Good day, ladies and gentlemen and welcome to the Haemonetics Corporation second quarter 2017 earnings 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. As a reminder, this conference is being recorded. I would now turn the call over to your host, Gerry Gould, Vice President, Investor Relations. Please go ahead.

Good morning. Thank you, Stephanie, and thank you for joining us for Haemonetics' second quarter fiscal 2017 conference call and webcast. I'm joined today by Chris Simon, President and CEO; Bill Burke, CFO; Dan Goldstein, Corporate Controller; and Susan Grieco, VP, 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 and in our latest 10-K filing. This morning, we posted our second quarter earnings release to our Investor Relations website. Additionally, we posted comments on second quarter and first half fiscal 2017 results. These comments cover much detail pertinent to understanding performance in the second quarter and first half. 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 and Bill will discuss highlights of our strategy and business performance, important trends in our commercial markets, and key elements of the financial performance in the business. Then we 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 have excluded certain costs and charges from the adjusted financial results, which we'll talk about today. In the second quarter of fiscal 2017, we excluded certain restructuring and turnaround charges related to cost reduction initiatives we launched earlier in the fiscal year. In the second quarter of fiscal 2016, we similarly excluded restructuring and related charges. Also, in the second quarters of both fiscal 2017 and 2016, we excluded deal-related amortization expense. And finally, we excluded the tax effects of excluded items. In our disclosures, you will note increasing emphasis on GAAP amounts, especially where GAAP and adjusted results differ only immaterially. Further details of second quarter and first half 2017 excluded amounts, including comparisons with the same periods of fiscal 2016, 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'll the turn the call over to Chris.

Thank you, Gerry, and good morning to all of you. In August during the first quarter earnings call, I shared my initial learnings about the company and its markets and how those insights had influenced our strategic plan. After we provide an overview of our second quarter's results, I will update you on how that thinking has evolved and the progress we are making at implementing our strategy. You will note, as Gerry said, there is significant additional financial detail in our earnings release in the commentary on our website, especially as it pertains to first half results. Our second quarter fiscal 2017 revenue was $220 million, flat as reported and up 1% in constant currency. First half revenue was $430 million, which was approximately 50% of the midpoint of our full fiscal year revenue guidance range and in line with our expectations. We had continued strong results in Plasma, our core performance driver. Plasma franchise revenue was $104 million, up 11% over the prior-year second quarter and up 12% in constant currency, with virtually all of the growth in disposables. North America and Europe represented nearly 90% of Plasma disposables revenue and grew 14% and 17% (sic) [7%] in constant currency respectively. Plasma disposables revenue grew 52% in constant currency in Japan, as plasma apheresis collections increased along with the ongoing market shift to double-dose platelet collections. About half of the North American disposables growth came from the continued benefit of growth in the end market for plasma-derived biopharmaceuticals. The remainder came from the continuing ramp of liquid solutions. We have high confidence in the continued growth of the underlying market for our commercial plasma collection business. Immunoglobulin, or Ig, represents approximately 50% of all plasma drug consumption. And industry sources such as PPTA [Plasma Protein Therapeutics Association] and…

Thank you, Chris, good morning, everyone. We reported second quarter net income of $20 million or $0.38 per share. Our adjusted net income was $24 million or $0.46 per share, up $0.02 over the second quarter last year. We excluded restructuring and turnaround expenses we incurred as we continued the implementation of our strategic plan. We also excluded deal amortization consistent with prior periods. On a year-to-date basis, adjusted earnings per share, which exclude restructuring, turnaround and deal amortization expenses, were $0.71. This was in line with our expectations for the first half. We remain on track to realize the $40 million of fiscal 2017 benefits we expected when we announced this restructuring and turnaround program. There are two factors to note in the quarter related to the leukoreduction recall announced earlier this fiscal year. First, the filter recall had approximately a $3 million negative impact on second quarter fiscal 2017 revenue. Second, the quarter's earnings were negatively impacted by $1 million, or $0.02 per share, due to expenses incurred in connection with the filter recall. We received and are analyzing claims totaling $14.5 million from customers seeking reimbursement for losses sustained as a result of the recall. We have insurance policies in place which may provide coverage for certain of the potential claims. We will continue to assess the potential for insurance recoveries as we receive more information. But for accounting purposes, we recorded a liability of less than $1 million in the second quarter of fiscal 2017, and we do not anticipate a material long-term financial effect. Second quarter revenue and earnings were in line with our expectations and we reaffirmed our full-year guidance. Detailed analysis was posted to our Investor Relations website. Our immediate priority is delivering on our fiscal 2017 commitments including revenue, profitability and cash…

