Haemonetics Corp Q1 FY2026 Earnings Call

Good day, and thank you for standing by. Welcome to the Haemonetics Corporation First Quarter 2026 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Olga Guyette, Vice President, Investor Relations and Treasury. Olga, you have the floor.

Good morning, and thank you for joining us for Haemonetics' First Quarter Fiscal Year 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 first quarter fiscal year 2026 results and full year fiscal 2026 guidance to our Investor Relations website. The same information was made available via the press release issued this morning. As we provide our business and financial update this morning, I would like to remind everyone that we will use both reported and organic revenue growth numbers that exclude the impact of FX, the divestiture of the whole blood business and the exit of liquid solution products. Organic revenue growth ex CSL also excludes the impact of the previously discussed transition of CSL's U.S. disposables business. We will also refer to other non-GAAP financial measures to help investors understand Haemonetics' ongoing business performance. Please note that these measures exclude certain charges and income items. A full list of excluded items, reconciliations to our GAAP results and comparisons with the prior year periods are provided in our first quarter fiscal year 2026 earnings release available on our website. Our remarks today include forward-looking statements, and our actual results may differ materially from the anticipated results. Factors that may cause our results to differ include those referenced in the safe harbor statement in today's earnings release and in other SEC filings. 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. Good morning, everyone, and thank you for joining. We started our first quarter fiscal 2026, the fourth and final year of our long-range plan by delivering solid results and advancing toward our ambitious growth targets for revenue, earnings, margin, and free cash flow. We reported revenue of $321 million, down 4% due to the anticipated $52 million impact from portfolio transitions, but up 13% organically ex CSL. Strong growth in our base business, margin expansion, and the most recent share buybacks drove 8% adjusted EPS growth to $1.10. Our business is straightforward with nearly 85% of total revenue driven by three core products: NexSys, TEG, and VASCADE, all of which are concentrated here in the U.S. This evolving portfolio provides the right balance of focus and resilience, enabling revenue growth and continued margin expansion despite macro and market challenges. In Plasma, we're reinforcing our global leadership through NexSys technology upgrades and share gains. In hospital, strong adoption of TEG 6S continues to fuel growth in blood management technologies, while we take decisive actions to strengthen execution in Interventional Technologies through key leadership additions, organizational realignment, and targeted commercial initiatives. Moving to our businesses. Our hospital business, the largest in our portfolio with two core growth drivers delivered $140 million in revenue in the first quarter, up 4% reported and organic. Strength in Blood Management Technologies more than offset temporary softness in Interventional Technologies, reflecting the resilience of our diversified portfolio and multiple drivers of performance. Blood Management Technologies grew 14%, led by another standout quarter in hemostasis management, which delivered 22% growth overall and 27% growth in the U.S. Performance was fueled by strong TEG disposable utilization, continued rapid adoption of the global hemostasis HN cartridge, accelerated new account openings, and customer conversions from the lab-based TEG 5000 to our advanced point-of-care TEG 6S system. The BMT franchise also benefited from continued growth in transfusion management, partially offset by distributor order timing in Cell Saver. Interventional Technologies declined 7% in the quarter, primarily due to tough comparisons from prior year OEM destocking in sensor-guided technologies and PFA-related pressures in esophageal cooling, which were anticipated in our fiscal '26 guidance. Vascular Closure grew 3%, led by 6% growth in MVP and MVP XL. This was partially offset by continued softness in our legacy VASCADE, concentrated in lower growth coronary and peripheral procedures, representing about 15% of Vascular Closure revenue. Despite increased competition, we remain confident in the clinical and economic advantages of our vascular closure portfolio. We view recent softness as executional, not structural, and we have taken decisive steps to strengthen our performance. With new franchise leadership, including several key hires, a more clinically focused sales force and targeted commercial initiatives underway, we expect to regain momentum in the second half of FY '26 so that Vascular Closure can contribute to revenue growth and margin expansion. We are reaffirming our full year hospital guidance of 8% to 11% reported and organic growth, reflecting strong momentum in Blood Management Technologies, which enables us to drive meaningful revenue growth and margin expansion as we work to strengthen our Interventional Technologies franchise. Moving to Plasma, where NexSys, our third and largest growth driver, delivered $130 million in revenue in the quarter, down 4% on a reported basis and up 29% organic ex CSL, driven by favorable impact from our prior Persona and Express Plus upgrades in the U.S. and a one-time revenue benefit from the renegotiation of a long-term software agreement, which accounted for roughly half of the organic growth in the quarter. This agreement reinforces our 80% market share in plasma DMS software and underscores the strength of NexLynk, which, when integrated with our broader Nex platform, delivers unmatched value to customers. Consistent with our expectations, growth in the U.S. plasma collection volume was in the low single digits. We are reaffirming our full year fiscal 2026 plasma guidance, including a reported revenue decline of 7% to 10%, but organic growth ex CSL of 11% to 14%. Growth is expected to be supported by price benefits from prior technology upgrades, continued share gains and the possibility of a modest recovery in U.S. plasma collections in the back half of this fiscal year as customer yield and productivity gains annualize. Blood Center revenue declined 22% on a reported basis to $52 million, reflecting the divestiture of the whole blood business. Organic revenue grew 4%, driven by continued strength and favorable order timing in the core apheresis portfolio. We are reaffirming our full year guidance of a 23% to 26% decline on a reported basis as we fully anniversary the Whole Blood divestiture and a 4% to 6% organic decline as we continue to streamline the apheresis portfolio and reallocate resources to higher growth areas. Our revenue outlook for the corporation is firmly on track, driven by strong performance in our growing and increasingly profitable base businesses. Even as we navigate $153 million in planned portfolio transitions, our three core products position us to deliver robust organic growth ex CSL, expand margins, and strengthen our leadership in the markets we serve. We are reaffirming full year revenue guidance of a 3% to 6% reported revenue decline, but 6% to 9% organic growth ex CSL. Over to you, James.

