Good morning, everyone. Thanks for joining us on day two of the Raymond James Institutional Investor Conference. I'm Andrew Cooper. I cover tools and diagnostics, and that includes Haemonetics for me here. Happy to be joined by Chris Simon up on the stage. We also have James D'Arecca and Olga Guyette, and David Trent in the audience as well from IR. Appreciate everybody joining us. Maybe first, Chris, can you just start us off? I think maybe some fresh faces in the audience. Give us a few minutes on who Haemonetics is, what you do, and kind of how you fit into the landscape.
Sure, Andrew. Again, thanks for having us. Delighted to be here with you guys. Some of my remarks might include forward-looking statements, so typical safe harbors apply. Haemonetics has three businesses: plasma, blood, and hospital. The first two are focused on collecting plasma and blood products for medical therapy. The hospital business is focused on essential cardiology, electrophysiology, trauma, and transplant procedures. What's interesting about the company is we're currently midway through a four-year long-range plan, which we hope will generate transformational growth, diversification, and sustainability. Our plan can be summarized very simply as winning in plasma while accelerating in high-growth, high-gross margin segments. We did over $1 billion in revenue last year for the first time in the company's 50-year history, a milestone that highlights our ability to build scale and accelerate growth. This year, we're on track to do more than $1.3 billion.
Perfect. It's been about a year since we sat in this exact venue, having a very similar conversation directionally, at least. Maybe as you look at the last 12 months, what's been the thing you've been most proud of in terms of the Haemonetics trajectory and story, and maybe what's been the bigger challenge to overcome?
Sure. In general, it's been an absolutely terrific year for us. I'd highlight a couple of few thoughts. Plasma recovery has definitely fueled unprecedented collections growth. We're expecting double-digit growth again this year on top of growing 43% last year. We've overcome numerous supply limitations. We've had to expedite and do a whole bunch of spot buying and other one-off things, and we're still hand-to-mouth on our inventory. But as we did last year, we will sell every bowl we'll manufacture this year. We will keep our customers appropriately stocked, and I think really have advanced the industry and ourselves in that regard. VASCADE is probably the most exciting young product in the portfolio. It'll penetrate 80% of the U.S. accounts by the end of our fiscal next month. And we're growing our global footprint now in Europe and Japan.
And then meanwhile, TEG, kind of our stalwart hospital product, continues to deliver mid-teens growth, defying all odds. So we're excited about both of those opportunities in hospital. And then we're really building out this interventional technologies portfolio. We closed OpSens back in December. We announced Attune this morning, and we're looking to rapidly integrate, begin the cross-selling process, and really drive that entire portfolio. So lots to celebrate. I guess the last thing I would highlight is operational excellence. We hit our goal and anticipate saving gross $116 million this year. And that allows us to essentially wrap up the program fully a year ahead of schedule. We're not done with improvements in productivity and operational efficiencies. And as we see a further easing in the macro pressures, I think that gives us a chance to do more. But there's a whole lot to celebrate.
Of course, there are challenges. I'm sure we'll get into some of those this morning, but it's been a terrific year overall for us.
No, that's great. And you're right. We're going to get into a lot of what you just mentioned there. Certainly, we're going to talk about plasma, but let's start with hospital. You've really kind of focused on building that out as a broader segment, including a deal this morning that I want to get into in a few minutes. But maybe just first at a high level, you came in, I forget how many years ago at this point, and sort of talked about hospital before people were ready to kind of think about you as a hospital play. So what's the high-level vision and what's given you that confidence to sort of push through over the last several years?
Yeah. When I joined, almost 8 years ago now, strategy was simply stated threefold. We want to compete in winning med-tech segments, which we've continued to define as top quartile medical device revenue and profit growth and sustainability. We want to be either number one or two with the products that we bring to market in each of those segments. And then the combination of those things should allow us to deliver superior results. And we measure that as core revenue and income growth, but also return on invested capital. We run a capital-intensive business and free cash flow, which is the ultimate metric of a healthy, sustainable business. So that was the plan. We applied it to hospital overall to say, "Let's transform. We want this business to achieve top quartile med-surg business performance." So think about that as north of 70% gross margin.
As it builds over time, north of 30% operating income margin, which I realize is lofty goals. It was even loftier when we said it five, six years ago. But to the team's credit, we've doubled the revenue of that hospital business over the past several years. Today, it's going to finish well in excess of $400 million. It continues to grow in the high teens as we have in each of the last two years. And we're really bullish on our prospects for what we can continue to do in hospital as a second major pillar along with our collections business of Haemonetics growth.
