What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-08-08 compared with 2024-02-08 · 120 added, 163 removed, 183 unchanged (61% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read in conjunction with both our interim condensed consolidated financial statements and notes thereto which appear elsewhere in this Quarterly Report on Form 10-Q and our annual consolidated financial statements, notes thereto and the MD&A contained in our Annual Report on Form 10-K for the fiscal year ended April 1, 2023.

The following discussion may contain forward-looking statements and should be read in conjunction with the “Cautionary Statement Regarding Forward-Looking Information” in this discussion.

Haemonetics Corporation is a global healthcare company dedicated to providing a suite of innovative medical products and solutions for customers to help them improve patient care and reduce the cost of healthcare.

Haemonetics is a global healthcare company dedicated to providing a suite of innovative medical technology solutions that improve the quality, effectiveness and efficiency of care.

We challenge ourselves to think big and make new possibilities a reality, so that our customers can make it matter for patients, every single day.

Our technology addresses important medical markets:

blood and plasma component collection, the surgical suite and hospital transfusion services.

When used in this report, the terms “we,” “us,” “our,” “Haemonetics” and the “Company” mean Haemonetics Corporation.

We view our operations and manage our business in three principal reporting segments:

Plasma, Blood Center and Hospital.

For that purpose, “Plasma” includes plasma collection devices and disposables, plasma donor management software and anticoagulant and saline sold to plasma customers.

For that purpose, “Plasma” includes plasma collection devices and disposables, donor management software and supporting software solutions sold to plasma customers.

“Blood Center” includes blood collection and processing devices and disposables for red cells, platelets and whole blood.

“Hospital”, which is comprised of Hemostasis Management, Interventional Technologies, Cell Salvage and Transfusion Management products, includes devices and methodologies for measuring coagulation characteristics of blood, vascular closure devices, sensor guided technologies, specialized blood cell processing systems and disposables, surgical blood salvage systems and blood transfusion management software.

“Hospital” is comprised of Interventional Technologies, which includes Vascular Closure, Sensor Guided Technologies and Esophageal Protection products, and Blood Management Technologies, which includes Hemostasis Management, Cell Salvage and Transfusion Management products.

We believe that Plasma and Hospital have growth potential, while Blood Center competes in challenging markets that require us to manage the business differently, including reducing costs, shrinking the scope of the current product line, and evaluating opportunities to exit unfavorable customer contracts.

Recent Developments

Issuance of Convertible Senior Notes

On May 28, 2024, we issued $700.0 million aggregate principal amount of 2.5% convertible senior notes due 2029 (the “2029 Notes”).

The 2029 Notes are governed by the terms of the Indenture between the Company and U.S.

Bank National Association, as trustee.

The total net proceeds from the sale of the 2029 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were $682.8 million, of which $230.0 million was used to repay the entirety of the balance on the revolving credit facility under the Company’s current credit agreement, $185.5 million was used to repurchase a portion of our existing 0% convertible senior notes due 2026 and $88.2 million was used to complete capped call transactions, with the remaining proceeds available for working capital and other general purposes.

The 2029 Notes will mature on June 1, 2029, unless earlier converted, redeemed or repurchased.

Debt Issuance and Repayment

On April 30, 2024, we entered into a second amended and restated credit agreement with certain lenders to refinance our prior credit facilities and extend their maturity date through April 2029.

The second amended and restated credit agreement provides for a $250.0 million senior unsecured term loan, the proceeds of which, along with $12.5 million of cash on hand, have been used to retire the balance of the term loan under our prior credit facilities, and a $750.0 million senior unsecured revolving credit facility.

Acquisition of Attune Medical

On March 5, 2024, the Company entered into a definitive agreement to acquire Advanced Cooling Therapy, Inc., d/b/a Attune Medical (“Attune Medical”), the manufacturer of the ensoETM ® proactive esophageal cooling device, pursuant to which, among other things, the Company agreed to acquire all of the issued and outstanding common shares of Attune Medical.

On April 1, 2024, the Company completed its acquisition of Attune Medical for total consideration of $186.2 million, which included an upfront cash payment of $160.7 million, or $149.2 million net of cash acquired, the fair value of contingent consideration of $25.0 million, and $0.5 million of estimated working capital adjustments.

The Company’s purchase price is subject to customary working capital and certain other adjustments as of the closing of the transaction and additional contingent consideration based on sales growth over the next three years, which is uncapped, and the achievement of certain other

The Company financed the acquisition through a combination of cash on hand and borrowings under its senior unsecured revolving credit facility.

Attune Medical's ensoETM technology is designed for use across a range of medical conditions involving patient cooling or warming, including treatment in electrophysiology, critical care, neurocritical care, trauma, burn surgery, spine surgery, and cancer surgery, among others.

