Haemonetics Corp
NYSE:HAE
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Haemonetics Corp
Earnings Call Analysis
Q2-2024 Analysis
Haemonetics Corp
The company continues to make waves in the medical field with two key products: OptoWire and SavvyWire. OptoWire is a guidewire designed to improve patient outcomes through precise measurements of blood flow in arteries, aiding in the diagnosis and treatment of coronary artery disease. Meanwhile, SavvyWire stands out as the world’s first 3-in-1 guidewire that not only guides but also senses pressure and provides pacing during TAVR procedures. The effectiveness of SavvyWire was evidenced through its feature in live cases at the TCT conference and further supported by data from the SAFE-TAVI trial.
The company's strategic focus has shifted toward major hospitals, specifically targeting the top 600 U.S. hospitals which conduct the majority of specialist procedures. This aggressive expansion, quadrupling their commercial footprint, has significantly bolstered market presence, with projections indicating coverage of approximately 80% of these key hospitals by the end of fiscal year 2024.
Financially, the company reported a second quarter adjusted gross margin of 54%, marking a slight year-over-year improvement, and an adjusted operating margin improved by 110 basis points to 21.5%. The company is profiting from increased prices, volumes, and a favorable product mix, but these gains were partly offset by investments to meet high product demand and a one-time adjustment from a product recall. Adjusted operating expenses also rose due to investment in growth, though they were partly mitigated by operational savings and lower freight costs. The company's financial outlook is robust, having updated its fiscal 2024 adjusted earnings per share guidance to a range of $3.75 to $3.95, suggesting healthy income prospects.
A minimal impact on the adjusted fiscal 2024 results is expected from the acquisition of OpSens and ongoing portfolio rationalizations, which focus on sunsetting lower-margin products. Additionally, substantial improvements in gross and operating margins are anticipated over time with these strategic adjustments. The company is tracking an increase in its cash flow and is raising its free cash flow guidance due to favorable working capital changes and lower capital expenditure. This suggests a strong financial structure that supports strategic investments like the acquisition of OpSens, anticipated to enhance both revenue and margins.
To fund the strategic acquisition of OpSens, the company plans to primarily use its U.S. cash reserves together with potential credit facilities. Post-acquisition, the expected leverage ratio is around 2.1x adjusted EBITDA, which signifies a continued capacity for pursuing opportunistic acquisitions and organic investments that can drive future growth.
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Good day, and thank you for standing by, and welcome to the Second Quarter 2024 Haemonetics Corporation Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Olga Guyette, Senior Director, Investor Relations and Treasury. Please go ahead.
Good morning, everyone. Thank you for joining us for Haemonetics second quarter and first half fiscal year 2024 conference call and webcast. I'm joined today by Chris Simon, our CEO; Stewart Strong, President of our Global Hospital business; and James D'Arecca, our CFO. This morning, we posted our second quarter and first half fiscal year 2024 results to our Investor Relations website, along with our updated fiscal '24 guidance. Before we begin, just a quick reminder that all revenue growth rates discussed today are organic and exclude the impact of currency fluctuations. We'll also refer to other non-GAAP financial measures to help investors understand Haemonetics' ongoing business performance. Please note that these measures exclude certain charges and income items. For a full list of excluded items, reconciliations to our GAAP results in comparisons with the prior year periods, please refer to our second quarter and first half fiscal year 2024 earnings release available on our website. Our remarks today include forward-looking statements, and our actual results may differ materially from the anticipated results. Factors that may cause our results to differ include those referenced in the safe harbor statement in today's earnings release and in our other SEC filings. We do not undertake any obligation to update these forward-looking statements. And now I'd like to turn it over to Chris.
