Earnings Call
Haemonetics Corp (HAE)
Earnings Call Transcript - HAE Q2 2026
Operator, Operator
Good day, and thank you for standing by. Welcome to the Second Quarter 2026 Haemonetics Corporation Earnings Conference 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 Treasurer. Please go ahead.
Olga Guyette, Vice President, Investor Relations and Treasurer
Good morning, and thank you all for joining us for Haemonetics' Second Quarter Fiscal Year 2026 Conference Call and Webcast. I'm joined today by Chris Simon, our CEO, and James D'Arecca, our CFO. This morning, we released our second quarter and year-to-date fiscal 2026 results and updated full year fiscal '26 guidance. The materials, including our earnings release, Form 10-Q, and supplemental earnings presentation, are available on our Investor Relations website and through this morning's press release. Before we begin, I'd like to remind everyone that we will use both organic and reported revenue growth rates. In case of organic growth rates, those exclude the impact of FX, the divestiture of the whole blood product line, and the exit of certain liquid solution products. Organic growth ex CSL also excludes the impact of the previously disclosed transition of CSL's U.S. disposable business. We'll 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 earnings release. Our remarks today include forward-looking statements, and our actual results may differ materially from 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 our 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.
Christopher Simon, CEO
Thanks, Olga. Good morning, everyone, and thank you all for joining us. Second quarter revenue was $327 million and $649 million year-to-date, each reflecting a 5% reported revenue decline driven by $48 million and $101 million in last year's portfolio transitions, respectively. Excluding these transitions, organic growth ex CSL was 9% in the quarter and 11% year-to-date. Adjusted EPS increased 13% in the quarter and 11% year-to-date to $1.27 and $2.36, respectively. Our results reflect disciplined execution, delivering strong core product growth, record margin expansion, and solid earnings that convert to cash, while advancing our portfolio and company transformation to sustain this momentum well beyond our long-range plan. The focus on NexSys, TEG, and VASCADE continues to advance our leadership and fuel growth. We are gaining plasma share through best-in-class collection solutions. We are reinforcing TEG leadership in viscoelastic testing, and we are executing targeted vascular closure initiatives to strengthen performance and return Interventional Technologies to growth. Turning now to our individual business performance. Hospital revenue was $146 million in the second quarter and $285 million year-to-date, up 5% on a reported basis and 4% organic in both periods. Strong Blood Management Technologies performance offset softness in Interventional Technologies, underscoring the resilience of our diversified portfolio and multiple drivers of performance. Blood Management Technologies delivered strong growth, up 12% in the quarter and 13% year-to-date, driven by sustained strength in hemostasis management. Growth was fueled by higher TEG disposable utilization and the ongoing rapid adoption of the global heparinase neutralization cartridge. In October, we reinforced our global leadership in viscoelastic testing by launching the HN cartridge in EMEA and Japan. The broader portfolio also contributed to growth, with transfusion management achieving double-digit growth, supported by heightened demand for transfusion safety and efficiency. Interventional Technologies declined 5% in the quarter and 6% year-to-date, reflecting softness in the esophageal cooling against accelerating PFA adoption. While modest in size at approximately $3 million in revenue in the second quarter, esophageal cooling remains a disproportionate driver of near-term underperformance. Vascular Closure grew 2% in the quarter and 3% year-to-date, led by MVP and MVP XL, and electrophysiology growing 4% and 5%, respectively. These gains were partially offset by continued softness in legacy VASCADE concentrated in lower growth coronary and peripheral procedures. We remain confident in the strong clinical and economic differentiation of our vascular closure portfolio, and we are taking decisive actions to strengthen execution to accelerate growth. We are also making solid progress with SavvyWire in the U.S., delivering consistent double-digit growth as we build its foundation and broaden our relevance in structural heart. We are updating our hospital revenue growth guidance to 4% to 7%, both reported and organic, reflecting sustained double-digit growth in Blood Management Technologies and little to no contribution from Interventional Technologies. This