Haemonetics Corporation — Form 10-Q Summary
Business context and reporting period. Haemonetics provides products and solutions for plasma and blood collection, hospital transfusion services, surgical blood management, and related markets. This fiscal 2023 second-quarter report covers the three and six months ended October 1, 2022; comparisons are with the periods ended October 2, 2021. Amounts below are in U.S. dollars.
Financial performance
| Metric | Three months | Six months |
|---|---|---|
| Net revenue | $297.5 million, up 24.0% reported and 27.0% constant currency | $558.9 million, up 19.3% reported and 21.9% constant currency |
| Gross profit / margin | $157.9 million / 53.1%, versus 51.1% | $300.1 million / 53.7%, versus 49.2% |
| Operating income / margin | $46.7 million / 15.7%, versus $24.5 million / 10.2% | $77.5 million / 13.9%, versus $25.9 million / 5.5% |
| Net income | $33.2 million, versus $14.9 million; diluted EPS $0.64, versus $0.29 | $53.1 million, versus $10.4 million; diluted EPS $1.03, versus $0.20 |
| Operating cash flow | Not presented for the quarter alone | $129.0 million, versus $41.8 million |
Revenue by business. Second-quarter constant-currency revenue growth was 57.2% in Plasma and 21.9% in Hospital; Blood Center grew 0.5% for the quarter but declined 3.2% for the six-month period. Management attributed Plasma and Hospital gains mainly to volume and price, while Blood Center results reflected lower apheresis disposable volumes. Vascular Closure revenue grew 42.1% in the quarter and 38.9% over six months.
Cash, liquidity and debt. At October 1, 2022, cash was $241.2 million, working capital $453.6 million, and the current ratio 2.7. The company reported net debt of $576.5 million. Balance-sheet current and long-term debt were $58.2 million and $759.6 million, respectively. Six-month investing cash outflow was $89.3 million, including $81.4 million of capital expenditures; financing cash outflow was $49.1 million. Cash declined $18.3 million to $241.2 million. The company said available cash, operating cash flow and revolving credit capacity should fund requirements for at least the next 12 months.
Material changes and management commentary
- Revenue growth and stronger margins were driven primarily by Plasma and Hospital performance, productivity savings under the Operational Excellence Program, and product mix. Results were partly offset by inflation, higher freight costs, increased depreciation, and higher sales and marketing and performance-based compensation expenses.
- Plasma revenue growth reflects, in part, an amended CSL Plasma agreement extending use of the PCS2 system and purchases of disposable kits through December 2023, with an $88 million minimum purchase commitment in fiscal 2023.
- In July 2022, the company refinanced its credit facilities and extended maturity to June 2025. It had $278.3 million outstanding under the term loan and $50.0 million drawn on the revolver at quarter-end; the revolver was repaid in October 2022. The company reported compliance with debt covenants. Interest-rate swaps hedge a portion of variable-rate borrowing.
- The board authorized up to $300 million of repurchases over three years. The company paid $75 million under an accelerated share repurchase agreement in August; approximately 0.2 million additional shares were delivered when it settled in November. Remaining authorization at quarter-end was $225 million.
- The revised Operational Excellence Program is expected to incur $95–$105 million in aggregate charges by fiscal 2025 and generate $115–$125 million in annualized gross savings once completed. Cumulative charges were $62.3 million at October 1, 2022.
Outlook, risks and contingencies
The filing provides no specific revenue or earnings guidance. Management expected supply-chain inflationary pressures to continue through fiscal 2023 and stated that future cost increases may not be fully mitigated. Key risks include customer concentration and loss of significant customers, product quality and regulatory matters, raw-material and supply continuity, foreign-exchange and interest-rate movements, and execution of restructuring and growth plans. International sales were 29.6% of six-month revenue, and currency movements reduced reported growth relative to constant-currency growth.
The company disclosed a qui tam matter involving allegations related to apheresis and autotransfusion products; the DOJ and 31 states moved not to intervene, and the case was unsealed in August 2022. A separate Illinois biometric-privacy class action remains at an early stage; the company disputes the allegations and says it cannot reasonably estimate potential loss. In November 2022, after quarter-end, the company invested an additional €20 million in Vivasure Medical, bringing its total investment to €30 million.
Important facts for investors to verify
- Whether Plasma growth and the CSL minimum-purchase commitment translate into sustained sales, while monitoring customer concentration and the previously disclosed customer loss.
- Whether Hospital growth and margin improvement persist, and whether Blood Center declines stabilize.
- Execution, remaining cash costs, and realized savings from the Operational Excellence Program amid inflation and elevated freight costs.
- Debt balances, covenant headroom, interest expense, and liquidity after the revolver repayment and share repurchases.
- Developments and potential exposure in the qui tam and biometric-privacy matters, and the returns and risks associated with the Vivasure investment.