Thanks, Olga. Good morning, and thank you all for joining. Today, we reported organic revenue growth of 8% in the second quarter and 14% in the first half of fiscal 2024 as our momentum continues to build, and we advance our leadership in Plasma and Hospital. Adjusted earnings per diluted share in the second quarter was $0.99, 19% growth over prior year. We are raising our fiscal year 2024 total company organic revenue growth guidance from 7% to 10% to 8% to 10%, which represents an increase of 50 basis points at the midpoint of this updated range. Our performance speaks to the transformative impact of our growth strategy focused on establishing leading positions in high-growth markets to generate superior financial returns. We are delivering revenue and earnings growth ahead of our long-range plan, while broadening our global presence and industry leadership by investing in innovation and taking impactful steps to support growth in our Plasma and Hospital businesses. Our operational excellence program continues to drive our focus on efficiency and productivity contributing to improved operating leverage and margin expansion. We continue to scale and rebalance our portfolio by investing in attractive growing markets where we can add value through a unique enabling solutions. In October, we announced a definitive agreement to acquire OpSens Inc., a medical device manufacturer of optic sensor technology for use primarily in interventional cardiology. Expanding our hospital portfolio with OpSens's products creates exciting growth and diversification opportunities while providing immediately accretive financial benefits. Additionally, as part of our growth strategy and in consideration of increased regulatory requirements, we have made the decision to rationalize parts of our portfolio, including the ClotPro analyzer system and whole blood in line collection products and the associated manufacturing operations. We are committed to working closely with our customers through these transitions. Plasma revenue grew 11% in the second quarter and 22% year-to-date, delivering another quarter of double-digit growth on top of the 50%-plus growth we experienced in the same period last year. North America disposables grew 9% in the quarter and 23% year-to-date, disproportionately driven by growth in volume and price amongst our customers on NexSys with Persona. Software revenue grew 38% in the quarter and 32% in the first half due to additional upgrades to the latest NexLynk software and market share gains as we advance our leadership as the only provider of end-to-end plasma collection solutions. In the U.S., the collections environment continued to be favorable, notching an eighth consecutive quarter of growth exceeding historical seasonality. Our volume growth was slightly below U.S. collection levels due to unanticipated supply interruptions with one of our vendors, resulting in enhanced inventory management measures necessary to support a strong rebound in plasma collections and our leading market share. Our customers remain focused on attracting and retaining donors and achieving higher operational efficiencies. NexSys is the industry standard, helping them deliver against these priorities. With over 21 million procedures on Persona, we enable our customers to collect 1.5 million litres of additional plasma in just 2 years. This is equivalent to the average annual volume from 33 mature plasma centers, but without the real estate overhead staffing and other associated plasma center costs. Limited market release of our new collection bowl and Express Plus technology is underway. These enhancements increase procedure speed to further optimize door-to-door times, enabling higher plasma center throughputs and improved donor satisfaction. With multiple ongoing initiatives in our R&D pipeline, we are committed to providing our customers with the tools necessary to win in this competitive market. Encouraged by the continued strong plasma market momentum we are helping to enable and with confidence in our ability to work through temporary supply challenges, we are raising our organic plasma revenue growth guidance from the range of 8% to 11% to 10% to 12%. Blood Center revenue declined 5% in the second quarter and was flat in the first half. Apheresis revenue grew 3% in the quarter and 4% in the first half, driven by strong plasma and red cell collections, coupled with strong capital sales across the portfolio. We started to realize increased utilization benefits from the recent installation of NexSys Plasma collection systems in Egypt. We are excited about the opportunity to collaborate with our Blood Center customers worldwide to boost the global plasma supply. Whole Blood revenue declined 25% in the quarter and 11% in the first half, driven by the voluntary product recall we announced last quarter and the strategic decision to rationalize parts of this portfolio. In Blood Center, our focus remains on capitalizing on the growth opportunities within our apheresis portfolio and limiting margin and revenue growth dilution as a result of challenging market conditions in Whole Blood. We update our fiscal '24 revenue got decline guidance for Blood Center from minus 2% to minus 6% to minus 2 to minus 4%. Now over to Stu to discuss our hospital business.
