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Haemonetics Corp (NYSE:HAE)
Q4 2021 Earnings Call
May 13, 2021, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2021 Haemonetics Corporation Earnings Conference Call and Webcast. [Operator Instructions] I would now like to hand the conference over to Olga Guyette, Investor Relations. Thank you. Please go ahead.

Olga Guyette -- Director, Investor Relations

Thank you. Good morning, everyone. Thank you for joining us for Haemonetics' fourth quarter fiscal '21 conference call and webcast. I'm joined today by Chris Simon, our CEO; and Bill Burke, our CFO.

This morning, we posted our fourth quarter and fiscal '21 results to our Investor Relations website, along with our fiscal '22 guidance and analytical tables with the information that we'll refer to on this call. Additionally, we provided a complete P&L, balance sheet, summary statement of cash flows, as well as reconciliations of our GAAP to non-GAAP financial results and guidance.

Before we get started, unless otherwise noted, all revenue growth rates discussed today are on an organic basis and exclude the impact of currency fluctuation, strategic exits of product lines, acquisitions and divestitures, and the impact of the 53rd week in fiscal '21. As in the past, we'll refer to non-GAAP financial measures throughout this call to help investors understand Haemonetics' ongoing business performance. Please note that these measures exclude certain charges and income items. Please refer to this morning's earnings release for details on excluded items, including comparisons with the same periods of fiscal '20 and a reconciliation to our GAAP results.

Our remarks today include forward-looking statements, and our actual results may differ materially from the anticipated results. Haemonetics cautions that these forward-looking statements are subject to risks and uncertainties, including the potential impacts from the COVID-19 pandemic on our results and other factors referenced in the Safe Harbor statements in our earnings release and in our filings with the SEC. We do not undertake any obligation to update these forward-looking statements.

And now, I'd like to turn the call over to Chris.

Christopher Simon -- President and Chief Executive Officer

Good morning, everyone, and thank you for joining today. Before I get into our results, I want to review the news we announced a few weeks ago. In April, CSL Plasma notified us that they do not intend to renew their US supply agreement for the use of our PCS2 plasma collection system equipment and the purchase of plasma disposables that expires in June of 2022. We were informed that CSL's decision was not based on the level of service or quality of our products, but rather reflects the change in internal strategy that was made some time ago, presumably before they had experience with NexSys and Persona.

We are disappointed by CSL's decision, but it does not change our commitment to the plasma market and our technology to improve collections. The NexSys and Persona value propositions are strong, supported by real-world data and real-time customer feedback. And we are excited about what this platform means for our customers. We are taking a comprehensive approach to address the impact the CSL transition will have in fiscal '23. We are acting with urgency, but we are being thoughtful and balanced in our planning. Our ability to respond is enhanced by the steps we have taken these past few years to strengthen our financial health, improve productivity, drive innovation, reshape our portfolio and build a collaborative performance-driven culture. We are well positioned to navigate this change.

We are focused on driving value for customers and shareholders, and our decision making is guided by a through-cycle mindset. We will continue to pursue growth strategies to maintain our market leadership, including developing innovation in partnership with our customers. We also remain committed to productivity and being good stewards of the Company's resources. We will provide more details on the path forward as our plans take shape.

With that, let me turn to our results for the quarter and the fiscal year. Today, we reported organic revenue decline of 14% in the fourth quarter and 13% for fiscal '21; and adjusted earnings per share of $0.46, down 33% in the quarter, and down 29% to $2.35 for the year.

Fiscal 2021 was a difficult year for Haemonetics as the pandemic had varying effects across our businesses and their respective customers. Despite the challenges, we made progress to build a stronger Haemonetics. We divested non-performing assets like the Fajardo blood filter manufacturing operations, Blood Center donor management software in the US and Inlog SAS blood bank and hospital software in Europe. We made organic and inorganic investments in attractive and growing markets, including the launch of Persona and the Donor360 app, and the acquisitions of ClotPro and Cardiva Medical. We modified our capital structure for financial flexibility and remain diligent with cost containment, while continuing to fund growth. We made significant changes to the way we source and make our products as part of our Operational Excellence Program. While we cannot control the pandemic's impact on our customers' businesses, we met every challenge, keeping our employees safe and our plants operational with high levels of service and customer support.