Thank you, Chris, and good morning, everyone. As you heard from Chris this morning, we're off to a strong start to fiscal '26, delivering solid financial results and meaningful margin expansion in the first quarter. Our financial performance reflects disciplined execution across the organization and benefits from our strategic portfolio transformation, including the divestiture of the low-margin whole blood business, our leading innovation in plasma, and sustained growth momentum in TEG. Productivity initiatives across the enterprise are helping us better align our resources, and those efforts are beginning to show up in our results. In the first quarter of fiscal '26, the adjusted gross margin reached 60.8%, up 550 basis points year-over-year, driven by the benefits of our Persona technology and price initiatives across the portfolio, favorable product mix and a one-time 210 basis point benefit from license fees associated with the renegotiated plasma software agreement Chris referenced earlier. Adjusted operating expenses in the first quarter were $118 million, an increase of $3 million or 2% compared with the first quarter of the prior year. The modest increase in adjusted operating expenses reflects targeted R&D investments to support innovation and long-term growth while effectively managing G&A and other overhead costs. Despite a $52 million revenue headwind in the first quarter, adjusted operating income increased 9% to $78 million or 24.1% of revenue, up 300 basis points year-over-year. We expect these gains to build throughout the year, supported by continued share gains in plasma, strong momentum in TEG, improving contributions from Interventional Technologies in the second half of this fiscal and additional savings as we scale our operations to support our transformed portfolio. We are reaffirming our fiscal '26 adjusted operating margin guidance of 26% to 27% with stronger margins anticipated in the second half as product mix, stronger commercial execution, and continued cost discipline increase operating leverage. The adjusted income tax rate was 24.9% in the quarter, up from 19.9% last year, reflecting lower benefits from performance share vestings. For the full year fiscal '26, we expect the adjusted tax rate to be approximately 24.5%. Adjusted net income was $53 million, up 2% year-over-year and adjusted diluted EPS was $1.10, up 8% from Q1 of fiscal '25. The higher tax rate was a headwind in the quarter, largely offset by the recent $150 million share buyback. We are reaffirming our full year adjusted EPS guidance of $4.70 to $5, which reflects the benefit of disciplined capital deployment. This includes the offset of a higher expected income tax rate and interest expense with a lower diluted share count as a result of the most recent share buyback as well as the assumed use of cash on hand to retire the remaining $300 million of 2026 convertible securities at maturity. Turning to cash flow and the balance sheet. We generated $17 million in operating cash flow in the first quarter, driven by improved working capital management, particularly in inventory. Capital expenditures were $3.8 million, and we placed $11.5 million worth of devices at customer sites, reflected as an increase in CapEx and a reduction in inventory, but with no impact on cash outflow for the period. Free cash flow was $2.5 million, a significant improvement from the $17 million cash outflow in the same quarter last year, predominantly as a result of favorable working capital. As a reminder, first quarter free cash flow tends to be lower due to typical seasonality and the payout of prior year accruals, including performance-based compensation. We expect stronger cash generation over the remainder of fiscal '26 and are reaffirming our full year free cash flow guidance of $160 million to $200 million with a free cash flow conversion rate above 70% of adjusted net income, reflecting our renewed emphasis on cash discipline and capital stewardship. Let me also add a few comments on the balance sheet, which remains a key enabler of our operational resilience and strategic optionality. We ended the quarter with $293 million in cash, down $14 million from fiscal year-end, reflecting additional strategic investments. Net leverage, as defined in our credit agreement, was 2.53x EBITDA at quarter end with no material changes to our debt structure. We maintain strong liquidity and financial flexibility, supported by up to $1 billion in additional available capacity by the end of this fiscal year, including full access to our $750 million revolving credit facility. This positions us well to meet our obligations, fund operations and pursue other value-creating opportunities, including share buybacks when the opportunity arises. In closing, I'd like to reinforce some of the key messages from our call. Fiscal '26 is off to a strong start, and we remain on track to meet our full year guidance and long-range plan targets, including low double-digit compounded annual growth rate in revenue and mid-20s adjusted EPS CAGR, excluding CSL, adjusted operating margin expansion in the high 20s in fiscal '26 and cumulative free cash flow of $600 million to $700 million. Revenue growth and margin expansion are largely driven by three key products: plasma, hemostasis management, and vascular closure, with two outperforming, highlighting the resilience of our diversified portfolio. We are confident in our ability to meet financial objectives. Our plasma business continues to outperform and is expected to be larger and more profitable than originally assumed in our long-range plan by the end of this fiscal. IG demand remains strong, and we continue to grow our share both in the U.S. and Europe and establish our portfolio as the leading solution for driving efficiency and reducing cost per liter for our customers. Strong momentum in TEG is giving us confidence in our ability to deliver on all financial commitments while we work to position our Interventional Technologies franchise for long-term sustained success supported by new franchise leadership, a bifurcated commercial structure, and a renewed commercial strategy. With renewed focus on free cash flow, strong balance sheet flexibility, and ongoing margin expansion, we have the tools to invest in organic growth, meet debt maturities, and build a foundation for sustained long-term value creation for our customers and shareholders. Thank you. Operator, please open the line for questions.

