Good morning, ladies and gentlemen. Thank you for standing by, and welcome to Haemonetics Corporation Fourth Quarter Fiscal 2022 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker host for today, Olga Guyette, Senior Director of Investor Relations and Treasury. Please go ahead.

Good morning, everyone. Thank you for joining us for Haemonetics' Fourth Quarter Fiscal 2020 Conference Call and Webcast. I'm joined today by Chris Simon, our CEO; and James D’Arecca, our CFO. This morning, we posted our fourth quarter fiscal '22 results to our Investor Relations website, along with our fiscal '23 guidance and the analytical tables with the information that we'll refer to on this call. Additionally, we provided a complete P&L, balance sheet, summary statement of cash flows as a reconciliations of our GAAP to non-GAAP financial results and guidance. Before we get started, unless otherwise noted, all revenue growth rates discussed today are on an organic basis and exclude the impact of currency fluctuation, strategic exits of product lines, acquisitions and divestitures and the impact of the 53rd week in fiscal '21. As in the past, we will refer to non-GAAP financial measures throughout to help investors understand Haemonetics' ongoing business performance. Please note that these measures exclude certain charges and income items. Please refer to this morning's earnings release for details on excluded items, including comparisons with the same periods of fiscal '21 and a reconciliation to our GAAP results. Our remarks today include forward-looking statements, and our actual results may differ materially from the anticipated results. Haemonetics cautions that these forward-looking statements are subject to risks and uncertainties, including the potential impacts from the pandemic on our results and other factors referenced in the safe harbor statement in our earnings release and our filings with the SEC. We do not undertake any obligation to update these forward-looking statements. And now I'd like to turn it over to Chris.

Thanks, Olga, and thank you all for joining our earnings call. Today, we reported organic revenue growth of 19% in the fourth quarter and 7% in fiscal '22, and an adjusted earnings per diluted share of $0.65 in the fourth quarter, and $2.58 in fiscal '22, an increase of 41% versus the prior year fourth quarter, and an increase of 10% versus the prior fiscal year. The past year was a challenging one, but we are proud of how our people have responded. Our fourth quarter performance reflects our resilience and our commitment to meet the needs of our customers and deliver on our purpose of improving standards of care. Our agility and perseverance helped us achieve growth in all businesses, and we continue to distinguish Haemonetics for the meaningful value we are creating across our markets. As the industry leader, we delivered integrated solutions to help our plasma customers realize much needed growth in the volume of collections. In the face of unprecedented blood shortages, our blood center products help maximize the impact of donations, and attract and retain donors. Hospital, including Vascular Closure, continue to exceed expectations and was our fastest-growing business in fiscal '22, helping customers improve patient care and outcomes at less cost. As we evolve our portfolio and we expand our reach and relevance, Hospital will increasingly drive our growth and diversification. Our operational excellence program proved fundamental to our resilience and ability to quickly address supply chain disruptions, and serve all who depend on us. It will continue to play a critical role in sustaining our success, enabling us to be a more agile, efficient and productive company, creating lasting cost savings and bring resources to fund investments. Turning now to our business unit results. Plasma revenue increased 31% in the fourth quarter driven…

[Operator Instructions] And our first question coming from the line of Larry Solow with CJS Securities.

Welcome James to Haemonetics. First question, I guess, just on the guidance range. It's a fairly wide range. Just trying to decipher the major disparities sort of -- not everything, probably a long list, but sort of between the low end and the high end, how would sort of get to that $290 million versus that $250 million?

It's Chris. Let me get to start, and I'll invite James to comment as well. First and foremost, it has to do with revenue, right? And we we're dependent upon our customers who are doing everything within their power to drive both donations and procedures. We saw meaningful recovery in the fourth quarter of our fiscal year. We expect that to continue through the year, but it's -- as you can appreciate, the last 8 quarters, particularly in Plasma and Blood Center have been difficult to forecast. So we want to be cautious there. There's also a series of macro challenges that James had highlighted in the prepared remarks. We look at a combination of inflation, supply chain disruption, potentially, and then geopolitical risk, particularly in markets like China and Russia as potential headwinds in the overlay FX some other factors. It's a turbulent environment, and we just want to be mindful of that and reflect that with a wider range that we obviously will look forward to narrowing as we get further in the year, and some of these externalities play out.