Thanks, Chris, and good morning, everyone. I'm excited to join Chris and James to talk about our hospital business performance and our recent business development efforts. Let me begin with our second quarter and first half hospital business results and fiscal 2024 guidance. Total hospital business revenue increased 14% in the second quarter and year-to-date, disproportionately driven by our growth in Vascular Closure business. Vascular Closure grew 30% in the second quarter and 29% year-to-date driven by new account openings, both in electrophysiology and interventional cardiology. We continue to see improving product utilization rates fueled by our clinical education efforts and by increased procedure volumes in the U.S. hospitals. Internationally, our products are swiftly gaining recognition in Germany and Italy, and we had a strong start to our commercial launch in Japan towards the end of the second quarter. Hemostasis management revenue grew 8% in the quarter and 11% year-to-date. Growth in the quarter and year-to-date was driven by strong utilization of TEG disposables in the U.S. and benefits from price, partially offset by lower new capital deployment as we saw increased pressure from budgetary constraints in U.S. hospitals after some improvements in the first quarter. As you heard from Chris, as a part of our strategy to focus on products that are best positioned to sustain revenue growth and margin expansion, we have decided to end of life our ClotPro analyzer system. We will work with our customers to offer our TEG 6s system as an alternative to ClotPro. The rest of the hospital portfolio, which includes transfusion management and cell salvage grew 3% in the second quarter and was flat year-to-date. Strong performance in transfusion management was driven by continued market share gains in North America and Europe. Cell Salvage had a strong performance in the U.S. as we continue to see increasing utilization in U.S. hospitals. These benefits were diminished by differences in order timing among distributors outside the U.S. As we look at the remainder of the fiscal year, we expect an acceleration of revenue growth in our second half, which will be driven by growth in Hemostasis Management and Vascular Closure. For the full year, we expect our revenue growth to be consistent with the revenue growth we delivered last year or in the range of 16% to 18%. Now let me add additional color about our plans to acquire OpSens an interventional cardiology focused medical device company, delivering innovative solutions based on its proprietary optical sensing technology. This is a very exciting milestone for us as we continue to expand our hospital business with procedure-enabling technologies in high-growth areas like interventional cardiology and electrophysiology. With our total hospital addressable market of about $3.7 billion today, OpSens adds about another $1.1 billion in additional market opportunity, creating additional avenues for growth and diversification while being relevant and synergistic to customers already using our Vascular Closure products. OpSens core products include OptoWire, a pressure guidewire that aims to improve clinical outcomes by measuring fractional flow reserve in a vessel to aid clinicians in the diagnosis and treatment of patients with coronary artery disease. And SavvyWire, the world's first and only sensor guided 3-in-1 Guidewire that provides left ventricular pacing and pressure sensing during TAVR procedures. In fact, we attended TCT in San Francisco last week, where 2 live cases were broadcast featuring SavvyWire, and additional data was presented from the SAFE-TAVI trial published in the Journal of the American College of Cardiology, highlighting the safe and effective use of SavvyWire in TAVR procedures. Additionally, OpSens manufactures a range of fiber optic sensing solutions used in medical devices as part of their OEM business and other critical industrial applications. In recent years, our focus has been on bolstering our commercial and clinical teams in electrophysiology and interventional cardiology, resulting in a fourfold expansion of our commercial footprint. and in strengthening of our R&D capabilities that will continue to enhance our products and expand our reach into more procedures and geographies. With the commercial strategy set on targeting the top 600 U.S. hospitals, we've been steadily increasing our market share and strengthening our relationships with the top accounts performing about 90% of all procedures or EP. More than 80% of all TAVR procedures and nearly 60% of PCI procedures. We estimate by the end of our fiscal year 2024 will be in approximately 80% of these target hospitals and able to accelerate access to OpSens products in this group. Outside of the U.S., our global reach, combined with OpSens success internationally will allow us to create additional synergies, including opportunities for cross portfolio pull-through. We plan to build on this acquisition and further expand our portfolio of enabling technologies within these markets. Over the past several quarters, we've made strategic investments in other enabling technologies that would further complement our product portfolio and increase our reach and relevance. These investments include Vivisure Medical, a company that has developed a large bore vessel closure device called PerQseal, which is advantageous for procedures like TAVR and EVAR. [indiscernible] for the U.S. IDE trial is underway with an estimated completion date by mid-calendar year 2024. Organically, our business expansion efforts also include an extensive R&D pipeline focused on advancing our TEG 6s thromboelastography system with new assays. We and expanding our VASCADE Vascular Closure portfolio to address new emerging interventional technologies and procedures requiring either venous or arterial access. We're very excited about the future of our hospital business and the incredible opportunity we have to improve the standard of care with our procedure-enabling technologies. Now I'll turn things over to James to discuss the rest of our financial results and fiscal year 2024 guidance. James?