Our first question comes from Rohin Patel with JPM.

It's Rohin. I want to start with plasma. You had a really strong performance in the quarter. Is there any detail that you can provide on the drivers of this? You'd initially communicated limited collections recovery until the second half. So is it fair to assume this is primarily share gains? You also called out a one-time revenue benefit from software, I believe. What was the contribution from that in the quarter? And how should we think about the new growth trend settling out over the course of the year, given the guidance staying put?

Thanks for the question, Chris. We are very excited about the progress our plasma team is making, particularly in terms of innovation related to pricing and market share gains. Our plasma franchise is at its strongest point ever—it's larger, growing faster, increasingly profitable, and more diversified. The results from our first quarter reflect these improvements. We are benefiting from ongoing pricing advantages due to innovative technology introduced last year, all of which has already been contracted, along with the initial stages of rapid market share conversion that we expect to see pick up momentum throughout this year, again, all contracted. We feel positive about both the short and long term. As you mentioned, the software agreement played a significant role, contributing around half of the 29% quarter-over-quarter growth. The remainder, roughly 14% to 15%, is at or just above the upper end of our guidance range. While we anticipated this software agreement for the year, the exact timing was uncertain. Its benefits are evident in this quarter, making it highly profitable and solidifying our position with an approximately 80% share of the U.S. VMS market, which is a strong advantage for us. We've discussed this in the past, but our standalone software really is our key differentiator. It enables bidirectional connectivity and supports about 1,000 centers in the U.S., providing us with deep insights and connectivity. We are the only 510(k) approved DMS software available for commercial sale in the U.S., and we've taken steps to enhance that leadership. We are very proud of this achievement.

And I also wanted to ask on the hospital business. and specifically, interventional technologies. You talked to roughly 3% vascular closure growth in the quarter. And I may have missed this, but what was the MVP, MVP XL growth rate, and is there anything that you can speak to just with regards to the recovery in the legacy VASCADE product or anything else you're seeing on the demand front worth calling out and how you see that playing out over the course of the year?

Thanks, Rohin. Vascular closure, VASCADE specifically, one of our three core growth drivers. It's the one that is performing less well, and we certainly struggled with that in the quarter. To your question specifically, for MVP and MVP XL, we saw roughly 6% growth. There's a number of factors there. Some of it is our international business in Japan, in particular, which was like 700 basis points of our growth last year, has come back down. That's anticipated was part of our guidance. It's the changeover to PFA and some work we're doing to regain our positioning there. But more broadly, you're right, it is some executional challenges. It's things that really across all three products, but particularly base VASCADE, it's roughly 15% of the total closure opportunity for us. But in those PCI procedures, we have more to do to regain our competitiveness.

Our next question comes from Anthony Petrone with Mizuho Americas.

Congrats on a clean quarter here, particularly in plasma and at the margin. Maybe one on plasma, one on hospital. On plasma, you spoke quite a bit past few quarters about the share gain tailwinds here. So maybe just given that the installation cycles take a little bit of time. There's multiple contracts that have reset what do you think the timing is to have those share gains fully deployed at the center level? And can you quantify actually what that can mean just in terms of kind of a growth tailwind to the business? And then I'll have a follow-up on hospital.