Perfect. And maybe kind of on that, thinking about sort of the growth drivers within hospital, when you think about the business today, when you think about the LRP that you've mentioned, how much do we think about procedure volume versus penetration versus maybe price as sort of the growth algorithm that is underlying that?
Yeah. We like to think about, and this is the benefit of competing in top quartile sectors, we want to be in areas where the procedure volume creates a natural lift. So one of the reasons we highlighted electrophysiology and interventional cardiology is for the procedures we participate in, we're seeing double-digit, 10%-12%. So if you hold your own, you've got double-digit growth. For us, it's the rapid penetration. We're taking technologies that are nascent in the market. And our focus is advancing the standard of care, which picks up a whole additional new customers. And then the most powerful lever, whether we're talking about VASCADE or we're talking about TEG, is utilization, just driving the reach and the relevance of your product portfolio.
And for us, when we know we're improving clinical outcomes, we know we are lowering the cost of care in aggregate, and we have the data to prove both of those things. That's a powerful trifecta. And that's what's really spurring the growth we're experiencing.
Perfect. I had one about M&A pipeline, maybe taking a little shift given the news this morning. Maybe first, just for folks who maybe haven't had the chance to dive in deeply, give us a little bit of an overview of what you announced this morning, the Attune deal, and what their products are and how they fit.
Yeah. We're excited about Attune. It's yet another example of novel enabling technology that addresses a significant unmet need, this time in electrophysiology, which is a robust double-digit mark, as I just mentioned. I'll explain the device a little bit, and then I'll come back to what you're asking about value prop. So there are 3-6 million, depending on which data source you're using, AFib procedures in the U.S. Catheter ablation creates some scar tissue on the left atrium. Back of the wall of the atrium is directly in front of and adjacent to the esophagus. So what we're looking at is esophageal protection to make your standard RF procedures even safer by avoiding both fistulas and lesions that can form as a consequence of the ablation that needs to take place. So there's a lot of data out there highlighting the ramifications of this.
What we are looking at is EnsoETM is a very simple tube that goes into the esophagus. It's highly analogous to a gastric tube. All the physicians are aware and familiar with how to do this. The tube is used to circulate cold, sterile water to cool the esophagus and prevent injuries. It is both easy and highly effective. It takes the ongoing monitoring to a completely different level, and the efficacy is really well documented now.
Great. And just kind of thinking about how that fits, a lot of tools needed in an AF ablation procedure. Nothing comes free. So sort of to that value proposition angle, how do we think about that proactive cooling as helping reduce those complications? And maybe how does it stack up in terms of the cost stack needed for a hospital under the DRG for an ablation procedure?
Yeah. So we size the esophageal protection market, total addressable markets, approximately $300 million here in the U.S. alone. Again, growing mid-teens%. It is the same call point, the same clinician community as VASCADE MVP. So we expect meaningful adoption. In terms of the pricing and the value proposition, it's a simple device. It takes minimal training and adoption time. And it's easy to use with RF procedure. What we're looking at is if you think about we'll work off of the existing reimbursement. It's relatively modestly priced vis-à-vis that reimbursement opportunity. And I think one of the questions people will have is, "Well, here on the eve of the rollout of PFA, right? Why would you do this?" And from our perspective, we think RF will continue to play a meaningful role. We've got widely different estimates of exactly what PFA will do.
If clinician is focused or the hospital is focused on cost-effective care, not just the best clinical outcome, I think we win on both, right? RF plus EnsoETM versus PFA catheters, it's 2-3 times the cost differential, depending on which PFA device they're using. So it's highly economical for the hospital, and it's a procedure that they know and trust. We just have a way of simply making it better with equipment that, in most cases, is already present in the electrophysiology lab.
Perfect. You talked in the press release this morning about $22 million or so of revenues in 2023 that had more than doubled year-over-year. Just a little bit of sense for sort of what the growth profile looks like in your view for Attune, and along with that, what the margin profile can be as you think about in context of the rest of the hospital business and the broader Haemonetics as well.
Yeah. I mean, we watched Attune carefully over the last several years. There's a handful of things we wanted to see, proof of concept being one of those. And to Attune's credit, they've both driven the dialogue around the importance of esophageal protection, a bunch of literature now at HRS and elsewhere that speak to that. And to their credit, they've hit all of their milestones, clinical and commercial. They did $5 million in revenue two years ago. They doubled that to $11 million last year, $22 million for the year that wrapped up in FY, this past calendar year in December. So we look at that and say, "Now, dropping this in, it fits hand in glove with our field force. We're going to meaningfully explode the share of voice and the reach and relevance of the product." So we're optimistic about the pace of adoption.
