Earnings Call: Q3 2021

Feb 2, 2021

Ladies and gentlemen, thank you for standing by, and welcome to the Haemonetics Corporation Q3 2021 Earnings Conference Call. At this time, all participants are in a listen only mode. After the speaker presentation, there will be a question and answer Please be advised that today's conference is being recorded. I would now like to hand the conference to your speaker today, Olga Gayet, Director, Investor Relations. Please go ahead, ma'am. Thank you. Good morning, everyone. Thank you for joining us for Haemonetics' Q3 fiscal 2021 conference call and webcast. I'm joined today by Chris Simon, our CEO Stuart Strong, President of the Hospital Business Unit and Bill Burke, our CFO. This morning, we posted our Q3 year to date fiscal 2021 results to our Investor Relations website, including the analytical tables with the information that we'll refer to on this call and an investor presentation on the pending Cordiva transaction. Additionally, we provided a complete P and L, balance sheet, summary statement of cash flows as well as reconciliations of our GAAP to non GAAP adjusted results. Before we get started, unless otherwise noted, all revenue growth rates discussed today are on an organic basis and exclude the impact of currency fluctuations, strategic excess of product lines, acquisitions and divestitures. As in the past, we will refer to non GAAP financial measures throughout this call to help investors understand Haemonetics' ongoing business performance. Please note that these measures exclude certain charges and income items. Please refer to this morning's earnings release where detailed and excluded items including comparisons with the same periods of fiscal 2020 and reconciliations to our GAAP results. Our remarks today include forward looking statements and our actual results may differ materially from the anticipated results. Haemonetics cautions that these forward looking statements are subject to risks and uncertainties, including the potential impact from the COVID-nineteen pandemic on our results, risks related to proposed acquisitions of Cardiva Medical and other factors referenced in the Safe Harbor statements in our earnings release and in our filings with the SEC. We do not undertake any obligation to update these forward looking statements. And now, I'd like to turn it over to Chris. Thank you, Olga, and good morning, everyone. Our improved Q3 results are evidence of the strength of our strategy and our progress transitioning to transformational growth. We have a lot to discuss today. Let me start by highlighting 5 key themes. Revenue improved sequentially in all three business units as our markets are recovering from the pandemic. Productivity from the operational excellence program and cost management helped improve our profitability. We are making meaningful progress with NexSys adoption. Our innovation agenda continues to propel organic growth, and the Cardiva acquisition will help us diversify, grow and create shareholder value. Moving to our results. Organic revenue was down 6% in the quarter and 12 percent year to date as the impacts of the pandemic continue to affect our business. 3rd quarter adjusted earnings per diluted share was $0.81 down 14% from the prior year quarter and down 28% year to date. While our results were below our pre pandemic fiscal 23rd quarter, we did see a 14% sequential improvement in revenue driven by all three business units, and our adjusted earnings per diluted share was up 31% from 2nd quarter. Plasma rasmal revenue declined 13% in the 3rd quarter and 26% year to date as the pandemic continued to have a pronounced effect on the U. S. Sourced plasma donor pool. Revenue declines were partially offset by a $6,000,000 one time safety stock order of plasma disposables. Sequentially, North America collection volume improved 29%, excluding the effect of the safety stock order. To put this in perspective, we typically have a 3% to 5% seasonal increase in the Q3. Our customers have taken extensive donor safety measures and launched a myriad of promotional campaigns to encourage donations. Heightened safety protocols and compelling financial incentives, along with waning government stimulus, contributed to 10 consecutive weeks of volume recovery. Nexus platform adoption is progressing and we are confident that it will supplant PCS II as the standard for source plasma collection worldwide. We are on track to upgrade all U. S. Customers to our NexLink DMS software by the end of the calendar year. All major customers have agreed to adopt NexSys PCS devices somewhere in their network. This bodes well for eventual broad based implementation because history shows that firsthand user experience leads to adoption. Rollout will not be immediate as there is important planning and support work to be done and near term Haemonetics and our customers' primary focus is on driving a robust recovery in collections. Our innovation agenda continues to propel organic growth. Persona's individualized, donor specific approach is expected to yield an incremental 9% to 12% of plasma per collection. Nexus early adopters are validating the new nomogram's impact on immunoglobulin levels and implementing logistics changes needed to support the new procedure, including accommodating a collection bottle that is a third larger. The real world data being collected will strengthen the NexSys offering and inform ongoing innovation in our proprietary collection technology, including safely advancing additional personalization and further yield enhancements. Meanwhile, we continue to do everything we can to support our customers and we remain cautiously optimistic about the timing and pace of recovery. The Q3 highlights the critical role that donor economics play in plasma collections. Collection volumes weakened over the last few weeks, which we believe was driven by a donor response to the new government stimulus. Nonetheless, our customers are ramping up to support end market growth. And although forecasting remains difficult in this environment, once the pandemic subsides, we expect to see 8% to 10% collections growth over the long term and the potential to grow in excess of that as customers replenish their inventories. Blood center revenue declined 1.4% in the 3rd quarter and 2.6% year to date. The business continues to outperform as our continuity and responsiveness enable us to supply blood bankers around the world seeking expanded safety stocks. We also continue to support customers globally in collecting convalescent plasma. We had strong capital sales both in the Q3 year to date as our apheresis devices continue to play an important role in helping to provide essential blood products to our customers. We believe the increased installed base should provide longer term benefits to our disposable sales. Apheresis revenue was up 6% in the Q3 and 1.8% year to date. Continued plasma growth and favorable order timing among distributors in both periods was partially offset by the impact of a previously disclosed customer loss of about $4,000,000 in the quarter $12,000,000 year to date. We did not see distributor stocking order reversals in the 3rd quarter. Whole blood revenue declined 19% in quarter