Thank you, Anthony. The price increases powered us through most of last year and this quarter as well. The share gains build on that momentum and are actually ahead of schedule, which is encouraging. We see strong demand from customers wanting to upgrade their networks with the latest technology. This trend will continue to grow and is expected to be the main driving force behind our projected 11% to 14% organic growth for the year, which we aim to capitalize on. Some of this growth will carry into FY '27, creating an ongoing cycle, as you mentioned. When I reflect on our competitive edge, I see how significantly we've strengthened the business. Last year marked a major milestone as we transitioned all our U.S. customers to NexSys with Persona and Express Plus. This year, our focus will be on expanding agreements with two large collectors to enhance network conversion, along with our initiatives in Japan with the Red Cross. It's important to recognize the health of our business. One point that may be overlooked is that we are collaborating closely with our customers to maintain a steady stream of innovation. We will share more about this as the year moves forward. Interestingly, while we value all our customers, no single customer accounts for more than 9% or 10% of our total volume. In fact, the top three plasma customers now represent less than 25%. This indicates a much more diverse business with significant growth potential. We will continue to invest in R&D to strengthen this and actively protect our YES and Persona patents to ensure our exclusivity.

No, very helpful. And then switching gears over to hospital and digging in a little bit more to electrophysiology, post-field ablation volumes by the companies that have reported, it's still in a high-growth part of their product cycle. MVP had a good attach rate there, obviously, decelerates Q-over-Q. Just wondering from a competitive dynamic, how significant was that on the U.S. side? Were there centers that were lost? And if so, what is the path to sort of getting VASCADE MVP back into those centers and attached to PFA volumes?

Thank you, Anthony. There’s a lot to cover. Let me break it down into three parts. First, regarding the vascular closure market, we are optimistic about it globally, estimating it to be between $2.5 billion and $2.7 billion, with around $1 billion associated with electrophysiology and the rest from coronary and peripheral segments. For electrophysiology, we’ve provided detailed information on our investor site, indicating growth rates in the high single digits, specifically 8.5% this year. This is a favorable environment for us, particularly with our MVP and XL products, which account for 85% of our volume in this area. As I mentioned earlier in our remarks, we are currently facing some temporary softness, but this is not a structural issue and not a reflection of market conditions or our product. VASCADE presents a distinct value proposition with clinical performance and operational efficiencies that stand out in the category. Our solution is pain-free, narcotic-free, and leak-free, allowing patients to reduce their recovery time from approximately 6 hours to just 2 hours, enabling same-day discharge for most. Our clinical support underpins this, and we need to focus on execution, expanding our product label, and enhancing product development, all of which are in progress. We must take ownership of these execution challenges. It's important to note that as we surpassed 500 T600 openings, our strategy shifted from acquiring new accounts to increasing utilization in existing accounts, which tend to be smaller and often affiliated with integrated delivery networks. This requires a different approach and skill set. We have also intensified competition, particularly from established industry standards and low-cost rivals focused on pricing. We are taking necessary actions to address this, including efforts in international markets like Japan. We see this as a temporary phase related to execution, and we are committed to resolving it within this year.

Our next question comes from David Rescott with Baird.

I wanted to follow up on the interventional tech and BMT section in VASCADE. Initially, you mentioned a similar contribution split between hospital and interventional tech versus Blood Management. It seems that at the start of the year, Blood Management has performed well, while Interventional Tech has slightly underperformed in relation to the hospital guidance of 8% to 11%. Given the various factors at play, particularly in Interventional Technologies compared to BMT's strong performance, what gives you the confidence that there will be a reversion in Interventional Tech as we look at the full year? Also, is it still reasonable to expect comparable growth contributions from both of these main segments?

David, thank you for your question and for joining the call. Hospital segment grew 12% organically last year, and we expect to see double-digit growth again this year based on our current guidance. It's now our largest segment, nearing 50% of our corporate revenues, and it significantly contributes to both revenue and earnings growth, as well as margin expansion, particularly through increased gross margins. As we enhance our performance, we expect improved operating leverage. At the beginning of the year, we anticipated similar contributions from BMT and IVT. However, the success we're experiencing with PEG and IVT is currently driving our growth. We believe this trend will continue into the second quarter, especially given the developments with IVT, though we do anticipate a recovery in IVT. It’s unlikely that the contributions will be evenly split at 50-50, but we are confident in our ability to deliver. This confidence is bolstered by the strength of our TAG business, which we hope to discuss further today. The team's efforts are effectively compensating as we invest our energy and focus on restoring vascular closure to its full potential.

Okay. Then on gross margins, you touched on it a little bit in the response there. Gross margins were pretty healthy, pretty significantly above kind of our, I think Street expectations as well. I know you called out some product mix, better price across the portfolio. And I'm wondering if you could unpack that a little bit. I know in the IVT the hospital segment, you've got a bit of a benefit there from a contribution perspective, same thing on plasma, which again was ahead of our expectations. I know within plasma, you have a little bit better of an argument to make for pricing in the non-CSL accounts. So can you help us think about maybe what all went right in the quarter to deliver the gross margin guide that result that you had? And then as you think about that in the back half of the year, where some of those moving pieces are kind of shaking out as it relates to the full year guide.