The Company’s addition of the Esophageal Protection product line through its acquisition of Attune Medical expands the Hospital business unit’s presence in electrophysiology and complements its Vascular Closure product line within Interventional Technologies, which is included in the Hospital reportable segment.

Acquisition of OpSens Inc.

On October 10, 2023, the Company announced it had entered into an Arrangement Agreement with OpSens, Inc.

On October 10, 2023, the Company entered into an Arrangement Agreement with OpSens Inc.

(“OpSens”), a medical device cardiology-focused company delivering solutions based on its proprietary optical technology, pursuant to which, among other things, the Company agreed to acquire all of the issued and outstanding common shares of OpSens.

On December 12, 2023, the Company completed its acquisition of OpSens for total consideration of approximately $254.5 million, or $243.9 million, net of cash acquired.

The Company financed the acquisition through a combination of cash on hand and borrowings under the revolving credit facility.

The Company financed the acquisition through a combination of cash on hand and borrowings under its senior unsecured revolving credit facility.

OpSens offers commercially and clinically validated optical technology for use primarily in interventional cardiology.

2 unchanged sentences

OpSens also manufactures a range of fiber optic sensor solutions used in medical devices and other critical industrial applications.

The addition of OpSens expands the Hospital business unit portfolio in the interventional cardiology market and will be included in the Hospital reportable segment.

Portfolio Rationalization Initiatives

In November 2023, the Company announced its plans to end of life the ClotPro analyzer system within the Hospital business unit and whole blood inline collection products within the Blood Center business unit, including the associated manufacturing operations and closure of certain other facilities.

These product rationalization initiatives have not materially impacted the third quarter of fiscal 2024 results and we do not expect a material impact for the remainder of fiscal 2024.

The addition of OpSens expands the Hospital business unit portfolio in the interventional cardiology market and is included in the Hospital reportable segment.

Financial Summary

Three Months Ended Nine Months Ended

(In thousands, except per share data) December 30,

2023 December 31,

2022 % Increase/ (Decrease) December 30,

2023 December 31,

Three Months Ended

(In thousands, except per share data) June 29,

2023 % Increase/ (Decrease)

5 unchanged sentences

% of net revenues 11.8 % 17.2 %

Interest and other expense, net $ (1,949) $ (1,055) 84.7 % $ (6,489) $ (12,001) (45.9) %

Interest and other income (expense), net $ 6,957 $ (2,069) n/m

Income before provision for income taxes $ 46,713 $ 51,590 (9.5) %

5 unchanged sentences

Net income per share - diluted $ 0.74 $ 0.80 (7.5) %

Net revenue s increased 10.1% and 11.7% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

Without the effects of foreign exchange, net revenues increased 10.3% and 12.4% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

Revenue increases in our Plasma and Hospital businesses, primarily related to volume and price benefits, drove the overall increase in revenue during the three and nine months ended December 30, 2023.

Operating income in creased 6.2% and 11.7% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

The increases during the three and nine months ended December 30, 2023 were primarily due to increased revenues in Plasma and Hospital as well as operating leverage, partially offset by continuous growth investments, portfolio rationalization initiatives, transaction costs in connection with the OpSens acquisition and digital transformation costs related to the upgrade of our enterprise resource planning system.

Net revenue s increased 8.0% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

Without the effects of foreign exchange, net revenues increased 8.7% during the three months ended June 29, 2024, as compared with the same period of fiscal 2024.

Revenue increases in our Hospital businesses, primarily related to recent acquisitions as well as volume and price benefits, drove the overall increase in revenue during the three months ended June 29, 2024.

Operating income de creased 25.9% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

The decrease during the three months ended June 29, 2024 was primarily due to transaction and integration costs related

to recent acquisitions, continuous growth investments, increased amortization of acquired intangible assets and increased freight costs, partially offset by operating leverage.

Management’s Use of Non-GAAP Measures

7 unchanged sentences

Three Months Ended

(In thousands) December 30,

2023 December 31,

2022 Reported growth Currency impact Constant currency growth (1)

United States $ 250,804 $ 224,104 11.9 % — % 11.9 %

International 85,446 81,197 5.2 % (0.7) % 5.9 %

Net revenues $ 336,250 $ 305,301 10.1 % (0.2) % 10.3 %

Nine Months Ended

(In thousands) December 30,

2023 December 31,

(In thousands) June 29,

2023 Reported growth Currency impact Constant currency growth (1)

6 unchanged sentences

Our products are marketed in approximately 90 countries around the world through a combination of our direct sales force and independent distributors and agents.

During the three and nine months ended December 30, 2023 our revenue generated outside the U.S.

was 25.4% and 25.0% of total net revenues, respectively, as compared with 26.6% and 28.5%, respectively, during the three and nine months ended December 31, 2022.

During the three months ended June 29, 2024 our revenue generated outside the U.S.

was 26.0% of total net revenues, as compared with 23.9% during the three months ended July 1, 2023.