In terms of the economics of the product, they're outstanding. This will be highly accretive to our gross margin. It's immediately accretive to our operating income margin. And from a return on investment capital perspective, it checks all the boxes, certainly double-digit ROIC within a three-year period.
Okay. So safe to think of this as one that kind of drops right into the existing commercial infrastructure. You've got those sales reps calling on EP suites already. Nothing sort of incremental to add in terms of OpEx to support this business.
No. I think this is a good example of our enabling technology M&A strategy at work, right? This is an important lever for how we create operating leverage in the business, for a hospital and for the corporation more broadly. They've run a nice operation. It's already profitable in Attune's hands. So it just gets that much more attractive for us. And we can talk about our formula for M&A, but from a sales and marketing perspective, from a G&A perspective, highly synergistic.
Perfect. I want to shift a little bit to OpSens. It's been about three months since the close, a little bit under, I suppose. Maybe just how has integration gone? And give us a sense for maybe what you've learned that surprised you, what's exceeded expectations, what's been a little bit more challenging.
Yeah. So we were delighted to close OpSens roughly six weeks early, back in the middle of December. That let us get immediately into integration and cross-training. For us, we kind of break it down. Every deal is different, but OpSens is a good example of kind of a four-part playbook. We look at the different functional areas of the company. So I just tick through those. On commercial, really powerful sensors between sensor-guided technology and our own vascular closure portfolio. So immediate-scale benefits given the overlap. Majority of TAVR procedures, in that case, are also performed by the top EP hospitals, something like 90%. So really good overlap there. And we've already trained the OpSens sales force, which was in roughly 40 hospitals in North America. We've already cross-trained them immediately on all the vascular closure products.
The process that's underway now, we complete it later this month, is for the OpSens trainers to teach our VASCADE reps how to do guidewires. It's a more sophisticated sale, slightly more complicated interaction. But we've got smart folks, probably a third of whom have already sold guidewires in a private life. So we like that. OpSens has a decent footprint external to the U.S. in 30 countries, so we can build upon that. In terms of manufacturing, from our diligence, the most important item for us was to really focus in, it's a sophisticated, high-quality product. We know we're going to need more capacity. We'll immediately expand the current footprint, but we're also looking to create redundancy elsewhere in our network. Over time, that automation and that expansion will drive meaningful improvements in COGS and further improve an already very good gross margin.
On R&D, we ring-fence what they do. We don't presume to know more about guidewires than they do. In fact, quite the opposite. So we're spending the time now to do detailed portfolio reviews, leveraging what we learn from external key opinion leaders. I don't want to presuppose an answer. My guess is we will eliminate some of the programs, but we will probably double down and invest further in others to give them a higher probability of success or to get them to market earlier. So R&D is not a big source of cost savings for us there, but we do think there's an opportunity to accelerate growth. And then lastly is G&A. And to your earlier question, your earlier comment, we're looking for strong operating leverage coming out of the G&A. OpSens was a public company traded on the Canadian exchange.
We know from firsthand experience, there's real scale economies there. So one plus one does not equal two, right? It equals something much closer to one. And that's the path we're on, and that's why this thing can be, again, accretive pretty much out of the gate and certainly double-digit ROIC in three years' time.
Great. I had a couple more. I could keep going on M&A, but for the sake of time, let's switch gears to Plasma a little bit. Maybe just at a high level, a little bit of commentary on the collections market as a whole, the pace of collections you've seen coming out of the pandemic, and any commentary you can offer in terms of where fractionator inventories are. I know it's closely guarded, but any insights would be great.
Yeah. We are very bullish on the continued double-digit growth rate of plasma collections. This is the time of year where we sit with all of our plasma collector Fractionator customers and get an update on the year to come, but also their long-range plans. The reality is the widely touted 20 million missed collections is a fact that's taken inventories down substantially, while the end market demand for primary and secondary immune deficiency, for autoimmune disease treatment from IG, some albumin, but IG-based therapy has continued to grow robustly. So it varies from one customer to the next, but in the main, the vast majority of our customers are still operating highly depleted inventory levels. Some talk about being hand-to-mouth. Some may be a little bit better than that. But having inventory is a competitive advantage for that end market space. So they all are anxious to rebuild.
We grew, as I said earlier, 43% last year. We'll grow double digits again this year. We're looking at this. We're looking at the amount of fractionation capacity that's been added to the system, 25 million liters over the last 5 years. We're looking at the number of new centers opened through the pandemic, 500, going from 700 to roughly 1,200 today. So these are strong indications, along with the real push to expand outside the U.S. in Europe, Egypt, Canada, and now France as well. So there's a push for self-sufficiency. There's clear capital expenditures. Our customers are smart business people. They wouldn't be making those investments if they didn't have an intention to follow through. And the great news is we've been there to support them, and we continue to build on that momentum.