Yes. Thank you, David. Let me start, and then I'll ask James to weigh in and fill in the details. We're off to a good start with two of our three primary growth drivers really delivering, and we feel quite good and we're more than confident to reaffirm our 26% to 27% operating income margin, which from where we sit, reflects roughly a 300 basis points improvement. That's a similar trend to what we had last year. We started the year at 21%, which looked a lot like the year before and then build accordingly. And that's a story that will play out again for us this year based on our forecast. Volume, major driver of gross margin expansion. You saw that 60-plus that was the target for the LRP. We expect to hold that throughout the year at this point. Delighted to get it this early. Shifting portfolio mix is the single largest contributor to gross margin expansion. It includes not only some outstanding performance in the hospital segment, but also a reducing contribution from both CSL and from the whole blood divestiture, which were gross margin dilutive to us. Having them pass through is you're seeing the benefit quarter-over-quarter. I think the outperformance we're having in plasma is outstanding. And because of the way it's coming, it's relatively neutral in terms of the impact on our gross margins at the corporate level. But as you can imagine, highly accretive to our operating margin expansion, especially with all the U.S. business now with NexSys with Persona. We do have productivity initiatives underway. We can talk more about them. The largest amongst them is the regional and market alignment program that we've called out. Team is working hard to hold G&A flat in dollar terms while we continue to invest in the areas we need to, sales, marketing, R&D, et cetera. So as the year progresses, we'll get all those things and then you'll see increasing operating leverage, which is the dynamic you would expect in a high-performing Med-Surg business. So we can walk through any and all of that, but that's the story.

Yes. And I'll just add to Chris' explanation there. Just on the IV BMT dynamic, we have similar gross margins among those two businesses. So if BMT is doing a little better than that really has no effect. If anything, it might be slightly positive to our gross margin.

Our next question comes from Mike Matson with Needham & Company.

Yes, thanks. I have a couple more questions about Interventional Technologies. Are you experiencing increased competition in the mid-bore category, specifically with MVP and MVP XL, or is the competition primarily focused on the smaller bore products that account for 15%?

Mike, we're seeing it across the board. We see it certainly in electrophysiology, more pronounced in interventional cardiology, our value prop in electrophysiology is just stronger. It's the things I highlighted earlier where we just have meaningful clinical differentiation and benefit there that carries. I think what we're doing in response, as I said, we own the issue, and we believe it's entirely addressable in the current period. So we've hired new sales and marketing leaders from academy companies, companies with real deep expertise in electrophysiology and interventional cardiology, so we can strengthen our play there. As we called out last quarter, we've reorganized into two dedicated teams, one for vascular closure. And really, vascular closure is everything here for IVT. But we also have the structural heart team to enable deeper clinical engagement and better resource alignment. We're definitely investing in our toolkit, more sales enablement, getting deeper at an account level so we can compete proactively rather than responsively. We've overhauled performance management, quotas, comp plans, training for reps and for supervisors alike. We are building a strategic accounts management team, which is one of the bigger gaps that we've identified. Collectively, we're putting together account-specific competitive responses. The answer is different in PCI than it is for AFib, for example, but we need to action both. We'll have more to say as the year progresses, but that's the playbook, and we're on it.

Okay. I wanted to ask about your interest in pursuing further mergers and acquisitions. I know your recent focus has been on hospital interventional technologies. Given the challenges in that area, will you be addressing those issues before considering additional acquisitions?

Short answer, Mike, is yes. I'll let James weigh in on if he wants. But we did $225 million in share buybacks last year, and our Board authorized a new $500 million program for the next three years. We bought back shares because we believe deeply in our plan, and we think our stock is significantly historically undervalued. So I think from our vantage point, as we deliver on FY '26 guidance and annualize the impact of that $153 million we called out earlier, both our customer and our shareholder value creation is going to become a lot more clear. That's good. It gives us the ability to invest and to drive the performance improvements that we're making. In the near to intermediate term, M&A is off the table. The only thing we're going to consider, I'm happy to give the background on it, is to action our option with Vivasure so we can get the PerQseal Elite product, which we think is a potential game-changer and closure for procedures like TAVR and EVAR. But other than that, we're heads down. We've got our ears pinned back, and we're driving execution.

Our next question comes from Joanne Wuensch with Citi.

This is Anthony on for Joanne. Just going back to plasma, and please correct me if I'm wrong, but did your outlook for U.S. collections change this year in the back half? I think the language last quarter was you were expecting a modest rebound in volumes. And then the language this quarter was a possibility of recoveries. Just want to see if anything changed in your near-term outlook.