outlook reflects our focus on taking the steps necessary to drive long-term value creation, with Interventional Technologies expected to play a larger role in accelerated growth and margin expansion beyond FY '26. Moving to Plasma. Revenue was $125 million in the quarter and $255 million year-to-date, down 10% and 7% on a reported basis, respectively, reflecting the CSL transition. Excluding CSL, organic revenue grew 19% in the quarter and 23% year-to-date. Second quarter results were driven by share gains, robust growth in U.S. collections, and ongoing benefits from innovation. Our plasma business is stronger than ever, delivering revenue growth and margin expansion, enabled by best-in-class solutions that help improve customer performance to drive our share gains. Based on customer forecast and strong sentiment from PPPA, we have renewed confidence in the sustained robust growth of the plasma therapeutics market, particularly immunoglobulins. Our second quarter results reinforce that view, with U.S. collections growing in the high single digits and European collections continuing to grow double digits. Given stronger-than-anticipated first half performance, we are raising our full year reported plasma revenue guidance to a decline of 4% to 7% or 14% to 17% organic growth ex CSL. Second quarter collections growth was very encouraging. However, our guidance remains grounded in the factors we can control, primarily share gains. Blood Center reported revenue decline of 18% in the quarter and 21% year-to-date, reflecting the impact of the whole blood divestiture. Organic revenue grew 4% in the quarter and 5% year-to-date, driven by resilience in our core apheresis business. We are raising our full year Blood Center guidance to reflect this performance, now expecting reported revenue to decline 17% to 19% as we fully anniversary the Whole Blood divestiture and organic growth to be approximately flat. Overall, revenue momentum remains strong, underpinned by growth and expanding profitability across our businesses. Despite $153 million in last year's portfolio transitions, two of our three growth franchises continue to deliver outsized organic growth while we strengthen our commercial execution for renewed sustained success in IVT. Reflecting better-than-expected first half performance across more than 80% of our portfolio, we are raising full year revenue guidance from a reported decline of 3% to 6% to a decline of 1% to 4%, and organic growth ex CSL from an increase of 6% to 9% to an increase of 7% to 10%. Over to you, James.
James D'Arecca, CFO
Thank you, Chris, and good morning, everyone. We delivered another strong quarter of profitable growth. Our results highlight the benefits of our strategic portfolio transformation, ongoing productivity initiatives, and disciplined approach to cost management, contributing to continued improvement in margins and earnings growth. Adjusted gross margin reached 60.5% in the second quarter and 60.6% year-to-date, up 380 and 460 basis points, respectively. The expansion was driven by the continued adoption of our Persona technology, price initiatives across the portfolio, and favorable product mix, all of which are expected to continue to support margins in the second half. Software license fees in the first quarter contributed roughly 100 basis points of gross margin benefit year-to-date. Adjusted operating expenses in the second quarter were $111 million, a decrease of $1.5 million or 1%. The decline reflects lower freight costs, coupled with disciplined expense management and continued focus on efficiency across G&A while prioritizing targeted investments to support innovation and long-term growth. Adjusted operating expenses year-to-date were $229 million, slightly up from $227 million last year, predominantly due to the timing of certain R&D investments. The strength of our core portfolio and our ability to drive margin expansion is evident in our results. Year-to-date, we've absorbed $101 million of revenue impact from last year's portfolio transitions, all while growing our adjusted operating income. This performance reflects the strength and higher profitability of our base business and disciplined cost management, holding G&A flat and delivering additional productivity savings that help offset continued strategic investments in growth initiatives that strengthen our long-term trajectory. Adjusted operating income increased 5% in the second quarter to $87 million, with adjusted operating margin expanding 250 basis points year-over-year to a new record of 26.7%. Turning to the segment level performance in the second quarter. In hospital, adjusted operating margins expanded by 370 basis points, predominantly on continued strong momentum in Blood Management technologies and higher operating leverage. In Plasma, adjusted