Perfect. So now the elephant that's been in the room for three years, CSL. I guess first, look, they're at about 10% transitioned over to Terumo based on what they've said. It's taken a while to get there. It's going to take a while to get the rest. But you gave some incremental disclosures last week. Can you just maybe remind folks that maybe didn't hear that, what those were and how you think about maybe the unwind of that business?
Yeah. I think from where we are, it's important to understand, and we'll take our measure at trying to clarify CSL's contribution. Due to the lengthy transition, they are likely to be approximately 13% of our revenue, again, in FY24. Fully 90% of that, or about $150 million, is the US disposable contract that's covered by this transition agreement. Our software agreement and our European agreement, which is on NexSys, are not addressed by the same terms. So that revenue, that $150 million today, contributes less than 20% of our adjusted earnings, right? So that's roughly something less than $0.80 out of what will be approximately $4 earning this year. And I think that's different. And we take our share of responsibility for the confusion because when we talked about this back in June of 2022, they were still 12% or 13% of our revenue.
But at the time, we estimated they were fully 30% of our profits. So obviously, a lot changed since then, Andrew. And if I just go through a couple few highlights of that because I think the math matters, we have absolutely transformed our product portfolio. We've significantly improved our margin profile and the contribution from the remainder of our Plasma business on NexSyss, which continues to grow quite robustly. And that profitable growth in the base business ex-CSL has already offset a large portion, probably more than half of the volume loss that we anticipated back in 2022. Secondly, we've driven OEP hard. And although we were hit with significant one-time costs from expediting and a whole bunch of inflation as the rest of the industry was, we have meaningfully improved our manufacturing and supply chain productivity.
Our overhead costs today are roughly half of what they were in FY22. That's a testament to the productivity we've driven. However, the thing that is really critical here is we acted on the communications we had with CSL and our other customers. We took meaningful capacity out of the system only to very quickly discover that we needed to continue to invest in that capacity. On the heels of the pandemic and even in today's environment, we've had to spend significantly to expedite and supply. So in fairness, those one-time costs, that marginal dilution, if you will, is directly attributed to our intent to continue to serve CSL through the transition. It's obviously profitable, and it delivers to the bottom line, but it's dilutive to our margin rates.
That's why when we do a proper cost accounting today, it is less than 20% of our profitability and falling significantly as that volume winds down. So happy to talk more about it, but I think there's an important bridge that needs to be done to get from what was 30% down to something that's now less than 20% and on its way down from there.
So maybe kind of diving into that and thinking about the bridge there. I mean, it feels like part of it is a little bit sort of definitional and timeline-related. Maybe give us a sense for that. And my takeaway is you're sort of telling us that a lot of the costs there that might have been stranded with a CSL transition over the timeline we talked about two years ago, you're able to absorb, to repurpose, or to sort of push out the door as those volumes go down. Is that the right takeaway?
That's exactly the right takeaway, Andrew. And I define it in this way. So $0.75 EPS back in FY 2022 on $100 million in revenue, not hard to do the math on that with RP&L and come up with something that looks like a 50% operating income margin. Today, less than 80% of EPS on $150 million in revenue gets you a number that's in the mid-30s and falling. And so how is that? Well, it's the variable costs that I highlighted just a minute ago that are both inflation and expediting. We called out 700 basis points of headwinds across the business in the last 2 fiscal years. A lot of that is right here in Plasma volumes, of which a large portion is CSL.
In 2022, when we did that calculation, we were assuming the imminent loss of CSL and the resulting stranded costs and whatnot that we would have to absorb. That's not the situation today. When we entered the Eighth Amendment with CSL, we cared about a number of things. We wanted to be rewarded for being the company that all the industry, including CSL, can turn to for reliable supply. But we also wanted to be able to manage down the dreaded cliff that folks were talking about on our earnings profile. So one of the things we insisted upon was a gradual and smooth rampdown. Sitting here today, we know this transition will take place over the next 18 months as opposed to when we were sitting in June of 2022, where we thought it would happen over the next year.
This is now, in totality, a 3-4-year transition. From our vantage point, that gives us the ability to do a number of things that are critical, including gaining share with other leading companies and managing down the one-time cost associated with this volume. We feel quite good about our ability to manage forward.