and 11% year to date, driven by lower than usual procedure volumes due to COVID-nineteen, previously discontinued customer contracts and overall declines in blood utilization rates. Additionally, whole blood revenue in the 3rd quarter was impacted by unfavorable order timing among distributors. Our recent efforts to optimize this portfolio has allowed our team to focus on apheresis devices and disposables, which is driving performance. Before I turn the call to Stu to talk about hospital business unit results and the Cardiva integration, I want to reiterate our rationale for the deal. Cardiva is a leader in vascular closure, an underdeveloped segment with significant potential. FASCADE is a leading product with strong tailwinds, and the Cardiva team is talented and highly motivated to deliver. With focus and support, we can accelerate growth, especially in electrophysiology, where Bascade MVP is uniquely positioned for use with cardiac ablation procedures. This is a revenue deal. But with added scale, there will also be increased operating leverage. We avoid the G and A costs Cardiva would have incurred to operate as a public company. We can use our infrastructure to support U. S. Expansion and our international commercial organization can help to launch VASGADE outside the U. S. Together, we can improve our global reach and relevance. Investments in sales and clinical reps as well as clinical, medical and health economics capabilities will benefit both portfolios in IC and EP. Our TEG long range plan is anchored in interventional cardiology with further opportunity in electrophysiology. Haemonetics Hospital BU can learn from Cardiva and over time there may be commercial and or clinical call point synergies. We value diversification and growth. Cardiva diversifies our product offerings and catapults us into IC, EP and vascular closure, attractive near adjacencies that can fuel accelerated growth. Our focus has shifted to integration and execution is now our top priority. Over to you, Stu. Thank you, Chris, and good morning, everyone. I would like to reiterate my excitement about Cardiva. The acquisition is on track to close this quarter, detailed integration planning is underway, and we're squarely focused on driving revenue growth. We're supporting the Cardiva team's strategy and their commercial, product innovation and manufacturing plans while working on G and A integration. Now moving to our results. Hospital revenue increased 5% in the 3rd quarter and 1% year to date. Our hospital business has seen continued sequential improvement over the course of the fiscal year and our Q3 growth was driven by our direct markets across the globe and in particular our top two markets, North America and China. Hemostasis Management revenue was up 11% in the 3rd quarter and 6% year to date compared with the prior year, driven by strong sales of TEG Disposables in the U. S. And capital sales in Europe. The pandemic continued to partially offset the strength of this business both in the quarter year to date. We are excited to share that the FDA has issued guidance on the use of viscoelastic testing in patients suspected of COVID-nineteen coagulopathy, and we are working to update our indications in line with the guidance. The use of TEG analyzers for hypercoagulable patients has already been discussed in a number of scientific publications and updated indications will give us the opportunity to be proactive in deploying this technology to help advance COVID-nineteen patient management. In parallel, we're driving our go to market strategies. We recently signed an agreement in China to manufacture locally designed and made viscoelastic testing analyzers and locally manufactured reagents to expand our product offering to meet the unique needs of the Chinese market. The product line will focus on automation, high throughput and easy customer interface as we build a market specific platform with further innovation in the pipeline. Transfusion management was up 7% in the 3rd quarter and 9% year to date, primarily driven by strong growth in blood track through new accounts in several key geographies. Our teams have implemented alternative methods to advance installations and utilization in customer environments where access continues to be restricted. Self salvage revenue declined 6% in the 3rd quarter and 11% year to date, primarily driven by declines in disposable usage. Sequentially, cell salvage revenue was up 1% in the 3rd quarter as additional recovery in procedure volumes plateaued toward the end of the quarter. The pandemic continues to validate the essential role our technologies play in assessing bleeding and thrombosis risks, autologous blood transfusions and effectively managing blood supply. Recovery has been very encouraging, but we're cautious about the near term forecast as procedure volumes have leveled off over the past 4 weeks, driven by a global resurgence of COVID cases that may prolong the recovery. We are confident in the hospital business unit's long term value to our customers and their patients and our significant opportunity for growth and expansion. And now I'll turn the call over to Bill. Thank you, Stu, and good morning, everyone. Chris has already discussed revenue, so I will start with adjusted gross margin, which was 51.4% in the 3rd quarter, a decline of 70 basis points compared with the Q3 of the prior year. Adjusted gross margin year to date was 50.4%, a decline of 160 basis points compared to the 1st 9 months of the prior year. The primary drivers of the declines in both the 3rd quarter and year to date were impacts from higher costs, including an inventory charge in the 3rd quarter, cost of COVID-nineteen protective measures and lower volume. There was also some unfavorability due to product mix. These downward effects on gross margin were partially offset by productivity savings realized from the ongoing strength in our operational excellence program and lower depreciation expense as our PCS II devices were mostly depreciated by the end of the prior fiscal year. Additionally, the combination of our recent divestitures and our strategic exit of the liquid solution business resulted in a net negative impact on our 3rd quarter and about neutral impact on our year to date adjusted gross margin. We continue to successfully execute an appropriate balance of cost control measures and investments without disrupting our growth objectives. Adjusted operating expenses in the 3rd quarter were $71,000,000 a decrease of $2,400,000 or 3% compared with the Q3 of the prior year. Adjusted operating expenses year to date were $201,100,000 a decrease of $19,100,000 or 9% compared with the 1st 9 months of the prior year. Lower adjusted operating expenses both in the Q3 year to date were due to a combination of ongoing productivity savings related to our operational excellence program and cost containment measures implemented to help offset the negative effects of COVID-nineteen. Partially offsetting these savings were ongoing investments in key growth areas of the business. As a result of the performance in adjusted gross margin and adjusted operating expenses, the 3rd quarter adjusted operating income was $52,600,000 a decrease of $9,000,000 