Thank you, Stu, and good morning, everyone. I'll begin with our business results and some additional updates to our fiscal 2024 guidance. Second quarter adjusted gross margin was 54%, an increase of 30 basis points compared with the second quarter of the prior year. Adjusted gross margin year-to-date was 54.1%, a decrease of 30 basis points compared with the first half of the prior year. Both second quarter and year-to-date adjusted gross margins benefited from price, volume and favorable geographic and product mix as we continue to experience strong momentum in Plasma and Hospital, particularly in the U.S. These benefits were reduced by upfront investments and operations needed to meet the unprecedented demand for our products, higher depreciation expense and a $6.5 million onetime adjustment due to a voluntary product recall in our Whole Blood business, of which $3.1 million impacted our gross margin in the second quarter. Adjusted operating expenses in the second quarter were $103.6 million, an increase of $5 million or 5% compared with the second quarter of the prior year. As a percentage of revenue, adjusted operating expenses decreased by 70 basis points to 32.6% when compared with the second quarter of the prior year. Adjusted operating expenses year-to-date were $202.1 million, an increase of $4 million or about 2% compared with the prior year at 32.1% of revenue. The increase in adjusted operating expenses in the quarter and year-to-date was related to higher organic growth investments, partially offset by lower freight expense and savings from the operational excellence program. Adjusted operating income was $68.3 million in the second quarter and $138.6 million in the first half, representing increases of $8 million and $33 million, respectively. As a percentage of revenue, the adjusted operating margin was 21.5% in the second quarter and 22% in the first half, up 110 basis points and 310 basis points, respectively, when compared with the same periods in fiscal 2023. We are enthusiastic about our first half results and the momentum we continue to experience in our business. As we look at the second half of this fiscal year, we acknowledge a challenging macro environment, volatility in foreign exchange and an anticipated impact from changes in geographic and product mix. We are updating our adjusted operating margin guidance to approximately 21% to better reflect higher leverage in our first half results. Our updated guidance also includes $20 million in target gross savings from the operational excellence program or about $6 million in net savings, generating additional efficiency across our business. The adjusted income tax rate was 23% in the second quarter and 22% year-to-date compared with 22% and 23% in the same period of the prior year, respectively. We expect our fiscal 2024 adjusted income tax rate to be 23%. Second quarter adjusted net income was $50.7 million, up $8 million or 19%, and adjusted earnings per diluted share was $0.99, also up 19% when compared with the second quarter of fiscal 2023. First half adjusted net income was $104.3 million, up $31 million or 43%, and adjusted earnings per diluted share was $2.03, up 44% when compared with the first half of fiscal 2023. The combination of the adjusted income tax rate, interest expense, net of interest income, changes in the share count and FX had a $0.04 favorable impact in the second quarter and a $0.07 favorable impact year-to-date when compared with the prior year. We're excited about our performance in the first 6 months of our fiscal year 2024. We are updating our fiscal 2024 adjusted earnings per diluted share guidance to be in the range of $3.75 to $3.95 or approximately 27% growth in our adjusted EPS at the midpoint of our guidance range, which includes a $0.02 negative impact from the below-the-line items I just discussed as we anticipate an unfavorable impact from foreign exchange and interest expense in our second half.Now let me add more detail about the portfolio initiatives that Chris discussed at the beginning of our call. We are excited about our definitive agreement to acquire OpSens and expect this transaction to be immediately accretive to revenue growth, adjusted gross margins and adjusted earnings per diluted share. That said, due to the expected close of this transaction by the end of January 2024, we expect minimal impact on our adjusted fiscal 2024 results. Additionally, with our focus set on high-growth, high-margin products, we are moving forward with several