Great. Maybe just one more on Plasma because I do want to touch on sort of the LRP as well. You mentioned that time there. I think another thing that's happened over the last 3-4 years is you've pushed forward on some advancements in the technology. Maybe just give us how you think Haemonetics is positioned from a competitive perspective today versus 3, 4, 5 years ago when you didn't have Persona, you didn't have Express Plus, and things like that.
Yeah. Look, I couldn't be more proud and forgive the swagger, if you will, around this. But the value we did deliver to customers is unmatched, absolutely unmatched. And we're fully committed, right? Anybody who is counting us out in Plasma isn't keeping score, right? We are going to maintain the proprietary advantage of our products and our leading market share, period, full stop, right? We were the company that was there for folks when everybody else failed them. We were the ones who kind of managed our supply chain and scaled. In the process, we meaningfully advanced our competitive advantage. You highlighted Nexus. Nexus is a great technology, 90% new compared to a PCS2 device that was introduced in 1990. It is the industry standard used the world over. We're in countries like Egypt and Canada and Japan. They want to know, what are they using in the States?
What's this NexSys thing, and how does it work? So that's the base element, right? We've gone further now, procedure speed through the Express Plus, limited market release. We'll go live with that early fiscal 2025 to take the rest of the market forward. That will happen seamlessly. Probably the area that gets talked about the least, which is probably the most meaningful to our customers, is the investments we're making in standalone donor management system software, right? We're the only ones who offer it. It's a bidirectionally connected capability that standardizes SOPs, that makes the productivity initiative that we're talking about all the more explicit. And nobody else is even trying to match. We had a competitor in the U.S. several years ago. The product was inferior versus what we were offering. And look, there are scale benefits to this business. So it's unrivaled.
It is kind of the secret sauce, if you will, in the mix that allows us to drive a 12% yield, that allows us to program the device to run Express Plus at speeds that are at or better than anybody else's. Probably most importantly, from donor satisfaction, it allows us to continue to ratchet down door-to-door time, which is probably the single biggest determinant of donor sat and repeat donations. Our system enables that. We talked before about 16 minutes. We're beyond 16 minutes now, and we'll continue to work hard at it to further differentiate ourselves from whatever might come next.
Perfect. And maybe just for the sake of time, shifting over to the LRP. And I think the biggest component there that folks have talked about lately is operating margins. So you expect to exit this year at, call it, 21% or so, still hoping to get to high 20s by fiscal 2026. So maybe just give us that bridge because the next two years need a lot to happen to get there.
Yeah. And look, we anticipate sizable step-ups in each of the next two years. That is not some casual aspiration that we threw out there. That's not a hope and a dream. That's our goal and the targets we've put forth. And it's not lost on anybody on our leadership team that when we guide in May, 60 days from now for FY25, we're essentially guiding for FY26 in the process. At the time, we'll go through a more explicit bridge. But there's no mystery to it. We're not magicians, but we are going to deliver effectively against the business. Plasma volume, Plasma mix, and the ongoing cost reductions from our productivity effort, big part of the equation. Hospital revenue growth, hospital mix, the scale benefits, particularly outside the U.S., and the operating leverage that I mentioned earlier, both organically and inorganically, huge part of the mix. Blood centers participating.
That business is increasingly a source of stable and durable EBITDA. Apheresis will come into its own with very minimal support. We've talked extensively now about the rationalization of whole blood to get those margins in line and contributing favorably to the rest of the business. We'll go through each of those. We'll talk about how it comes together when we give our guidance in May. But we remain committed to those goals. We're already so far ahead on revenue growth and EPS growth. I think margin will come to the fore over the next eight quarters, and we're going to be excited to talk about it.
Great. And we're kind of right at the end here. But Chris, I'll give you the chance. Anything final you'd like to leave attendees with or listeners on the webcast?
Yeah. Look, Andrew, I think you've covered all the salient points in your questions. We appreciate that. I have three questions. Can we attain our LRP goals? It's about sustainable growth. It's about earnings growth, which will be twice our revenue growth. And it's about the margin expansion. We understand the 600 basis points challenge, and we're prepared to react to it. CSL Terumo probably gets more airtime than it deserves. We've hopefully quantified the overhang for folks. I think we've demonstrated our ability to grow share and margin during their transition. And we feel like we are going to continue to have the dominant position and the associated pricing power that comes with it. And then I think the last thing I'd say, which is it's ours to prove, which is there's a, I think, an unhealthy underappreciation for the growth and earnings power of our hospital business.
Look what we've done the last three years, project that forward. I think that the scale and the operating leverage will come, and we're excited about it.
Fantastic. Thanks.