Okay. And just in terms of your operating margin, it looks like relatively flat year-over-year. And just -- can we just speak to I guess the moving parts to that -- a couple of questions there. Gross margin is that -- it has been trending upwards. It doesn't sound like you're losing a lot of this to CSL revenue this year. So I guess maybe I'll absorb that next year. How do you view sort of gross margin? I know there's a lot of moving parts inflation, maybe getting a little bit worse for you guys. And then you also mentioned just part that question on the operational excellence program, $22 million in savings, half of that going back into gross margin. Are you spending the other half in operating expenses? Is that what I heard? Or will some of that actually flow to the bottom line? James D’Arecca: Yes. Thanks, Larry. So yes, on the gross margins, we do expect those to improve slightly. What's benefiting them. I think you brought it up is price and mix, of course, to Cardiva as well as our operational excellence programs. What takes us back the other way, however, but not as much, is depreciation from the NexSys systems as well as the inflationary headwinds that we've spoken about, along with some negative FX in there. So those would be sort of the levers that we're looking at to affect gross margins. And then that obviously has an impact on operating margin as well. Yes. So you're right on the $22 million, it's roughly half to cost of goods savings, the other half going to OpEx. In terms of -- we will be making some investments next year on the S&M line and the R&D line, so not all of that drops through. And we're also keeping a careful eye on the geopolitical risk as well as inflation. So I think once you net through all of that that's how the operating margins are essentially flat, and it could skew either way based on where the world turns as we go through the remainder of '22 into '23.

Yes. Got you. So I mean a lot of moving parts. Okay.

Our next question coming from the line of Drew Ranieri with Morgan Stanley.

Maybe just first on VASCADE. You've had the asset for a year now. Just curious how you're thinking about maybe the growth opportunity here in front of you, if you could lay out a number? I mean it looks like Hospital pre-VASCADE might have been growing high single digits. So is the right way to think about VASCADE is adding maybe 10 points to your Hospital growth? Just any help would be appreciated.

Yes. Drew, I appreciate the question. We're excited by what Hospital as a business is contributing, and will continue to contribute, right? We -- as a business, we're forecasting high teens, 16% to 19%, which is a continuation of where the combined business was in FY '22. Obviously, the 2 big drivers there are Hemostasis Management, the TEG franchise, and VASCADE as you highlight. We expect Hemostasis Management's performance to rival what it did in '22, which is great given the larger base. And then VASCADE. VASCADE is exciting, right? We'll continue to focus primarily on the U.S. market. We're building out our plans for international expansion, both clinically from a regulatory perspective and our sales presence. But this year, FY '23, again, will be defined by further penetration into those top 500 or 600 electrophysiology hospitals here in the U.S.

Got it. And then just maybe on Plasma recovery. Can you give a little bit more details on what you're seeing in the market just as customers are trying to work through VASCADE cost for donor fees? Just maybe what you're seeing? And then with just the CSL revenue, I think I heard you say $88 million for fiscal 2023. Just curious about the cadence there. Should that be kind of a ratable basis across the quarters? Or is there any weighting that we should be thinking about?

Yes. Thanks, Jim. So clearly, Plasma is in recovery. It's been long coming. But I think you hear that from our customers as they're speaking publicly about this, we certainly saw that in our fourth quarter. Typically, the fiscal fourth quarter is the weakest quarter of the year in term of collection volumes, just given a bunch of seasonality, we expect to build from that, and that's what's reflected in our guidance, essentially building throughout the course of the year, culminating with the winter holidays. So we feel about that. Clearly, it looks different than it has historically, more coming from new center openings, a disproportionate share of that growth. And that's a testament to the hard work that our customers are doing. They haven't backed off their pace of new center openings as fast as it has ever been, and they continue to do what they can to recruit and retain their donor base. So we stand ready to serve them. The great news is we have the devices, they're ready to go, and we're well on track for our conversions, both to NexSys and to Persona. So we feel good about it. Obviously, there's factors that FY '22 is challenging in that regard. We think '23 will be different and better. We want to be cautious, which I know you can appreciate after 8 quarters of trying to forecast this, probably caution the operative term here.

Our next question coming from the line of Andrew Cooper with Raymond James.

Maybe first, I just want to get a better sense when we think about the last guide. Can you give us a little bit more flavor of -- how to comment on the fractionators time to make up some of that safety stock and maybe growing volumes faster than 8% to 10% in the near term. What's really reflected in the guidance there? That would be the first one. And then I'll ask one more after that.