or 15 percent, and adjusted operating income year to date was $124,100,000 a decrease of $46,700,000 or 27% compared with the same periods in fiscal 2020. As our business continues to recover from the pandemic, we have seen significant progress in the sequential quarterly improvement of our adjusted operating margins throughout the fiscal year. We continue to expect adjusted operating margins to improve to levels above fiscal 2020 once the pandemic fully subsides. Adjusted operating margin was 21.9% in the 3rd quarter and 19.2% year to date, down 190 basis points and 3.50 basis points, respectively, compared with the same periods in fiscal 2020. For both periods, the loss leverage from revenue declines outpaced the impacts of cost mitigation efforts. The adjusted income tax rate was 16% in the 3rd quarter and 15% in the 1st 9 months of the fiscal year compared with 17% in the 3rd quarter and 14% in the 1st 9 months of the prior year. 3rd quarter adjusted net income was $41,400,000 down $7,100,000 or 15 percent, and adjusted earnings per diluted share was $0.81 down 14% when compared with the Q3 of fiscal 2020. Adjusted net income year to date was $96,800,000 down $39,100,000 or 29 percent, and adjusted earnings per diluted share was $1.89 down twenty 8% when compared with the prior year. Our 3rd quarter results are encouraging and show a significant recovery from the effects of the pandemic. In the short term, however, we continue to view the current environment as uncertain, and we will not be providing guidance for the Q4. Our operational excellence program is delivering positive results and continues to drive improvements in adjusted gross margin and adjusted operating margin. We remain committed to delivering $80,000,000 to $90,000,000 of savings by the end of fiscal 'twenty three as part of this program, which is essential for our future growth. The progress we have made has helped us to reduce the impacts from the pandemic. We expect the majority of savings realized will drop through to adjusted operating income by the conclusion of the program with the return of the business back to historical levels. Free cash flow before restructuring and turnaround costs was $99,000,000 in the 1st 9 months of fiscal 2021 compared with $95,000,000 in the prior year. We have been able to offset the decline in earnings due to the impact of the pandemic on sales volumes, particularly in the plasma business, through a combination of lower increases in inventory, lower capital expenditures and improvement in accounts receivable when compared with the prior year. Although our free cash flow from inventory is lower than the same period of the prior year, the impact from lower sales volumes in plasma has resulted in a higher disposables inventory balance. We continue to monitor our inventory levels and have seen a decrease in our disposable inventory sequentially. Additional fluctuations in inventory may occur as we adjust our production to support customer demand and our operational excellence program initiatives. Cash on hand at the end of the 3rd quarter was $189,000,000 an increase of $52,000,000 since the beginning of the fiscal year. In addition to free cash flow, the Q3 ending cash balance increased $28,000,000 from recent portfolio moves and decreased seventy $3,000,000 due to debt repayments, including a $60,000,000 repayment of the revolving credit line that was outstanding at the end of fiscal 2020. The borrowing of $150,000,000 under the revolving credit facility in the Q1 of this fiscal year was repaid during the Q3 and has no effect on the cash increase in this fiscal year. Our current debt structure includes a $700,000,000 credit facility that does not mature until the Q1 of fiscal 2024, with the majority of the principal payments weighted toward the end of the term. At the end of the 3rd quarter, total debt outstanding under the facility included a $311,000,000 term loan. There were no borrowings outstanding under the existing $350,000,000 revolving credit line at the end of the 3rd quarter. Following our announcement to acquire Cardiva Medical, we will execute additional term loan of $150,000,000 and we'll finance the remaining $325,000,000 balance using a combination of our cash on hand and our existing revolving credit line. At the completion of this transaction, which is expected to occur during the Q4, our EBITDA leverage ratio, as calculated in accordance with the terms set forth in the company's existing credit agreement, will increase from 1.3 at the end of our Q3 of fiscal 2021 up to about 3.2. Our capital allocation priorities are clear and remain unchanged as we continue to prioritize organic growth, followed by inorganic opportunities and share repurchases. Over the last 4 years, put a lot of emphasis on strengthening our portfolio and funding key organic growth initiatives. These investments have enabled us to improve our growth trajectory and will continue to fuel growth. We have also bought back a total of $435,000,000 or 4,500,000 of the company's shares outstanding. And while we do not plan to make additional purchases under the current share repurchase authorization, We view share repurchases as an important driver of shareholder return. M and A is also a critical pillar of our capital allocation, and by acquiring Cardiva Medical, we are adding a high growth asset, which will help us sustain future revenue growth and provide attractive financial returns. And now I'd like to open the call for Q and A. Thank you. Our first question comes from David Lewis with Morgan Stanley. Your line is now open. Good morning and thanks for taking the questions. Just a couple for me here. And obviously, Chris, I want to start obviously with your NexSys comments because obviously they departed from prior quarters. So can we take from your commentary, Chris, that you now have reached contractual terms with all your customers as it relates to the use of NexSys? Short answer, David, is yes. But I want to qualify the answer because I think it's important not to drive undue speculation. We are very confident that Nexus is well on its way to supplanting PCS II as the standard for source plasma collection worldwide. The reason we're confident for that is because at this point, substantially all of our major customers have agreed to adopt Nexus somewhere in their collection networks. And I want to be clear about this somewhere in their network. In some cases, it is global, commensurate with our current share. In other cases, they've said they want it for the U. S. Market as a starting point or another geography as a starting point. The reason we are reacting to that development is because in the past, the device experience has been the key driver of adoption. When customers have the opportunity to use the device, experience the benefits firsthand, the integrated platform and everything it delivers in terms of work processes, in terms of improved compliance and reporting capabilities, the better donor experience, which is absolutely paramount in the current environment. And of course, the yield, not just the 3% that comes with NexSys PCS properly equipped, but Persona to follow. And the combination of those things is just a very powerful value