operating margin expanded by 190 basis points, driven by prior technology upgrades, share gains, and the full transition of our legacy U.S. PCS2 business, partially offset by additional investments into innovation. Blood Center adjusted operating margin expanded 320 basis points, driven by the whole blood divestiture, a stronger core apheresis mix, and continued productivity gains from the ongoing portfolio rationalization. Adjusted operating income for the total company year-to-date was up 7% to $165 million, with adjusted operating margin of 25.4%, an improvement of 270 basis points versus the prior year. We expect continued margin expansion in the second half and reaffirm our total company full year adjusted operating margin guidance of 26% to 27%. The adjusted tax rate was 24.7% for the quarter compared with 25.1% in the prior year. Year-to-date, the adjusted tax rate was 24.8%, and we expect it to remain consistent for the remainder of the fiscal year. Adjusted net income rose 5% to $60 million in the second quarter and 4% year-to-date to $114 million. Adjusted EPS increased 13% to $1.27 in the quarter and 11% year-to-date to $2.36. The combined impact of share repurchases, tax, interest, and FX provided a $0.06 benefit to quarterly adjusted EPS and a $0.05 benefit year-to-date. We are raising our full year adjusted EPS guidance to $4.80 to $5 a share. At the midpoint of our revised fiscal year guidance, we assume approximately $35 million in interest and other expenses, generally comprised of net interest expense and foreign exchange hedge contracts, and approximately 47.6 million in diluted shares outstanding at year-end. Turning to cash flow and the balance sheet. We continue to enhance working capital management to optimize value creation, generating $111 million in operating cash flow in the second quarter, up 128% year-over-year. Year-to-date operating cash flow was $129 million, a sixfold increase when compared with the same period last year, primarily due to improved inventory management, including the build-out of NexSys devices, which impacted our cash flow in the prior year. Free cash flow was $89 million in the quarter and $91 million year-to-date, with the free cash flow to adjusted net income conversion ratio of 147% and 80% in the quarter and year-to-date, respectively. Our ability to generate cash remains strong, supported by disciplined execution and renewed focus on cash efficiency. We are raising our full year free cash flow guidance to $170 million to $210 million and reaffirming our expectation for the free cash flow to adjusted net income ratio to be in excess of 70% for the full fiscal year, underscoring our commitment to performance, cash discipline, and capital stewardship. Turning to the balance sheet. We ended the quarter with $296 million in cash, down $10 million from the beginning of this fiscal year, primarily reflecting $75 million in share repurchases and additional strategic investments, partially offset by higher net income, translating into an even stronger cash flow. Our capital structure remains unchanged, with total debt of $1.2 billion, no borrowings under our revolving credit facility, and a net leverage ratio of 2.5 as defined by our credit agreement. This positions us well to meet near-term debt obligations, fund operations, and pursue value-creating opportunities, including additional share repurchases when appropriate. Before we begin Q&A, I'd like to close with a few thoughts. We continue to execute our plan with strength and discipline, delivering profitable growth, expanding margins across all segments and translating our adjusted earnings to cash. Despite $153 million in last year's portfolio transitions impacting this fiscal year, most of which are now behind us, we remain on track to achieve our updated guidance for the year and meet all our long-range plan targets. Our growth and profitability are anchored in the success of our three core products: NexSys, TEG, and Vascular Closure, supported by company-wide initiatives that continue to drive productivity and operational excellence. Margin expansion remains a hallmark of Haemonetics. And with plasma and blood management outperforming and progress underway in Interventional Technologies, we are building a strong foundation for continued margin expansion beyond fiscal '26. Across the company, our results reflected disciplined execution and a high-performance culture. And when combined with strong cash generation and a solid balance sheet, this positions us to further enhance long-term value creation. For fiscal '26, our priorities remain focused on meeting debt obligations, returning excess cash to shareholders via buybacks when appropriate, and advancing targeted investments in our growth products. Thank you. Operator, please open the line for questions.