Thank you, Bill. I've been with Haemonetics nearly six months now, and the question I get asked most is am I glad I joined the company? The answer is a resounding yes. In fact, I am more optimistic today about the intrinsic value of our business and its long-term potential than I was in May. However, I am also more aware of the magnitude of the turnaround required and the need to address our organizational issues. To realize this long-term value creation potential, our strategy remains: first, to compete in winning segments and geographies, those capable of supporting lasting growth in revenue and profitability; second, to achieve superior short and long-term operating performance through greater productivity and return on invested capital; and third, to achieve and maintain the number one or number two competitive position in our markets. To implement this strategy, we have embarked on a multiyear journey to stabilize, transform, and accelerate growth. Phase 1 is nearly complete and we have made important strides to stabilize the company and pursue organic growth and sustainable profitability. We have defined and we are pursuing a set of priorities, each of which is led by a member of my senior leadership team. In Phases 2 and 3, during the second half of fiscal 2017 through fiscal 2019 and beyond, we will advance these initiatives to accelerate growth, with a greater focus on execution, quality, speed, and productivity. We aspire to return to growth by investing in product development, scaling our production, and launching innovative products in our growth businesses. We continue to work with our Plasma customers and regulators to advance meaningful innovation. Our NextGen plasma collection software is commercially available in the U.S. market and generating strong customer interest. Our new PCS 300 plasma collection device is on track for…

Thank you. Our first question comes from David Lewis with Morgan Stanley. Your line is open. David Ryan Lewis - Morgan Stanley & Co. LLC: Good morning, a few questions. Maybe I'll start with Plasma and then move to some financial questions. So, Chris, just a couple questions on Plasma. The first is have your thoughts around pricing as it relates to PCS 300 evolved at all? And as it relates to liquid solutions business, what's the long-term strategic opportunity here or size of that opportunity? And then I had a couple quick ones for Bill.

Okay, David, thank you for the questions. One first point of clarification, I believe I misspoke when I talked about the growth rates. I cited 14% and 17% in constant currency, respectively. It should be 14% and 7% – 7%, not 17%. So it's just a miscommunication. That is actually what's been posted to the website as well. In terms of pricing on our next generation equipment, we are very confident that this, through field testing with customers to date, that the combination of our software, our hardware and our disposables will meaningfully enhance the performance of our customers. And as such, the dialogue that we are having with them is how do we best participate in that value creation. The response has been overwhelmingly positive. I think as we demonstrate real value, it gives us the opportunity to price the products going forward more consistent with that value creation, and sharing that in the sense of the partnership that we experience with those customers. So I think we're very optimistic about that and we are open to a more creative financial arrangements moving forward therein. In terms of the liquid solution, that was very much a point in time decision. It obviously predates me, but it was decided to support one of our largest customers at a point in time where they were in need specifically of saline. We also provide citrate to all of our customers and we would expect we will continue to do that going forward. I would say it's not a strategic priority for us, and if there are other sources of opportunity for the customer and for us, we'll take advantage of it as it results. Our focus in going forward increasingly needs to be hardware, software and disposables. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay. And then, Chris, just another strategic one and then maybe one for Bill. I guess strategically, you're very clear about the plan the next three years. As you look into fiscal 2019, I think you identified that as the acceleration year. And I kind of just want to understand how much of that acceleration in 2019 comes from the pipeline contributing in a more material way, and how much comes from any estimate you're making about the two donor business becoming more stable? That's for you, Chris. And then for Bill, just free cash flow over the next couple of years, do you see free cash flow as a steady, linear progression, or are we going to see next year or 2019 immaterial CapEx outlays to reorganize plants and things of that nature? And I'll jump back in queue. Thanks so much.

Yes. Thanks, David. So, our growth increasingly going forward will be a combination first and foremost of organic growth, looking at what we have in the pipeline and what we are bringing to market, and fully realizing a set of assets, some of which are already in the market. I think that's disproportionately true in our Plasma and our hospital businesses. And I think as we go forward, we will selectively augment. In the near term, as I've talked about before, that would be more small scale, tuck-in M&A, things that were core to our existing business or immediate adjacencies where we could quickly convince ourselves that we are a natural owner and we would get the natural ownership benefits, the synergies top and bottom line that would come with that. I think over time, we would be open to something broader base, but that would certainly be post FY 2019 as we currently understand the time schedule. The donor business plays an important role for us overall. It's a profitable business and it's an important source of cash flow, cash flow that we need to fund our growth across all franchises.