Yes, Anthony, thank you for your question. You understood that correctly. Let me address our current guidance as well as the long-term outlook since there seems to be quite a bit of speculation surrounding both. This year, our strategy is focused on price increases linked to the innovation we’ve already implemented and the share gains we’re seeing. That’s our driving force and what we can control in our planning. We believe that the recent dip in collections, which has been somewhat supported by our productivity improvements for customers, is temporary. We’ve experienced cycles like this numerous times over the decades, and our long-term models can account for this. We anticipate low single-digit growth in the latter half of the year, which will depend on how our NexSys technology-enabled gains are realized, but we can't predict that with certainty, especially given the varied opinions in the market. Historically, plasma collections have shown cyclical behavior. We may have intensified this cycle due to the performance boost we’ve given the industry. There’s a lot of speculation about long-term declines, but from our perspective, we support a robust $30 billion biopharmaceutical market, and we don’t expect demand for immunoglobulins to diminish anytime soon. Our key customers, like Takeda, Grifols, and CSL, are reporting double-digit growth or high single-digit growth and reaffirming their guidance for their immunoglobulin franchises. Looking at the long-term potential and current inventory levels suggests a favorable environment for collections. Overall, we believe the conditions are aligning positively. Though there are recombinant therapies available, immunoglobulin remains essential for most patients, particularly those with primary and secondary immune deficiencies, and the trends for new patient starts versus other therapies reflect this. Thus, we maintain a positive outlook on plasma in the near, intermediate, and long term.

Okay. And then in hemostasis management as you continue to roll out the new happens cartridge, how long do you think this benefit from that lasts? Or I guess in other words, like how far into this rollout in the U.S.?

Yes. Early innings for sure. And what's pretty clear to us now in hindsight is the introduction of our heparinase neutralization cartridge last year has proven to be a watershed moment in this space. If you go back, we help drive the creation of Viscoelastic testing as a marketplace. We are the market leader with something around 70% share and the broadest body of clinical evidence and track record of usability supported by a really outstanding team that's just firing on all cylinders. The category itself, the underlying treatment areas, probably mid-single-digit growth on an ongoing basis. But to your question about the sustainability, we're in half of what we believe are the T700 accounts, the largest procedure-based hospitals. We're in less than half when I think about Europe and Japan, where we don't yet have the heparinase neutralization cartridge. More on that as the year progresses. We think about the TEG 5000 conversions that are underway driven by the adding of this additional assay, we've converted roughly half of our current TEG 5000 users to TEG 6S. So there'll be capital. There'll be the initial buy-ins and then, of course, there's the utilization. So we like what we see here, and I think we have renewed enthusiasm about the long-term value that this franchise can bring as one of our top three value drivers and currently our fastest-growing and largest hospital product.

Our next question comes from Larry Solow with CJS Securities.

Chris, I want to follow up on the question regarding TEG. You mentioned the 70% market share. The heparinase cartridge is clearly contributing to faster growth. As you look at your existing share base, are you regaining any market share? Do you anticipate any changes with this cartridge? Can you provide insight on whether your competitor has something similar in their pipeline?

Let me take a step back. This is less about capturing competitive share, although we are focused on that. We see this as approximately an $800 million addressable market, which is growing in the mid-single digits. The areas with the most significant growth are cardiac, trauma, and transplant, where heparinase neutralization has been a game changer. Our greatest opportunity lies in the adoption of Viscoelastic testing, moving practitioners away from current standards of care to realize the clinical and economic benefits of TEG. We have strong data showing how it leads to better interventions or sometimes avoids unnecessary ones, positively impacting clinical outcomes. Additionally, when hospitals adopt TEG, we observe a reduction in blood usage, as they avoid unnecessary interventions and use the right combination of blood products when they do intervene. This is a powerful opportunity for us. We estimate that the U.S. is currently around 50% utilization, while outside the U.S. it's closer to 30%. More updates will follow.

Our next question comes from Andrew Cooper with Raymond James.

Maybe one more on the EP business. If we think about the 6% growth relative to what you did last year, last quarter, fiscal 1Q was kind of the last one where you didn't have full market release of XL, so probably the easiest comp of the year. Maybe just help us think about some of those moving parts on the execution side that you called out. And then I think, Chris, you mentioned there's a series of actions that you could walk through if relevant. I think it might be relevant and would love to hear the details on some of the things beyond what you've already discussed.

Sure, Andrew. Thanks. Yes, we have three main products driving the company, specifically VASCADE, which targets the U.S. EP market. We need to succeed in that area. The underlying market has its ups and downs, with a lot of misinformation out there. However, our own measurements show high single-digit growth in EP access sites, around 8.5% this year. Our current growth of 6% is below market expectations, indicating we need to step up our competitive efforts, especially as we have recognized new competition and need to respond effectively. I've outlined several strategies that can help us, although none are guaranteed solutions. When we reflect on our progress in a year, some of these strategies will likely have a more significant impact than others, but it's hard to predict now. We have brought in new sales and marketing leaders with strong backgrounds in electrophysiology and interventional cardiology, which will enhance our team's expertise. The changes in sales compensation that began in the fourth quarter have the potential to be beneficial, although they may disrupt us in the early stages. Therefore, we shouldn't draw too many conclusions from our first-quarter results regarding our future performance. This transition will improve our clinical support, ongoing trials, and communication with customers. I’ve mentioned before that scaling a product from $25 million or $50 million to $200 million is one challenge, but moving beyond that is a different one entirely. Achieving this requires sales enablement tools to focus on specific accounts, as well as developing a strategic account capability that we previously lacked. By doing this, we can strengthen relationships with IDNs, which play a crucial role in opening the last 75 to 80 accounts and increasing usage across all of them. As we adapt to an increasingly managed market, we must view it accordingly. There are promising developments on the horizon, particularly changes from CMS affecting ASCs, which could benefit us due to the value VASCADE offers. However, we need to be proactive and manage our approach at the corporate strategic accounts level. We are implementing the necessary capabilities to achieve this, though progress won't be immediate. Execution is key, and while we believe we can achieve our goals this year, it will be a gradual process from our current position.