proposition that when experienced firsthand has led to broad based adoption. So what we're communicating is that we're on that path. Okay. And can you just just 2 quick follow ups there in terms of, 1, do you believe these contracts reflect the value of Persona? And in the old days, we sort of thought that the timing from implementation to contract signing is something around 6 months. Any comments on those two points? Yes. So I want to clarify, the message we're delivering is specific to NexSys PCS devices. They are in combination with the NexLink DMS software and the broader support for the package. They don't necessarily include Persona. The commentary we're offering today is around NexSys. I'm happy to talk about Persona and where we are on that, but our commentary was specific to NexSys. In terms of the adoption, it's the second part of the qualifier, if you will, on this. I think everybody is enthusiastic about what Nexus can mean for them in their network over time in a broad based way. But in the interim, the first, second and third priority for Haemonetics as well as our customers is helping those customers recover collection volume from the pandemic. And we're pleased with 3rd quarter results. We think there's forces at work that will continue to build there over time. But that's our focus. That's our customers' focus, and that's going to be the primary orientation that we follow. Beyond that, there is further work to be done on the software upgrades. There's further work to be done to plan and accommodate for Nexus and eventually for Persona in the collection centers and in their fractionation network. So it's time bound. We're not going to actually comment on the commentary for time today. We may get into that more in May when we have more clarity. But at this point, it would be premature. Okay. And just 2 quick ones and I'll ask them both upfront and back in queue. The first just and sorry, Chris, had a follow-up for you that I asked about Persona, but obviously people are focused on value either for Nexus or value for Persona. Do these contractual terms reflect any value for Nexus? And then Bill just for you, this quarter is interesting, leverage really inflected in the quarter. You basically saw the kind of profit levels you saw back in March, but the plasma number was $10,000,000 lower. So how are we thinking about OEP here towards the end of the year? And frankly, what's the trajectory In terms of the value proposition, in terms of value capture, we feel very good about where we are. We spent a lot of time talking about and focusing our energy on competing on innovation. We think clearly Nexus, NexLink, PCS, the Persona upgrades are best in class and they define a path that we're on that we continue to improve upon. There's the great news in all of this is the early adopters for Nexus who've been working with device over the last 2 years have validated that value proposition across all the dimensions that we've been talking about and what I just referenced a moment ago. So the good news there is, those existing customers feel great about the value proposition and what they're paying for it. And I think we are equally confident that the next wave of customer adoptions will bear that out further. And then Persona just adds to it beyond that. Bill? Yes. Thanks, Chris. So David, your question on operating margin. So we've seen sequential improvement now from Q1 to Q2 and then again from Q2 to Q3. We're at almost 22% operating margins in our 3rd quarter. That really gets us back to the operating margin that we were at for full year FY 2020. We're still below the prior year by 190 basis points in the quarter and 3 50 basis points against the prior year on a year to date basis. But what we're seeing is, you mentioned the operational excellence program, we are getting good savings, and we continue to get traction in that program. We also have some containment cost activities that we implemented related to COVID, which is helping offset some of the actually most of the costs related to COVID from an expense standpoint. Again, it's really important that as that plasma business continues to return and we eventually see it returning to pre COVID levels, that adds significantly to our operating margins. And then finally, longer term, we do expect to be above where we were for FY 2020, driven again by a combination of OEP savings, the plasma growth and the value for the innovation that we're delivering. So we're really bullish on our operating margins longer term. Great. Thanks so much. Thank you. Our next question comes from Larry Keusch with Raymond James. Your line is now open. Okay, great. Thank you. Chris, since you opened the door to questions around Persona, maybe you could provide an update on kind of the feedback that you're getting or where you think you stand with that would be great. Yes, Larry, thanks for the question. Persona is a game changer and has been viewed as such by our customers who are on the front edge of that, right? Anybody who adopted Nexus earlier in the process is eligible for Persona now. What we are doing with them, because it is meaningfully different than the current collections, we're talking about an additional 9% to 12% yield enhancement. They're going through the process, which was all expected to do validation of the protein concentration in the additional collected plasma to make sure there is no dilution. We've done our own testing through the original clinical work. We're very confident in the outcomes we'll get to, but it's an understandable factor that these customers want to go through, I think it's point 1. I think there's also, and what's great about the Nexus device equipped with NextLink is the ongoing tracking and monitoring of donor safety, right? We want to make sure that everything we are doing prioritizes donor safety and enhances the donor experience as we experienced in the trial. So there's an ongoing monitoring there. And then it sounds trivial, but it matters a lot given that we're talking about 40,000,000, 50,000,000, 60,000,000 units a year collected of source plasma, the logistics of handling a bottle that is a third larger and processing that bottle into their fractionation facilities, right? The laser that used to cut the bottle, how the bottle itself is solved, the freezing dynamics, all important factors that need to be validated in our customers' supply chain. So we are going through that process. We don't anticipate any hiccups along the way. But it's a meaningful change, and we're working our way through that. But what's very clear in this market, perhaps even more so due to the challenges associated with collecting in the middle of the pandemic is that yield matters and yield enhancements there are meaningful and we intend to add to it, right? We're not done. We're going to continue to drive our innovation agenda to advance both safety and yield, which we think there's room to run there with Persona. Okay, terrific. 