Operator, Operator
Our first question comes from Rohin Patel of JPMorgan.
Rohin Patel, Analyst
I just wanted to start off with some of the revenue drivers. You had a nice quarter in plasma and are raising the guidance, and you mentioned high single-digit collections growth in the U.S. So I just want to ask what you're assuming in the second half for collections versus share gains versus pricing? And are you seeing any meaningful kind of recovery in collections intra-quarter? And how should we reconcile that with the strong ex CSL growth maybe with your longer-term sustainable outlook in plasma?
Christopher Simon, CEO
Rohin, it's Chris. Thank you for the question. We had a really stellar quarter with Plasma, a stellar first half. And I think you see that in the organic results. The second quarter was propelled by three things in order of priority: share gains as we continue to pick up additional centers on our devices, the benefits of innovation pricing, premium pricing for us, what is a superior product. And now collections volume growth. We had always predicted volume growth in the back half of the year. It started early in the second quarter. And that's a powerful trifecta. To be specific about the volume growth, we experienced high single-digit in the U.S., double-digit growth in Europe. And we see that as a return from the normal cyclicality that has defined this industry for a very long period of time. So we remain really bullish on the end market demand for Ig-derived therapies, and you see that in our customers' earnings discussions as well. So plasma goes from strength to strength. We're very optimistic about its continued success.
Rohin Patel, Analyst
Great. And then also just turning to hospital. Maybe if you can provide an update on some of the commercial work to get IVT back on track. I appreciate the additional color and disclosure you provided in that business. And also just it seems from your disclosures that the hospital business actually drove a lot of the incremental margin benefits in the quarter. So maybe if you could just talk about some of the levers you're pulling to drive operating margin and how you're balancing that with any of this additional commercial spend to get those products back on track.
Christopher Simon, CEO
Sure. Again, thank you. Yes, hospital was the single largest contributor to what continues to be really robust margin expansion. We're trying to provide more detail to be as transparent as possible. As we calculate the segment P&Ls, the hospital operating income expanded 370 basis points in the quarter. And to your point, that's mix, that's volume. And increasingly now, that's operating leverage, which we're really keen to see. Obviously, there's two parts to hospital. Blood Management Technologies continues to excel, which is allowing us to put the appropriate focus and resources on driving IVT. And so IVT is defined by vascular closure. You saw the numbers in the quarter. Happy to go through as much detail as you want on that. But we remain confident in both the clinical and the economic differentiation of our vascular closure portfolio. And we're taking the right actions. We're being decisive to regain growth momentum in the latter part of this year and into FY '27.
Operator, Operator
Our next question comes from the line of Marie Thibault of BTIG.
Marie Thibault, Analyst
Congrats on a nice quarter. I wanted to follow up there on Rohin's question about the IVT commercial efforts. You've mentioned some of the progress underway. Can you give us a little more detail on what exactly is happening, some of the green shoots that you're starting to see? Just any more detail on that turnaround?
Christopher Simon, CEO
Yes. Thanks, Marie. Good to hear from you. So I'd summarize it this way. I am highly confident in our team. They're taking the right actions in the right way, and they're fully resourced. And so the things we are highlighting, that commercial leadership group from first-level sales supervisors on up to the business president, many of them are new. They come with the exact right background experience and relationships to excel, particularly in electrophysiology, but also interventional cardiology. You know that at the beginning of the year, we bifurcated our field force. It's an 80-20 split with 80%, of course, going to vascular closure. That gives us over 200 personnel in the field driving the product. We feel that's quite appropriate for the opportunity set. We've put a number of tools in place to drive sales force excellence, and I won't drag you through the details, but we're closing vacancies. We've upgraded our training. We have a new set of tools to track and monitor. The quotas have been aligned. The incentive comp is state-of-the-art. So we feel quite good about sales force excellence. The other part of this is we've meaningfully strengthened our corporate accounts group that will help us with IDNs and increasingly with the ASCs as those become an important driver for the market where we think our value proposition is even more distinct. We have successfully completed the MVP-XL trial, and we're able to make a timely submission to the FDA prior to the shutdown. So that should bode well as we get here later in this fiscal year and next in terms of stronger clinical evidence and opportunity to leverage that trial outside the U.S., particularly in Japan. And then we've gotten very targeted in our competitive response. And I know there's concern about whether this is going to meaningfully diminish your gross margins. It will not. We think we can actually maintain excellent margin and execute well to hold, regain, and expand share across the board.