Okay. That's super helpful. Maybe just one on margins as well. I know you talked a little bit, James, about some of the trends throughout the year. I just want to make sure with this software piece that you did see in 1Q, how much of that drops to the bottom line? And how much of that was maybe in the annual plan and just movement from quarter-to-quarter versus potentially a little bit bigger change or something we need to think about from a jumping-off point from 1Q into 2Q and the rest of the year?

Yes, sure, Andrew. The gross margin increased by 210 basis points, and that all points to a straightforward scenario without additional expenses involved. This was included in our annual plan. As Chris mentioned earlier, it was really a question of timing, and it just so happened to fall in the first quarter. Chris highlighted the advantages of this situation in strengthening our position. Additionally, this factor acts like an annuity that will keep driving our software revenue in the years ahead. It was part of our full year guidance, contributing approximately 210 basis points to the quarter. However, this benefit will decrease in the next quarter, so our gross margin won't see that advantage again. Nevertheless, we anticipate further positive impacts from the mix and pricing factors that Chris discussed earlier regarding gross margin. Therefore, we expect our gross margins to remain stable at this level for the rest of the year.

Okay. Helpful. And then I'm going to sneak one more in just on plasma quickly. Can you give a little bit more flavor? I think the comment was share gains were kind of on track or a little ahead. When you think about what was already assumed in the guide, what inning are we in, whether it's as of the end of 1Q or kind of at present in terms of those incremental centers that you were hoping to have your footprint in that you weren't in prior.

Yes. The ongoing competitive center conversion will be relevant in fiscal year 2026 and likely into the first half of fiscal year 2027. We are ready to move as quickly as our customers are prepared to proceed. They are taking advantage of the current short-term pullback in total collection volume to complete the conversions, which is positive. If they wish to accelerate the process, we will support them. Our outlook, based on our discussions and experiences, heavily influences our guidance for the year, which is set at 11% to 14%. In terms of progress, we are midway through; we have more ahead of us than behind us. It's on track and progressing. I want to step back to discuss our corporate-level guidance. Our strategy is working, and we consider the first quarter results to be solid, although we will remain conservative. We generally prefer not to change guidance after just one quarter, as it doesn’t seem appropriate. Our guidance aligns well with what many viewed as ambitious goals. This includes an expectation for plasma growth of 11% to 14% and hospital growth of 8% to 11%, alongside mid-20s growth in earnings per share. My calculations indicate that when we exclude CSL and whole blood, which contributed between $0.70 and $0.90 of earnings per share last year and won't repeat this year, our midpoint guidance suggests mid-20s growth. We also project mid-20s growth in cash flow, similar to what we achieved last year. We will guide based on what we can control, as there are many external factors we cannot influence, and our focus remains on delivering results accordingly.

Our final question comes from David Turkaly with Citizens.

I really need to call in earlier. I think you mentioned that you did $150 million in buybacks during the quarter. I just wanted to confirm that and find out the price at which that occurred.

No, no, we didn't buy it back this quarter. That was last quarter.

So did you do this quarter?

Yes, we did not buy back. We repurchased any shares. We had a new authorization as well that Chris spoke about, but we haven't acted against it.

Okay. The $52 million impact you mentioned was a quarterly headwind from the transitions. Is that something that can easily be broken into different categories or not?

Yes, I mentioned $153 million for the year, which includes two factors. One is the transition from CSL, resulting in no U.S. PCS2 disposable revenue in the quarter, which accounted for $35 million to $37 million this time last year. The other factor is the divestment of whole blood. The combination of these two results in the $52 million impact we see. We expect comparable numbers for the next quarter, followed by a significant decline in the third and fourth quarters. It will be interesting to observe how the underlying health and performance of the business becomes clearer without needing further qualifications. We anticipate achieving high single-digit revenue growth and mid-20s earnings growth moving forward.

It's 35% in '17 is the breakout between CSL and whole blood this quarter.

Thanks a lot for that. And last one I'll just leave you with is when can we expect the next LRP, Chris?

When we're ready, we want to present this because we discussed this after our last call. The first slide will cover our say-do ratio. We expect high single-digit revenue growth, and by the end of the year, it should hit 10%. We talked about mid-20s adjusted EPS growth excluding CSL, and that's projected to be 28%. We also mentioned adjusted margins of 26% to 27%, which represents an improvement of 800 to 900 basis points from where we were previously. Our guidance remains as stated, and we plan to meet it. Lastly, we're targeting cash flow of $600 million to $700 million. Additionally, there's a cash to net income conversion ratio that we're aiming to achieve, which should be in the top quartile—certainly above 70%. Once that slide is finalized, we can discuss the next steps. Think spring or summer for that.