2 other questions. Maybe for you, Chris. Maybe if we can peel back the onion a little bit here and just dive into sort of what you saw with plasma collections from your vantage point during the quarter. You obviously alluded to in your comments of some, I guess, movement backwards a little bit here recently. So if you could sort of get to that maybe kind of both U. S, which I understand dominates collection, but also what you're seeing perhaps in Germany or elsewhere that might provide some color for us. And I guess along with that, how should we be thinking about that seasonal impact in the fiscal Q4 because clearly that tends to go the other direction on you. So maybe help us think about that. And then I guess just quickly for Bill, just any plans, thoughts on an Analyst Day and timing there or updating the LRP? What do you need to kind of see or get visibility on to be able to move forward with those two events? Thank you. Thanks for the question. On plasma volumes and what we are seeing, so Q3 can be characterized as 10 weeks of recovery, which really started in early October. We've tracked multiple factors. I don't think there's any mystery around this. It is multifactorial, starting with donors' attitudes around safety and their willingness to venture out and do donations. What we can say is clearly the efforts our customers have taken and they have been extensive have driven home the point that plasma donation is safe. The centers themselves are socially distanced. There's some things we've done to help. We rolled out the COVID application, which lets you do all your screening remotely, queuing up virtually, etcetera. But the centers are safe and fully functioning, and we clearly saw the donor attitudinal response to that in the Q3. The other factors really come down to just a cross play of various economics. And this is probably less precise than any of us would like it to be, but given the human dynamic there, that's I think the reality. On one hand, you have recessionary pressures. We are in a deep recession and our donor pool needs to supplement their income stream. You couple that with a challenge, an offset that comes through stimulus, which is a benefit to donors and would work negatively against collection volumes. And then the counterbalancing actions that our customers have taken to further incent donation, promotional efforts, higher donor fees, etcetera. So you have this interplay on the economics. What we saw in the Q3 was the pressure of the recession, the absence of or at least the waning government stimulus and a meaningful step up in promotion remuneration from our customers to their donors led to this drive, right, which was quite meaningful well above and beyond the seasonal adjustments we would expect. We get to January and we have seen seen new stimulus back into the market and we're seeing some of the corresponding effects that we would have expected to see from our modeling in terms of diminished ultimately will be time bound. Unfortunately, the recession will take time to correct, and that's a positive effect. So we remain very confident in the long term 8% to 10%. And in fact, as we said in our prepared remarks, for a period of time, as we're recovering, collectors will do what they can do to replenish their depleted reserves, which means we could grow in excess of that 8% to 10% for a period of time, so the inventories are replenished. As it pertains to Q4 and seasonality, typically our Q3 is our most robust collection volume of the year. So we tend to see a modest drop off in the 4th quarter, kind of a bit of an aftermath to the holidays, etcetera. We would assume that, but candidly, it's an assumption at best given how unstable this market is given the pandemic and everything else that's going on. So it's an interesting dynamic. We're paying close attention. I think because of the hard work that we and our collector customers have done, this is really down to the economics and there you can watch the same factors we are and predict accordingly. So Bill, over to you. All right. Thanks, Chris. So Larry, your question on Investor Day. So obviously, we're overdue for an Investor Day. We definitely need to have 1 and we want to have 1. It's important for us to be able to understand exactly what's happening with the financials as the pandemic eases because that recovery will obviously drive our financials going forward. So it's important to eliminate some of those questions. We're hoping summertime, we'd love to do it in person with the vaccine out there for COVID. We're hoping that has a major impact and things open back up and we can get something scheduled this summer, but no promises. We may have to end up doing it virtually, but we prefer to do it in person. And does the LRP get tied to that Analyst Day? Do you kind of need the same inputs and visibility to be able to do both or were they disconnected? Well, I think we'd love to showcase the innovation. We don't have the whole Investor Day focused on innovation, but I think everyone would be disappointed if we don't provide an LRP at that Investor Day. And obviously, we did it a few years ago now, I think 4 years ago. So we're long overdue. I think the combination of doing looking at the innovation as well as the 5 year LOP in that form is the right place to do it. Okay, great. Thank you. Thank you. Our next question comes from Anthony Petrone with Jefferies. Your line is now open. Thanks and good morning everyone. I have a couple of thoughts on plasma and then I'll shift to Cardiva. Just on plasma, Chris, can you give us an update on where the total installed base sits? And maybe what percent as we sit here today has already upgraded to Nexus? And then as you look ahead to Persona and you referenced conversations, how broad based over time do you think Persona upgrades will be just based on your interest exiting last quarter? And then I'll have a few follow ups. Yes, Anthony. So in terms of our total installed base, there has not been any meaningful change in share in aggregate, right? There's always puts and takes in any given time period. 1 of our customers will acquire somebody if they were an existing customer of ours and that customer has a split share, we may see a modest loss of share over time. On the other hand, if the customer they acquired was not one of our customers, then we see the corresponding benefit. But we're roughly on a global basis at this point where we were a year ago, say, pre pandemic. So we haven't seen a meaningful change in the installed base. And I don't expect that we will. At the end of the day, we compete on innovation. I think that resonates with our customers. There may be some who don't value it and on the margin that will present whatever challenges it presents. But we're committed to competing on innovation and standing behind the value propositions that support that. In terms of Persona, as I said, there are rate limiting factors to the pace of the rollout, but it's got everybody's attention for the right reasons. It is proprietary. We intend to continue to invest behind it. So the process for Persona is a staged rollout. Of course, you have to be on Nexus to benefit from the Persona technology. And right now, I think that's having the desired effect in the market in terms of the overall agreements around Nexus adoption. One point I didn't mention, just to go back to Larry's question. The European market, while it's a more modest portion of our total collection