International sales are generally conducted in local currencies, primarily Japanese Yen, Euro and Chinese Yuan.

4 unchanged sentences

Three Months Ended

(In thousands) December 30,

2023 December 31,

(In thousands) June 29,

2023 Reported growth Currency impact Constant currency growth (1)

5 unchanged sentences

63,044 37,620 67.6 % (0.4) % 68.0 %

Hemostasis Management 41,423 34,921 18.6 % 0.1 % 18.5 %

Blood Management Technologies (3)

70,973 64,885 9.4 % (0.6) % 10.0 %

Hospital 134,017 102,505 30.7 % (0.6) % 31.3 %

Net business unit revenues 330,704 300,383 10.1 % (0.2) % 10.3 %

Service 5,546 4,918 12.8 % 1.9 % 10.9 %

Net revenues (4)

Nine Months Ended

(In thousands) December 30,

2023 December 31,

2022 Reported growth Currency impact Constant currency growth (1)

Plasma $ 427,315 $ 365,735 16.8 % 0.1 % 16.7 %

Apheresis 151,380 152,287 (0.6) % (3.0) % 2.4 %

Whole Blood 54,538 60,452 (9.8) % (0.7) % (9.1) %

Blood Center 205,918 212,739 (3.2) % (2.3) % (0.9) %

Interventional Technologies (2)

$ 336,172 $ 311,332 8.0 % (0.7) % 8.7 %

Hemostasis Management 116,241 102,737 13.1 % (0.7) % 13.8 %

80,760 76,875 5.1 % (0.7) % 5.8 %

Hospital 316,170 270,909 16.7 % (0.6) % 17.3 %

Net business unit revenues 949,403 849,383 11.8 % (0.7) % 12.5 %

Service 16,362 14,861 10.1 % 0.7 % 9.4 %

Net revenues $ 965,765 $ 864,244 11.7 % (0.7) % 12.4 %

(1) Constant currency growth, a non-GAAP financial measure, measures the change in revenue between the current and prior year periods using a constant currency.

See “ Management’s Use of Non-GAAP Measures.

(2) Interventional Cardiology includes Vascular Closure and Sensor Guided Technologies product lines of the Hospital business unit.

(3) Other includes the Cell Salvage and Transfusion Management product lines of the Hospital business unit.

Plasma revenue increased 8.4% and 16.8% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

Without the effects of foreign exchange, Plasma revenue increased 8.1% and 16.7% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

The increases during the three and nine months ended December 30, 2023 were primarily driven by volume and price.

During the third quarter of fiscal 2023, we amended our supply agreement with CSL, which was scheduled to expire in December 2023, to extend the term through December 2025.

CSL has a minimum purchase commitment under the non-exclusive supply agreement that slightly exceeds $100.0 million in fiscal 2024, and we expect that CSL will continue to provide a meaningful contribution to our Plasma business revenue in fiscal 2025.

Blood Center revenu e decreased 3.9% and 3.2% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

Without the effects of foreign exchange, Blood Center revenue decreased 2.6% and 0.9% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

The decreases during the three and nine months ended December 30, 2023 were primarily driven by declines in our Whole Blood business.

Hospital revenue increased 23.9% and 16.7% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

Without the effects of foreign exchange, Hospital revenue increased 23.8% and 17.3% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

The increases during the three and nine months ended December 30, 2023 were primarily attributable to increased Interventional Technologies and Hemostasis Management revenue, as well as moderate increases in revenue in our Transfusion Management business.

Three Months Ended Nine Months Ended

(In thousands) December 30,

2023 December 31,

2022 % Increase December 30,

2023 December 31,

(2) Interventional Technologies includes Vascular Closure, Sensor Guided Technologies and Esophageal Protection product lines of the Hospital business unit.

(3) Blood Management Technologies includes Hemostasis Management, Cell Salvage and Transfusion Management product lines of the Hospital business unit.

(4) Beginning in fiscal 2025, the Company integrated service revenue within its three business units.

Prior periods were conformed to current presentation.

Plasma revenue decreased 2.7% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

Without the effects of fo reign exchange, Plasma revenue decreased 2.6% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

The decrease during the three months ended June 29, 2024 was primarily driven by lower sales volumes in North America relating to a previously announced customer transition and a temporary plasma center outage at one of our customers.

During the third quarter of fiscal 2022, we amended our supply agreement with CSL, which CSL had previously notified us of its intent not to renew and was initially set to expire in June 2022, to allow CSL to continue to use our PCS2 plasma collection system devices and purchase disposable plasmapheresis kits on a non-exclusive basis through December 2023.

During the third quarter of fiscal 2023, we further amended our supply agreement with CSL to extend the term through December 2025.

CSL has a minimum purchase commitment under the non-exclusive supply agreement of approximately $85 million in fiscal 2025.

