However, after taking into account certain one-time items, adjusted earnings came in at 48 cents per share, surpassing both the Zacks Consensus Estimate of 46 cents and the year-ago quarter’s adjusted earnings of 40 cents per share. For the full year, adjusted EPS was $1.71, up 13% year over year exceeding the guidance range of $1.65–$1.70.
Revenues increased 34% year over year (up 38% at CER) to $249.9 million, in line with the Zacks Consensus Estimate. Fiscal 2013 net revenue was $892.0 million, up 23% on a year-over-year basis and in line with the guidance range of $888–$898 million.
After taking into account the recently acquired whole blood business from Pall Corporation (PLL), the company recorded quarterly organic revenue growth of 4% year over year (up 6% at CER).
Revenues from the U.S. and the international market increased 48.7% and 20.8% to $130.1 million and $119.8 million, respectively. Barring Japan, where organic revenues declined 13% year-over-year, growth was recorded across other regions, namely Asia (28%), North America (9%) and Europe (1%).
Haemonetics earns about 86% of its revenues from the sale of disposables – plasma, blood centers and hospital disposables. Revenues from these segments stood at $68.2 million, (up 10.3% year over year), $112.9 million (up 100.2%) and $32.7 million (up 2.5%), respectively. The rest of the revenues were derived from software solutions and equipment, which recorded respective sales of $18.6 million (down 3.9% year over year) and $17.5 million (up 1.8%).
Haemonetics expects its plasma business growth in the range of 4%−6%, in fiscal 2014, consistent with the end-market growth rates of the industry. Within blood center disposables, revenues from platelets disposables were flat at $44 million, while red cell disposables were up 13% at $14 million. Subsequent to the completion of the acquisition, whole blood was inducted in the company’s portfolio in the second quarter and recorded $54.9 million of sales in the reported quarter.
Platelet revenues continued to face challenges due to tough comparisons in Japan with Japanese Red Cross increasing inventories of platelet disposables in advance of their system conversion. The improved sales from red cell disposables were a result of the company’s timing of orders at the end of the reported quarter in North America. The company expects its blood center business to remain flat organically in fiscal 2014.
OrthoPAT (orthopedic perioperative autotransfusion system) was down 5.1% year over year to $7.9 million. However, the company expects that the impending launch of its new OrthoPAT Advance system in the first half of fiscal 2014 followed by its recent 510(k) approval will likely drive growth in OrthoPAT in fiscal 2014.
Revenues from Surgical disposables and Diagnostics increased 1.2% to $17.5 million and 16.8% to $7.2 million, respectively. While the former benefited from the 7th consecutive quarter of growth from the Cell Saver Elite, growth of the Diagnostics business resulted from the company's Impact initiative that benefited the TEG Thrombelastograph Hemostasis Analyzer business.
Strong sales of Cell Saver Elite and TEG equipments signify growth in disposables revenue in the forthcoming quarter. During the reported quarter, TEG disposables sales increased over 66% in China.
The company expects its hospital business to grow 6%–9% in fiscal 2014, which will be supported by growth in surgical, diagnostics and a return to growth in OrthoPAT.
The company reported a 31% increase in adjusted gross profit to $124.2 million accompanied by 110 basis points (bps) contraction in adjusted gross margin to 49.7% during the quarter. Margin improvement in the core business partially offset the impact of revenue mix toward low-margin whole blood disposables.
With an increase in adjusted operating expenses (up 31.8% to $89.3 million), the adjusted operating margin contracted 50 bps to 14.5%. The rise in operating expenses was due to inclusion of $14 million in the new whole blood collection business and investments in global growth initiatives, emerging markets and infrastructure development.
Last year, Haemonetics completed a two-for-one split in the form of a 100% stock dividend. On a post-split basis, the company continued with its stock buyback program and repurchased 694,600 shares for $41.52 per share in the fourth quarter. In fiscal 2013, the company repurchased 1,236,300 shares for $40.44, completing the earlier authorized $50 million repurchase.
Haemonetics provided an update to its fiscal 2014 outlook. The company expects its adjusted EPS in the range of $2.30-$2.40, (up 15-20% annually), in line with its preliminary outlook provided earlier this year. In addition, total revenue is expected to increase by 9%–12% on a yearly basis. Overall fiscal 2014 organic revenue growth is expected in the band of 3%–5% on a reported basis (5%–7% at CER).
The company expects to report adjusted gross margin in the range of 51%−52% with adjusted operating income of $177−$183 million. In addition, free cash flow is still expected to be around $125 million.
Haemonetics reported a mixed quarter with earnings beating the Zacks Consensus Estimate and revenues in line. Low global penetration and positive demand dynamics provide an encouraging long-term thesis for investing in the blood processing and supply chain management industry. However, the drag on margins during the quarter remains a cause of concern.
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