volume, European market throughout the year, our fiscal year has fared better. Initial back off from the early days where Europe locked down. But as Europe began to reopen, what we saw, because the donor economics are just different there. We've had a more robust recovery. We're actually ahead of forecast, and we're actually experiencing modest year on year growth through the European collection network. It's not a material effect to our business. I don't want to overstate it, but it does give us another lens through which to observe the donor attitudinal and behavioral dynamics that are driving the U. S. Market, which is what we're really dependent upon. Thanks. And then the follow-up would be just the 9% to 12% yield benefit, is that does that just Persona or is that for both technologies? And then the follow ups on Cardiva, one quick one would be, is there an update on the financing mix for the $475,000,000 upfront? How much of that will be debt versus cash on hand? And then one for Stu, just on Baskade in Europe. Maybe just if you could describe what the competitive sort of move in Europe or broadly in EP is, how long do you think Vascade MVP could be in the EP market on a relatively standalone basis? Thanks again. Yes. Anthony, I'll take the first and then hand it to Bill and Stu, respectively. On PERSONA, PERSONA was run through the IMPACT trial, which was done comparing Nexus PCS versus Nexus PCS with Persona. So the 9% to 12% yield enhancement is additional to the 3% that we factor in, the 23 milligrams that come as an improvement off of the base PCS-two on to Nexus and then Persona is driving additional yield on top of that. The reason it's ranged is because there are meaningful differences in the population. The whole concept of Persona is an individualized nomogram that is tailored to the individual donors' height and weight and hematocrit essentially determining how much plasma they have to give and then angling for a constant percentage there. And we just see that much variability in the population, which is why it's 9% to 12% additional to what we do with Nexus. All right, Anthony. And your question on Cardiva Financials was around the $475,000,000 upfront payment. We have not updated from what we said on the Cardiva call from 2 weeks ago, we are going to take out a $150,000,000 term loan. And on the remaining $325,000,000 that would be split between revolver and cash. We haven't said what the allocation would be there. But I did point out in the prepared remarks that we have no borrowings under our existing revolving credit facility as of the end of Q3, and we have available on that line $350,000,000 And we actually have almost $200,000,000 of cash on the balance sheet. Okay. Stu? Thank you. Yes. Thanks, Anthony. So to answer your question about the landscape in Europe, primarily in the interventional side of the business for EP, we're looking at either a figure of 8 suture or compression for closure. That's what the vast majority of physicians are doing in Europe right now. So as I'm sure you know, in Europe, every country is very different in the way they approach things. What we're looking closely at, what the value proposition is in each of the major countries in Europe to determine what our launch strategy is there based on both cost considerations as well as clinical considerations from a value prop. There's a lot of upside relative to growth of vascular closure devices being used in electrophysiology procedures in Europe. And to give you some sort of timeline, we're probably looking at a 12 to 24 months before we're able to enter that market, But we are looking at those options and pursuing updates to their clinical registrations in Europe. Thank you. Anthony, let me come back to you and correct something I said, right? So Nexus off of a baseline of PCS-two is essentially a 2% to 3% yield enhancement, 23 milligrams, right, they're not if they're just using base Nexus or that base PCS-two. Persona, in the trial work we did was another 70 milligrams plus or minus on top of that. We think about that as 8% to 10% incremental. Therefore, the combined benefit for somebody who's not using Nexus is the 9% to 12% we quoted in our prepared remarks. I just want to be clear about that. So 2% to 3% on Nexus, 8% to 10% on Persona in combination, 9% to 12%, again, the variability driven by differences in the population. Understood. Thank you. Yes. Sorry about that. Thank you. Our next question comes from Dave Turkaly with JMP Securities. Your line is now open. Great. Thanks. Chris, maybe given the comments on Nexus and the compete on innovation comments you've made, I know pricing was an important component of what the system and I imagine with Persona even is expected to deliver. So I just love to get your thoughts on how those contracts are coming through? Are you getting the price that you thought? Is it more or less? Any color would be great. Yes, Dave, I appreciate the question. I know this is pivotal for folks in terms of the investment thesis around plasma. Obviously, we get very sensitive talking about individual customers or price in any way that's going to disadvantage us vis a vis competition. What I will say is, we aspire to be a value added partner to the industry. We never want to put technology out there, priced in a way that isn't the ultimate win win win, better for donors, better for collectors and better for us, right? And I think we have that in the case of Nexus and Persona. We have that in the case of our NexLink DMS. So we feel very good. And more importantly, the customers who have adopted Nexus and have been running with it now for an extended period, who are also on the front edge of the validation and adoption of Persona, it continues to ring true to them. So it bodes well going forward. Beyond that, I just want to rather not give our competitors any more information than we to help to work to help drive the recovery, to help drive yields, to make that donor experience that much more user friendly. Got it. And congrats again on the Cardiva deal. If we look at the last, I guess, year, maybe a little more, you had a bunch of sort of little transactions, acquisitions, divestitures and the like. I'm just curious, given the size of that and where the portfolio stands, should we still expect things like that? Or I think your answer might be that it may be done for a while, but what do you feel about the overall Stu to comment on Cardiva and what that market may mean for us. I think we've been on a journey over the past 4.5 or 5 years to turn around the company. And portfolio rationalization factors prominently in that, right? We take words matter and the words winning market, leading position, superior results are the essence of our strategy. And then we break that down into the 6 value drivers that we've been talking about for a while. So we are committed to inorganic growth as part of that portfolio rationalization. We divested some of the blood center software business that was really tied to our filter business in North America and in France and parts of Europe, they just didn't make sense for us going forward. We're hugely committed to software and ultimately digitization of our platforms and our offerings. But