Executive Summary / Key Takeaways

• Strategic Transformation Complete: Haemonetics has successfully pivoted from a diversified blood products company to a focused medical technology leader, shedding low-margin Whole Blood operations and building a portfolio centered on high-growth, high-margin plasma collection and hospital technologies. This shift underpins management's confidence in reaching 26-27% adjusted operating margins by fiscal 2026.

• Plasma Business Resilience: Despite a 9.5% reported revenue decline in Q2 FY26 due to the CSL Plasma customer transition, organic growth excluding CSL reached 19%, driven by share gains and NexSys technology adoption. With over 70% market share in plasma collection devices and renewed confidence in immunoglobulin demand, this segment remains the company's profit engine, generating 34% adjusted operating margins.

• Hospital Segment Bifurcation: Blood Management Technologies delivered 13% growth fueled by the TEG 6s heparinase cartridge launch, while Interventional Technologies declined 4.6% as pulse field ablation (PFA) adoption disrupted the ensoETM esophageal cooling business. This divergence highlights both the power of HAE's core hemostasis franchise and the execution challenges in newer acquisitions.

• Margin Expansion Trajectory: Adjusted gross margin hit 60.8% in Q1 FY26, up 550 basis points year-over-year, driven by favorable product mix, pricing power, and productivity gains from portfolio rationalization. The company expects to fully offset the Whole Blood divestiture's earnings impact through planned savings, demonstrating operational leverage.

• Valuation Disconnect: Trading at approximately $84 per share with a forward P/E around 14x and EV/EBITDA of 13.8x, HAE trades below historical norms and peer medians despite delivering 19.5% ROE and 70%+ free cash flow conversion. This suggests the market has yet to price in the durability of the transformed earnings profile.

Setting the Scene: From Blood Bags to Precision Medical Technology

Haemonetics Corporation, founded in 1971 and headquartered in the Boston area, has spent the past five years executing one of the most deliberate portfolio transformations in medical technology. The company has evolved from a broad-based blood management supplier into a focused leader in two high-value domains: plasma collection automation and hospital-based patient blood management. This matters because it fundamentally alters the company's margin profile, revenue predictability, and competitive moats.

The business model operates through three reporting segments, but the investment story really hinges on two growth engines. Plasma (approximately 40% of revenue) and Hospital (approximately 40% of revenue) drive the narrative, while Blood Center (the remaining 20%) has been rationalized to focus only on high-margin apheresis products. The company makes money by selling capital equipment (plasma collection devices, TEG analyzers) and, more importantly, high-margin disposables that generate recurring revenue streams. This razor-and-blade model creates customer stickiness and pricing power.

Industry dynamics favor HAE's positioning. The plasma therapeutics market is experiencing robust growth, with immunoglobulin demand expanding at high single-digit rates and fractionation capacity projected to grow at high single-digit CAGR through 2032. Subcutaneous immunoglobulin formulations require 20-25% more plasma per dose, creating a structural tailwind. In hospitals, the push for value-based care and transfusion safety drives adoption of viscoelastic testing, where HAE holds over 70% market share. Against this backdrop, HAE has sharpened its focus while competitors like Grifols (GRFS) and Terumo (TRUMY) maintain broader, less differentiated portfolios.

Technology, Products, and Strategic Differentiation

The NexSys Platform: Share Gains Through Innovation

HAE's NexSys plasma collection system, enhanced by Persona donor management software and Express Plus optimization tools, represents the company's core technological moat. This platform delivers measurable improvements in collection efficiency and donor safety, which translates directly into customer share gains. The company now commands over 70% of the plasma collection device market, a position built not on price but on performance.

Why does this matter? In an industry where plasma collection centers operate on thin margins and high throughput, even modest efficiency gains drive substantial ROI. NexSys customers achieve faster collection times and higher yields per donor, creating switching costs that competitors struggle to overcome. This technological edge enables HAE to command premium pricing while expanding market share, as evidenced by the recent Japanese Red Cross contract win after a head-to-head competitive evaluation. The 34% adjusted operating margin in Plasma reflects this pricing power and the recurring nature of disposable sales, which represent the majority of segment revenue.

TEG 6s: The Heparinase Inflection Point

Within Hospital's Blood Management Technologies franchise, the TEG 6s hemostasis analyzer and its new global heparinase neutralization cartridge represent a product cycle inflection. Management describes this franchise as having "hit a new inflection point," with double-digit growth "absolutely sustainable for about as far as we can see." The cartridge addresses a critical unmet need in anticoagulation management, expanding TEG's addressable market beyond traditional cardiac surgery into broader surgical and critical care settings.

The technology's impact extends beyond revenue growth. Each cartridge sale generates higher margins than standard disposables, while the need for TEG 6s hardware upgrades drives capital equipment sales. This creates a virtuous cycle: as hospitals adopt the heparinase cartridge, they increase disposable utilization and upgrade analyzers, boosting both top-line growth and margin expansion. The 13% growth in Blood Management Technologies, compared to Baxter (BAX)'s more modest performance in blood management, underscores HAE's technology leadership and its ability to capture value from clinical differentiation.