Marie Thibault, Analyst
Yes. Very helpful, Chris, and thanks for all that detail. It sounds like things are improving for sure. And then I wanted to follow up here and talk about Blood Management Technologies. Again, very, very strong performance. Help us think about the sustainability of that over the next few quarters. How should we think about the cadence of launches that you've recently put out, the length of kind of the rollouts, and some of the benefits that you tend to see, again, sort of growing above historicals?
Christopher Simon, CEO
Thank you for your question. Blood Management Technologies continues to perform exceptionally well, with a growth rate of 12% in the last quarter and 13% year-to-date. This marks several consecutive quarters of double-digit growth. We believe that the introduction of the global heparinase neutralization cartridge has significantly advanced this franchise and that double-digit growth is likely to continue for the foreseeable future. This growth is driven by a mix of capital equipment, increased use of disposables, and the adoption of the heparinase neutralization cartridge. As noted in my prepared remarks, we were excited to launch the cartridge in both Europe and Japan this October, enhancing our strength in a market we helped establish, where we hold over 70% market share, and we aim to expand further. Additionally, Blood Management Technologies benefited this quarter from double-digit growth in transfusion management, which, while a smaller segment, is highly promising and continues to make a positive impact. We are enthusiastic about the future of Blood Management Technologies.
Operator, Operator
Our next question comes from the line of Mike Matson of Needham & Company.
Unknown Analyst, Analyst
It's Joseph on for Mike. Could you just touch on blood center growth a little bit? Just, I guess, why was it so strong? I think 4% organic. Can you just talk about some of the growth drivers there, what you benefited from in the quarter?
Christopher Simon, CEO
Yes. Happy to talk about it, Joseph. Yes, Blood Center, again, that's the real unsung success story here, I guess, and it's meaningfully benefiting from focus. As you know, at the end of last calendar year, we divested the whole blood franchise and some of the supporting products, liquids, etc., that were really a drag on our margin and a distraction from a focus area. So with those behind us, we've really been able to focus on what is increasingly plasma apheresis done in blood centers often with our NexSys device. And you see that growth, 15% of the corporate revenue, but it's a solid source of EBITDA and return on invested capital and free cash flow, as you see from our numbers in the quarter. The operating income in that business, on a stand-alone segment basis, we estimate expanded its operating margin by 320 basis points, again, benefiting from the divestiture and an ongoing effort to rationalize that portfolio. We talk about the regional market alignment program. That's the focus there. So that gave us a lot of confidence to raise the guidance. And now on an organic basis, we expect that business to hold serve and finish flat for the year.
Unknown Analyst, Analyst
Okay, great. It's clear you are benefiting from the rationalization. I have two more quick unrelated questions. How much did the share repurchase contribute to the EPS for the quarter or to the EPS increase for fiscal '26? Also, regarding VASCADE and Vivasure, are you still committed to the large bore market, and do you still plan to proceed with the acquisition of Vivasure?
James D'Arecca, CFO
Yes. It's James here. I thought I'd jump in on the first question on the share buyback in the quarter. It was a few cents, and it's included in the $0.06 below the line item that I gave earlier.