Blood Center revenue decreased 4.3% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

Without the effects of foreign exchange, Blood Center revenue decreased 2.1% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

The decrease during the three months ended June 29, 2024 was primarily driven by declines in our Whole Blood business.

Hospital revenue increased 30.7% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

Without the effects of foreign exchange, Hospital revenue increased 31.3% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

The increase during the three months ended June 29, 2024 was primarily attributable to the product lines within the Interventional Technologies franchise with benefits from Sensor Guided Technologies and Esophageal Protection that were recently acquired, as well as growth in Vascular Closure.

Three Months Ended

(In thousands) June 29,

2023 % Increase

1 unchanged sentence

% of net revenues 52.0 % 53.7 %

Gross profit increased 12.1% and 12.4% for the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

Without the effects of foreign exchange, gross profit increased 15.3% and 14.8% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

The increases during the three and nine months ended December 30, 2023 were primarily driven by volume, mix and price, partially offset by portfolio rationalization initiatives, continuous growth investments and higher depreciation expense.

Gross profit increased 4.6% for the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

Without the effects of foreign exchange, gross profit increased 5.8% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

The increase during the three months ended June 29, 2024 was driven by increased revenues in the Hospital business and volume and mix, partially offset by amortization of fair value inventory step-up and restructuring costs related to portfolio rationalization initiatives.

Operating Expenses

Three Months Ended Nine Months Ended

(In thousands) December 30,

2023 December 31,

2022 % Increase/

(Decrease) December 30,

2023 December 31,

Three Months Ended

(In thousands) June 29,

2023 % Increase

5 unchanged sentences

% of net revenues 3.7 % 2.4 %

Impairment of intangible assets $ — $ — n/m $ 10,419 $ — n/m

% of net revenues — % — % 1.1 % — %

Total operating expenses $ 135,168 $ 113,606 19.0 %

1 unchanged sentence

Research and Development

Research and development expenses increased 4.5% and 11.9% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

Without the effects of foreign exchange, research and development expenses increased 4.1% and 11.4% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

The increases during the three and nine months ended December 30, 2023 were due to increased investments into product innovation across our product portfolio.

Research and development expenses increased 14.2% during the three months ended June 29, 2024, as compared with the same period of fiscal 2024.

Without the effects of foreign exchange, research and development expenses increased 14.2% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

The increase during the three months ended June 29, 2024 was due to increased headcount as a result of recent acquisitions.

Selling, General and Administrative

Selling, general and administrativ e expenses increased 18.0% and 11.2% during the three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023.

Without the effects of foreign exchange, selling, general, and administrative expenses increased 17.6% and 11.1% during th e three and nine months ended December 30, 2023, respectively, as compared with the same periods of fiscal 2023 .

The increases during the three and nine months ended December 30, 2023 were primarily driven by higher investments in sales and marketing, transaction costs and costs associated with the upgrade of our enterprise resource planning system, partially offset by operating leverage.

Selling, general and administrativ e expenses increased 15.8% during the three months ended June 29, 2024 as compared with the same period of fiscal 2024.

Without the effects of foreign exchange, selling, general, and administrative expenses increased 15.2% during th e three months ended June 29, 2024 as compared with the same period of fiscal 2024 .

The increase during the three months ended June 29, 2024 was primarily driven by transaction, integration and operating costs related to recent acquisitions, as well as increased headcount, partially offset by gains realized on the sale of a manufacturing facility.

Amortization of Acquired Intangible Assets

We recognized amortization expense related to our acquired intangible assets of $6.9 million and $21.6 million during the three and nine months ended December 30, 2023, respectively, and $8.1 million and $24.7 million during the three and nine months ended December 31, 2022 , respectively.

The decreases were primarily the result of intangible assets that became fully amortized during fiscal 2023.

Impairment of Intangible Assets

We recognized a $10.4 million impairment of intan gible assets in the second quarter of fiscal 2024 related to the enicor GmbH acquisition completed in fiscal 2021 within our Hospital business unit.

Interest and Other Expense, Net

Interest and other expenses in creased 84.7% during the three months ended December 30, 2023 and decreased 45.9% during the nine months ended December 30, 2023, as compared with the same periods of fiscal 2023.

The increases during three months ended December 30, 2023 were driven by foreign currency impact due to market and rate volatility and higher interest incurred on our term loan, partially offset by interest income on investments due to higher interest rates.

The decreases during the nine months ended December 30, 2023 were primarily driven by increased interest income on investments due to higher interest rates and foreign currency impact due to market and rate volatility, partially offset by higher interest incurred on our term loan.

We recognized amortization expense related to our acquired intangible assets of $12.5 million during the three months ended June 29, 2024 and $7.5 million during the three months ended July 1, 2023 .