Our last question comes from Michael Petusky from Barrington Research.

I guess I really need to dial in faster. So Chris, I didn't catch this if you talked about this, but the sort of the geographic performance of TEG, can you just speak to how TEG did EMEA region, China, anywhere else you might want to talk about?

TEG is quite focused, particularly in the U.S., where we experienced high 20s growth. Overall, we saw growth in the low to mid-20s. Currently, about 70% of our performance is driven by the U.S. Interestingly, looking at our portfolio, around 75% to 80% of our revenue now comes from TEG, VASCADE, and NexSys in the U.S. Despite discussions about our complexity, we only have three products in the U.S. market, which defines our operation. We aim to grow significantly outside the U.S. as we believe the market for viscoelastic testing in Europe and Japan is largely unexploited. We appreciate the improvements made by our team there and are awaiting regulatory approval for the heparinase neutralization cartridge in EMEA. We anticipate that this approval will have a similarly positive impact as it has in the U.S. over the past six quarters. For now, however, our focus remains on the U.S.

You can just push a little bit. Anything on China. I think you had talked about market challenges in China, which doesn't seem super surprising in the current environment, but I'm just curious if there's any comment there.

Yes. We've taken our lumps in China over the prior one or two years. That's largely normalized. Now China is less than 4% of our corporate revenue. across the entire portfolio. TEG, in particular, is the older product, TEG 5000 success is not released there, but the TEG 5000 has local competition. We took a beating on some of the local efforts that the government had put in place. That's all stabilized. We actually grew TEG in the quarter pretty nicely, but off of a really modest base. But there's more we can do there, for sure, we'll have it. We seem to be kind of navigating the tariff structure in a way that our products we can supply out of Asia, et cetera. So we've kind of largely sidestepped that, and we're there to support the market, but it's a really modest contributor, less than 5% overall.

Okay. Great. And just the last one, going back, I guess, to the U.S. ET market. you've gone out of your way to say, "Hey, look, some of these changes are going to take time, but we've made changes. We’re making changes, brought in sales and marketing leadership, and are essentially calling this within your control. It's not structural. But I'm just curious, as you sort of look at the first quarter performance and then measure that up against what you sort of consider market growth, 8.6% access sites growth, I guess I'm asking you looking at a crystal ball here, but I guess what I’m wondering is, over the next quarter or two, is it likely that the, let's say, mid-single digits sort of sticks or possibly even takes a minor step back before you guys sort of get the momentum that you hope to get towards the high single digits? So I'm just curious as sort of the cadence of how you see changes you've made and how they flow through say, over the next 4, 6, 8 quarters?

I believe it's going to be a gradual progression, and I don't want to downplay that. We cannot accept below market growth, especially in a category that is about 50% penetrated in terms of utilization in the U.S., with even greater opportunities in Europe and Japan. It's important that the current leadership with aligned incentives makes the right investments. There are no shortcuts; we're committed to delivering in fiscal year 2026 and achieving the four-year long-range plan. This is about the next long-range plan and long-term growth. We see significant scale potential in both Interventional Technologies and blood management technologies and are dedicated to investing and allowing the team the necessary time to succeed. While sooner is better, we need to recover what we've lost and expand on that to strengthen our position with VASCADE. Expect more updates as success breeds success. Sometimes, just not losing is a victory. Our team has a strategy in place, and I am cautiously optimistic, but it will take time to build. You will likely observe this in our quarterly results for fiscal year 2026.

Chris, can I ask one more quick question? Regarding the sales and marketing leadership you brought in, are we talking about just a few people, maybe two or three? Or is it a larger group? Also, could you share which notable companies some of these individuals may have come from?

No, I'm not going to go into details of it, but I will tell you this, right? And now I'm going back to my prior life as a consultant, been through more than a few turnarounds and launches, et cetera. We're talking change management at a very fundamental level. Yes, we've changed at the top, but we're also changing throughout the ranks. And I mean individual reps and clinicals that have the right experience in pedigree, first-level sales supervisors, every sales force I've ever been around succeeds or fails on the caliber and the commitment of that first level supervisor. We're making the investments there and then up through the rest of the chain, we're building out the key account capabilities I referenced. Obviously, there's some marketing work behind the scenes up and downstream. So there's a lot as we prepare this business to go to a fundamentally different level, right? Like we're investing heavily because we think the demand in IVT, in BMT across the Med-Surg opportunities is much more addressable, much more controllable by us. We love plasma. But plasma has inherent cyclicality and some systemic risk associated with it. We've called that out. What we like about what we're building in hospital is we have more of an ability to control and particularly as we scale and we scale these investments, you're going to start to see the operating leverage come through. That's what takes this to another level, and that's the investments we're making.

This ends the question-and-answer session. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.