So, David, it's Bill. Thanks to your question. So, on the free cash flow lumpiness, I guess, if you want to refer to it that way, as we determine what the plan will be for the ramp-up of the new devices, obviously, there has to be decisions made on ramping down the existing device. But in the short term, we will definitely be producing more devices than we have historically as we start to swap out the units in the field. So, in short, the answer is yes, but we're going to do everything we can to minimize the lumpiness of the cash outlays. David Ryan Lewis - Morgan Stanley & Co. LLC: Okay, thank you very much.

You're welcome.

Our next question comes from Larry Solow with CJS Securities. Your line is open.

Good morning.

Hi, Larry.

Chris, just a couple for you and then maybe a couple more, just general. You gave us a lot of optimistic points and reasons for encouragement. Perhaps, you've been there 6 months, and about 12 in total, if you include the strategic review. What's probably the one thing that is maybe the biggest negative surprise or biggest challenge you see and, perhaps, that will lead to even more positive improvement as you turn that piece around, too?

Hey, Larry. I appreciate the question. I don't think there's been significant negative surprises. I do – as I said earlier, more optimistic about the intrinsic value, more cognizant of the challenges associated with acting on that opportunity and realizing it, some of which are organizational in nature. And I think none of what we have laid out is a Herculean task but, in total, there are many things that have to happen simultaneously and having a fit-for-purpose organization capable of executing against that is a top priority for us and an important part of this next phase of the turnaround.

Okay. In terms of just the full-year outlook, clearly, you guys – I know you don't guide quarterly and it sounds like things are within the range of your expectations in the first half. As we look out, it looks like cost-cutting to me seems like it's either come faster or it's perhaps a little bit greater than you thought, even the opportunity in 2017. As you look back on the first half of the year, would you say that perhaps the revenue decline in blood bank is helping more, or is it cost cuts a little bit faster than you expected, or is it just a combination of the two? Any more color on that would be great.

This is Bill. In terms of the cost on the productivity initiatives, we're actually on track to deliver our $40 million. There was obviously timing built into the forecast and the guidance, and we're achieving that. Overall, in the mix of the business, we're still within our $140 million to $150 million. We don't guide quarterly obviously, so I don't want to talk about the individual quarters and what our expectations are. But overall, the cost savings and productivity initiatives that were announced related to the restructuring program that were announced early in the year, we're spot on those and we're feeling pretty good about where we are right now.

Okay, great. Thanks.

Our next question comes from Brian Weinstein with William Blair. Your line is open. Brian David Weinstein - William Blair & Co. LLC: Hey, guys. Thanks for taking my question.

Hi, Brian. Brian David Weinstein - William Blair & Co. LLC: So a question on TEG. You guys had talked about longer-term 20% growth. We're trending a little bit below that now in the mid-teens, and I think you talked about doubling over the next five years, which suggests a mid-teens type of a growth rate as well. Can you just help us bridge? Is there any kind of change in the way that you're thinking about the long-term opportunity, or is it just going to take longer to maybe see some of the benefit from the success? Just help us bridge the 20% versus the mid-teens that we're seeing. Thanks.

I think we feel good about our performance year to date and where we will likely finish this year as well with regards to what we guided to and where we are with TEG. It's obviously an exciting product. We have good growth aspirations that the five-year doubling is something that was put out back in the Investor Day, and we stand behind that. Obviously, subsequent indications and really driving the uptake both through producing a body of clinical evidence that we can take into the market and communicate and really driving a change in treatment protocols. If I might, I get asked the question how do we think about our competitors, the acquisition and additional reinforcement there. As I tried to say in the statement, we encourage that. That's actually a positive. It validates what we are trying to do in the market. Often having a second competitor helps raise the tide, and our expectation is that that will be the case here. But we intend to build and create further momentum with regards to our leadership position in hemostasis. Brian David Weinstein - William Blair & Co. LLC: Okay, and then a second one for me. You talked about strength in Plasma in Japan and cited increased plasma collections as you shift towards double-dose platelets. Can you just help me understand the correlation between the two of those and just how the end market for Japanese Plasma should be, how we should be thinking about that going forward? Thanks.

It is two sides of the same coin. As the Japanese market continues, as predicted, to move to multi-dose collection, double and in some cases triple, it basically frees up donors for plasma collection. So as they're able to get their red cell counts that they were looking for from a smaller donor base, those other donors are tracking towards plasma, which is a growth opportunity like that. So we are benefiting on the one side from what we lose on the other because we don't participate in the multi-dose collection. Brian David Weinstein - William Blair & Co. LLC: Got it, great. Thank you.