portfolio rationalization initiatives. We've initiated the end-of-life process for our ClotPro analyzer system. In Whole Blood, we plan to rationalize the low-margin Whole Blood in-line collection products and keep the rest of the portfolio, including Whole Blood products for efficient cell processing and hospital bedside transfusions. The rationalization of parts of the Whole Blood business will be executed over multiple years as we rightsize our manufacturing footprint and work with our customers on transitioning them to alternative products. Due to the size and timing of these portfolio changes, we don't envision them affecting our fiscal 2024 adjusted results. Over time, we anticipate improvements in our gross and operating margins. Turning now to select balance sheet and cash flow highlights. Cash flow from operations for the 6 months was $118 million compared with $129 million last year, primarily attributed to higher NexSys PCS inventory levels, which more than offset higher net income this fiscal year. As a reminder, we continue to work on replenishing our inventory of NexSys PCS devices and expect our device inventory to continue to increase throughout the year. Free cash flow before restructuring and restructuring-related costs was $89 million in the first half of this fiscal year compared with $66 million at the same time last year, primarily due to changes in working capital and less capital expenditures. We are confident in our ability to generate free cash flow, and we are increasing our guidance for free cash flow before restructuring and restructuring-related costs to a range of $170 million to $190 million to better reflect benefits from changes in our working capital and capital plans, some of which were understated in our previously issued guidance. Our financial position continues to provide us flexibility to operate our business and execute our disciplined capital allocation strategy. At the end of our second quarter, we had $351 million of cash on hand, up $67 million since the beginning of this fiscal year. We also had $420 million of untapped revolving credit facility, providing additional liquidity to fund growth initiatives. We plan to utilize the majority of our U.S. cash balance potentially coupled with a small drawdown on the revolver to fund the acquisition of OpSens and expect our leverage ratio to be around 2.1x adjusted EBITDA after the close, allowing us to remain opportunistic with additional M&A and organic investments, both in the short term and in the long run. To conclude, I'd like to summarize some key takeaways from today's call. Our first half results were strong, and we remain confident in our ability to deliver sustainable growth and margin expansion in the mid to long term. We are accelerating our momentum through additional portfolio transformation and growth-focused investments throughout our business. In Plasma, we are enthusiastic about continued plasma collections momentum. We are taking the steps necessary to support the demand for our disposables and reinforce our market-leading position with additional innovation that further reduces the cost per litre. Our hospital portfolio is evolving and helping us create new opportunities for growth and diversification. We are committed to further augmenting our scale and broadening our presence in interventional cardiology, which will further accelerate our revenue growth and margin expansion. And lastly, we remain committed to value creation for all our stakeholders. As our capital capacity continues to grow, we plan to put it to good use throughout our long-range plan to accelerate top and bottom line growth through additional M&A, organic growth investments and opportunistic share buybacks. Thank you. And now I would like to open the line for Q&A.
Thank you so much, presenters. [Operator Instructions] Your first question comes from the line of Anthony Petrone of Mizuho Group. Your line is now open.
Good quarter here and also the recent OpSens acquisition. Maybe, Chris, I could start with a little bit on Plasma and just some of the moving parts there. You did announce a few months ago the rollout of a new system. So wondering, in terms of the drivers, if you can maybe bucket between just discontinued inventory catch-up by the fractionators being one driver. We still have some persona upgrade opportunities. So how much did that contribute? And then lastly, was there any benefit from the rollout of the next-generation plasma system? And then I'll have a couple of follow-ups.
