pressures. Executional challenges are being addressed, but recovery is expected only in the second half of FY '26.

Vascular Closure: Continued softness in legacy VASCADE products, representing 15% of Vascular Closure revenue, is attributed to lower growth in coronary and peripheral procedures. Increased competition poses additional challenges.

Plasma Business: The plasma business reported a 4% revenue decline, with growth heavily reliant on prior technology upgrades and a one-time software agreement benefit. U.S. plasma collection volume growth remains low, and recovery is uncertain.

Blood Center Revenue: Revenue declined 22% due to the divestiture of the whole blood business, with organic growth limited to 4%. The business is undergoing streamlining, which could impact short-term performance.

Regulatory and Market Pressures: The company faces macro and market challenges, including increased competition and pressures in esophageal cooling and sensor-guided technologies.

Operational Costs: Adjusted operating expenses increased by 2%, reflecting targeted R&D investments and higher tax rates, which could pressure margins.

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Guidance & Outlook

Full Year Revenue Guidance: Reaffirmed full year revenue guidance of 3% to 6% reported revenue decline, but 6% to 9% organic growth excluding CSL.

Hospital Business Guidance: Reaffirmed full year hospital guidance of 8% to 11% reported and organic growth, driven by strong momentum in Blood Management Technologies and expected recovery in Interventional Technologies in the second half of FY '26.

Plasma Business Guidance: Reaffirmed full year fiscal 2026 plasma guidance, including a reported revenue decline of 7% to 10%, but organic growth excluding CSL of 11% to 14%. Growth supported by price benefits from prior technology upgrades, continued share gains, and potential modest recovery in U.S. plasma collections in the second half of the fiscal year.

Blood Center Revenue Guidance: Reaffirmed full year guidance of 23% to 26% decline on a reported basis and 4% to 6% organic decline as the company continues to streamline the apheresis portfolio and reallocate resources to higher growth areas.

Adjusted Operating Margin Guidance: Reaffirmed fiscal 2026 adjusted operating margin guidance of 26% to 27%, with stronger margins anticipated in the second half of the fiscal year due to product mix, stronger commercial execution, and continued cost discipline.

Adjusted EPS Guidance: Reaffirmed full year adjusted EPS guidance of $4.70 to $5, reflecting disciplined capital deployment and benefits from share buybacks.

Free Cash Flow Guidance: Reaffirmed full year free cash flow guidance of $160 million to $200 million, with a free cash flow conversion rate above 70% of adjusted net income.

Long-Range Plan Targets: Reaffirmed targets including low double-digit compounded annual growth rate in revenue, mid-20s adjusted EPS CAGR excluding CSL, adjusted operating margin expansion in the high 20s in fiscal 2026, and cumulative free cash flow of $600 million to $700 million.

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Shareholder Return Plan

Share Buyback: The company executed a $150 million share buyback recently, which contributed to an 8% growth in adjusted EPS for the quarter. The buyback also resulted in a lower diluted share count and is expected to offset higher income tax rates and interest expenses. Additionally, the company plans to use cash on hand to retire $300 million of 2026 convertible securities at maturity. The balance sheet remains strong, with up to $1 billion in additional available capacity by the end of the fiscal year, enabling further share buybacks when opportunities arise.

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Key Q&A

Q:What were the drivers behind the strong performance in the plasma segment this quarter?

A:The strong performance in the plasma segment was driven by innovation in pricing and share gains. The plasma franchise is larger, faster-growing, more profitable, and more diversified. Approximately half of the 29% growth quarter-over-quarter was due to a software agreement, while the remaining 14%-15% growth was at or slightly above the high end of the guidance range. The software agreement solidified the company's position with roughly 80% share of the U.S. VMS market.

Q:What was the growth rate for MVP and MVP XL in the hospital business, and what challenges were faced?

A:MVP and MVP XL saw roughly 6% growth. Challenges included a decline in the international business, particularly in Japan, and executional issues across all three products, especially the base VASCADE. The company is working to regain competitiveness in PCI procedures.

