Good day, ladies and gentlemen. And welcome to the Haemonetics First Quarter 2017 Results Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. [Operator Instructions] As a reminder, this call is being recorded. I would now like to introduce your host for today's conference, Gerry Gould, Vice President Investor Relations. Please go ahead.

Thank you, Kat. Good morning. Thank you for joining us for Haemonetics' first quarter fiscal '17 conference call and webcast. I'm joined today by Chris Simon, President and CEO; Dan Goldstein, our Corporate Controller, Susan Grieco, Vice President, Finance. Please note that our remarks today will include forward-looking statements. Our actual results may differ materially from anticipated results. Additional information concerning factors that could cause results to differ materially is available in the Form 8-K we filed today as well as in our recent 10-K filings. This morning, we posted our first quarter earnings release to our Investor Relations website. Additionally, we posted comments on first quarter fiscal 2017 results. These comments cover much detail pertinent to understanding performance in the first quarter. We made them available in advance so that we may discuss more strategic topics on this morning's call and to proceed more directly to your questions. On today's call Chris will discuss highlights of our strategy and business performance, important trends in our commercial markets and key elements of the financial performance of the business. Then he, Dan, Susan and I will take your questions. Before I turn the call over to Chris, I would like to mention the treatment in our adjusted results of certain items which by their nature and size affect the comparability of our financial results. Consistent with our past practice, we've excluded certain costs and charges from the adjusted financial results which we'll talk about today. The first quarter of fiscal '17 we excluded certain restructuring and other charges and reserves related to cost reduction initiatives we launched during the quarter. The first quarter of fiscal 2016 we similarly excluded restructuring and other charges and reserves. Also in the first quarters of both fiscal '17 and '16 we excluded deal related amortization expense. Finally, we excluded the tax effects of all excluded items. Further details of first quarter '17 excluded amounts, including comparisons with the same quarter of fiscal '16 are provided in our Form 8-K and have been posted to our Investor Relations website. Our press release and website also include a complete P&L and balance sheet and a summary statement of cash flows, as well as reconciliation of our GAAP and adjusted results. With that, I will turn the call over to Chris.

Thank you, Gerry. And good morning to all of you. For the past 11 weeks since joining the company on May 16th, I have immersed myself into the Haemonetics business in part by embarking upon a series of listening and learning endeavors. I've solicited input from our stakeholders, including customers, scientific and medical key opinion leaders, suppliers and other business partners, regulators, employees, and many of you as investors and analysts. This is provided helpful insights and a deeper understanding of the company and its markets. I'll share some of the learning from that process and how it has influenced the development and implementation of our strategic thinking. But first, I'll give you a brief overview of our first quarter results and remind you as Gerry said upfront, that there is significant additional financial detail in our earnings release and commentary. Our first quarter fiscal '17 revenue was $210 million, down 2% as reported and flat in constant currency. This was 24% of the midpoint of our full fiscal year revenue guidance range and inline with our expectations. Strong performances in Plasma and Hemostasis Management, our TEG family of products continued and theses two business franchises delivered over $10 million of revenue growth in the first quarter. They have delivered strong constant currency growth consistently over the past six years and this trend continued into fiscal '17. Our North America Plasma franchise delivered 15% growth in the first quarter with about half that growth coming from the continuing ramp of liquid solutions. We continue to benefit from growth in the end market for Plasma derived biopharmaceuticals and we continue to advance meaningful innovation to differentiate our product offering, working with our customers to help optimize collection productivity and yield. Our next generation Plasma collection of software is commercially available in…

Thank you. [Operator Instructions] Our first question today comes from the line of Larry Keusch with Raymond James. Your line is open.

Thank you. Good morning everyone.

Hi, Larry.

So I wanted to, Chris, start with - you made a comment that your focus will be on business areas that you are number one or number two in, so I thought it might be useful to let us know where you're not currently one or two and maybe broadly how you're thinking about improving those market positions?

Yes. Thank you for the question. So defining market segments, we're clearly the number one player both in our broad-based Plasma business and Hemostasis Management TEG. That's not the case for our cell processing businesses or our blood center businesses. So the plans that those teams are developing are aimed at putting forth a realistic perspective on whether or not it is attainable to achieve a top position in those markets and that's our primary focus there.

