Haemonetics Corporation (HAE) — Form 10-Q Summary
Reporting period: Fiscal third quarter ended December 30, 2023; comparisons are with the quarter ended December 31, 2022. Year-to-date figures cover nine months. Financial amounts below are in U.S. dollars.
Financial performance
| Metric | Q3 FY2024 | Q3 FY2023 | Nine months FY2024 | Nine months FY2023 |
|---|---|---|---|---|
| Revenue | $336.3m | $305.3m | $965.8m | $864.2m |
| Gross profit / margin | $177.9m / 52.9% | $158.7m / 52.0% | $515.6m / 53.4% | $458.8m / 53.1% |
| Operating income / margin | $46.0m / 13.7% | $43.3m / 14.2% | $134.9m / 14.0% | $120.8m / 14.0% |
| Net income | $31.2m | $32.9m | $97.2m | $86.0m |
| Diluted EPS | $0.61 | $0.64 | $1.89 | $1.67 |
Quarterly revenue rose 10.1% (10.3% at constant currency); nine-month revenue increased 11.7% (12.4% at constant currency). Quarterly operating income grew 6.2%, but net income fell 5.2%, primarily reflecting higher tax expense and costs. The nine-month effective tax rate increased to 24.3% from 20.9%.
Q3 business-unit revenue: Plasma $146.8m, up 8.4%; Blood Center $70.5m, down 3.9%; and Hospital $113.4m, up 23.9%. Management attributed growth mainly to Plasma and Hospital volume and price benefits; Blood Center weakness was driven primarily by Whole Blood declines. Hospital growth also reflects the addition of OpSens, acquired in December.
Cash flow, balance sheet and debt
- Nine-month operating cash flow was $117.7m, versus $193.4m a year earlier. Investing cash outflow was $309.3m, including the OpSens acquisition; financing provided $101.7m.
- Capital expenditures were $56.6m, versus $98.3m. Operating cash flow less capital expenditures was approximately $61.1m, compared with $95.2m in the prior period.
- Cash was $194.0m at December 30, down from $284.5m at fiscal year-end. Working capital was $503.2m; current ratio was 2.9.
- Total debt was approximately $870.6m, including $500m principal of 0% convertible notes due March 2026, a $266m term loan and $110m drawn on the revolving facility. Net debt was approximately $676.6m, compared with $481.4m at fiscal year-end.
- The term loan and revolving facility mature in June 2025. The term loan carried a 6.8% effective rate and the revolver 6.7%. The company reported compliance with its debt covenants and believes available liquidity sources can fund requirements for at least 12 months.
Material changes and notable items
- Completed the OpSens acquisition on December 12 for approximately $254.5m, or $243.9m net of acquired cash, funded with cash and revolving-credit borrowings. Preliminary purchase accounting includes $180.5m of identifiable intangible assets and $87.1m of goodwill; valuations may change materially as accounting is finalized.
- Inventory increased to $304.0m from $259.4m at fiscal year-end. Management attributed lower operating cash generation in part to inventory replenishment, including NexSys devices.
- Recorded a $10.4m impairment of Hospital-related intangible assets acquired with enicor GmbH. Nine-month results also included $14.6m of restructuring and restructuring-related costs and $7.8m of OpSens integration and transaction costs.
- In November, announced plans to discontinue the ClotPro analyzer and Whole Blood inline collection products and related operations. Management did not expect a material impact from these initiatives for the remainder of fiscal 2024.
- Issued a voluntary recall in August 2023 of certain Whole Blood products. Cumulative charges were $6.8m through December 30; the company said additional charges may be recorded.
Outlook, risks and contingencies
The filing provides no specific consolidated revenue or earnings guidance. Management expects CSL to meet a minimum purchase commitment slightly above $100m in fiscal 2024 under its supply agreement, which runs through December 2025, and expects CSL to remain a meaningful Plasma customer in fiscal 2025. The company expects $95m–$105m of cumulative charges under its Operational Excellence Program by the end of fiscal 2025; $74m had been incurred to date.
Key stated risks include product quality and recall exposure, customer demand and concentration, acquisition integration and realization of expected benefits, foreign-exchange and interest-rate movements, supply-chain disruption, regulatory requirements, litigation and the ability to meet debt obligations. An Illinois biometric privacy case had a proposed settlement process underway; the company recorded a total $8.8m accrual. Relators’ claims in a separate qui tam case were dismissed with prejudice as to the relators and without prejudice as to the government. Management reported effective disclosure controls as of quarter-end; ERP implementation is continuing in phases through fiscal 2025.
Important facts for investors to verify
- Progress on OpSens integration, final purchase accounting, and whether expected strategic benefits are realized.
- Further costs, customer impacts or regulatory developments related to the Whole Blood product recall.
- Whether elevated inventory converts to sales and cash, given the decline in operating cash flow.
- Plasma customer concentration and CSL purchasing, alongside continued weakness in Blood Center.
- Debt repayment and refinancing plans ahead of the June 2025 credit-facility maturity and March 2026 convertible-note maturity.
- Final terms and approval of the biometric privacy settlement and any developments involving the government’s remaining rights in the qui tam matter.