Good morning, Anthony. Thanks for the questions. With regards to Plasma, we remain very bullish, near, intermediate and longer term, right? This is yet our eighth quarter of double-digit growth, above seasonality -- historical seasonality and the momentum continues there. I think that's closely related to what the industry is estimating is potentially as much as 20 million loss collections through the pandemic that as robust as the collection environment is today, our estimates are that our -- our fractionators are doing everything they can. However, they're probably just keeping pace with end market demand that did not, in any way, slow through the pandemic. So there's a meaningful gap there keen to close that gap. We're doing our part, particularly through NexSys with Persona to help them close that gap. And I think you see that in our results year-to-date and certainly through the second quarter. With regards to the enhancements we've made, both the Express Plus and upgrades to the device and the bowl itself, we are now in limited market release. It's performing as advertised, and we're really excited about the additional benefits in procedure time and ultimately, door-to-door time and the associated donor sat. So one plan, making good progress. We are taking a stepwise approach because it's a meaningful set of changes, and we want to make sure that we're collaborating real-time with our customers who are in the process of updating this. The supply issues were a challenge, and I'll elaborate on that just in a moment. We have multiple suppliers --
--For the [indiscernible] the quarter. Maybe just one on PMT-O2, the opportunity there you size of [indiscernible]. I'm just wondering if you could provide an outlook on PMT-O2 versus the expectations in the market sizing that Novartis has out there.
Anthony are you still done, or is it over?
Thank you, Chris. And then lastly and I'll hop in queue. Do you have any update you can provide just on CSL contribution in the quarter? And as we look over the next couple of years, where they may sit in the mix? Thanks again.
Yes, Anthony, let me pick up on a point that I was making earlier, which is the challenges we had in the quarter were specifically related to supply for one of our ingredients. And in that regard, we have multiple suppliers. One of them had a real issue. It happens to be the largest of the suppliers that we rely on. We've worked our way through that, but it did require us to put in place a set of measures that included taking our inventory levels down and some of our customer inventory levels down as well. We don't believe we've lost any collection volume in aggregate. It's just a timing issue in the second quarter versus the second half of the year, probably more so in the fourth quarter, the way we estimate it, but that will come back. In terms of CSL, they're doing their part to close this gap as all of our customers are and their growth in our portfolio was proportionate to our other customers.
Thank you so much. And your next question comes from the line of Lawrence Solow of CJS Securities.
Ledaga for Larry this morning. And I'll try not to ask any Novartis questions. Just 2 quick ones related to your margins. I guess it sounds like you did a pretty good job going through the reason for the margin decline in the second half versus the first half as implied in your guidance. If I look out to the long-term goals of getting to the high 20s margins, can you help us bridge that gap through a combination of just the end-of-life stuff that you talked about and then the addition of the acquisitions and some of the leverage you're seeing there?
Yes, sure. It's James. Yes. So overall, you're right, the longer-term play for us really is leverage, I would say. And that is just a simple our revenues -- our operating income has to grow more quickly than our revenue. And it's driven really, I would say, by [indiscernible]. One is favorable mix towards the more profitable hospital products. And certainly, OpSens is a part of that moving forward in the future. The second part is continued focus on our cost of goods and improving whether it's through volumes or through our operational excellence program the margins -- the gross margins that we have. We have a target there, too, of high 50s, low 60s. So that will – that will certainly help drive it as we move forward. And the third one really is the volumes being pushed through. Those 3 things combined is what gets you to the higher 20s. And yes, we're -- I'm glad you brought up OpSens. We're excited about that one. And certainly, that will help contribute as we move forward.
And then just looking at your new free cash flow guide, obviously, a nice increase there. It sounds like there was a little bit of conservatism on your part as it related to working capital. But can you kind of go through the revised CapEx guidance? And how much of that is just lower expenses versus timing and push out to next year?
Yes. Sure. So overall cash flow, very strong for the quarter. We had $51 million in cash, $90 million -- almost $90 million in free cash flow for the first half of the year. Our initial guidance was, I would say, understated by the combined effect of having too much CapEx, so an overestimate on CapEx and then an underestimate on some working capital sources of cash and benefits. And so we took the opportunity to correct that and update that here in our -- with our disclosures. I think that was more -- I wouldn't say there's anything really changing for us in terms of the underlying capital plan. Longer term, our CapEx should remain fairly consistent. And I feel like the cash flow generation of the business is a real strength for us that we'll utilize going forward.
Thank you so much. Your next question comes from the line of Andrew Cooper of Raymond James. Please go ahead.
Maybe first, just hoping you could give a little more context on sort of the supply disruption on plasma and maybe from a dollar basis, what that meant? Because like you mentioned optically, it does look like the revenue growth was a little bit slower than the typical seasonality, but you're calling out end markets that were a little bit better. So just if you could help us bridge the gap on a numbers basis, that would be wonderful.