The increase was related to the amortization of the intangible assets acquired in conjunction with the recent acquisitions of OpSens and Attune Medical.

Interest and Other Income (Expense), Net

Interest and other income in creased $9.0 million during the three months ended June 29, 2024, as compared with the same period of fiscal 2024.

The increase during three months ended June 29, 2024 was driven by the net gain on the repurchase of convertible notes during the first quarter of fiscal 2025, partially offset by higher interest incurred on our term loan and revolving credit facilities as compared with the same period of fiscal 2024.

We conduct business globally and report our results of operations in a number of foreign jurisdictions in addition to the United States.

2 unchanged sentences

Our effective tax rate is adversely impacted by non-deductible expenses including executive compensation and transaction costs.

For the three and nine months ended December 30, 2023, the Company reported income tax expense of $12.8 million and $31.3 million, respectively, representing effective tax rates of 29.0% and 24.3%, respectively.

The effective tax rate for the nine months ended December 30, 2023 includes $1.1 million of discrete tax benefit, of which $2.6 million relates to stock compensation windfalls, partially offset by other discrete items.

For the three and nine months ended December 31, 2022, the Company reported income tax expense of $9.3 million and $22.8 million, respectively, representing effective tax rates of 22.0% and 20.9%, respectively.

The effective tax rate for the three months ended December 31, 2022 includes $0.1 million of discrete tax expense relating to stock compensation shortfalls.

The effective tax rate for the nine months ended December 31, 2022 includes a discrete tax benefit of $0.5 million related to tax rate changes enacted in the period and $0.4 million of discrete tax expense relating to stock compensation shortfalls.

The increase in the reported tax rates for the three and nine months ended December 30, 2023, compared to the same periods in fiscal 2023, relates primarily to unfavorable changes in the jurisdictional mix of earnings, research tax credits generated and non-deductible acquisition-related expenses, partially offset by discrete tax benefits from stock compensation windfall deductions.

For the three months ended June 29, 2024, the Company reported income tax expense of $8.3 million, representing an effective tax rate of 17.9%.

The effective tax rate for the three months ended June 29, 2024 includes $3.6 million of discrete tax benefit, primarily related to stock compensation windfalls.

The discrete benefit also includes other items such as provision to return differences.

For the three months ended July 1, 2023, the Company reported income tax expense of $10.5 million, representing an effective tax rates of 20.4%.

The effective tax rate for the three months ended July 1, 2023 includes $1.2 million of discrete tax benefit primarily related to stock compensation windfalls.

The decrease in the reported tax rates for the three months ended June 29, 2024, compared to the same period in fiscal 2024, relates primarily to increased discrete tax benefits year-over-year, partially offset by unfavorable impact of jurisdictional mix of earnings and non-deductible acquisition-related expenses.

Liquidity and Capital Resources

The following table contains certain key performance indicators we believe depict our liquidity and cash flow position:

(Dollars in thousands) December 30,

2023 April 1,

(Dollars in thousands) June 29,

2024 March 30,

Cash and cash equivalents $ 344,429 $ 178,800

6 unchanged sentences

(1) Net debt position is the sum of cash and cash equivalents less total debt.

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations and our revolving credit facility.

We believe these sources are sufficient to fund our cash requirements over at least the next twelve months.

Our expected cash outlays relate primarily to acquisitions, investments, capital expenditures, including enhancements to our North American manufacturing facilities, share repurchases, portfolio rationalization initiatives and cash principal and interest payments under our revised credit agreement.

The Company has $500.0 million aggregate principal amount of 0% convertible senior notes due in 2026, or the 2026 Notes.

The 2026 Notes are governed by the terms of the Indenture between the Company and U.S.

Bank National Association, as trustee.

The total net proceeds from the sale of the 2026 Notes, after deducting the initial purchasers’ discounts and debt issuance costs, were approximately $486.7 million.

The 2026 Notes will mature on March 1, 2026, unless earlier converted, redeemed or repurchased.

The 2026 Notes have an effective interest rate of 0.5% as of December 30, 2023.

As of December 30, 2023, we had $194.0 million in cash and cash equivalents, the majority of which is held in the U.S.

Our primary sources of liquidity are cash and cash equivalents, internally generated cash flow from operations and our senior unsecured revolving credit facility.

We believe these sources are sufficient to fund our cash requirements over at least the next twelve months and to meet our known long-term cash requirements, including our convertible senior notes due March 1, 2026.

Our e xpected cash outlays relate primarily to acquisitions, investments, capital expenditures, including enhancements to our North American manufacturing facilities, share repurchases, portfolio rationalization initiatives and cash principal and interest payments under our revised credit agreements.

As of June 29, 2024, we had $344.4 million in cash and cash equivalents, the majority of which is held in the U.S.

or in countries from which it can be repatriated to the U.S.