Our next question comes from Anthony Petrone with Jefferies. Your line is open.

Thanks and good morning. I'll begin with Plasma and then jump over to blood bank disposables, maybe just an update on where the PCS2 installed base is at this point in time. And it sounds like you're actively starting the process of transitioning to the next-generation system. I was wondering how that plays with the existing contracting cycle in Plasma, I was under the impression that it was a handful of contracts in the 2018 – 2019 timeframe. It sounds like there's an upgrade cycle going on now. So as we look out in our model, should we assume that this upgrade cycle is pushing out the contract expiration dates that were previously issued?

No, I don't think that's a fair interpretation. So if we created that perception, let me walk that back. So we are developing with customers to advance both the software and the hardware. We're on track for our submissions in the spring, as planned. And with good luck and good fortune, we will be launching the PCS 300, the hardware, in fiscal 2018, likely in the second part of the year. So we'll work our way through that. For now, what we are doing is focusing very carefully on that installed base of PCS2s and helping our customers optimize their performance within the existing installed base. That's in our customers' best interest, obviously, but it's also in our best interest that we can avoid placing more PCS2s in this interim period. It obviously will help us with our overall return on invested capital and avoidance of any accelerated depreciation against equipment that we would put into the market in this interim period before we make the change to the PCS 300.

Got it. Got it. And maybe, Chris and/or Bill, just can you give an update here on blood bank disposables, the blood bank division, just in terms of where you are on restructuring that operating segment. You did give that in terms of SKUs, countries and customers. It sounds like the progress is a little bit ahead of sort of expectations as they were issued at Analyst Day. When do you expect that entire program to be complete? And once we get there, what does the margin profile of that business look like? Thanks.

Yes. I'll talk about the process and I'll let Bill comment on the financials. With regards to the process, I think we are on track. It's complicated and as you can imagine, this is a very different operating model that what existed prior to my arrival. So, by creating more of a business unit orientation where we break out the different component parts of the company, we are going through what is first, an accounting exercise, what belongs where, and then increasingly now, a physical separation, so that we can have line of sight and manage each of the businesses consistent with their potential. So, it's an ongoing process. It's very much something that we're now facing into with the second phase when we talk about transforming the company. I think this is where it will become very real and we feel like we're on track to begin that process now, but it'll continue and particularly it'll continue over the next six quarters.

And in terms of the financials. So, we're still working through our five-year strategic plan. But generally, the philosophy when we're dealing with the Blood Center business is that we want to maintain our operating margin percentage or improve it. We would love to keep operating income flat from the business through that five-year period. But we're definitely going to be projecting continued revenue declines in that business. So, it's going to be up to us to offset that revenue decline and the associated margin with productivity savings in the business. And Chris did hit on some of the things that are definitely going to help us out, but it's going to be just an ongoing initiative on that business.

Thank you.

Our next question comes from Jim Sidoti with Sidoti & Company. Your line is open. James P. Sidoti - Sidoti & Co. LLC: Good morning. Can you hear me?

Yes, Jim. We hear you. James P. Sidoti - Sidoti & Co. LLC: Great. So, first question on the R&D spend, it was down quite a bit from the first quarter. Is that related to the timing of projects or is this a level we should consider to be kind of more normalized going forward?

Jim, it's very much a function of timing, some of which we will see in the second half of this year. It didn't happen in the first half of this year. What we are doing and what was communicated dating back to May is very much focusing and prioritizing those projects that will advance our growth businesses. So, we're looking very carefully at the return on investment in those projects. But what you're experiencing in the first half is – that are just a timing issue from when we need to advance individual efforts. James P. Sidoti - Sidoti & Co. LLC: Okay. And the second question for Bill, your predecessors have used forward contracts to help manage the effects of currency and give you better predictability in the near term. Do you think you'll continue that practice? And if so, when do you think you'll start to see some – currency, which has been a headwind from past several quarters, when do you expect that to turn around?

So, our intent is to continue to use the forward contracts. We're not going to change the methodologies that we have in place now. I know going into the fiscal 2017, there was anticipated headwinds versus the prior year. And those still exist, although at a slightly lower rate than what was anticipated. As far as predicting what's going to happen with the currencies, I mean, I really don't know, but we will see a benefit. If the rates stay where they are right now, we have a benefit in FY 2018 versus FY 2017. James P. Sidoti - Sidoti & Co. LLC: Okay, thank you.

You're welcome.