Interventional Technologies: Execution Challenges in a Competitive Arena

The Interventional Technologies franchise, built through acquisitions of OpSens ($243.9M) and Attune Medical ($176.2M), faces a more complex story. While the SavvyWire sensor-guided guidewire delivers consistent double-digit growth in TAVR procedures, the broader portfolio struggles. Vascular Closure grew only 2% in Q2, with legacy VASCADE products facing softness in coronary and peripheral procedures. More concerning, the ensoETM esophageal cooling device, acquired through Attune, faces disruption from pulse field ablation (PFA) technology, which eliminates the need for esophageal protection in many cardiac ablation procedures.

This matters because it reveals the limits of technology differentiation without flawless execution. VASCADE offers superior clinical metrics—faster time to ambulation and discharge, pain-free closure—but competitors have responded aggressively. Management acknowledges they "woke up both of the direct competitors," requiring increased commercial investment and pricing flexibility to defend share. The PFA disruption, while temporary and limited to a $3 million quarterly revenue stream today, demonstrates how rapidly evolving medical technology can undermine acquired assets. The 370 basis points of margin expansion in Hospital despite IVT's struggles reflects the strength of Blood Management Technologies offsetting Interventional's headwinds.

Financial Performance: Evidence of Strategic Execution

Revenue Quality Over Quantity

HAE's financial results tell a story of deliberate quality improvement. Total revenue declined 1-4% on a reported basis in FY26 guidance, yet organic growth ex-CSL accelerated to 7-10%. This apparent contradiction reflects the strategic portfolio pruning. The Whole Blood divestiture, completed in January 2025 for $43.3 million, removed approximately $50 million of low-margin revenue while freeing management attention and capital for higher-return opportunities.

The Plasma segment's performance illustrates this quality focus. Reported revenue fell 9.5% in Q2 due to the CSL transition, but organic growth hit 19% driven by share gains and technology upgrades. This is precisely the kind of revenue HAE wants—recurring, high-margin, and defensible. The 23% organic growth for the six-month period demonstrates that underlying demand remains robust, with U.S. collections growing high single-digits and European collections posting double-digit gains. Management's guidance assumes flat to low single-digit U.S. collection volume growth, making clear that their confidence stems from factors they control: share gains and technology adoption.

Margin Expansion: Mix, Price, and Productivity

Adjusted gross margin reaching 60.8% in Q1 FY26, up 550 basis points, signals a structural shift. Three drivers explain this improvement. First, product mix favors higher-margin disposables and software, particularly in Plasma and Blood Management Technologies. Second, pricing initiatives across all business units reflect HAE's differentiated value proposition. Third, productivity gains from the Operational Excellence Program and portfolio rationalization reduced manufacturing and supply chain costs.

Segment-level margins reveal the strategy's impact. Plasma's 34% adjusted operating margin expanded 190 basis points in Q2, driven by prior technology upgrades and the full transition from legacy PCS2 systems. Blood Center's 26.3% margin expanded 320 basis points despite revenue decline, proving that divesting Whole Blood improved segment economics. Hospital's 20.5% margin expanded 370 basis points as Blood Management Technologies' strength overwhelmed Interventional Technologies' investments. These gains are not one-time events; they reflect a permanently improved cost structure and pricing power.

Cash Flow and Capital Allocation Discipline

Free cash flow conversion exceeding 70% of adjusted net income demonstrates that margin expansion translates into cash generation. The company generated $142.5 million in free cash flow over the trailing twelve months, funding strategic initiatives while maintaining a net leverage ratio of 2.5x EBITDA. This matters because it provides flexibility for capital allocation without jeopardizing financial stability.

Management's capital allocation priorities reflect confidence in the transformation. The company completed a $300 million share repurchase program and immediately launched a new $500 million authorization, with $75 million executed through an accelerated share repurchase in Q1 FY26. These buybacks, funded by strong cash flow, signal that leadership views the stock as undervalued relative to the transformed earnings power. The decision to keep M&A "off the table" until Interventional Technologies stabilizes shows capital discipline, focusing resources on organic growth and margin expansion rather than dilutive acquisitions.

Outlook and Guidance: Ambitious but Grounded

Management's raised FY26 guidance reflects stronger-than-expected execution across more than 80% of the portfolio. Revenue guidance improved from a 3-6% decline to a 1-4% decline, while organic growth ex-CSL accelerated to 7-10%. Adjusted EPS guidance increased to $4.80-5.00, implying 28% compound annual growth from FY22 levels. Free cash flow guidance rose to $170-210 million, reaffirming the 70%+ conversion target.