On July 26, 2022, we entered into an amended and restated credit agreement with certain lenders to refinance our prior credit agreement entered into on June 15, 2018, which consisted of a $350.0 million term loan and a $350.0 million revolving credit facility (together, as amended from time to time, the “2018 Credit Facilities”), and extend the maturity date through June 2025.

Our Revised Credit Facilities include a $280.0 million senior unsecured term loan, the proceeds of which have been used to retire the balance of the term loan under the 2018 Credit Facilities, and a $420.0 million senior unsecured revolving credit facility.

Loans under the Revised Credit Facilities bear interest at an annual rate equal to the Adjusted Term SOFR Rate (as specified in the amended and restated credit agreement), which is subject to a floor of 0%, plus an applicable rate ranging from 1.125% to 1.750% based on the Company’s consolidated net leverage ratio (as specified in the amended and restated credit agreement) at the applicable measurement date.

Adjusted Term SOFR Rate loans are also subject to a credit spread adjustment of 0.10% per annum.

In the first quarter of fiscal 2025, the Company used a portion of its proceeds from the 2029 Notes to repurchase, for $185.5 million, $200.0 million of the $500.0 million aggregate principal amount of its 0% convertible senior notes due 2026 (the “2026 Notes”), resulting in a gain of $14.5 million related to the discount on repurchase.

As the repurchase of the 2026 Notes met the criteria for extinguishment accounting, $1.9 million of unamortized debt issuance costs were allocated to the repurchase, resulting in a net gain of $12.6 million.

As of June 29, 2024, the $300.0 million remaining principal balance on the 2026 Notes was netted down by $2.6 million of remaining debt issuance costs, resulting in a net convertible note payable of $297.4 million.

Interest expense related to the 2026 Notes was $0.7 million for the three months ended June 29, 2024, which is entirely attributable to the amortization of the debt issuance costs.

The remaining debt issuance costs are amortized at an effective interest rate of 0.5%.

On July 26, 2022, the Company entered into an amended and restated credit agreement to refinance its credit facilities initially entered into in 2018 and extend their maturity date through June 2025.

The amended and restated credit agreement provided for a $280.0 million senior unsecured term loan and a $420.0 million senior unsecured revolving credit facility (together, the “2022 Revised Credit Facilities”) with applicable interest rates during the period established using an annual rate equal to the Adjusted Term SOFR Rate plus an applicable rate ranging from 1.125% to 1.750% based on the Company’s consolidated net leverage ratio, as specified in the agreement.

On April 30, 2024, the Company entered into a second amended and restated credit agreement with certain lenders to refinance the 2022 Revised Credit Facilities and extend their maturity date through April 2029.

The second amended and restated credit agreement provides for a $250.0 million senior unsecured term loan, the proceeds of which, along with $12.5 million of cash on hand, were used to retire the balance of the term loan under the 2022 Revised Credit Facilities, and a $750.0 million senior unsecured revolving credit facility (together, the “2024 Revised Credit Facilities”).

Loans under the 2024 Revised Credit Facilities will initially bear interest at an annual rate equal to the Adjusted Term SOFR Rate (as specified in the second amended and restated credit agreement), which is subject to a floor of 0.0%, plus an applicable rate ranging from 1.125% to 1.750% based on the Company’s consolidated net leverage ratio (as specified in the second amended and restated credit agreement) at the applicable measurement date.

The revolving credit facility carries an unused fee that ranges from 0.125% to 0.250% annually based on the Company’s consolidated net leverage ratio at the applicable measurement date.

Under the Revised Credit Facilities, the Company is required to maintain certain leverage and interest coverage ratios specified in the amended and restated credit agreement as well as other customary non-financial affirmative and negative covenants.

The Revised Credit Facilities mature on June 15, 2025.

The principal amount of the term loan under the Revised Credit Facilities is repayable quarterly through the maturity date at a rate of 2.5% for the first year and 5% thereafter, with the unpaid balance due at maturity.

As of December 30, 2023, $266.0 million was outstanding under the term loan with an effective interest rate of 6.8%.

During the third quarter of fiscal 2024 in connection with the acquisition of OpSens, the Company borrowed $110.0 million under the revolving credit facility, with an effective interest rate of 6.7% , which remains outstanding as of December 30, 2023.

We also had $20.1 million of uncommitted operating lines of credit to fund our global operations under which there were no outstanding borrowings as of December 30, 2023.

Additionally, the Company was in compliance with the leverage and interest coverage ratios specified in the credit agreement as well as all other bank covenants as of December 30, 2023.

The Company has scheduled principal payments of $3.5 million required during the remainder of fiscal 2024.

The 2024 Revised Credit Facilities mature on April 30, 2029.

The principal amount of the term loan under the 2024 Revised Credit Facilities amortizes quarterly through the maturity date at a rate of 2.5% for the first three years following the closing date, 5.0% for the fourth year following the closing date and 7.5% for the fifth year following the closing date, with the unpaid balance due at maturity.

