Rohin Patel

Rohin Patel asked about the drivers of plasma business growth, including collections, recovery, market growth, and share gains, and sought insights into sustainable plasma performance and share gain expectations for fiscal year 2027. He also inquired about the sequential step-down in adjusted operating margin, the impact of a challenged hospital business on future leverage, and the expected pace of margin expansion beyond fiscal year 2026.

Answer

Chris Simon (President and CEO, Haemonetics) attributed plasma's strong performance to a 'trifecta' of share gains (from competitors and customer technology adoption), annualizing price benefits from new technology, and double-digit collection volume growth in the U.S. and internationally. He noted that FY2027 guidance would be provided in May but highlighted customer enthusiasm. James D'Arecca (CFO, Haemonetics) explained that while overall margin expansion was strong (up 60 bps in Q3, 200 bps YTD), quarterly segment performance can be uneven. He anticipates smaller future margin improvements (50-100 bps) and noted that hospital business softness and performance-based compensation impacted Q3, reaffirming full-year operating margin guidance of 26%-27%, potentially at the lower end due to Vivisure acquisition expenses.

Rohin Patel inquired about the drivers of plasma business growth, including collections, recovery, market growth, and share gains, and sought insights into sustainable plasma performance for fiscal year 2027. He also asked about the sequential step-down in adjusted operating margin, future leverage sources for the hospital business, and expectations for margin expansion beyond fiscal year 2026.

Answer

Chris Simon, President and CEO, highlighted the 'trifecta' of share gains (from competitors and customers using NexSys technology), price benefits from new technology rollout, and double-digit collection volume growth in the US and internationally. James D'Arecca, CFO, explained that while pleased with margin expansion (up 60 bps in Q3, 200 bps YTD), future improvements would be in smaller increments (50-100 bps). He attributed Q3's sequential step-down to modest margin pressure in the hospital segment due to Interventional Technologies softness and increased performance-based compensation, noting strong plasma performance offset these factors. The full-year operating margin guidance remains 26%-27%, potentially at the lower end due to Vivasure acquisition expenses.

Rohin Patel inquired about the drivers of the strong Q1 Plasma performance, the specific contribution from a one-time software benefit, and the expected growth trend for the remainder of the year. He also asked about the Hospital business, seeking the growth rate for Vascade MVP/MVP XL and the recovery outlook for the legacy Vascade product.

Answer

CEO Christopher Simon explained that the Plasma segment's strength is driven by innovation, pricing benefits from prior technology rollouts, and accelerating share gains. He noted a one-time software agreement accounted for roughly half of the 29% organic growth ex-CSL, solidifying Haemonetics' 80% market share in plasma DMS software. For the Hospital business, Simon stated that Vascade MVP and MVP XL grew approximately 6%, but acknowledged executional challenges with the legacy Vascade product, which he described as temporary and not structural.

Rohin Patel asked about the strong performance and outlook for the Plasma business, inquiring about the drivers behind the fiscal 2026 guidance of 11-14% growth (ex-CSL) and its impact on margins. He also requested details on the drivers for the fiscal 2026 EPS guidance, including gross margin, OpEx initiatives, and the assumed $0.20 tariff impact.

Answer

CEO Christopher Simon explained that the robust 11-14% Plasma growth forecast is primarily driven by share gains and technology adoption premiums, with collection volumes expected to rebound modestly in the second half of fiscal 2026. CFO James D'Arecca added that the 26-27% operating margin target is supported by improved gross margin mix from portfolio rationalization, like the Whole Blood divestiture. He clarified the $0.20 annualized tariff impact is the starting point, with about half of that already factored into the guidance midpoint, and the company has mitigation plans in place.

Rohin Patel followed up on VASCADE, seeking clarification on new product revenue contributions and the PFA attach rate. He also questioned the discrepancy between strong operating margin expansion and the lowered free cash flow guidance.

Answer

CEO Christopher Simon clarified that the mid-20s growth referred specifically to VASCADE MVP and MVP XL. Executive Olga Guyette added that a 12% figure mentioned was the M&A contribution to the reported growth rate. CFO James D'Arecca attributed the lower free cash flow to increased working capital, primarily from building up NexSys and plasma inventories from previously low levels, which he does not expect to recur.