Q:What is the timing for the full deployment of share gains in the plasma segment, and what is the expected growth impact?

A:The share gains are fully on track and ahead of schedule. They are expected to be the primary driver of the 11%-14% organic growth for the year, with some carryover into FY '27. The company has transitioned all U.S. customers to NexSys with Persona and Express Plus and is expanding agreements with large collectors.

Q:What is the company's outlook for the vascular closure market and the competitive dynamics?

A:The vascular closure market is estimated at $2.5 billion to $2.7 billion TAM, with high single-digit growth (8.5%) expected this year. The company is experiencing temporary softness, which is not structural. Competitors include a prior industry standard and a low-cost alternative. The company is addressing these challenges through new sales and marketing leaders, reorganized teams, and strategic account management.

Q:What is the expected contribution of the hospital and interventional tech segments to the full-year guidance?

A:The hospital segment grew 12% organically last year and is expected to grow double digits again this year. The interventional tech segment is expected to recover, but the contribution will likely not be 50-50 with the hospital segment. The strength in the TAG business is expected to cover the underperformance in vascular closure.

Q:What factors contributed to the strong gross margins this quarter, and what is the outlook for the rest of the year?

A:Strong gross margins were driven by volume, shifting portfolio mix, and productivity initiatives. The software agreement contributed 210 basis points to gross margin. The company expects gross margins to hold at the current level for the rest of the year, supported by mix and price improvements.

Q:What is the company's approach to M&A given the challenges in interventional technologies?

A:The company is focused on fixing the interventional technologies business before pursuing further M&A. The only potential M&A activity is related to the PerQseal Elite product from Vivasure. The company is prioritizing execution and investing in its current businesses.

Q:Has the outlook for U.S. plasma collections changed this year?

A:The outlook for U.S. plasma collections has not significantly changed. The company expects low single-digit growth above historical seasonality in the back half of the year, but this remains uncertain. Long-term, the company is optimistic about the demand for immunoglobulins and the health of the plasma market.

Q:What is the progress and outlook for the heparinase neutralization cartridge in the hemostasis management segment?

A:The heparinase neutralization cartridge is in the early stages of rollout and has been a watershed moment for the segment. The company is in half of the T700 accounts in the U.S. and less than half in Europe and Japan. The cartridge is driving conversions from TEG 5000 to TEG 6s, with roughly half of current TEG 5000 users converted.

Q:What is the company's position in the TEG market, and what are the growth opportunities?

A:The company has a 70% share of the TEG market, with the U.S. contributing high 20s growth and the global market growing in the mid-20s. The biggest opportunity is driving adoption of viscoelastic testing, particularly in Europe and Japan, where utilization is lower than in the U.S.

Q:What actions is the company taking to address challenges in the interventional technologies segment?

A:The company has hired new sales and marketing leaders, reorganized into dedicated teams, and is investing in sales enablement tools and strategic account management. The focus is on driving utilization and responding to competition in PCI and AFib procedures.

Q:What is the company's guidance for plasma and hospital segments this year?

A:The company expects plasma to grow 11%-14% and the hospital segment to grow 8%-11%. The guidance reflects confidence in the performance of the plasma and hospital businesses, despite challenges in interventional technologies.

Q:What is the company's approach to addressing competition in the vascular closure market?

A:The company is addressing competition by hiring experienced sales and marketing leaders, reorganizing teams, and investing in account-specific competitive responses. The focus is on leveraging the clinical and workflow efficiencies of VASCADE to regain competitiveness.

Q:What is the company's strategy for long-term growth in interventional technologies?

A:The company is investing in sales and marketing capabilities, clinical engagement, and strategic account management to build a scalable and competitive interventional technologies business. The focus is on driving utilization and expanding the value proposition of VASCADE.

Q:Review of Unclear Management Responses

A:Management avoided providing a direct answer to the question about the timing and magnitude of the recovery in U.S. plasma collections. They acknowledged the uncertainty and cyclical nature of plasma collections but did not provide specific details or a clear outlook for the back half of the year.

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Earnings Word Cloud

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