in that sector of the business, it was neither an attractive market nor a leading product. And by divesting it, we've created greater focus. You see that in some of our blood center results on equipment and disposables. For Cardiva, and then I think we've said this for a while, we believe there's meaningful benefits to scaling and expanding our hospital business worldwide. And we think the Cardiva opportunity for what it means in vascular closure, electrophysiology, interventional cardiology is incredibly powerful in that regard. Our immediate priority, as we said in our prepared remarks, is properly integrating Cardiva into Haemonetics and adding fuel to the fire that they've created and driving that 40% plus growth that is forecast for the product mix there. So that's our we're hyper focused on helping make that happen. The good news about this business, it's robust and with recovery, our cash flow returns and our EBIT expands. And yes, we'll be back in the market to take a hard look at other complementary assets that can help propel that growth story. So, Stu, over to you to talk more there. Yes. I think, first I'll just say I'm really proud of what we've done with TEG. We've successfully penetrated into cardiovascular surgery, trauma in particular. In those settings, we've become the standard of care for identifying bleeding and thrombosis risk. So we've done a great job there. Interventional cardiology and by extension EP is really the next largest area of potential use for TEG and it's currently underpenetrated. There's a big target there for us to grow the adoption of TEG through training and education in interventional cardiology and by extension EP. So when we look at what Cardiva helps do for us on top of the value it has as a standalone is it really enhances our penetration into the attractive interventional cardiology, EP markets. It also does it in a way where we're not competing head to head with some of the major strategic in that space. So those major strategics are driving the growth of that market through innovation. We're seeing about 13% growth of the EP space. What Cardiva has been able to do is carve a niche for themselves to facilitate those procedures, make those procedures easier and more efficient, get patients to ambulate quicker, which makes sense for everyone in the room and do it in a way that's not necessarily competing with the major strategic. So we really like that simplicity of the portfolio, the way they can create efficiency in the EP lab, We believe it's a strong value proposition when combined with what we're already doing and the space we're already moving into with products like tech. Great color. Thanks. Thank you. Our next question comes from Mike Matson with Needham and Company. Your line is now open. Good morning. Thanks for taking my questions. Chris, I wanted to ask about your conversations with your customers in the plasma business about their kind of safety stock inventory levels. Do you expect them to in the long run try to get back to the levels they were at prior to COVID? And is there any potential that given kind of the shock experience of COVID that they might actually try to run higher inventory levels in the longer run? Yes, Mike, I appreciate the question. The our customers are really thoughtful about this. It's these are world class companies with global supply chains and extensive long range plans dealing with this year volume of clinical trial work that they are doing to grow and expand the autoimmune and immunology suite of product offerings. So they have robust growth plans. Clearly, the pandemic was a setback. I think depending on the company and their starting point, they felt more pressured some more than others. And we've seen some of that response in the market in terms of the productivity. However, I think all realized this is a challenge for them and it is a very connected logistical network. So, A, we fully expect long term growth in that 8% to 10%. It will ebb and flow based on new trial work, competitive offerings, etcetera. But we feel quite good about that number, tying back to an 8% growth in demand for IG. We do expect that they will want to replenish their safety stocks. They're thoughtful. They have the ability. It's very long shelf life for frozen source plasma. So I think we would be fully expecting that over time, they will build back those inventory levels. And I think candidly, there's been some lessons learned for us in that process. When we were collecting at 15% or 20% with individual customers in the prior 3 years pre COVID, we need to pay more attention to how much of that is their organic growth, which it was in many cases, versus their building safety stocks for some eventuality, which unfortunately has been COVID, right? So but I think they're thoughtful about it. We need to be thoughtful about it as well. I fully expect in the year to come, they will double down on new center openings. They've opened many centers through the pandemic. I think they'll be back on track fully to do so in calendar 2021. As Bill said, as the vaccine rolls out and we see that, they are doing what they can to drive the remuneration. Then obviously, we think that our technology helps take that all to another level. So it bodes well for a robust recovery on the other side of the pandemic. It won't be linear. There's going to be fits and starts as we're seeing in the current environment. But long term, we feel quite good about it and we think that they'll do the things in terms of ensuring they have supply. Okay. Thanks. And then just regarding this FDA guidance around TEG testing for COVID, have you seen any sort of measurable benefit to that business from COVID to date? And does this guidance increase the probability that you could see a benefit going forward at least until COVID rates kind of come down? I'll let Stu answer your question directly. I think one of the things that we're excited by is this is an ongoing dialogue that we're having with the medical community, with our scientific advisory committee and the KOL base on patient blood management and ultimately with the regulators. And what we're excited by is obviously to be able to play a role in an absolutely horrific set of conditions here around COVID-nineteen, but also what it bodes well for with regards to a broader based view of patient blood management, hemostasis and physioelastic testing and the role that it plays and kind of working across different disease states, different procedures, I think is an interesting area of scientific advancement that we've been championing for a while. But Stu, maybe you should comment on the specifics. Yes. Mike, we haven't seen any material difference made by this announcement. And keep in mind, this just happened over the last couple of weeks. But what we do think is to sort of reiterate what Chris said, is it opens the dialogue for conversations around, in particular, thrombosis and the diagnosis of potentially hypercoagulable patients that have COVID, and that conversation happening in departments that we're typically not in. As I just mentioned a moment ago, cardiovascular surgery, trauma, those settings were typically in and have a good footprint in hospitals. This