Christopher Simon, CEO
Yes, we are very committed to completing the acquisition of Vivasure large bore closure. I would describe our submission to the FDA as nearly finalized and successful. If anyone attended the most recent TCT, they would have heard impressive results from the patch trial, particularly in terms of reduced vascular complications and near-instantaneous time to hemostasis, which is very exciting. We anticipate that this will be an event in fiscal year 2027, considering the timing of the FDA's release. This $300 million market for large bore arterial access in TAVR and EVAR is characterized by high growth, and our product is distinctly differentiated. It is fully absorbable and implant-free, making it a best-in-class option regarding safety and ease of use. Moreover, it aligns synergistically with our primary focus on closure products in IVT and offers additional synergy with our SavvyWire business in structural heart. We are excited about this opportunity and recognize that more work is ahead, but we expect to provide further updates later this year.
Operator, Operator
Our next question comes from the line of David Rescott of Baird.
David Rescott, Analyst
Congrats on the progress here. Two questions from us, and I'll ask them both upfront. First, on the plasma side, it seems like a pretty substantial step change in the U.S. collection volumes that are going out. I know you've talked in the past and have remain committed to the fact that there's ebbs and flows in the market and had expected it to get better in the second half of the year. It's clearly coming sooner than expected. So I'm curious on what you're seeing on the ground level as to why, again, a multi-quarter kind of low single flat growth number has now stepped up to this high single-digit level in the U.S. And just interested to hear on your confidence that maybe this isn't just a one-time thing. Should we expect the cyclicality on a quarterly basis, maybe to even step back down and step back up as this multi-year return to high single digit plays through? That's the first question. And then second, on the VASCADE business, I know there were some comments around some of the competitive nature in that market. Last quarter, you're focusing on getting the sales force initiatives realigned here. So just curious to hear if you could parse out maybe the benefits you've seen from the work that you've done versus the overall market acceptance versus some of the things on the competitive side that again give you the confidence that you can continue to progress here through the year.
Christopher Simon, CEO
Thank you, David. First, regarding U.S. plasma collections, we are experiencing high single-digit volume growth, complemented by pricing benefits from technological advancements and continued market share gains. We are optimistic about the cyclical nature of this market. Conversations with our clients and observations at PPTA indicate that the trends we saw in the last quarter are likely to be sustainable in the latter half of the year and beyond. Our customers are gaining market share, aided by the success of NexSys. Although we achieved a 23% growth in the first half of the year, our guidance is more conservative, reflecting our control over share gains and the annualization of previous technology implementations taking place this quarter. We are focused on the share gains we continue to achieve, which we feel positive about, and this is evident in our forecast. On the VASCADE front, we face stiff competition, but we've seen promising trial results from Excel and positive performance in head-to-head scenarios. This gives us confidence that we can regain market share, and we already have instances of early success. Our upcoming results will highlight our progress, particularly with VASCADE in electrophysiology. While SavvyWire is a smaller yet important contributor and is expected to sustain double-digit growth excluding OEM, we also anticipate the introduction of PercuSeal Elite from Vivasure as a third priority moving into fiscal year '27. Our guidance for this area is cautious; we've adjusted our expectations downward as we don't foresee significant contributions this year. However, the signs we are seeing indicate that we have the right team and are taking the right actions to reestablish growth in this category moving forward.
Operator, Operator
Our next question comes from the line of Travis Steed of BofA Securities.
Unknown Analyst, Analyst
This is Anja speaking on behalf of Travis. I wanted to ask about VASCADE. I understand the challenges from competitive discounting and the previous Japan launch. Do you believe the changes in the sales force will help you achieve growth above the market? Also, when can we anticipate the expansion of the Japan label, and how significant will that be?
Christopher Simon, CEO
We are confident that the changes we've implemented will lead us to exceed market growth rates. Our product is clinically and economically distinct in the right environment, and there is significant growth potential, especially with MVP and MVP XL in electrophysiology. Historically, Japan has been a key growth area for us this fiscal year, and the launch of PFA changes the landscape. However, the reception of PFA in Japan is more subdued, as safety is a top priority in the market. We anticipate a slower adoption curve, with a more balanced distribution among the main players. This is beneficial for us as they have welcomed MVP-XL into the market, and we have reimbursement for the base label, allowing us to cover nearly all procedures except one. We are optimistic that Japan will become a significant contributor to our growth as the year progresses. Notably, they have agreed to consider U.S. data in our regulatory submission for broader access site indications. While we cannot predict the exact timing since it is outside our control, we are confident in our distributor there and believe that, with the approval of the expanded label and favorable reimbursement, Japan will be a source of growth moving forward.