Andrew, what I would say about that is we had advanced notice on part of this and some of it was just in the moment, our response what we were able to do is ramp up production from other suppliers, which is what gives us confidence. This is very situational and very temporal. We don't expect this to be a problem in our second half or beyond. So you see that in our guidance and why we had confidence to raise guidance for plasma revenue specifically. In terms of where we were, we were required to take our inventory levels down. We typically hold something north of 30 days inventory for that product. We are below that now. In the field, our customers don't have real storage capacity across the 1,200 collection sites that we serve. So they typically have 2 to 3 weeks. In many cases, we've cut that in half as a result of this. And then we've got into a focus, a micro focus on how to make sure that we don't turn those reductions into stock out. So we're in the process of it. At the end of the day, I can sit here and tell you with confidence that we will ship every bowl we make over the second half of the year to meet the growing demand in third quarters, and then we forecasted this is always our most robust quarter of the year. If we get any reprieve from demand in the fourth quarter, we'll use that to rebuild inventories first our customers and then our own. So the effect -- the net effect to answer your question directly is reflected in our guidance, and we have a lot of confidence that we can make up for it in the second half.
Maybe just one more, sticking with plasma. You mentioned in the prepared remarks seeing share gains on the software side. Wondering if you're seeing anything or there's anything to report on sort of the collection device side as well, anything you're hearing or any potential to take share, especially now that you go to market with at least some talking points on Express Plus and eventually a full rollout there. Just wondering if anything changing in the competitive landscape from that perspective.
Yes. We continue to be very bullish on our competitive advantage. We're absolutely convinced, as I said in the prepared remarks that NexSys is the industry standard. -- the fully integrated collection, the bidirectional communication, the superior donor response, right, to a quiet well-functioning system. And so we feel quite good about that. The upgrade software were a meaningful tailwind for us in the quarter, and that's great. In terms of the actual device placements, actually, when you go through our inventory in some regards, we've slowed the pace of place and it's not because of any drop in demand that the opposite. But with our customers, we're becoming very focused on fleet optimization, getting more done with the existing devices. So we've got active programs there. So device count is not the right metric on this. We continue to look at churn rates which continue to go up particularly, and this is the real driver for growth for us in the quarter. Our customers with Persona outperformed the rest of the field meaningfully driving our growth. So not only are they collecting more per donation, but they're actually kind of pushing the front edge of that. And I think that's a reflection of their ability to recruit and retain donors. So again, quite bullish on the system. And with regards to the Express Plus and the speed up, that's in the market. We've purposely done a limited market release working with a handful of customers to make sure there's no disruption. But it is in the market. The feedback to date has been outstanding.
Your next question comes from the line of Mike Matson of Needham & Company. Your line is now open.
Just a few on the OpSens deal. So I guess, first, are you more excited about their SFR opportunity kind of traditional SFR with OptoWire or the SavvyWire-TAVR opportunity? And then are you going to sort of -- I assume they have some sort of sales force. So I guess that would get integrated with your existing kind of base closure sales force and you'd have a single group selling both product lines?
I'll start, and I'll invite Stu to comment. We are very optimistic about the deal, have to recognize that we're in an interesting period where -- they are in the process of soliciting shareholder approval. So we'll be somewhat guarded in what we say just because we will be respectful of that process. In terms of the assets, right, we actually define it in 3 parts. We're very enthusiastic about SavvyWire. We think what SavvyWire can do in the TAVR space and more broadly in interventional is super exciting, and we are in the very, very early innings of that for sure. OptoWire and OptoMonitor or the second piece, great Guidewire, real interesting potential and support there. So we intend to lean in. Let's to talk about that specifically to help make that product everything it can be. There's a third piece, which is their OEM business, which we're typically not an OEM manufacturer. But in this case, when you're talking about the blue chip companies that make up their customer base we're excited to lean in. We're going to secure those relationships and build upon them where we can. We think it's a really attractive market. And the underlying economics of that business do not look like your traditional OEM business, they look much more like the core portfolio. So candidly, all 3 aspects of OpSens and what they've been able to achieve on a stand-alone basis are exciting to us, and we think we can add real leverage too. Stu?