At June 29, 2024, $248.4 million was outstanding under the term loan with an effective interest rate of 6.8%.

There were no outstanding borrowings under the revolving credit facilities at June 29, 2024, as the Company paid all outstanding borrowings during the first quarter of fiscal 2025.

The Company also had $17.6 million of uncommitted operating lines of credit to fund its global operations under which there were no outstanding borrowings as of June 29, 2024.

The Company has scheduled principal payments of $3.1 million required during the remainder of fiscal 2025 related to its term loan.

During fiscal 2022, our Board of Directors approved a revised Operational Excellence Program.

1 unchanged sentence

These charges, the majority of which will result in cash outlays, including severance and other employee costs, will be incurred as the specific actions required to execute these initiatives are identified and approved and are expected to be substantially completed by the end of fiscal 2025.

During the three and nine months ended December 30, 2023, we incurred $2.6 million and $6.8 million, respectively, of restructuring and restructuring related costs under this program.

Nine Months Ended

(In thousands) December 30,

2023 December 31,

During the three months ended June 29, 2024, we incurred $2.4 million of restructuring and restructuring related costs under this program.

Three Months Ended

(In thousands) June 29,

Net cash provided by (used in):

8 unchanged sentences

GAAP, we have eliminated the effect of foreign currency throughout our cash flow statement, except for its effect on our cash and cash equivalents.

Net cash provided by operating activities decreased by $75.8 million during the nine months ended December 30, 2023, as compared with the nine months ended December 31, 2022.

The decrease in cash provided by operating activities was primarily the result of an increase in inventory due to replenishment of NexSys devices and decreases in accounts payable and accrued expenses, partially offset by an increase in net income.

Net cash used in investing activities increased by $183.6 million during the nine months ended December 30, 2023, as compared with the nine months ended December 31, 2022.

The increase in cash used in investing activities was primarily the result of the acquisition of OpSens, partially offset by lower capital expenditures driven by NexSys PCS device placements that occurred during fiscal 2023 and decreased cash outflows for other investments compared to the nine months ended December 31, 2022.

Net cash provided by financing activities increased by $200.4 million during the nine months ended December 30, 2023, as compared with the nine months ended December 31, 2022, primarily due to the borrowing under the revolving credit facility during the third quarter of fiscal 2024 in connection with the OpSens acquisition, as well as the share repurchases and higher contingent consideration payments in fiscal 2023.

Net cash used in operating activities increased by $46.5 million during the three months ended June 29, 2024, as compared with the three months ended July 1, 2023.

The increase in cash used in operating activities was primarily due to the timing of accounts payable payments, decreased net income when considering certain non-cash items, increased inventory balances and a payment in connection with a previously disclosed legal settlement.

Net cash used in investing activities increased by $123.9 million during the three months ended June 29, 2024, as compared with the three months ended July 1, 2023.

The increase in cash used in investing activities was primarily the result of the acquisition of Attune Medical, partially offset by the proceeds from the sales of property, plant and equipment.

Net cash provided by financing activities increased by $334.3 million during the three months ended June 29, 2024, as compared with the three months ended July 1, 2023, primarily due to the issuance the 2029 Notes, partially offset by the repurchase of a portion of the 2026 Notes, capped call transactions, payments on the revolving credit facility and debt issuance costs.

Concentration of Credit Risk

9 unchanged sentences

If the financial condition of customers or the countries’ healthcare systems deteriorate such that their ability to make payments is uncertain, allowances may be required in future periods.

We continue to monitor inflationary pressures generally and raw materials indices that may affect our procurement and production costs.

Increases in the price of petroleum derivatives could result in corresponding increases in our costs to procure plastic raw materials.

Historically, we have been able to limit the impact of the effects of inflation by improving our manufacturing and purchasing efficiencies, by increasing employee productivity and by adjusting the selling prices of products, but we may not be able to fully mitigate these increases in our operational costs in the future.

Foreign Exchange

During the three and nine months ended December 30, 2023, 25.4% and 25.0%, respectively, of our sales were generated outside the U.S., generally in foreign currencies, yet our reporting currency is the U.S.

During the three months ended June 29, 2024, 26.0% of our sales were generated outside the U.S., generally in foreign currencies, yet our reporting currency is the U.S.

We also incur certain manufacturing, marketing and selling costs in international markets in local currency.

17 unchanged sentences

Recent Accounting Pronouncements

Standards to be Implemented

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Codification (“ASC”) Update No.

2023-07, Segment Reporting (Topic 280).

The new guidance requires public entities to provide expanded disclosures over significant segment expenses and additional disclosures related to the chief operating decision maker.

ASC Update No.

2023-07 is effective for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The new guidance is applicable to Haemonetics beginning with the fiscal 2025 Annual Report on Form 10-K.