Yes. Andrew, it's Chris. So what we experienced in our fiscal '22 was essentially 10% growth across the network, maybe a touch higher than that in North America and a touch below that outside the U.S. So if you think about that 10% growth in volume, we expect '23 will -- at the high end of our range, we'll replicate that. There's things that can be done above and beyond that. We made comments in my prepared remarks that we still see the underlying demand for IG at unprecedented level. So I think 6% to 8% demand for IG, that translates due to a number of factors we've outlined in the past 8% to 10% long-term growth in collections. And we know that our customers -- and we are committed to helping them gain inventory to get off of this incredibly low base that they're operating at today. So we would expect double-digit growth on top of that. And we just need for the various economic and societal factors to line up to enable them to do that. But we're in a good position to support it, and we think it grows over the course of the year. We'll look forward to updating and focusing that guidance as we watch the recovery unfolds.

Okay. Helpful. And then maybe just to sneak [too] in together here, but can you give us a better sense for sort of where specifically you are in the rollout of NexSys and Persona in terms of how many of the folks that are adding NexSys either have or are planning to add Persona? And how we should think about that? And then lastly, you made a comment about broadening the portfolio and have talked about innovation. So anything you can kind of give us some hint stores as to where new products might be and what -- how the portfolio might expand would be helpful as well?

Yes. So as we think about kind of the build-out and where we're going with collection volumes. It's something that we'll see unfold. I think it's a combination, as I've said before, about new center openings and recovery, hopefully, in the existing centers. That builds gradually over the course of the year. For us, we've got essentially everything contracted at this point, and we still believe we will have completed the NexSys PCS device rollout by the middle of our fiscal '23. So end of summer, early fall. In terms of Persona, what's included in our guidance is the pricing benefits of everything that is already contracted. So we're not introducing any risk in terms of contracts beyond where we are. Obviously, it's a very powerful technology, 9% to 12% yield. It's the only thing like it in the market today. And we think -- when we look at the early adopters of the NexSys platform, so they've got NexLynk, they have the PCS device, and then they also have Persona. Those customers in our fiscal fourth quarter collected more Plasma than they had in any other prior quarter. So -- and I'm talking now back prior to the pandemic. It's a powerful enabler of what they're very keen to do in terms of accelerating their growth rates. So we think that will build, but it comes with some challenges. It's a larger bottle. They have to make logistical changes. Some of our customers are feeling compelled to validate the protein concentration, which we'll work with them to do clinically as we have in our regulatory filings. So yes, it takes a bit of time, and hopefully get more clarity as the year goes forward. But it's an exciting technology, and we're seeing that in the marketplace. You asked about portfolio evolution. I think as we've said, right, our capital allocation priorities really focused primarily on growth, both organic and inorganic. We've seen the additions we've made to the hospital portfolio. We now feel very good about our focus in cardiovascular, specifically electrophysiology and interventional cardiology. There's good convergence there. We think it's a target-rich opportunity set for us. And hopefully, you have a chance to talk more about it at the Investor Day in June where we'll outline our priorities, and how we're pursuing it.

[Operator Instructions] Our next question is coming from the line of Mike Matson with Needham & Company.

So I appreciate you breaking out the CSL revenue that you're expecting in '23. What should we be assuming in, if any, in '24, should we assume that it's largely done heading into fiscal '24?

Yes. Mike, we're not -- I think we've just given the guidance in the last hour on '23. I'm going to reserve comment on '24 until we get a little closer. But obviously, we stand ready to serve all of our customers. We did think the breakout is helpful just so you could see at '22 versus FY '23, but -- and then when we talk more at Investor Day. We'll be very clear over the next 4 or 5 years, how that growth trend line continues. And I think you'll be appropriately impressed with the organic capability of that business to scale and grow profitably.

Yes. Sorry, I guess I was talking specifically about CSL within the Plasma business I mean if you're not willing to answer, I understand because it isn't more than a year away. So...

Yes. I think we'll -- as we get closer, there's a bunch of things we don't have visibility into or don't control. Obviously, we'll serve CSL and all of our customers to the best of our ability within the existing agreements, which do go out, in CSL's case, through December of '23.

Okay. All right. And then I wanted to ask about this debt refinancing. You went through it kind of quickly. So I just want to make sure I understand the timing, the amount. And is there a risk here that, that results in higher interest expense, just given that rates have surged lately? James D’Arecca: Yes. So thanks, Mike. Yes. The debt will be -- we'll look to refinance the debt in some way over the next quarter or so. I think it will look an awful lot like the end result of that will look an awful lot like it does today. With regards to interest rates, we do have interest rate swap coverage on 70% of the debt, which is now -- it's floating rate debt, it's been swapped to fixed. And we're covered there to 4% all the way through June of '23. So at that point in time, which seems a long time away. We'll see where the rates are and we'll look to see whether or not we want to re-up. But at the moment, we are not forecasting any increase in interest expense related to our refi activities.