Yes, Mike, thanks for the question. It's Stewart. I would just add that what this really does for us is that it really expands our portfolio in interventional cardiology, complements the success that we're already having with the Vascular Closure portfolio. So there's some really nice call point synergies there. And you've heard us talk about it before. We've targeted the top 600 centers across the U.S. that drive about almost 90% of all EP procedures. It's equally concentrated in procedures like TAVR, where that top 600 also drives over 80% of all TAVR procedures. So we think there's really nice synergies there and the acquisition of OpSens gives us that sort of reach and relevance to leverage the sales force that we also have, but also complement the team that they have as well. So we're really excited about it and really starts to underscore the commitment that we have to this space and the growth that we're looking forward to in it.
And then just in the Plasma business with Express Plus, can you just remind me, are you getting a price premium for that technology?
So Mike, we haven't broken out specific expectations there. What I would say in general, and I think we're living into this quite specifically, we have superior technology. We aspire to compete on innovation. And we, of course, would expect a premium for that innovation. But in all cases, we translate it to a specific benefit, not the features and attributes, but an economic or a donor satisfaction benefit that manifests for our centers. Express Plus is certainly part of that, but we haven't broken out any specific expectations there.
Thank you so much. And your next question comes from the line of Michael Petusky of Barrington Research. Please go ahead.
A couple of questions. I guess, first, starting with the expected acceleration in hospital is, I guess, first, anything you can share in terms of traction in terms of the Vascular Closure in Europe? And is sort of a pickup there a material part of the acceleration you expect in the second half?
I'll let Stu take that directly. Thanks, Mike.
I would say, Mike, thanks for the question. Most of the material growth that we're going to see is going to continue to come out of the U.S. We've launched, as I said in my prepared remarks, we've launched in Germany and Italy, and we're starting to see accounts coming on board in those 2 countries. And we also just had a launch that started in Japan. On September 28, we did our first cases in Japan. We got reimbursement in Japan starting at the end of September. So we're really excited about what we're doing in Japan. But I would say for the year, the material growth that's going to come from that portfolio is still driven disproportionately by the U.S.
And then switching over to Plasma. Chris, I'm just wondering, so I think roughly a couple of quarters ago, you said, hey, we think we have a minimum order commitment from CSL of slightly above $100 million for fiscal '24. And then I think you termed it a meaningful commitment for fiscal '25. And I guess my question is, is the expectation you guys had a couple of quarters ago, is that still the case? Or is that in any way shifted?
Yes, Mike, your recollection is exactly right. And there's been no additional developments there. We're working collaboratively with CSL and all of our customers to meet their accelerated demand. So as I said earlier, they're participating fully in the growth that we're experiencing this year. And we expect, as we communicated before, a substantial contribution again in our fiscal '25. But we'll have more to say about that when we guide for '25 in May.
Okay. Great. And then just -- I just want to clarify on the rationalization of the products in Blood Center and I guess the [indiscernible] transition, do you guys expect -- and I understand it's going to take place over multiple years, but do you guys expect any sort of net revenue loss at the end of this? I mean how much revenue are we actually talking about in terms of current contribution?
Yes, it's an interesting dynamic for us, right? Because we've taken a micro look at this code-by-code SKU by SKU. We are definitely influence, as we said in the prepared remarks, by the product recall, some challenges that have arisen as a result of that, the increased regulatory burden that these products would face for CE Mark and other approval via MDR or IVDR. So we've kind of put that all in the mix and taking a hard look and said, the best path for us is to end of life, those specific codes. So longer term, not this year beyond what's in our guidance. But longer term, there will be a dampening effect on the overall revenue from that portion of the portfolio. It's a modest portion of the Blood Center portfolio, which is the smallest of our 3 businesses, as you know. We do not expect any negative effect on the overall contribution. Our actual margins. In fact, our margin percent will increase as a result of delisting these products. But more on that when we guide for '25.
Thank you so much. And there are no further questions at this time. This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, you have a great day.