Haemonetics(US:HAE)2024-08-08 10:04Executive Summary & Q1 FY25 Highlights Haemonetics reported an 8% increase in total revenue to $336 million for Q1 FY25, with organic revenue up 3%, and adjusted EPS of $1.02, alongside cash outflows Q1 FY25 Key Financial Highlights Key financial metrics for Q1 FY25 include an 8% revenue increase to $336 million and adjusted EPS of $1.02, alongside cash outflows Q1 FY25 Key Financial Highlights | Metric | 1st Quarter 2025 | | :------------------------------ | :--------------- | | Revenue | $336 million, 8% increase | | Organic revenue | 3% increase | | Earnings per diluted share | $0.74 | | Adjusted earnings per diluted share | $1.02 | | Cash outflow from operating activities | ($27.4) million | | Free cash outflow | ($16.9) million | CEO Statement CEO Chris Simon highlighted the strong Q1 performance, attributing it to the strength and breadth of the company's products and their impact in high-growth markets - CEO Chris Simon emphasized strong Q1 performance driven by product strength and market impact, expressing confidence in the strategy for sustainable and profitable growth through innovation and investments to expand market share, margins, and operating leverage2 First Quarter Fiscal 2025 Financial Performance This section details Haemonetics' financial performance for Q1 FY25, analyzing both GAAP and adjusted results across revenue, profitability, and earnings per share GAAP Results GAAP results for Q1 FY25 showed an 8.0% increase in total net revenue to $336.2 million, primarily driven by the Hospital segment, but gross margin decreased to 52.0% due to acquisition-related amortization and restructuring costs, leading to declines in operating income and net income Revenue Performance (GAAP) Total net revenue increased by 8.0% year-over-year to $336.2 million, with significant growth in the Hospital segment while Plasma and Blood Center segments experienced declines Q1 FY25 GAAP Revenue by Business Unit | Business Unit | 1st Quarter 2025 ($ millions) | 2025 Reported Growth | | :------------ | :---------------------------- | :------------------- | | Plasma | $135.9 | (2.7)% | | Blood Center | $66.3 | (4.3)% | | Hospital | $134.0 | 30.7% | | Total net revenue | $336.2 | 8.0% | Profitability and Expenses (GAAP) Gross margin decreased by 1.7 percentage points to 52.0% due to acquisition-related amortization and restructuring costs, while operating expenses as a percentage of revenue increased to 40.2% mainly from acquisition costs, increased headcount, and amortization of acquired intangible assets Q1 FY25 GAAP Profitability and Expenses | Metric | Q1 FY25 | Q1 FY24 | Change (bps) | | :----------------------------------- | :-------- | :-------- | :----------- | | Gross margin | 52.0% | 53.7% | (170) | | Operating expenses as % of revenue | 40.2% | 36.5% | 370 | | Operating income | $39.8 million | $53.7 million | (25.9)% | | Operating margin | 11.8% | 17.2% | (540) | - Primary drivers of gross margin decrease were amortization of fair value inventory step-up related to the Attune Medical acquisition and restructuring costs, partially offset by volume and mix - The increase in operating expenses as a percentage of revenue was primarily driven by transaction, integration, and operating costs related to recent acquisitions, as well as increased headcount and amortization of acquired intangible assets, partially offset by gains on the sale of a manufacturing facility3 Net Income and EPS (GAAP) Net income for Q1 FY25 was $38.4 million, a 6.5% decrease from the prior year, resulting in diluted EPS of $0.74, down 7.5%, with a slight improvement in the income tax rate Q1 FY25 GAAP Net Income and EPS | Metric | Q1 FY25 ($ millions) | Q1 FY24 ($ millions) | Change (%) | | :---------------------- | :------------------- | :------------------- | :--------- | | Net income | $38.4 | $41.0 | (6.5)% | | Earnings per diluted share | $0.74 | $0.80 | (7.5)% | | Income tax rate | 18% | 20% | (200 bps) | Adjusted Results Adjusted results for Q1 FY25 showed organic revenue growth of 2.8%, with adjusted gross margin improving by 110 basis points to 55.3%, but adjusted operating margin decreased by 150 basis points to 21.1% due to increased operating expenses from acquisitions and headcount, leading to declines in adjusted net income and EPS Organic Revenue Growth (Adjusted) Organic revenue grew by 2.8% in Q1 FY25, led by 13.5% growth in the Hospital segment, while Plasma and Blood Center segments experienced organic declines Q1 FY25 Organic Revenue Growth by Business Unit | Business Unit | 1st Quarter 2025 Organic Growth | | :------------ | :------------------------------ | | Plasma | (2.6)% | | Blood Center | (2.1)% | | Hospital | 13.5% | | Total net revenue | 2.8% | Adjusted Profitability and Expenses Adjusted gross margin increased by 110 basis points to 55.3% due to volume and mix, but adjusted operating expenses as a percentage of revenue rose to 34.2% from recent acquisitions and increased headcount, resulting in a 150 basis point decrease in adjusted operating margin to 21.1% Q1 FY25 Adjusted Profitability and Expenses | Metric | Q1 FY25 | Q1 FY24 | Change (bps) | | :----------------------------------- | :-------- | :-------- | :----------- | | Adjusted gross margin | 55.3% | 54.2% | 110 | | Adjusted operating expenses as % of revenue | 34.2% | 31.7% | 250 | | Adjusted operating income | $71.0 million | $70.2 million | 1.1% | | Adjusted operating margin | 21.1% | 22.6% | (150) | - The primary drivers of the increase in the adjusted gross margin percentage were volume and mix - The increase in adjusted operating expenses as a percentage of revenue was primarily driven by costs associated with the operations of recent acquisitions and increased headcount45 Adjusted Net Income and EPS Adjusted net income decreased by 2.4% to $52.4 million, and adjusted diluted EPS fell by 2.9% to $1.02 compared to the prior year, with the adjusted income tax rate at 20% Q1 FY25 Adjusted Net Income and EPS | Metric | Q1 FY25 ($ millions) | Q1 FY24 ($ millions) | Change (%) | | :---------------------- | :------------------- | :------------------- | :--------- | | Adjusted net income | $52.4 | $53.7 | (2.4)% | | Adjusted earnings per diluted share | $1.02 | $1.05 | (2.9)% | | Adjusted income tax rate | 20% | 21% | (100 bps) | Balance Sheet and Cash Flow Analysis This section analyzes Haemonetics' balance sheet and cash flow performance, highlighting significant changes in cash position and the drivers of operating and free cash outflows Balance Sheet Overview Cash on hand significantly increased to $344.4 million at June 29, 2024, primarily driven by debt transactions, partially offset by the acquisition of Attune Medical, and the issuance of $682.8 million in new convertible senior notes - Cash on hand at June 29, 2024, was $344.4 million, an increase of $165.6 million since the end of fiscal 2024, primarily driven by debt transactions, partially offset by the acquisition of Advanced Cooling Therapy, Inc. (d/b/a Attune Medical)6 - During Q1 FY25, the Company received $682.8 million of net cash from the issuance of 2.5% convertible senior notes due in 2029, with $230.0 million used to repay the revolving credit facility, $185.5 million to repurchase existing 0% convertible senior notes due in 2026, and $88.2 million for capped call transactions6 Cash Flow Activities Q1 FY25 saw a cash outflow from operating activities of $27.4 million and a free cash outflow of $16.9 million, a significant shift from prior year inflows, mainly due to timing of accounts payable, decreased net income (considering non-cash items), increased inventory, and a legal settlement payment Q1 FY25 Cash Flow Activities | Metric | Q1 FY25 ($ millions) | Q1 FY24 ($ millions) | | :------------------------------ | :------------------- | :------------------- | | Cash outflow from operating activities | ($27.4) | $19.1 | | Free cash outflow | ($16.9) | $9.8 | - The drivers of operating cash outflow were timing of accounts payable payments, decreased net income when considering certain non-cash items, increased inventory balances, and a payment in connection with a previously disclosed legal settlement, with free cash outflow partially offset by the sale of property, plant and equipment7 Fiscal 2025 Guidance This section outlines Haemonetics' financial guidance for fiscal year 2025, including projections for revenue growth, profitability, and free cash flow Revenue Growth Guidance Haemonetics reaffirmed its fiscal 2025 GAAP total revenue growth guidance of 5-8% and organic revenue growth guidance of 0-3%, with the Hospital segment expected to be the primary growth driver Fiscal 2025 Revenue Growth Guidance | Metric | Plasma | Blood Center | Hospital | Total Company | | :---------------- | :-------- | :----------- | :---------- | :------------ | | Reported | (3 - 6)% | (5 - 8)% | 27% - 32% | 5 - 8% | | Currency impact | 0% | (0 - 1)% | 0% | (0 - 1)% | | Acquisitions | 0% | 0% | 14 - 16% | 5 - 6% | | Organic | (3 - 6)% | (5 - 7)% | 13 - 16% | 0 - 3% | Profitability and Cash Flow Guidance The company reaffirmed its fiscal 2025 guidance for adjusted operating margin at 23-24%, adjusted earnings per diluted share between $4.45 and $4.75, and free cash flow between $130 million and $180 million Fiscal 2025 Profitability and Cash Flow Guidance | Metric | Guidance | | :------------------------------ | :------------ | | Adjusted operating margin | 23% - 24% | | Adjusted earnings per diluted share | $4.45 - $4.75 | | Free cash flow | $130M - $180M | Additional Company Information This section provides supplementary company information, including details on the Q1 FY25 earnings call, an overview of Haemonetics, forward-looking statement disclaimers, and definitions of non-GAAP financial measures Webcast Conference Call Details Haemonetics announced it would host a conference call with investors and analysts on Thursday, August 8, 2024, at 8:00 a.m. ET to discuss Q1 FY25 results, providing details for teleconference and webcast access - Haemonetics will host a conference call on Thursday, August 8, 2024, at 8:00 a.m. ET to discuss first quarter fiscal 2025 results, accessible via teleconference or live webcast on the investor relations website1011 About Haemonetics Haemonetics is a global healthcare company dedicated to providing innovative medical products and solutions to improve patient care and reduce healthcare costs, with technology addressing blood and plasma component collection, surgical suites, and hospital transfusion services - Haemonetics (NYSE: HAE) is a global healthcare company providing innovative medical products and solutions to improve patient care and reduce healthcare costs, with technology addressing blood and plasma component collection, surgical suites, and hospital transfusion services11 Forward-Looking Statements This section contains a standard disclaimer regarding forward-looking statements, noting they are not guarantees of future results and are subject to various risks and uncertainties, including product availability, new product development, competitive pressures, cybersecurity, acquisition integration, pricing, supply chain, regulatory issues, indebtedness, intellectual property, and litigation, with no undertaking to update these statements - Forward-looking statements are not meant to predict or guarantee actual results and are subject to risks and uncertainties, including availability and demand for products, ability to develop new products, competitive impact, product quality, cybersecurity, acquisition integration, pricing pressures, manufacturing disruptions, regulatory uncertainties, indebtedness, intellectual property, and litigation1314 Management's Use of Non-GAAP Measures Management uses non-GAAP financial measures to monitor performance, make business decisions, and set targets, considering them supplemental to GAAP results, and defines key non-GAAP terms such as organic revenue growth, adjusted gross profit, adjusted operating expenses, adjusted operating income, adjusted net income, adjusted earnings per diluted share, and free cash flow - Management uses non-GAAP measures to monitor financial performance, make informed business decisions, establish budgets, and forecast future results, emphasizing they are supplemental to GAAP results15 - Key non-GAAP measures defined include organic revenue growth (excluding currency and acquisitions), adjusted gross profit, adjusted operating expenses, adjusted operating income, adjusted net income, and adjusted earnings per diluted share (excluding restructuring, amortization of acquired intangibles, inventory step-up, integration costs, and other specific charges) - Free cash flow is defined as cash provided by operating activities less capital expenditures and additions to Haemonetics equipment, net of proceeds from asset sales16 Condensed Consolidated Financial Statements This section presents the unaudited condensed consolidated financial statements for Q1 FY25, including statements of income, balance sheets, cash flows, and reconciliations of adjusted measures Condensed Consolidated Statements of Income This section presents the unaudited condensed consolidated statements of income for the three months ended June 29, 2024, and July 1, 2023, detailing net revenues, cost of goods sold, gross profit, operating expenses, operating income, and net income, along with corresponding profit margins Condensed Consolidated Statements of Income (Q1 FY25 vs Q1 FY24) | Metric | Q1 FY25 ($ thousands) | Q1 FY24 ($ thousands) | Inc/(Dec) % | | :---------------------------------------- | :-------------------- | :-------------------- | :---------- | | Net revenues | 336,172 | 311,332 | 8.0% | | Gross profit | 174,924 | 167,265 | 4.6% | | Operating expenses | 135,168 | 113,606 | 19.0% | | Operating income | 39,756 | 53,659 | (25.9)% | | Net income | 38,373 | 41,042 | (6.5)% | | Net income per common share assuming dilution | 0.74 | 0.80 | (7.5)% | | Gross profit margin | 52.0% | 53.7% | (1.7)% | | Operating income margin | 11.8% | 17.2% | (5.4)% | | Net income margin | 11.4% | 13.2% | (1.8)% | Revenue Analysis by Business Unit This table provides a detailed breakdown of revenues by business unit (Plasma, Blood Center, Hospital, with Hospital further segmented into Interventional Technologies and Blood Management Technologies) for Q1 FY25 and Q1 FY24, showing reported growth, currency impact, acquisition impact, and organic growth Revenue Analysis by Business Unit (Q1 FY25 vs Q1 FY24) | Business Unit | Q1 FY25 ($ thousands) | Q1 FY24 ($ thousands) | Reported growth | Currency impact | Acquisitions | Organic growth | | :-------------------------------- | :-------------------- | :-------------------- | :-------------- | :-------------- | :----------- | :------------- | | Plasma | 135,910 | 139,621 | (2.7)% | (0.1)% | — % | (2.6)% | | Blood Center | 66,245 | 69,206 | (4.3)% | (2.2)% | — % | (2.1)% | | Hospital | 134,017 | 102,505 | 30.7% | (0.6)% | 17.8% | 13.5% | | Interventional Technologies | 63,044 | 37,620 | 67.6% | (0.4)% | 48.6% | 19.4% | | Blood Management Technologies | 70,973 | 64,885 | 9.4% | (0.6)% | — % | 10.0% | | Total net revenues | 336,172 | 311,332 | 8.0% | (0.7)% | 5.9% | 2.8% | Condensed Consolidated Balance Sheets This section presents the unaudited condensed consolidated balance sheets as of June 29, 2024, and March 30, 2024, detailing assets (cash, receivables, inventories, property, intangibles, goodwill) and liabilities & stockholders' equity (debt, other liabilities, equity) Condensed Consolidated Balance Sheets (as of June 29, 2024 vs March 30, 2024) | Metric | As of 6/29/2024 ($ thousands) | As of 3/30/2024 ($ thousands) | | :----------------------------------- | :---------------------------- | :---------------------------- | | Cash and cash equivalents | 344,429 | 178,800 | | Total current assets | 978,578 | 768,903 | | Total assets | 2,540,977 | 2,195,591 | | Total current liabilities | 260,076 | 300,383 | | Long-term debt | 1,218,477 | 797,564 | | Stockholders' equity | 905,368 | 959,959 | | Total liabilities & stockholders' equity | 2,540,977 | 2,195,591 | Condensed Consolidated Statements of Cash Flows This section provides the unaudited condensed consolidated statements of cash flows for the three months ended June 29, 2024, and July 1, 2023, outlining cash flows from operating, investing, and financing activities, and a reconciliation of free cash flow Condensed Consolidated Statements of Cash Flows (Q1 FY25 vs Q1 FY24) | Metric | Q1 FY25 ($ thousands) | Q1 FY24 ($ thousands) | | :-------------------------------------- | :-------------------- | :-------------------- | | Net cash (used in) provided by operating activities | (27,421) | 19,086 | | Net cash used in investing activities | (139,197) | (15,261) | | Net cash provided by (used in) financing activities | 333,692 | (598) | | Net Change in Cash and Cash Equivalents | 165,629 | 1,253 | | Free cash (out)flow | (16,926) | 9,825 | Reconciliation of Adjusted Measures for First Quarter of FY25 and FY24 This section provides a detailed reconciliation of GAAP financial measures to their non-GAAP adjusted counterparts for Q1 FY25 and Q1 FY24, showing specific adjustments made for items such as amortization of acquired intangibles, inventory step-up, integration costs, restructuring, and litigation-related charges across gross profit, operating expenses, operating income, net income, and EPS - The reconciliation details adjustments from GAAP to non-GAAP measures, including amortization of acquired intangible assets, amortization of fair value inventory step-up, integration and transaction costs, restructuring costs, digital transformation costs, MDR and IVDR costs, litigation-related charges, gain on repurchase of convertible notes, gains on sales of property, plant and equipment, and discrete tax items2526 Key Adjustments from GAAP to Adjusted Net Income and EPS (Q1 FY25) | Adjustment Category | Net Income Impact ($ thousands) | EPS Impact ($) | | :-------------------------------------- | :------------------------------ | :------------- | | Amortization of acquired intangible assets | 9,377 | 0.18 | | Amortization of fair value inventory step-up | 3,953 | 0.08 | | Integration and transaction costs | 11,605 | 0.23 | | Restructuring costs | 3,544 | 0.07 | | Gain on repurchase of convertible notes, net | (9,541) | (0.19) | | Gains on sales of property, plant and equipment | (10,702) | (0.21) | | Total Adjusted Net Income | 52,366 | 1.02 |