Okay. Got it. And then just on the operational excellence savings, the $37 million of gross savings. I think that was for last fiscal year. What was the net savings, if it was $37 million gross? James D’Arecca: Yes. So we don't break out gross versus net savings. We've -- on the -- to get you though to just give you some color, we certainly had made some investments in the business, plus there was some offsets during the year because of the inflationary headwinds, which took back some of that. And as we move forward, I think we'll see some of the same things as we -- our guidance assumes an additional savings next year. But then as I talked about earlier with regard to operating margins, there's some pieces that take it back as we make investments in S&M and R&D as we move forward.

And our next question coming from the line of David Turkaly from JMP Securities.

I apologize. I was coming on a couple of calls, but Chris, I wanted to see if you -- did you guys make any comments about the Terumo device, I know it's still very early. I don't know if it's out anywhere, but any of the features or -- obviously, we know CSL is there. But I kind of looked at your device thinking, hey, you can't really collect too much more from somebody or do it faster. So I'd just love to get your thoughts on sort of what it is or if anyone has seen it, or where it kind of stands today?

Yes. Mike -- Dave, I appreciate the question. It's -- I think folks were a little surprised how little information is out there, right? Obviously, we pay close attention to this. My understanding, having studied with our teams, the publications on the dot gov site, the -- got the device approved with a trial size of 124 donations. And kind of hard to draw a bunch of conclusions from that. We did over 20,000 donations to get Persona approved 2 years ago. They didn't publish anything on yield. We kind of piece together the metrics we assume, and it's an assumption that it was approximately 830 milliliters per collection. Obviously, we're well above that, right? And we've now got -- as we mentioned in the call, 30 million -- nearly 30 million NexSys donations, right? We stand behind the value proposition on the integrated NexSys platform. It is easy to use and set up, and that leads to a safe collection as evidenced by the 98% elimination of documentation errors and an impeccable safety record. Donors like the device. They express a 93% affinity for NexSys. Donor satisfaction leads to more frequent donations and greater retention, which is absolutely key to the recovery we've been talking about. And then we've got good quantifiable evidence created with real-world work with our existing customers that NexSys lowers the cost to collect the liter of Plasma. And that's a combination of the 9% to 12% yield coupled with speeding up door-to-door time 16 minutes on average in our work with NexSys in the base configuration. So it's a good value proposition. We are building on that value proposition. I encourage you to come the team here in Boston when we do the Investor Day in June because we're going to unveil additional aspects of our innovation agenda, where we will further improve upon every one of those dimensions going forward. So excited. It's our platform, and it's doing good things with customers to support their growth aspirations. So feel good about it.

Yes. I appreciate that. And maybe just as a quick follow-up. I know Blood Center, certainly not a growth driver or a super important sort of part of probably the future of Haemonetics. But a decent quarter. I'd love to just get your thoughts on -- does that bottom at some point? Is it something that strategically is still an important part of sort of the go-forward plans? Or -- could it flatten out? Or -- I mean I know your guidance is calling for another whatever mid-single-digit decline, but does that stop at some point?

Dave, we care deeply about our Blood Center business and the customers we serve there. And yes, they had a very good quarter. In fact, they had a very good year overall relative to our initial expectations. And no small part, that was because our teams were able to step up, aided by our operational excellence program, right? We talk about the gross to net savings, and that's important. We want to free up resources to reinvest in growth, typically in other franchises. But what we also get from that OEP program is meaningful agility and resilience, not to mention the highest possible levels of product quality. We benefited in the quarter and in the year in that blood center business, we were able to step in and meet customer demands, large stocking orders in some cases, as a contingency. In other cases where maybe their existing source of supply had let them down. So we were able to step in and fill that, and that bodes well. The guidance we gave a fairly wide range and down again, reflects disproportionately geopolitical risk, and some potential headwinds in FX. That business is concentrated outside the U.S. And we have some exposure there that we have to be mindful of. But we think it's actually increasingly stable and a good source of continued EBITDA for the company.

And I'm not showing anyone else in queue at this time. Ladies and gentlemen, that does conclude our conference for today, and thank you for your participation. You may now disconnect. Everyone, have a great day.