These targets rest on several key assumptions. Plasma revenue is expected to decline 4-7% reported but grow 14-17% organically ex-CSL, grounded in continued share gains and the annualization of prior technology rollouts. Hospital revenue growth of 4-7% assumes sustained double-digit growth in Blood Management Technologies and little to no contribution from Interventional Technologies—a conservative stance that acknowledges IVT's execution challenges. Blood Center's 17-19% reported decline and flat organic growth reflect the full anniversary of the Whole Blood divestiture.

The guidance's fragility lies in factors outside HAE's control. Plasma collection volumes, while assumed to grow modestly, depend on end-market demand for immunoglobulin and fractionation capacity additions. The PFA disruption to ensoETM, though limited to a small revenue base, could intensify if adoption accelerates beyond current estimates. Tariff impacts, estimated at up to $0.20 per share annually, are partially mitigated by supply chain diversification but remain a headwind.

Risks and Asymmetries: What Could Break the Thesis

Plasma Volume Uncertainty

The most material risk to the core thesis is a sustained slowdown in plasma collection volumes. While HAE's guidance is grounded in share gains, not volume growth, a structural decline in plasma demand would eventually limit the addressable market. Management acknowledges this explicitly: "We don't control collection volume. While we have every confidence that they continue and grow from here. Our guidance reflects what we can control." This creates asymmetry—upside if volumes recover faster than expected, but downside risk if immunoglobulin demand softens or fractionation capacity additions slow.

PFA Disruption and Interventional Execution

The PFA technology's impact on ensoETM represents a classic disruption risk. While management describes PFA as "a disruptive influence for ensoETM specifically, but there's a way to work through that," the timeline and magnitude remain uncertain. The $3 million quarterly revenue base is modest, but the strategic value of the Attune acquisition was to establish an electrophysiology presence. If PFA adoption reaches 90% of target accounts faster than anticipated, the recovery timeline for Interventional Technologies could extend beyond FY26.

Execution risk in Vascular Closure compounds this challenge. Despite clinical superiority, legacy VASCADE faces competitive pressure, requiring increased commercial investment and pricing flexibility. Management's reorganization of the U.S. sales force to focus on structural heart procedures shows awareness of the issue, but results may take several quarters to materialize. The Vivasure Medical acquisition option, while promising for large-bore closure, remains an FY27 event at best due to FDA timing.

Tariff and Supply Chain Pressures

The tariff environment creates margin volatility. Management estimates up to $0.20 annualized EPS impact, with the midpoint of guidance already reflecting this headwind. While HAE's manufacturing concentration in North America and Mexico provides some protection, the remaining Blood Center operations in Mexico and Cell Saver production face exposure. The company's proactive mitigation through supply chain diversification and inventory builds helps, but sustained tariff escalation could compress margins beyond current guidance.

Valuation Context: Pricing a Transformed Business

At approximately $84 per share, Haemonetics trades at 14.0x forward earnings and 13.8x EV/EBITDA based on FY26 guidance. These multiples sit below the company's historical average and peer medians, despite delivering superior margins and returns. The price-to-free-cash-flow ratio of 15.8x appears attractive given the 70%+ conversion rate and 19.5% ROE.

Peer comparisons highlight the valuation disconnect. Grifols trades at 13.8x earnings but generates a 4.96% net margin and 5.89% ROE—far below HAE's 12.67% margin and 19.47% ROE. Baxter trades at a similar EV/EBITDA multiple but operates with negative net margins and lower growth. LivaNova (LIVN) achieves higher gross margins (69%) but struggles with negative operating leverage. Terumo trades at a comparable 26.7x P/E with similar margins but lacks HAE's pure-play focus and growth trajectory.

The balance sheet supports the valuation case. Net leverage of 2.5x EBITDA remains well within covenant limits, and the company maintains $425 million in remaining share repurchase authorization. With free cash flow expected to exceed $170 million in FY26, HAE has ample capacity to return capital while funding innovation. The key valuation question is whether the market will award a higher multiple as the portfolio transformation proves durable and Interventional Technologies recovers.

Conclusion: A Transformed Business at an Inflection Point

Haemonetics has completed a fundamental portfolio transformation, emerging as a focused leader in high-margin plasma collection and hospital blood management technologies. The company's ability to expand margins while navigating external headwinds—CSL customer transition, PFA disruption, tariff pressures—demonstrates the durability of its competitive moats. With over 70% market share in plasma devices and viscoelastic testing, HAE commands pricing power and generates recurring revenue streams that support 26-27% operating margins.

The investment thesis hinges on two variables: continued share gains in Plasma driven by NexSys technology adoption, and successful stabilization of Interventional Technologies despite PFA headwinds. Management's raised guidance and confidence in double-digit Blood Management Technologies growth suggest the core business is stronger than ever, while the conservative stance on IVT provides downside protection. Trading at 14x forward earnings with 19.5% ROE and 70%+ free cash flow conversion, the stock offers attractive risk/reward for investors willing to look past near-term reported revenue declines to the underlying earnings power of a transformed medical technology leader.