Rohin Patel from JPMorgan Chase & Co. inquired about NeuroPace's FDA submission strategy for its Idiopathic Generalized Epilepsy (IGE) indication, asking if the company would pursue a broad label or a more segmented one. He also questioned the outlook for gross margin, noting the updated guidance implies a second-half decline despite strong Q2 performance.

Answer

CEO Joel Becker confirmed the strategy is to pursue a broad IGE indication for the entire patient population, citing the compelling and statistically significant data from pre-specified secondary endpoints. CFO Patrick Williams addressed the gross margin guidance, explaining it reflects prudence and not an expected decline. He highlighted that the core RNS System gross margin is already above 80% and that the company is on a path to achieve this level overall after the lower-margin Dixie Medical business is phased out. Williams also noted that the recent debt refinancing would save approximately $2 million in annual cash interest, aiding the path to cash flow breakeven.

Rohin Patel from JPMorgan Chase & Co. requested quantitative details on Project CARE's contribution to growth and an updated timeline for the upcoming software release and next-generation RNS platform.

Answer

Executive Joel Becker stated that Q1 RNS growth was driven by both Project CARE implants/referrals and new prescribers in Level 4 centers, but declined to provide specific KPIs. He confirmed the company remains on track for a software release in the second half of 2025, focused on driving adoption through ease of use. He offered no new updates on the next-gen platform timeline beyond what was shared at the Investor Day.

Rohin Patel from J.P. Morgan asked about capital prioritization following the recent offering, questioning where NeuroPace plans to invest to drive growth towards cash flow breakeven. He also followed up on the strong gross margin performance, asking about its primary drivers and expected trends for 2025.

Answer

Executive Joel Becker stated that investment priorities for 2025 include expanding the commercial organization, increasing direct-to-consumer marketing, and launching 'CARE 2.0' programs. Regarding gross margins, he attributed the strength to increased sales volume, low single-digit pricing opportunities, and contracting discipline. CFO Rebecca Kuhn added that while some Q4 margin strength was due to lower seasonal payroll costs, the 73% to 75% guide for 2025 is appropriate, with RNS volume gains tempered by the lower-margin DIXI products.

Rohin Patel, on for Robbie Marcus, asked about the long-term growth outlook for the RNS system versus DIXI Medical products and for any preliminary color on 2025 contributions. He also sought specifics on the SG&A leverage achieved in Q3 and the rationale for an implied OpEx increase in Q4.

Answer

Executive Joel Becker stated that while DIXI growth is strong, the RNS system will be the significant majority of growth going forward due to its larger market opportunity. CFO Rebecca Kuhn explained that Q3 OpEx leverage was driven by efficiencies in G&A, which offset investments in R&D and sales. She noted that Q4 OpEx is expected to be higher, partially due to expenses associated with the large American Epilepsy Society (AES) annual meeting.

Rohan Patel from JPMorgan Chase & Co. requested segment-level details for the updated full-year guidance and asked about the primary drivers behind the company's improved adjusted EBITDA outlook and its path to achieving free cash flow breakeven.

Answer

EVP & CFO Michael Bourque detailed that the updated guidance anticipates mid-single-digit growth in Q3 and low-double-digit growth in Q4, supported by stabilizing Direct-to-Consumer (DTC) operations and initial contributions from the VOXIe 5 launch. Bourque emphasized that disciplined execution has led to positive adjusted EBITDA in four of the last five quarters. While not providing a specific forecast for free cash flow breakeven, he noted the $4.4 million in operating cash flow generated in Q2 and expressed confidence in the company's current cash position to fund all business needs.

Rohin Patel, on for Robbie Marcus, asked about the expected revenue cadence for the remainder of the year, actions being taken to stabilize DTC and rental revenues, and the tariff implications for the Yuwell partnership outside of the U.S.

Answer

CFO Mike Bourque explained that second-half growth rates are expected to improve as difficult year-over-year comparisons in the Direct-to-Consumer (DTC) channel ease. CEO Kevin Smith addressed tariffs, stating that current exemptions protect U.S. imports and that their manufacturing presence in the Czech Republic provides mitigation options for supplying international markets, including China.