is actually opening the aperture a little bit more to have those discussions in other departments as well around that hypercoagulable state that these patients are in. So we think there's opportunity to further educate around the use of TEG down the road as a result of this guidance. Okay, great. Thank you. Thank you. And our last question comes from Larry Solow with CJS Securities. Your line is now open. Great. Thanks and good morning guys. Thanks for taking the question. Just a couple of just clarifications or follow ups. Just on the Chris, you mentioned there hasn't been any meaningful change in the installed base, which sounds like your announcement this morning that you have some planned initial placements or placements at some of your larger collectors who maybe not have adopted. Is this the language is a little bit different. I'm just trying to figure out, prior placements, did customers sort of start with an initial base and then expand? Or I'm just trying to figure out if it's any different than how you've done prior placements. And realizing that some of the 2 largest Can you maybe clarify on that? Yes, Larry. I appreciate the question. Each customer is different because they each have different starting points. What my comments earlier around the installed base, we haven't seen meaningful change in share. It can happen. There's obviously different and important dynamics in the marketplace. We do have competitors, customers over time are free to change, right? What we have found is customers prefer within whatever the base, whether the share is 100% or 10% or anything in between, they tend to like continuity and consistency. It's very rare to have a center that will operate more than one device, right? So if it's a PCS2 center or it's one of our competitor center or it's a Nexus center, they tend to want to have a single standard operating procedure and protocol across the center. Similarly, when they adopt a new standard operating procedure as they need to, for example, to upgrade to the next link DMS, they typically want to do that across their entire network. It will be staged. And with software, the staging is longer by necessity because of the amount of changes required. With Nexus PCS, we've talked in the past, we can change the center out overnight. We can't change the entire network overnight. And in this case, what we're trying to be clear about is we've meaningfully advanced the discussions. We've gotten to agreements. We're not getting into how many centers have they changed, etcetera. It doesn't help us or our customers to talk about that. We will factor that into our growth plans going forward, of course. But what we're trying to communicate is the nature of the discussions has evolved and has progressed. And that progression gives us renewed confidence in the longer term. The actual pace, etcetera, this has to be staged, and it is going to be staged as part of and largely behind the recovery from the pandemic. That is the first, second and third priority, as I said earlier. And we're not going to do anything to disrupt the momentum that our customers are creating with regards to the recovery. Now as that happens, we then can feather this in as we complete the NextLink software upgrades, as we get them ready to go kind of trained and equipped or as they experience it, they take it in a different market, not the U. S. Market, but somewhere else in the world at scale, they're going to get that experience. And we're confident that as they have that experience, they'll get increasingly excited about not only the value proposition, as we talked about, but also our ability to convert them, right? So and we are confident in our ability to do that even in the height of the pandemic. We had some of those experiences this past year. So I think it bodes well, but it will be staged and it will likely be measured over an extended period of time, because that's the nature of the environment that we and our customers operate in. And I suppose, of course, I'm sure Persona and just the onset of COVID has obviously helped accelerate these conversations, certainly with new customers or customers that haven't converted. How about existing customers that are already on NEXUS? I assume interest on Persona is probably pretty high. Have you can you speak qualitatively any conversions yet, logistically how that process would work? Yes. Folks are very excited by it and we are neck deep in that validation process that I referenced earlier, making sure there's no degradation in the IG concentration. We are confident there is not, but it's something that needs to be tested and validated in our customers' network. It's the ongoing safety monitoring, make sure there's no adverse events with donors. Again, high level of confidence there, but we want to continue to monitor this as we go forward at scale. And then the logistics, depending on the supply chain and the fractionation process, the front end, right, how does that frozen block of source plasma get processed in for production? It varies from one customer to the next, and we need to help them adapt their systems and their supply to be able to handle a bottle that's meaning larger. Have any customers adopted Persona on a commercial level without getting into details just qualitatively? Can you confirm that? It's work in progress, right? So it is underway, but I don't want to get into the nuances of the difference between validation or validation at scale versus full rollout. It is underway and I can confirm that those conversations have been very positive across the entire installed base of NexSys. Fair enough. Just a quick question for Bill. Bill, just on the operational excellence, nothing new on the in terms of the $80,000,000 $90,000,000 save cost savings, productivity gains and the majority of crude going to the bottom line, I think you said by fiscal 2023. That does assume that that was an initial sort of target built on a growth assumption, right? So I assume if we're not backed or COVID is still impacting us and we're not at that level that you revenue level that you had assumed in that analysis, we won't quite get to that number by the end of or by fiscal 'twenty three until revenue sort of reaches that target, correct? So overall, the operational excellence program is going really well, Larry. I mean, we're making we have good traction, good projects going on. We do expect volumes to return here eventually, and we still feel comfortable at this point that by FY 'twenty three, we'll see those savings. But yes, it is dependent on at some point getting back to the normal levels of revenue that we've experienced historically with growth. Right. And the Cardiva acquisition, I know I think the obviously that was more on the revenue growth potential. But I got to imagine as you roll that into your network, there'll be some potential savings coming out of that too inevitably on the cost side? Of course, there are always synergies, right? But again, just to reiterate what Stu and Chris said, right, the deal is built on revenue growth. But since we don't have a natural part of M and A, yes. Great. Okay, great guys. I appreciate it. Thanks. Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.