Okay. Perfect. And then two other quick ones. EMEA revenues were fairly weak, I think down 5% in the quarter. Also there was a comment in there somewhere that you were feeling global price pressure on whole blood. So I'm wondering if you can just walk us – excuse me, through the dynamics in the European markets and then the thoughts around this global price pressure on whole blood?

So I'll take that one. The main driver for the decrease that you're seeing in the EMEA region is driven by the Russia CIS market where obviously macroeconomic situations there have impacted our business, as well as some continued inventory management by our supplier. In terms of the whole blood business overall, we continue to face a reality in terms of the pricing level and are continuing to implement the contracts that we have in place that do reflect those pricing reductions.

Okay. Perfect. And then just the last one. So you had the $0.06 of recall expenses in the quarter, which I assume that when you provided guidance were not anticipated, but yet you maintained the guidance for the year. I just want to make sure I'm understanding that correctly?

Yeah. I'll handle that one directly. So we definitely saw the $0.06 or $3 million from the leukoreduction in that filter recall. There will be some carry-forward on that. However, we're reasonably optimistic at this point that we'll cover that through business operations elsewhere.

Okay. Terrific. Thank you.

Thank you. Our next question comes from the line of James Francescone from Morgan Stanley. Your line is open.

Good morning. Thanks for taking the question. Chris, just wanted to follow up on the target that you outlined for improvement of operating income and cash flow. Could you clarify over what time frame you expect to double EBIT and quadruple cash flow? And second, what are some of the, from a conceptual perspective, what are some of the drivers that would make the improvement in cash flow so much larger than the improvement in earnings?

Yes, let me start and then I'll invite the team to comment. The strategic plan that we put forth and the financials that I referenced at the end of my statement both pertain to our five year plan. So it's over that five-year period of time, beginning in fiscal '17. In terms of the differential top line versus bottom line, it's a combination of factors, not the least of which is mix between the different businesses and our ongoing productivity whereby we aspire to be significantly more productivity with a leaner operations, starts with OpEx and general and administrative cost, but it also includes our cost of goods sold and the manufacturing network.

And I'll just add to that that as Chris mentioned with the product launches that we have coming up, in particular within our Plasma organization which is our largest as everyone knows, that is a very capital intensive process to launch those projects. So over that same five year horizon we will be using some cash to launch those products, but then enjoying the stream of cash disproportionately as it catches up after the capital investment is made.

Okay. That's helpful. And then on a p separate issue, can you maybe talk, give us a little bit more color on how the filter quality issue was uncovered, how Confidence that it will not have a material impact going forward?

So let me start with that. On the reality of that situation is it dates back fully to one year ago. Those filters are produced in our Fajardo, Puerto Rico plant and there were a set of changes made to the operating line there that led to the issue. We just have a lengthy supply chain as you can appreciate, so they didn't pass through the supply and actually materialize in the market until earlier this year, midway through first quarter. The actual issue itself and the remedy to the issue actually predated this quarter in its entirety.

Okay. Understood. That's all from me. Thank you.

Thank you. Our next question comes from the line of Brian Weinstein with William Blair. Your line is open.

Hi. Good morning. This is Matt LaRue in for Brian. My first question here Chris, is about sort of the long-term footprint and obviously the company just went through a process where in order to. Did some some work in moving manufacturing around. As a part of your plans to reduce the operating structure, is it component to another look at the footprint or where does that stack up as you look at things?

Yes. Speaking very candidly, the footprint of Haemonetics is a tale of two very different businesses and we have our growth businesses with increased capacity requirements. We are facing into those realities and optimizing network and we'll add as appropriate our plans as discussed, include the capacity expansion necessary to make that happen. The other parts of our business are struggling more and in that part of the network we're actually more in a retrenchment mode. We'll face into the realities of that. I think we've begun to do so already. But I want to be crystal clear about the three broad phases of the restructuring as articulated. The first phase is stabilization. One of the things that's caused us problems in the recent past is the transfer of products between sites and our strong intent is to stabilize and avoid further disruption associated with that TEG transfer.

Okay. Fair enough. And then the second one is on the blood end markets here and one of the issues the last couple years is been that's a hard end market to get visibility into. And just wondering if there are things you can do differently to get better visibility into those end markets, both on the transfusion side and with your blood center customers, is that a part of the process as well?