Our next question comes from Larry Keusch with Raymond James. Your line is open. Lawrence Keusch - Raymond James & Associates, Inc.: Thanks. Good morning, everyone.

Hi, Larry. Lawrence Keusch - Raymond James & Associates, Inc.: Hi. So, I just wanted to circle back to TEG's success and the trauma indication in the U.S. and just to understand what happened with the slippage in the FDA timing. And I guess, as part of that, it was my impression that that was actually quite an important clearance for the fiscal year 2017, so how are you offsetting that impact there?

Larry, it's Chris. Thanks for the question. So, in terms of where we are with it, we are looking at everything we're doing including that submission. We didn't feel that it was at a proper state of development to get the approval and it's a complicated submission because it's not one submission, it's literally several submissions, all of which are underway. So we've taken a hard look at it. We don't feel it's ready to go at this juncture. We still remain very confident in our ability to secure clearance for trauma. We have that indication essentially in all of the other major markets of the world for this success and we're confident we'll get it in the U.S., but the timeline is likely to be delayed from where we had originally hoped for, and that's what was communicated this morning. In terms of the actual contribution to performance, there was little to no financial impact associated with the trauma indication for success in FY 2017. As I tried to state on the call, there is a benefit in FY 2018 to the tune of approximately $5 million, which represents a combination of hardware and the actual cartridge disposables themselves. And we will cover that by driving harder on the TEG 5000 where we do have the broad set of indications, and by putting more of the focus in the U.S. on the cardiovascular surgery indication, which has received rapid uptake and a lot of enthusiastic support. So, where we can, we will drive both of those and obviously TEG is a global product, a global brand and we will pursue it aggressively across the broader set of indications, including trauma outside the U.S. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. That's helpful. And then just two other questions here. Again, I guess for Chris, as you think about the PCS 300 rolling out and let's just assume at this point that the model is consistent with where we are today in terms of placed instruments in exchange for disposable streams and there may be some variations to that, I understand. But how long do you think it will take, once you gain that FDA clearance, to kind of, if you will, swap out the older PCS2 for the PCS 300? Is that a two-year cycle, three-year cycle? And I guess embedded in that question is, is there incremental CapEx spending associated with that as you roll those instruments out? And then the second question is – I'm just trying to understand and I'm not sure if I have my math correct here – but is there a difference in selling days in this 2Q versus last year's 2Q? Thanks very much.

I think on the last one, Larry, I mean we're on a fiscal, it should be the same in both years if you're referring to the extra week that's in the fourth quarter. If it's something other than that, I guess shoot us an e-mail and we'll look into it. Lawrence Keusch - Raymond James & Associates, Inc.: Yeah. I'm talking about the 2Q specifically.

There should be no change. In terms of the PCS 300 approval and rollout, Bill, commented on this earlier. I think our customers would like us to wave a magic wand and have them all in their hands tomorrow. And I'm sure our shareholders would like that as well. We want to be very clear, though. Operationally, this is no small feat. And the one thing we won't do is we won't go prematurely and we won't make this be anything other than seamless in terms of the cut-over. So, we're working our way through it. We're not prepared to talk about the specifics of the timeline. It's one of the things that we'll absolutely factor into our three and five-year guidance when we're prepared to talk about that late this year. Lawrence Keusch - Raymond James & Associates, Inc.: Okay. Very good. Thank you.

Our next question comes from Anthony Petrone with Jefferies. Your line is open.

Just a follow-up as we look at the models into the second half in terms of, I guess, gross margin benefit versus incremental spend. I mean, as you look at it through the first half at – you're tracking a little bit ahead of actually the guidance range. So, I'm just wondering where we should be baking in some cost acceleration either at the gross margin line or operationally. Thanks.

On the gross margin line, I think I would anticipate gross margins not changing materially first half versus second half. And on SG&A, there'll be some benefit versus some of the full impact in the first half with the cost savings programs that were initiated as part of the restructuring but generally, think it's going to be very similar.

Great. And then R&D, this quarter should be kind of the run rate or should we...

I would expect higher spending in the second half for the reasons that Chris mentioned earlier with the reallocation of resources to projects that drive benefits to ROIC, and just takes a little while to do that reallocation, actually ramp the spending up on a project basis.

Great, thank you.

And I'm showing no further questions. I will now turn the call back over to Chris Simon for closing remarks.

Well, good. I just want to thank you for the time this morning and for the questions. Good dialogue as always. We appreciate your continued support of the company. Have a good day.

Thank you, ladies and gentlemen, that does conclude today's conference. You may all disconnect. Everyone, have a great day.