Operator, Operator
Our next question comes from the line of Joanne Wuensch of Citi.
Unknown Analyst, Analyst
This is Anthony on for Joanne. Could you maybe characterize a bit more? I know it's early, but just how the launch of the HN cartridge is going in EMEA and Japan and if it's tracking similarly to how the U.S. launch was in the first few months?
Christopher Simon, CEO
Yes, it will vary in those markets due to the differences in viscoelastic testing. Our product offers broad-based applications, and if the trends we see in the U.S. continue, we are observing a significantly higher number. The dollar revenue per device has notably increased with the heparinase neutralization cartridges in the U.S. We anticipate that the launch will be quite similar there, but it is starting from a different position. We have significantly fewer TEG 5000 devices, the previous product, available in those regions, which limits the conversion opportunities. These are smaller markets, yet we are capable of leading, and our teams are enthusiastic. The markets typically employ a hybrid strategy; for example, the U.K., Germany, and parts of Japan operate directly, while others rely on distributors. Therefore, there will be some delay as these distributors familiarize themselves with the new product and cartridge and become established in the market. However, in the long term, we see this as a crucial avenue for sustained double-digit growth for that business unit.
Operator, Operator
Our next question comes from the line of Andrew Cooper of Raymond James.
Andrew Cooper, Analyst
Maybe starting, I think Chris, you said a couple of times VASCADE was economically differentiated. Can you just give a little bit more color on sort of what you mean by that versus the competition? And then talk a little bit about how pricing and your approach to the market there has evolved competitively. Have you made changes to price? And do you feel like from here, we're in the right spot where it's going to be a little bit steadier? I know you said margins would hold in there, but just would love any thoughts on the top line and the price component.
Christopher Simon, CEO
Thank you, Andrew. The product's metrics, such as time to ambulation and time to discharge, are competitive with the best in the market. The key advantage we've noticed, especially after the post-PFA environment, is the enhancement in workflow productivity. When a center implements MVP and MVP XL, they can efficiently manage patients, get them stabilized, ambulated, and often send them home the same night, which is a significant benefit. Clinicians frequently highlight that it’s a pain-free solution. While suturing is effective and has its place, it tends to be painful and often requires narcotics, which come with their own issues. We effectively eliminate those concerns. The speed of workflow, lack of pain medication, and improved patient experiences are considerable advantages. As more procedures shift to ASCs, this distinction will grow even more prominent, and we're excited about it. Regarding pricing, we are carefully analyzing account-level details to understand where we're gaining ground and where we might be losing it. It's rarely about the product’s actual price. We might need to be more flexible with initiation trials or collaborations with VAC to convert remaining accounts, but in our head-to-head comparisons, slight price flexibility has been effective in achieving the desired results. Our hospital operating income margin notably contributed to our overall margin growth by 370 basis points of OI. Both BMT with TEG and IVT with VASCADE equally supported that gross margin expansion. Looking ahead, as we increase volume, we expect to see rising operating leverage. We are not concerned, as the necessary investments in OpEx have been made, and any price concessions are minimal. From our perspective, we anticipate that our margin expansion and growth objectives for both top and bottom lines are entirely attainable.
Andrew Cooper, Analyst
That's great. And then I wanted to ask one more on Blood Management as well, just given the traction there, not to jump too far ahead of ourselves, but it's clear that the HN cartridge has done a lot for driving that growth. When you look into the future from an innovation perspective, are there other menu items to add that could be similar in magnitude? And if so, can you give any color on what they might be or maybe when we could think about more of that menu expansion to continue driving penetration with TEG?
