Haemonetics Corporation — Form 10-Q Summary
Reporting period: Quarter ended July 2, 2022 (the first quarter of fiscal 2023); comparisons are with the quarter ended July 3, 2021. Amounts are in U.S. dollars. The statements are unaudited.
Business context and results
Haemonetics supplies products and solutions for plasma and blood collection, hospital transfusion services, surgical blood salvage, hemostasis management and vascular closure. It reports Plasma, Blood Center and Hospital segments. Management views Plasma and Hospital as growth businesses, while Blood Center operates in challenging markets.
| Metric | Quarter ended July 2, 2022 | Prior-year quarter | Change |
|---|---|---|---|
| Net revenue | $261.5 million | $228.5 million | +14.4%; +16.6% constant currency |
| Gross profit / margin | $142.3 million / 54.4% | $108.1 million / 47.3% | +31.6%; margin +7.1 percentage points |
| Operating income / margin | $30.8 million / 11.8% | $1.4 million / 0.6% | Improved |
| Net income (loss) | $19.9 million | $(4.5) million | Returned to profitability |
| Diluted earnings (loss) per share | $0.38 | $(0.09) | Improved |
| Operating cash flow | $42.0 million | $(1.7) million | Improved by $43.7 million |
Revenue growth was led by Plasma and Hospital, including volume and price increases. Plasma revenue grew 42.5% reported (43.5% constant currency); Hospital grew 12.7% (14.9% constant currency); Blood Center declined 9.9% (7.2% constant currency), primarily due to lower apheresis disposable volumes. U.S. revenue rose 29.0%; international revenue declined 9.2% reported, including a 5.2% adverse currency impact.
Gross profit benefited from volume and mix, pricing and Operational Excellence Program savings, partly offset by inflation in manufacturing and supply-chain costs and higher depreciation. Operating income also benefited from increased Plasma and Hospital sales, program savings and lower acquisition spending; higher freight and sales and marketing costs partly offset these factors. The comparison also reflects prior-year items, including a $9.6 million gain on divestitures in the prior-year quarter and differences in integration and other adjustment items.
Cash, debt and liquidity
- Cash and cash equivalents were $214.9 million at July 2, 2022, down from $259.5 million at April 2, 2022. Working capital was $507.3 million and the current ratio was 3.8.
- Operating activities provided $42.0 million. Investing used $58.2 million, including $45.5 million of capital expenditures and $10.4 million of other investments. Financing used $23.4 million, including $21.6 million of contingent-consideration payments. Cash declined $44.5 million during the quarter.
- Balance-sheet debt was approximately $770 million, including $280 million outstanding on the term loan and $490.1 million net carrying value of the 0% convertible notes due 2026. The filing’s cash-less-total-debt measure was negative $555.0 million (cash was below debt). No revolving-credit borrowings were outstanding at quarter-end.
- The company reported compliance with credit-facility covenants at July 2, 2022 and said available liquidity sources were expected to meet requirements for at least the next 12 months.
Outlook, developments and risks
- No specific consolidated revenue or earnings guidance is provided in the supplied filing text. Management expects inflationary pressures in the global supply chain to continue through fiscal 2023 and cautions that pricing and productivity measures may not fully offset cost increases.
- The revised Operational Excellence Program is expected to incur total charges of $95 million to $105 million by the end of fiscal 2025, with annualized gross savings of $115 million to $125 million once complete. Cumulative charges were $59.2 million at July 2, 2022; most charges are expected to require cash outlays.
- CSL Plasma extended its supply agreement through December 2023 on a non-exclusive basis and committed to at least $88 million of disposable purchases in fiscal 2023. The company previously disclosed that CSL would not renew the original agreement, making customer retention and post-extension demand important to monitor.
- After quarter-end, on July 26, 2022, Haemonetics refinanced its credit facilities, extending maturity to June 2025, with a $280 million term loan and a $420 million revolving facility. The new facility uses Term SOFR-based rates; subsequent market-risk disclosure stated a 4.2% term-loan rate as of July 26. The company was evaluating additional interest-rate swap protection beyond June 2023.
- In August 2022, the board authorized repurchases of up to $300 million of common shares over three years, with activity intended to begin in fiscal 2023. Repurchases are discretionary and subject to market conditions, legal requirements and loan covenants.
- Risks include inflation and freight costs, foreign-exchange and interest-rate movements, product quality and regulatory matters, supply continuity, customer concentration and the ability to realize restructuring savings. The company is cooperating with a U.S. Attorney’s Office subpoena concerning certain apheresis and autotransfusion products. A putative Illinois biometric-privacy class action remained at an early stage; the company said it could not reasonably estimate potential loss.
Most important facts for investors to verify
- Whether Plasma and Hospital growth can continue and whether Blood Center declines stabilize.
- How much of the quarter’s margin improvement is sustainable after accounting for prior-period gains, restructuring effects, inflation, freight and depreciation.
- Cash generation relative to elevated capital spending and equipment placements, and the economics of the resulting customer contracts.
- CSL’s fiscal 2023 purchases and the business impact as the extended agreement approaches expiration.
- Interest expense under the new SOFR-based facilities, covenant headroom, debt repayment and any additional hedging.
- Actual restructuring charges and realized savings, potential legal or regulatory developments, and whether share repurchases proceed without constraining liquidity.