The Company is currently evaluating the impact to its interim and annual report disclosures.

In December 2023, the FASB issued ASC Update No.

2023-09, Income Taxes (Topic 740).

ASC Update No.

2023-09 requires public entities to provide detailed income tax disclosures, including rate reconciliations and disaggregated income tax payment information, on an annual basis.

The updated guidance is effective for fiscal years beginning after December 15, 2024 and early adoption is permitted.

ASC Update No.

2023-09 is applicable to Haemonetics beginning with the fiscal 2026 Annual Report on Form 10-K and the Company is currently evaluating the impact to its annual report disclosures.

Refer to Note 2, Recent Accounting Pronouncements , to the Condensed Consolidated Financial Statements for a discussion of recently issued accounting pronouncements.

Cautionary Statement Regarding Forward-Looking Information

9 unchanged sentences

and market position and expenditures.

Because forward-looking statements are based on current beliefs, expectations and assumptions regarding future events, they are subject to uncertainties, risks and changes that are difficult to predict and many of which are outside of the Company ’ s

Investors should realize that if underlying assumptions prove inaccurate, or known or unknown risks or uncertainties materialize, the Company’s actual results and financial condition could vary materially from expectations and projections expressed or implied in its forward-looking statements.

2 unchanged sentences

For further discussion of these and other factors, see Item 1A.

Risk Factors in our most recent Annual Report on Form 10-K.

Risk Factors in our most recent Annual Report on Form 10-K (as supplemented by Item 1A of Part II of this Quarterly Report on Form 10-Q).

• Our ability to achieve our long-term strategic and financial-improvement goals;

4 unchanged sentences

• Security breaches of our information technology systems or our products, which could impair our ability to conduct business or compromise sensitive information of the Company or its customers, suppliers and other business partners, or of customers’ patients;

• The potential that the expected strategic benefits and opportunities from completed or planned acquisitions, including the Company’s acquisitions of OpSens Inc.

and Attune Medical, divestitures or other strategic investments by the Company may not be realized or may take longer to realize than expected;

• Pricing pressures resulting from trends toward healthcare cost containment, including the continued consolidation among healthcare providers and other market participants;

• Disruptions to the continuity, availability and pricing of plastic and other raw materials, finished goods and components used in the manufacturing of our products (including those purchased from sole-source suppliers) and the related continuity of our manufacturing, sterilization, supply chain and distribution operations, including disruptions caused by natural disasters, extreme weather and other conditions caused by or related to climate change, labor strikes, terrorism acts, cyber incidents or other adverse events;

• Our ability to obtain the anticipated benefits of restructuring programs that we have or may undertake, including the Operational Excellence Program;

• The potential that the expected strategic benefits and opportunities from the Company’s acquisition of OpSens and any other planned or completed acquisitions, divestitures or other strategic investments by the Company may not be realized or may take longer to realize than expected;

• Our ability to obtain the anticipated benefits of restructuring programs that we have or may undertake, including the Operational Excellence Program and portfolio rationalization initiatives;

• The impact of enhanced requirements to obtain regulatory approval in the U.S.

4 unchanged sentences

and foreign export and import restrictions and tariffs;

• The impact of changes in U.S.

and international tax laws;

• Our ability to meet our debt obligations and raise additional capital when desired on terms reasonably acceptable to us;

• The potential impact of our convertible senior notes and related capped call transactions;

• Geopolitical and economic conditions in China, Russia and other foreign jurisdictions where we do business;

• Geopolitical and economic conditions in China, Taiwan, Russia, Ukraine, the Middle East and other foreign jurisdictions where we do business;

• Our ability to execute and realize anticipated benefits from our investments in emerging economies;

• The potential effect of foreign currency fluctuations and interest rate fluctuations on our net sales, expenses and resulting margins;

• The impact of changes in U.S.

and international tax laws;

• Our ability to protect intellectual property and the outcome of patent litigation;

• Costs and risks associated with product liability and other litigation claims we may be subject to now or in the future;

• The impact of actual or threatened public health emergencies;

• Our ability to retain and attract key personnel;

1 unchanged sentence

• Our ability to achieve against our corporate responsibility initiatives and meet evolving stakeholder expectations concerning corporate responsibility matters;

• The impact of actual or threatened public health crises.

Investors should understand that it is not possible to predict or identify all such factors and should not consider the risks described above and in Item 1A.

Risk Factors in our Annual Report on Form 10-K to be a complete statement of all potential risks and uncertainties.

Risk Factors in our Annual Report on Form 10-K (as supplemented by Item 1A of Part II of this Quarterly Report on Form 10-Q) to be a complete statement of all potential risks and uncertainties.

The Company does not undertake to publicly update any forward-looking statement that may be made from time to time, whether as a result of new information or future events or developments.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis