Haemonetics at Raymond James Conference: Strategic Growth Insights

On Tuesday, 04 March 2025, Haemonetics Corporation (NYSE: HAE) presented at the Raymond James & Associates’ 46th Annual Institutional Investors Conference. CEO Chris Simon outlined the company’s transformation into a high-growth, high-margin entity, focusing on both opportunities and challenges in its plasma and vascular closure segments. While technological advancements and strategic acquisitions are driving growth, market disruptions and management changes pose challenges.

Key Takeaways

• Haemonetics is evolving into a high-growth, high-margin company, with significant revenue from plasma products.
• Strategic focus includes organic growth and strategic acquisitions, particularly in electrophysiology and interventional cardiology.
• The company anticipates significant growth in fiscal year 2026, driven by price increases and share gains.
• Management is consolidating leadership roles to enhance operational performance.
• A conservative financial outlook is maintained, with potential for upward revisions.

Financial Results

Plasma Segment:

• Plasma growth is a major driver of EBITDA and cash flow.
• Guidance for the year, excluding CSL transition, is 4% to 7% growth.
• Technological improvements and pricing are primary growth drivers.
• CSL contribution expected to be zero in FY 2026, with $100 million revenue expected this year.
• A 7% compound annual growth rate is projected for customer fractionation capacity over the next seven years.

Hospital Segment:

• Vascular closure portfolio, including MVP and MVPXL, grew 25% last quarter.
• BaseVascade contributes approximately 15% of the vascular closure portfolio.

Blood Management Segment:

• TEG has shown consistent double-digit growth over the past four to five years.
• The approval of the heparinase neutralization cartridge is driving conversion to TEG 6S.

Overall Financial Health:

• Opened a $30 million flagship plant in Pittsburgh for plasma bowls and TEG cartridges.
• Q2 margin was 24.2%, with Q3 improving to 25.7%.
• Free cash flow guidance lowered due to aggressive projections, with improvement expected in Q4 and FY 2026.

Operational Updates

Plasma Segment:

• All existing bases converted to Nexus with Persona and Express Plus.
• Customers project double-digit growth in plasma collections.

Hospital Segment:

• PFA is recognized as a growth driver for the vascular closure portfolio.
• Strong demand for MVPXL, six months post-launch.

Blood Center Segment:

• Sold whole blood business to focus on high-growth segments.
• Japan Red Cross awarded its plasma apheresis business to Haemonetics.

Enabling Technologies:

• Monitoring RF ablation adoption for long-term prospects.

Management Changes:

• Two EVP roles consolidated into one, with Frank Chan as COO.
• Roy Galvin appointed global chief commercial officer.

Future Outlook

Plasma Segment:

• Share gains and price increases expected to significantly boost revenue.
• Collection volumes will be crucial for FY 2026 performance.

Hospital Segment:

• PFA expected to continue driving growth in vascular closure.
• Goal to make vascular closure a $300 million product.

Capital Allocation:

• Priority on organic growth, with strategic acquisitions as a secondary focus.
• Potential acquisitions in EP and IC are being considered.

Financial Guidance:

• Detailed guidance for FY 2026 to be provided in May, with a conservative approach.

Q&A Highlights

Plasma Segment:

• Recombinant therapies like Argenx might increase overall demand as adjunctive therapies.

Tariffs:

• No manufacturing or sourcing from China; exposure to tariffs from Mexico and Canada is minimal.

Free Cash Flow:

• Lowered guidance due to aggressive projections; improvements expected in Q4 and FY 2026.

Revenue Targets:

• Analyst mentioned revenue target of $1.34-1.35 billion and $5 earnings.

Readers are invited to refer to the full transcript for a detailed analysis of Haemonetics’ strategic direction and financial health.

Full transcript - Raymond James & Associates’ 46th Annual Institutional Investors Conference 2025:

Andrew Cooper, Analyst, Raymond James: Great. Good afternoon, everyone. Thanks for joining us. I’m Andrew Cooper. I cover life science tools, diagnostics, so a little bit of kinda med tech exposure as well here for Raymond James.

Happy to be joined by the team from HemaNetics. I have CEO Chris Simon with me, today up on the stage for a little bit of fireside chat, and then we’ll go down to Amarante One for the breakout afterwards. Maybe first, Chris, just kinda brief overview of of Humanetics, and then we’ll dive into the the plasma segment directly from there.

Chris Simon, CEO, HemaNetics: Yep. It’s, been with Humanetics for almost nine years now. I think one of the more important things to know about the company is we’ve really evolved as a company and a portfolio. What was 5050 is now eighty five fifteen, where the 85% is our core growth oriented products. I’m sure we’ll talk about all of those, but they’re 85% of the revenue.

They’re more than 85% of the profits and probably a 10 of the growth going forward.

Andrew Cooper, Analyst, Raymond James: Perfect. And jumping into to one of those core areas, let’s start with plasma. There’s been no shortage of things going on in that industry broadly. I think a more dynamic sort of five year stretch than a typical five year stretch over the last, you know, last five years. Maybe just walk us through the market as you see it today, the the key dynamics that are kinda pushing and pulling on that end market.

Chris Simon, CEO, HemaNetics: Yeah. Plasma is always interesting and now more so than ever. Plasma for us, you know, with our leading share and its consistent, you know, high single digit growth is an absolute engine of both EBITDA and cash flow. You know, there’s a lot of consternation back and forth because the growth in the prior two years was, you know, net of over 40 and then high teens. And folks were saying, well, was there a pullback?

We remain absolutely bullish on plasma, near term, intermediate term, longer term. It’s natural that there’s a pullback occasionally, but our guidance, you know, for the year, ex the CSL transition, is 4% to 7%. Obviously, we wouldn’t have put that out there a month ago with, you know, less than three months left in the year if we didn’t feel quite confident that the baseline growth is there.

Andrew Cooper, Analyst, Raymond James: Perfect. And and maybe on that 4% to seven percent, you know, I think there’s a lot going on in terms of some innovations you’ve rolled out, adoption of Persona of Express Plus. Maybe give the updates there and how we think about price sort of fitting into the equation in the four to seven.

Chris Simon, CEO, HemaNetics: Yeah. I’d, you know, I’d I’d call out that team for their excellent execution. Three years ago, we made some very bold commitments as to what was gonna happen in plasma. Sitting here today, three years into a four year plan, they have met or exceeded each dimension, whether it was the the share gains or the new technology innovation or just the ability to respond to the ebbs and flows in the market. They’ve done a truly excellent job.

This year, our primary driver of growth is the technological improvements, the new technology we’ve rolled out. And the pricing against that is our single biggest contributor to growth. Share gains is is second, and then the return to base volume collections is third.

Andrew Cooper, Analyst, Raymond James: Perfect. And maybe before I dive deeper into the the nitty gritty of Humanetics directly, you know, thinking about the market, We get questions, and it’s picked up a little bit of late on some of the recombinant therapies, the the, you know, non plasma therapies that are are coming, you know, coming forward and progressing. Just lay the the framework of the competitive landscape around IVIGE and whether you felt, you know, impact from a share perspective from VivGuard or or anybody else kinda trying to come into that space.

Chris Simon, CEO, HemaNetics: Yeah. I appreciate the question, Andrew. I I think there’s a bit of a mis misnomer that we’re somehow on the other side of the argenx trade. Argenx can do quite well. They are.

It’s a well organized company executing nicely, but all of our leading customers are growing double digits and executing quite nicely as well. When we listen to what they have to say, when we talk to key opinion leaders, it’s very clearly a case of concomitant therapy or adjunctive therapy and the new entrant actually raising demand across the entire class. It is important to keep in mind the class we’re talking about is autoimmune. There’s still another fifty plus percent that’s primary and secondary immune deficiency where product like anti FCRN doesn’t have a role, but at the end of the day, it’s not an either or. In this case, it’s been both, and there’s good reason for it.

We’re not the experts there. We tend to just look at some of the basic demand fundamentals, and we feel quite optimistic about where things are going.

Andrew Cooper, Analyst, Raymond James: Great. And, you know, I’m gonna have to touch on CSL at least briefly. I don’t think we could have this conversation without anything there. You know, where are you today on on that conversion or that roll off? It sounded like they were pretty clear, you know, done by sort of June of of this calendar year, on their earnings call last month, which was after your call.

We took all the revenue out for fiscal twenty six in our model. I I don’t know that everybody necessarily did that, but should we expect contribution in fiscal twenty six or should it be, you know, zero?

Chris Simon, CEO, HemaNetics: I think you’re right, to take it out. We’re gonna be conservative with our guidance. Sitting here today, I don’t anticipate that we’re gonna include any CSL in FY ’20 ’6. This year, we reaffirmed approximately a hundred million. It was heavily skewed to the first half of the year, seventy, thirty, if you will, and kind of winding down as we speak.

Andrew Cooper, Analyst, Raymond James: In in the past, when you’ve talked about the kind of margin dynamics around CSL, there was some cost outs and some repurposing and things like that to help kind of ease the, you know, the loss of that revenue. Are you in a place where you’ve captured, you know, most of that? Are you still confident with the kind of ranges you’ve provided before in terms of the decrementals?

Chris Simon, CEO, HemaNetics: Yeah. We’re we’re very confident. We’ve sized our capacity and our, infrastructure to deliver against the demand we see going forward with share gains, with a return to growth. It’s interesting. If I go back to June of twenty twenty two when we issued the LRP, we had just finished a year where the company earned $2.59 a share.

Of that, CSL was over a dollar, I think a dollar 5, dollar 10. Sitting here today with this year’s kind of guidance, we’re on target for a $4.60 EPS per share with very little difference in share count. CSL is less than 45¢ of that. And, you know, the plans we’ve put in place, the lead time we had to respond, the gains we’ve had elsewhere, have served to really mitigate any, unexpected impact.

Andrew Cooper, Analyst, Raymond James: Okay. And then, you know, maybe to to kinda sum up the conversation on this segment. As we think about fiscal twenty six, you know, a lot of puts and takes, whether it’s CSL, it’s VivGuard, it’s the overall kind of volume trajectory, persona pricing, share gains. Yep. How do we think about blending all of that together in the coming fiscal year knowing that, you know, you’re you’re wrapping up your fiscal fourth quarter here?

Chris Simon, CEO, HemaNetics: Yeah. I’d answer it kind of in in two parts. For the intermediate and longer term demand, there’s a lot of noise in the system. There’s a bunch of data kind of jumping around. A number that’s been highly predictive over extended period of times is the rate of growth of capacity expansion of our customers fractionation facilities.

That seven year projection from where we sit today based on what’s been publicly announced is roughly a 7% compound annual growth rate. We think that accords quite nicely with our high single digit growth forecast, and, you know, that’s where we see this going over time. For FY ’26, you know, we are very bullish. Probably our single biggest contributor will be share gains. That’ll be followed by the annualizing of the price increases associated with the new technology.

We’ve now converted all of the existing base to Nexus with, Persona and Express Plus. So that’s very bullish for us. What remains to be seen and and will hold for our May guidance is just what’s the collection volume that our customers are committing to. This year, they booked the 10% or 11% productivity we gave them and and ran with it. That’s gonna annualize, and we’ll see what they do on top of that for next year.

Andrew Cooper, Analyst, Raymond James: And maybe just on that last piece quickly, you know, appreciate that yeah. They’re waking up, and they have 10% more plasma without needing to do 10% more collections. I think you also have questions around sort of their inventory levels where they were rebuilding safety stock out of the pandemic as well. Can you size sort of how you or at least your perception from your seat of how big each of those is in terms of the volume trends we’re seeing today?

Chris Simon, CEO, HemaNetics: Yeah. It does vary from one company to the next, closely guarded, you know, trade secrets, and there’s a lot of, moving parts to do that quantification. When we sit back, we listen to their guidance, their near term play. They’re all projecting double digit growth. So we feel quite good they’re gonna need to continue to collect plasma near and intermediate term.

Andrew Cooper, Analyst, Raymond James: Okay. Helpful. Quickly on blood center, I know we’re probably not gonna spend the most time on that one, but you did sell the the whole blood business, Yeah. I think January, second week of January of this year. Why did that piece make sense to kinda pull out and and not be a part of the portfolio?

And, you know, what should we take away about what keeping the remaining apheresis business sort of says about that?

Chris Simon, CEO, HemaNetics: Yeah. Everything we do has to track back to our core corporate strategy. We wanna be in high growth, high margin segments where we can be number one or number two and get the associated returns. Whole blood didn’t check any of those boxes for us. So we found a more natural owner in GVS.

It was a smooth transition of those customers. They will be better served by a filter company that has more of an industrial origin and allows us to really put the focus. And I think you see some of that in our our results currently as that remaining blood center apheresis business becomes increasingly plasma apheresis and the lines between a blood center customer and a source plasma customer begin to blur in places like Egypt, where we’ve had tremendous growth in partnership with one of our leading fractionators to help the Egyptians meaningfully step up and and become self sufficient. I think that’s the norm. I think the growth outside The US in that regard is gonna be faster than we see here.

And and our ability to play as the standard of care in that operation is serving us really well.

Andrew Cooper, Analyst, Raymond James: In last earnings call, I think you you announced the Japan Red Cross in terms of another nice win there. Yeah. You know, to me, it it feels like a nice validation to get that win particularly in that region for competitive purposes. But any any thoughts on that?

Chris Simon, CEO, HemaNetics: Yeah. We called it out because Japan is our second largest market worldwide, to The US. And the Japanese Red Cross, we have a, you know, multi decade history. They’re they’re a very discerning customer and they put the entire, you know, book of business out to bid. All of the major major competitors showed up.

We did not compete on price. There was those who attempted to and that didn’t serve them well. So they had a chance to look at this and for the plasma apheresis piece, we won it in its entirety. And, you know, there’ll be a multiyear transition, but we thought it was a really good ability for an independent third party to validate the system in a OUS setting. And, you know, yeah, the team takes a lot of pride in what they’ve delivered there.

Andrew Cooper, Analyst, Raymond James: Perfect. And shifting to hospital now. Sure. A lot to talk about there. But maybe just first, lay the groundwork for me.

I think, you know, the vascular closure portfolio, I wish the naming conventions were a little bit different. But, you know, give a sense for kind of the moving parts there, what you’ve experienced when we think about the most recent quarter, and and kind of where each of those products plays in in that portfolio.

Chris Simon, CEO, HemaNetics: Yeah. First and foremost, we’ve helped expand and and develop the vascular closure category. And I think more than anything over the last several quarters, the the realization that, you know, we are vascular closure, we need to win. It is our first, second, and third priority. We have three products, BaseVascade, which is small and mid bore, primarily in a interventional cardiology setting for PCIs.

We also have MVP, which is the real workhorse of the portfolio, And we are six months into our MVPXL launch, which is our answer for, PFA and and larger, appendages. So, together, they’re working. If you take the MVP and the XL, it grew 25% again last quarter. We’re enthusiastic about that. We’ve we’ve got to stay focused and we have to deliver.

And we’ve had some, you know, growing pains that we are addressing.

Andrew Cooper, Analyst, Raymond James: And just on those, maybe to to dive in a little bit more, you know, describe maybe what the learnings are from these growing pains that you saw last quarter and kinda what changes are going in place to to address them.

Chris Simon, CEO, HemaNetics: Yep. Broad statement of the obvious, but I think we and everybody else underestimated the disruptive influence of PFA. PFA is unequivocally a tailwind for us. It will help our vascular closure portfolio grow at a faster clip. But in the near term, it’s just been a major disruption to the market as as everybody gears up to adopt this new technology.

Bringing Excel allowed us to play front and center. Excel is the shiny new thing. It’s an outstanding product. There’s tremendous physician demand. And as we ran to that demand, we probably took our eye off the ball a bit with the base cascade product, which was the entirety of the challenge we had in the third quarter.

Andrew Cooper, Analyst, Raymond James: And just in terms of of kind of resolving those, is it adding heads? Is it adjusting where those heads are focused and and kind of the comp structure? Just give us a sense for what’s happening on the field now.

Chris Simon, CEO, HemaNetics: It’s the latter, and it’s just kind of understanding the place. But to put it in context, at this point, we’re tracking towards a hundred and 50, hundred and 60 million dollar a year product. So roughly 40,000,000 in the quarter, of which 15% is the base cascade. I’m not alibiing it, but a a $6,000,000 quarter is a great quarter. A $5,000,000 quarter, we’re we’re struggling, and that is the difference.

And so we need to correct for that. I I believe we have, but, you know, that was the challenge in the quarter. A lot’s been made of it. I get the importance of it. It’s a, you know, primary growth vehicle for us.

But I do think it’s entirely of our own making and entirely of our own solving.

Andrew Cooper, Analyst, Raymond James: Great. And, you know, you mentioned MVP and Excel doing well. I I think, frankly, that’s the piece that I would be more worried if that was struggling. Mhmm. But maybe just give us a better sense now that you are six months into the Excel launch.

You know, how has adoption compared to what you were hoping for? And, you know, has the thinking around PFA, you know, changed? I know Boston certainly has gone faster than we would have thought, but, any other thoughts there would be great.

Chris Simon, CEO, HemaNetics: Yeah. So I think PFA is the dominant influence. And as I said, it’s a tailwind for us. The math on that will evolve, but what we’ve estimated is, you know, there used to be three or four holes to close. Now there are two or three closed to hole holes to close.

And so what we estimate it was 3.2 per procedure is on its way to 2.7. It’s probably still above three right now, but so there’s a loss there. However, because of so much of what they have done right, both Boston and Medtronic and probably BioSense Sense when they come, that combination has taken a low double digit growth rate into the mid teens or beyond. So if we go to simple math from 16 from 12% to 16, percentage wise it more than offsets the the loss in terms of holes per procedure, and it drives both Excel and MVP in that usage. And that’s why we say it’s clearly a net tailwind for us and and something we can play on.

There are other ablation procedures that we play in. One of the neat things about XL is it’s also indicated for left atrial appendage. That’s one to two holes per per procedure. So it doesn’t have quite the same growth clip, but it’s an outstanding base, and it’s part of what we’re going to do to make this a $300,000,000 product over time.

Andrew Cooper, Analyst, Raymond James: And maybe just remind folks. I mean, I think one thing that we get questions on, and you did a had a nice slide, prior that laid it out of where penetration is in these markets. Because I think that’s one thing that, again, people ask about. There’s not a lot of visibility from some of the the competition or

Chris Simon, CEO, HemaNetics: Yeah.

Andrew Cooper, Analyst, Raymond James: Kinda where that standard of care is otherwise.

Chris Simon, CEO, HemaNetics: Yeah. We we called out competition, and certainly, the performance we’ve put up does attract the attention of others. That’s quite real. But the biggest opportunity is if you look at all ablation today, fully half of all procedures are done using either compression or figure of eight suturing, which is really suboptimal to the four out of five that use our product or the one out of five that use somebody else’s product. So our biggest opportunity is VascADE MVP, and it’s driving into, you know, the half of procedures that aren’t being done.

Andrew Cooper, Analyst, Raymond James: So a lot of greenfield still. Vascade, for all the reasons we we kinda talked about, you know, great deal, I think, over the the couple years you’ve had it. Two more recent deals have been a little bit more challenging early on. What surprised you in in each maybe? And how do you weigh, you know, those surprises in terms of short term need to sort it out versus is there any change on the longer term deal model and and longer term kind of industrial logic of the deals.

Yeah.

Chris Simon, CEO, HemaNetics: So we’re very committed to the enabling technology in high growth sectors, EP, structural heart. So we’re not backing away from any of that. We’re very much committed there. I think this story with the Guidewire business, SavvyWire and OptiWire, is meaningfully different than Enzo ETM. So I’ll start with the Guidewire’s outstanding product, well suited for the market opportunity, particularly in structural heart TAVR placement.

But that’s a very different clinical interaction between our reps and our clinical support and the actual, physician teams. And so we’ve come up a learning curve. It is a different profile. We’ve hired a completely different group of clinicals to come in and support the Guidewire products in that setting. And I think there’s just been a learning curve that we’ve now largely cleared.

I think we see really interesting green shoots there. And, I’m confident that over time, we’ll deliver very much consistent with what we had modeled. Enzo ETM is a bit different. Right? It’s esophageal cooling for use with RF ablation.

The very simple assumptions that we put forth when we did that acquisition is that if a third of the market, 30 to 35% remains RF, and we can get half of that market to use our product where there is no other competition, we’d be wildly successful. If we are wrong, it’s because takes more than 60 or 70% of the market. And like anything else we do, we’ll we’ll reassess at that point in time. I don’t believe we’re there yet, but that’s something we’ll watch for. And, you know, we have limited resource.

We wanna make sure they’re directed against things that have the highest possible return.

Andrew Cooper, Analyst, Raymond James: Great. And I wanna make sure we hit on blood management because it’s an area I think we probably don’t spend enough time on. TEG has grown really, really well. You’ve had good success on capital sales there in terms of of placing new instruments. Can you share the latest on kind of that landscape and how that continues to grow so well after know, several years of of ownership and being on market.

Chris Simon, CEO, HemaNetics: Yeah. Again, I’ll call out that leadership team that, they just go from strength to strength. And we were fortunate enough to get the approval for the global heparinase neutralization cartridge, which we knew would would fill a void in the market. But more than fill the void, it’s actually catalyzed the conversion from the precursor predicate product, which is the TEG 5,000, it’s a lab based product, to TEG 6S, which is a site of care product. And and with that transition, our team has just run hard.

We we joked that, you know, it’s now the not so little engine that could and, for them to consistently put up double digit growth in these last four or five years now, that’s exciting. And I think the challenge for us is with 80 share of the market, a market that’s still only 25% penetrated on this $800,000,000 TAM, where do we take it next and how do we keep keep the growth trajectory going? Because, again, our biggest challenge is not necessarily the head to head competition with other visoelastic testing. It’s the absence of visoelastic testing.

Andrew Cooper, Analyst, Raymond James: I think I’d be irresponsible today if I didn’t ask you about tariffs. So I’ll let you if you wanna opine on politics, have at it. If not, just would love, you know, a little bit on where your exposures are. We know Mexico and Canada. And then, you know, what efforts are underway to to try to mitigate as you think about, you know, whether these things stick around or not?

Chris Simon, CEO, HemaNetics: Yeah. Look, we, like everybody else, are are learning with with each successive tweet or news release. I have seen some things in print that I think mischaracterize our exposure. I guess I’d say this. So as it pertains to China, we don’t manufacture in China.

We have no sourcing relationships from China. The China business, which we care a lot about, is is struggling for different reasons. It’s less than 5% of our revenue, and it’s not a primary source of growth or profit. So I think the China exposure is quite minimal. In terms of Mexico and and of Canada, it’s a different story.

The good news is three years ago, we opened our flagship plant that we had invested $30,000,000 in in Pittsburgh, Pennsylvania. It produces plasma bowls and tag cartridges, two of our top runners. We feel great about that. Where we have exposure is primarily in interventional technologies, which come guide wires from Canada and and the rest of the vascular closure portfolio from, down in Wyomus, Mexico. We’re gonna start getting into important questions around, is it country of origin, country of source?

Until we know those things, it’s really hard to dimensionalize. I would say that’s one area of the portfolio where the elasticity of demand is such that we probably have more degrees of freedom to respond if we get to that point.

Andrew Cooper, Analyst, Raymond James: Okay. Capital allocation priorities, maybe just give us a sense for for how you think about m and a at this point, what we should expect near term. I know Vivisher is something we’re we’re all kinda waiting to see the press release on at some point. But, you know, what else is maybe attractive as you look out over the landscape? Is it another leg to the stool outside of interventional?

Is there more inside interventional? How do we think about that?

Chris Simon, CEO, HemaNetics: Yeah. I I think f y twenty six I mean, so our our capital allocation priorities remain unchanged. Organic growth is the best return on money that we have. The inorganic growth would be a close second, and then we’ll find ways to give back to shareholders where where that’s our best alternative. When we look at this for f y twenty six, the year to come, we would say, you know, task one is deliver against what we have.

For the conversation you and I just had, we know we have an obligation to drive that return on invested capital. We think the opportunity to do so is fantastic and we just wanna live into it. That said, there are other enabling technologies in the EP or IC space, Vivasur being one of them. And when ready, we’d like to action those. But in in many ways, to your earlier point, I feel like we have to earn it.

Andrew Cooper, Analyst, Raymond James: Fair enough. And margin goals in the long term plan, you know, you got you guys laid out high twenties in fiscal twenty six back in summer of twenty two, I think it was. You’ve stuck to your guns when when the street for a lot of years, you know, hasn’t necessarily believed that. You posted almost 26% last quarter. You’re still sticking to your guns.

And and what takes you, from that most recent level to the the kinda next however many basis points to get to high twenties?

Chris Simon, CEO, HemaNetics: Yeah. That’d be we’ll guide for ’26 in May, including the margin profile. But our strategy is working exactly as we laid it out. Things never happen quite the way you want them to. We had a bunch more growth and some of that came at a cost and but, yeah, twenty four point two in the second quarter, ’20 ’5 point ’7, that’s not an accident.

That is predominantly gross margin accretion driven by mix, driven by price, driven by productivity and volume. That’s gonna continue. That will will carry over into FY ’26 quite nicely. The additional factor for ’twenty six will be the operating leverage because we’ve largely made the investments in sales and marketing that we need to be where we are going forward. So, you know, that’s our that’s our strategy at work.

And, you know, Olga will shoot me for saying it, but sometime later this year, we will have a new LRP, and we’ll take it out the next three years, plus or minus. And, you know, we think we’ve got a foundation that we can build very solidly on.

Andrew Cooper, Analyst, Raymond James: Great. And we’ve covered a lot. I think there’s a lot of kinda moving parts. I think when stories are complicated, people like to look to to free cash flow. Yep.

You guys lowered that guidance for this year, last quarter, which I think made finding the floor for the equity a little bit trickier, to be frank.

Chris Simon, CEO, HemaNetics: Yeah.

Andrew Cooper, Analyst, Raymond James: What drove that, and and how should we think about that fiscal twenty six free cash, you know, improvement? I think inventory is a big piece of it I’m sure you’ll get into, but I love some color there.

Chris Simon, CEO, HemaNetics: One of the things I mean, if you think about humanetics as an investment thesis, our balance sheet has always been a big part of the strength of the story. The EBITDA growth, the free cash flow, and the cash flow conversion should all be, you know, important sources of, for investment. From our vantage point, you know, dial back, you know, we were aggressive. We were aggressive on the core demand for plasma collection volumes, something we don’t control, and we were aggressive on our hospital business. If I just go back to the numbers, you know, we guide it to, you know, mid teens organic and and 30 plus inorganic, reported.

If we had just said fourteen and twenty eight, we’d be heroes sitting here today. So we got it wrong, and that was a forecasting, you know, issue largely associated with things that were beyond our control that we should have been more conservative about going forward, and we will. From our vantage point, the difference in cash flow is almost entirely working capital at this point. And we had a need to build new devices for the share conversion to meet what we expect to be the uptick in demand going forward on disposables and to make some investments that we’ve made internally. We have an, you know, pretty sizable digital platform optimization work that’s now winding down.

The vast majority of that is behind us. And we look at our fourth quarter and, you know, FY twenty six as an opportunity to have a much cleaner story about the free cash flow conversion coming off of our EBITDA. You know, stay tuned. I think it’ll be impressive.

Andrew Cooper, Analyst, Raymond James: Great. And, you know, maybe actually, two before we wrap up. First, couple management changes or or leadership, announcements, this week. Maybe just any comment there. Would would love some sense for how you think about those, and then I’ll wrap it up with one more.

Chris Simon, CEO, HemaNetics: Yeah. We’ve consolidated slightly on the senior team. I had, two separate executive vice presidents, super talented folks who decided to retire. I’ve combined those into one position as, an EVP and chief operating officer. Fortunate to hire Frank Chan coming in from Medtronic and Covidian before that.

Really good seasoned leader by creating that role, was able to track someone of Frank’s caliber to the team, and I think that’ll be instrumental in helping us take our operating performance to the next level. On the commercial side, we’ve moved off of the two business units being separate entities and instead now focusing on the three franchises, plasma blood center, interventional technologies, blood management technologies, with one global chief commercial officer, Roy Galvin. Roy is the guy who delivered all the stuff I was banging on about earlier in terms of plasma and blood center being exactly where we need him to be. He’s probably our best commercial thinker, and I’m delighted to have him leaning in and helping us with some of the challenges in IABT and elsewhere.

Andrew Cooper, Analyst, Raymond James: Perfect. And maybe just to wrap it up, don’t look at Olga because she might give you the the ax on this. But, you know, you’re wrapping up fiscal four q in a few weeks. Any context you can share on how we should think about fiscal twenty six would be great. You know, street’s at 1.34, 1 point 3 5 billion of of top line.

Just about $5 of earnings. Are you grinning at those? Are you scared of those? Just give us a sense for how you think about them.

Chris Simon, CEO, HemaNetics: Once bitten, twice shy. We’ll guide in May. Right? But I from where we are, we think the fundamentals are incredibly sound and we like our direction of travel. But, this is a tough market and I would much rather be conservative with the guidance on some of the things we called out in this conversation and have an opportunity to revise upward as the picture gets clearer and and we, you know, follow through on the delivery.

So, conservatism’s gonna be the rule of the day. If we get, you know, criticized for that, so be it. But I think we were on a position when James first joined where I think we went nine or 10 quarters in a row where we beat and raise. That felt better than where we’ve been in the last quarter, so maybe we should get back to that.

Andrew Cooper, Analyst, Raymond James: Perfect. We will wrap it up there. Thank you so much. And, like I said, we’ll head down to Amarante One for the breakout session. Thanks,

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