It's certainly been part of my listening and learning. I've had occasion unfortunately all through the recall to talk to pretty much all the leading – all of our leading customers in the blood center business. So certainly as part of that discussion we talk about the state of blood collection, the frequency of transfusion and where we see that going. As you know, it's hard to get pinpoint data around this. Our strong belief, as theirs is, is that the long-term systemic reduction in transfusion rates will continue. We saw some abatement of that earlier this summer. But our sense is that's situational and a point in time and over the longer haul we will see the rates continue to go down and as a result of such need to face into that reality.

Thank you, Chris.

Thank you. Our next question comes from the line of Anthony Petrone with Jeffries. Your line is open.

Thanks and good morning. Maybe Chris a little bit on the top line outlook over the five-year time frame. It was helpful to get the outlook for operating income and cash. But anything you care to add in terms of blended top line growth outlook over that time frame and really what will come from organic growth and inorganic growth. And I have one follow-up? Thanks.

Thanks. So just for clarity's sake, the bottom line and ROIC and cash flow to the extent I've spoken with them are really focused on our organic plans and very modest acquisitions that would just augment and offset as the inevitable puts and takes in our own portfolio play forward. Acquisitions will be something separate. We'll talk about that over time. It's not lost upon me the challenges the company has had in the past executing M&A effectively. It's not part of our near term plan. It is something we'll consider as opportunities present but over time. In terms of the top line, we're still working through that. As I said, I'll be more comfortable with Bill on board and having gone through the details together with our franchise leaders, to give you more clarity perhaps at the end of second quarter. What I can say is right now the plan is very much focused on driving both Hemostasis and Plasma as discussed, making sure that we have a proper answer, we're excited about the upcoming launches in cell salvage and transfusion management. If they deliver fully against their opportunity, I think we'll have a much more exciting story to talk about on the top line as well as the bottom line going forward.

Great. Maybe an update, the second question would be on TEG. I guess we haven't had a retooling of that number in a while. The growth has come down here a bit from prior quarter, 17% constant currency growth. Just your updated outlook on TEG and where do you think peak sales are for that product? Thanks.

Yes. So I am not prepared to talk about peak sales. But I can tell you we're excited and I think it's very much contingent upon the breadth of indication and the rate at which we can penetrate the top 10 or so markets around the world. In terms of our specific guidance, we remain convinced and are on track to deliver a full year performance as we guided to back on our May 10th Investor Day. The setback, kind of where we stand with FDA, we still expect approval. We have approval for cardiovascular. We expect the trauma indication approval later this fiscal year. What I'm most excited about is that given where we are today, the performance is with exposables [ph] on the TEG 5000, both in the US and in China.

Thank you.

Thank you. [Operator Instructions] Our next question comes from the line of Jim Sidoti with Sidoti & Company. Your line is open.

Good morning. Can you hear me?

Yes. We hear you, Jim.

Can you give uses a little more color on the roll-out of the new TEG system. Is that going to initially go to the existing TEG 5000 customers or are you marketing a different customer for the 6X?

We're very much contingent upon the indications that we're approved for, as you can appreciate, Jim. At this point we have the approval in markets outside the US and it will vary by account and by country, depending on our placements. We are excited to continue to drive the 5000 in parallel. The 6S gives us some degrees of freedom and particularly with the four different cartridges that we'll be able to work into the treatment regime, we expect that to be a pretty robust part of our rollout. It does vary meaningfully from one account to the next and from one country to the next and all ultimately contingent upon the approvals that we receive.

And then can you just give us a few comments on overall R&D spending. You indicated at the Investor Day that investments in the blood center business were going to decline, but the overall number stayed pretty steady with the fourth quarter. Is that just an increase in spending on Plasma and TEG or should we see declines in that line going forward?

That is what the increase in spending was related to. In fact, our whole blood spend on R&D or our blood center spending on R&D was reduced significantly in Q1 to about a third of what it was in Q4.

So how should we look at that overall number going forward? Should that stay about this level?

I think it will probably stay about this level as we continue to develop further technologies to support the products that we are launching in our growth franchises and it will stays disproportionately focused on those products that we believe have growth in solid end markets.

All right. Thank you.

Thank you. [Operator Instructions] And I am showing no further questions at this time. It does conclude our Q&A portion of the call today. I'd like to thank you for participating in today's conference. It does conclude today's program. You may all disconnect. Everyone have a great day.