Rohin Patel from JPMorgan Chase & Co. inquired about the strategy to return the Direct-to-Consumer (DTC) channel to growth, focusing on sales force size and productivity. He also asked about the sustainability of recent positive free cash flow and the broader top and bottom-line outlook for 2025.

Answer

CEO Kevin Smith explained that the downsized Direct-to-Consumer (DTC) sales force is part of a planned 'rebase' year, with rep productivity improving. He noted the 'Patient First' initiative's full rollout is expected in H1 2025, which is key to returning the channel to growth. CFO Mike Bourque added that while the company has achieved two consecutive quarters of positive cash flow through diligent cost management, he cautioned that Q4 is a seasonally weaker quarter and did not provide a forward-looking cash guide.

Rohin Patel, on behalf of Robbie Marcus at JPMorgan, followed up on the sales force reorganization, asking for the assumptions behind the productivity ramp for the remainder of the year. He also questioned why gross margin guidance was maintained despite a stronger-than-expected performance in the quarter.

Answer

CFO Jared Oasheim stated that the guidance assumes continued territory activation and a ramp-up in rep productivity in the second half of the year. President and CEO Kevin Hykes added that sales force turnover has normalized and new hires are beginning to contribute. Regarding margins, Mr. Oasheim noted that while Q2 performance was strong, the beat was not significant enough to warrant raising the full-year guidance range of 83-84%.

Rohin Patel inquired about the key assumptions underlying the 2025 revenue guidance, specifically concerning new center additions and utilization rates. He also asked for a breakdown of the increased operating expense guidance and the primary spending priorities for 2025.

Answer

Jared Oasheim, an executive, explained that the 2025 revenue guidance of $63-$65 million assumes stable U.S. ASPs around $31,000, the addition of high single-digit to low double-digit new centers quarterly, and utilization returning to Q4 2024 levels after a seasonal Q1 dip. Regarding OpEx, Oasheim clarified that after excluding a one-time $8.4 million stock expense from 2024, the real year-over-year increase is about $8-9 million, with the vast majority allocated to expanding the sales and marketing organization.

Rohin Patel inquired about the key assumptions driving the 2025 revenue guidance, specifically regarding new center additions and utilization rates, and asked for details on the 2025 operating expense forecast, including spending priorities and management's confidence in maintaining those levels.

Answer

Jared Oasheim, an executive, explained that the 2025 revenue guidance of $63-$65 million assumes similar ASPs to 2024, high single-digit to low double-digit net new center additions quarterly, and utilization returning to Q4 2024 levels after a seasonal Q1 dip. He noted that the growth in operating expenses from 2024 to 2025, after excluding a one-time stock expense, is primarily allocated to expanding the sales and marketing organization, including adding approximately three new territories per quarter.

Rohin Patel from JPMorgan Chase & Co. asked about the long-term financial impact of the new Category 1 CPT code, specifically whether it would drive utilization or higher reimbursement. He also questioned the higher-than-expected Q3 operating expenses and sought clarity on spending priorities for 2025.

Answer

Executive Kevin Hykes clarified that the Category 1 code, effective Jan 1, 2026, is significant for streamlining patient access by reducing prior authorization denials and signaling credibility to payers, rather than directly increasing reimbursement. CFO Jared Oasheim attributed the Q3 OpEx increase to investments in the sales team, marketing, and physician education, noting some one-time costs. He indicated that OpEx growth in 2025 is not expected to be significant due to non-recurring 2024 expenses.

Rohin Patel from JPMorgan Chase & Co. asked about the long-term financial impact of the new Category 1 CPT code, specifically whether it would drive higher utilization or lead to increased reimbursement. He also questioned the 2025 spending priorities given the higher-than-expected Q3 operating expenses.

Answer

CEO Kevin Hykes explained that the Category 1 code is a significant milestone that streamlines the prior authorization process and reduces friction, thereby increasing patient access and predictability, rather than directly increasing payment rates. CFO Jared Oasheim noted that higher Q3 OpEx was due to strategic investments in sales and marketing, and that one-time expenses in 2024, such as those related to leadership changes, will not repeat, helping to manage OpEx growth in 2025.