Christopher Simon, CEO
Yes, Andrew, we definitely see more opportunities for growth in viscoelastic testing. In the U.S., for instance, a significant portion of T700 users have yet to adopt viscoelastic testing. We currently hold a 70% market share, and we plan to maintain and expand that. Our greatest potential lies in introducing viscoelastic testing to other market segments that do not currently utilize it. Hp neutralization facilitates this as it allows for a wider range of testing. Additionally, we are exploring further indications and applications for the product, which we will likely discuss in more detail during our next Investor Day in the spring. We will take some time to focus on the exciting portfolio pipeline we have developing alongside TEG.
Operator, Operator
Our next question comes from the line of Michael Petusky of Barrington Research.
Michael Petusky, Analyst
So Chris, I missed part of your prepared remarks this morning because of the numerous companies reporting. I'm curious about Vascular Closure and how things have progressed over the last 12 to 14 weeks since our last call. You've implemented a lot of initiatives to turn the business around, and I'm sure you're monitoring this, if not daily, then at least weekly. While I heard the positive comments, are you seeing consistent progress week by week, even as we approach the end of the quarter? Do you have enough evidence to suggest that we've hit the bottom and started to turn things around? It's not an immediate return to previous performance, but are we at a point where we're now engaging actively rather than just taking losses? What insights can you share about where you see us in this potential comeback story?
Christopher Simon, CEO
Yes. Thanks, Mike. I appreciate the question. And I appreciate the interest on this. We are absolutely anticipating a comeback story, right? And I think this one is going to be exciting and interesting to watch as it develops. We are confident that the actions that we have taken year-to-date have stabilized this performance. And so we don't expect any further deterioration in performance. We see green shoots with new account openings. We see green shoots with greater utilization. We see green shoots with competitive win backs or just healthy head-to-head that we've come out on top on. So we do expect meaningful growth going forward. However, we're going to be prudent in our guidance. And at this point, the guidance for IBT writ large, and it's important. We didn't talk about this probably enough, but that franchise is unfortunately dragged down by esophageal cooling, and I'm happy to come back and give some more specifics there because I'm not including cooling as part of my commentary. I'm talking specifically about closure. In closure, we put very little in for the second half, but that's us being prudent because it's a tough market, and I'd rather be on the conservative side of that. We've heard that loud and clear from the market to call it when you see it, but not before. Our results from here will speak for themselves, okay?
Michael Petusky, Analyst
Okay. Great. I have a quick question for James. With your recent aggressive approach to share repurchase, as you consider the long term, would you expect the share count to stay below 50 million over the next few years? Will you continue to be active in share repurchase as you think about capital allocation beyond fiscal '26?
James D'Arecca, CFO
Yes. Thanks, Mike. So there's roughly 47 million-ish shares outstanding now. So I think a lot would have to happen to get above that $50 million mark. So the thought process here is that certainly, we would aim to keep dilution in check for sure. And then I mean, let's face it, one of the benefits of having a strong balance sheet is that we do have some optionality on capital deployment. So yes, that includes buying back shares, also debt pay down, and so forth. But yes, for the foreseeable future, lower than $50 million, pretty good bet.
Christopher Simon, CEO
Yes, Mike, it's Chris. If I could just pile on there. From a capital allocation perspective, exactly as James just highlighted, we're going to focus on paying down our debt, being opportunistic with the share buybacks. We'll make targeted organic investments as we have to advance new technology into the market. But again, we feel we've fully resourced from an OpEx perspective. You see that. You see that in our leverage. And obviously, you see that in our robust cash flow and a really healthy free cash flow to net income conversion ratio. But we're focused on what we have. We're focused on making the most of the portfolio. As I've said repeatedly, we'll do Vivasure when the final set of milestones are hit, and we're ready to go there. Beyond that, M&A is off the table until we have IBT exactly where we need it to go.
Operator, Operator
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