Early fiscal '22 will continue to be challenging, but we expect the pace of recovery to accelerate over the year. The end market demand for our products remain strong, and we do not see structural or other changes from the pandemic that would impact the need for lifesaving plasma-based medicines or hospital devices for critical areas of medicine like trauma, interventional cardiology and electrophysiology. We have healthy and viable businesses, delivering exceptional value adding technology. We have proven our resilience and our ability to drive growth and productivity, and we will do so again as our markets recover from the pandemic.

Turning now to our business units. Plasma revenues declined 28% in the fourth quarter and 26% in fiscal '21, as the pandemic continued to have a pronounced effect on the US-sourced plasma donor pool. We saw lingering effects beyond fourth quarter into April. North America disposables declined by 31% in the fourth quarter, primarily driven by declines in volume and a negative impact from the expiration of pricing on a historical technology enhancement with one of our customers. Sequentially, plasma collection volumes declined by 13% compared with historical average seasonal declines of about 7%, as additional economic stimulus hindered recovery.

Fiscal '21 was an especially difficult year for plasma collections, given the interplay of different factors affecting donor behavior. Our customers have taken extensive measures to ensure the health and safety of donors and to launch a myriad of promotional campaigns to encourage plasma donations. Our teams have remained focused on ensuring no disruptions to our supply, service and support. Despite the environment, we advanced our innovation agenda with the FDA clearance of Persona, which safely yields an additional 9% to 12% of plasma on average per collection. We extended the reach of our customers to donors via a Donor360 app, which allows donors to engage with centers before in-person visits, decreasing door-to-door time and improving the overall donor experience.

Given the pandemic's negative effect on collections, increased yield is more important than ever and feedback from NexSys customers operating with YES technology or Persona continues to be positive. We believe they were able to offset some of the headwinds from the pandemic because they benefited from safe, higher plasma yield per donor, bidirectional paperless connectivity and increased donor satisfaction.

NexLynk DMS rollouts continue on pace, and the software continues to be a key enabler and differentiator for NexSys. All of our major customers have agreed to adopt NexSys somewhere in their collection network, and we anticipate that by mid-fiscal '23, the majority of our customers, excluding CSL, will be on NexSys in the US or globally. As we emerge from the pandemic and see future sustained increases in available donors, the operational efficiency benefits of NexSys, integrated with NexLynk DMS, will be an increasingly valuable tool to support greater donor traffic.

We anticipate initial Persona rollouts this fiscal year, as we strive to move in sync with our customers and pace our technology implementations to meet their individual needs. We are committed to advancing our innovation agenda across devices, disposables and software to develop products that create long-term sustainable value for our customers. We continue to do everything we can to support our customers, and we remain cautiously optimistic about the timing and pace of recovery. The demand for plasma-derived medicines remains strong, and our customers are doing what they can to recruit and retain donors. Unfortunately, donor economics play a critical role in plasma collections, and we expect collections will be muted until government stimulus wanes. Beyond stimulus, we expect a return to the long-term 8% to 10% growth of the US-sourced plasma collections market, and we see potential to grow in excess of that as customers strive to replenish depleted plasma inventories.

Hospital revenue increased 12% in the fourth quarter and 4% in fiscal '21. Our Hospital business experienced continued sequential improvement over the first nine months of the fiscal year. Fourth quarter recovery was uneven, as we saw another spike in COVID cases early in the quarter, followed by a material improvement in February and March, coupled with the anniversary of the previous year impact of COVID-19 in China and other geographies that were affected earliest by the pandemic.

Hemostasis Management revenue was up 19% in the fourth quarter and 9% in fiscal '21. North America, our largest market, showed sequential growth throughout the first nine months of the year. And despite a spike in COVID cases early in the fourth quarter, the business exited in a strong position, including additional penetration into new accounts. China, our second largest market, benefited from a lower comparator in the prior year fourth quarter due to the early onset of COVID-19. Strong capital sales in North America and EMEA have also contributed favorably to our fourth quarter and fiscal '21 results.

We continue to drive our go-to-market strategies for viscoelastic testing to meet the unique needs of our regional markets. We are executing on the Chinese market introduction of our locally designed and manufactured viscoelastic testing technology that expands our product offering to meet the needs of that geography.

Transfusion Management was up 9% in the fourth quarter and fiscal '21, primarily driven by strong growth in BloodTrack through new accounts and geographic expansion of SafeTrace Tx. Our teams have used remote tools to advance installations and utilization in customer environments where access continues to be restricted.

Cell Salvage revenue grew 2% in the fourth quarter and declined 8% in fiscal '21. Our Cell Salvage results in the quarter benefited from the easy comparison with the prior year quarter in China and 80% growth in capital sales as we continue to upgrade our customers to the latest technology. Partially offsetting these benefits in the fourth quarter was overall lower procedure volume due to COVID-19.

The integration of Cardiva Medical is going well, and the performance of the business is exceeding expectations. The VASCADE proprietary vascular closure technology strengthens our hospital portfolio in the attractive interventional cardiology and electrophysiology markets, and the team is focused on driving the strategy underlying this acquisition. Although excluded from our organic revenue results, Cardiva added close to $8 million of revenue in March, as our teams continue to drive penetration in the top hospital accounts for interventional procedures in the US. Additionally, as US procedure volume continues to improve, we've seen increasing benefit from product utilization among existing accounts. Our long-term outlook for this business is strong, as our combined product development and regulatory teams work closely together on OUS registrations and driving additional product innovation.

Overall, the pandemic has validated the essential role of our technologies in hospital. We have demonstrated our ability to safely and effectively sell, including to new and existing accounts, install and service our equipment despite limited access to hospitals.

Blood Center revenue declined 10% in the fourth quarter and 4% in fiscal '21. Apheresis revenue declined 3% in the fourth quarter and grew nearly 1% in fiscal '21. Fourth quarter apheresis results were impacted by unfavorable distributor order timing in EMEA and a competitive loss, partially offset by strong capital sales. Order timing was overall a benefit to our full year fiscal '21 results, as distributors made large stocking orders in response to the pandemic, particularly in Europe and the Middle East. We also benefited from strong capital sales as we continue to support our customers in the collection of convalescent plasma. These benefits were partially offset by the previously disclosed competitive loss that had a $17 million impact on our full year results. Excluding this loss, overall Blood Center revenue actually grew in fiscal '21.

Whole blood revenue declined 24% in the fourth quarter and 14% in fiscal '21, driven by lower collection volumes due to COVID-19 and discontinued customer contracts in North America. We remain committed to supporting enhanced product quality and services for our blood center customers, while preserving cash generation and exploring portfolio rationalization as appropriate.

I'll now turn the call over to Bill.

William P. Burke -- Executive Vice President, Chief Financial Officer

Thank you, Chris, and good morning, everyone. I will begin by discussing our fiscal '21 actual results, followed by our fiscal '22 guidance.

Chris has already discussed revenue, so I will start with adjusted gross margin, which was 50% in the fourth quarter, a decline of 30 basis points compared with the fourth quarter of the prior year. Adjusted gross margin year-to-date was 50.3%, a decline of 130 basis points compared with the prior year. On the positive side, we continue to benefit from productivity savings realized from our Operational Excellence Program and lower depreciation expense related to our PCS2 devices, which were mostly depreciated by the end of the prior fiscal year. We also saw benefits from the recent acquisition of Cardiva Medical.

The primary drivers of the adjusted gross margin decline were unfavorable pricing and product mix, mainly due to the impact of COVID-19, higher inventory-related charges and the impact of recent divestitures. These inventory-related charges, which relate to CSL's intent not to renew the US plasma disposables supply agreement, had about 220 basis points impact on our fourth quarter and about 60 basis points impact on our fiscal '21 results. The combination of our recent divestitures and our strategic decision to exit the liquid solution business resulted in a net negative impact of 70 basis points on our fourth quarter and about neutral impact on our fiscal '21 adjusted gross margin.

Adjusted operating expenses in the fourth quarter were $81.9 million, an increase of $9.2 million or 13% compared with the fourth quarter of the prior year. Adjusted operating expenses for fiscal '21 were $283 million, a decrease of $9.8 million or 3% compared with the prior year. Adjusted operating expenses, both in the fourth quarter and fiscal '21, were impacted by higher variable compensation, the acquisition of Cardiva Medical and the impact from the 53rd week. Contributions from our productivity savings and cost containment efforts that we put in place earlier in the pandemic helped to offset some of the impacts and allowed us to make additional growth investments into our business.

As a result of the performance in adjusted gross margin and adjusted operating expenses, fourth quarter adjusted operating income was $30.5 million, a decrease of $16.8 million or 35%, and adjusted operating income for fiscal '21 was $154.6 million, a decrease of $63.4 million or 29% compared with the prior year.

Adjusted operating margin was 13.5% in the fourth quarter and 17.8% in fiscal '21, down 630 basis points and 420 basis points respectively compared with the same periods in fiscal '20. For both periods, the lost leverage from revenue, coupled with the inventory-related charges, higher variable compensation and impacts from portfolio changes, outpaced the impact of cost mitigation efforts and productivity savings. These inventory-related charges and higher variable compensation put downward pressure on operating margins by approximately 500 basis points in the fourth quarter and approximately 100 basis points in fiscal '21. The variable compensation incentives we established during the pandemic and the one-time inventory-related charge due to the recent customer announcement are not expected to affect future operating margins.

The adjusted income tax rate was 12% in the fourth quarter and 14% in fiscal '21 compared with 18% and 15% respectively for the same periods of the prior year.

Fourth quarter adjusted net income was $23.9 million, down $11.5 million or 33%, and adjusted earnings per diluted share was $0.46, down 33% when compared with the fourth quarter of fiscal '20. Adjusted net income for fiscal '21 was $120.7 million, down $50.6 million or 30%, and adjusted earnings per diluted share was $2.35, down 29% when compared with the prior year. The inventory-related charges and higher variable compensation had a downward impact on adjusted earnings per diluted share of $0.18 in the fourth quarter and $0.12 in fiscal '21.

Our Operational Excellence Program continued to deliver positive results and drive improvements in adjusted gross and adjusted operating margins. This program has also enabled us to offset some of the challenges resulting from the pandemic. During fiscal years '20 and '21, the program-to-date gross savings are approximately $34 million, with the majority of those savings dropping through to adjusted operating income.

Cash on hand at the end of the fourth quarter was $192 million, an increase of $55 million since the beginning of the fiscal year. Free cash flow before restructuring and turnaround costs was $99 million in fiscal '21 compared with $139 million in the prior year. Fiscal '21 included a $54.3 million payment for a compensation-related liability as part of the Cardiva Medical acquisition. The total purchase price paid for Cardiva Medical was reduced by the amount of this liability. Lower increases in inventory, lower capital expenditures and improvement in accounts receivable compared -- when compared with the prior year have benefited fiscal '21. Although the free cash outflow for inventory is lower than in the prior year, the impact from lower sales volume in Plasma has resulted in a higher disposables inventory balance. We will continue to monitor our inventory levels and expect inventory fluctuations to continue as we adjust our production to support customer demand and our Operational Excellence Program initiatives.

In addition to free cash flow, the fourth quarter ending cash balance benefited from the completion of a $500 million convertible debt offering, which resulted in a net cash inflow of $439 million. Offsetting the cash inflow during fiscal '21 was $390 million of net cash spent on recent portfolio moves and $82 million of debt repayments, including a $60 million repayment of the revolving credit line that was outstanding at the end of fiscal '20.

Our current debt structure includes a $700 million credit facility that does not mature until the first quarter of fiscal '24 with the majority of the principal payments weighted toward the end of the term. At the end of the fourth quarter, total debt outstanding under the facility was $302 million. There were no borrowings outstanding under the $350 million revolving credit line at the end of fiscal '21. During the fourth quarter, we completed a $500 million convertible debt offering. Our EBITDA leverage ratio, as calculated in accordance with the terms set forth in the Company's existing credit agreement, is 3.4 at the end of fiscal '21.

The existing $500 million share repurchase authorization will expire at the end of May 2021 with $325 million remaining on the authorization. We will update our capital allocation priorities in the next few quarters as we continue to develop our long-range plan.

Now, I will turn to our fiscal '22 guidance. Our business continues to be impacted by the pandemic. Therefore, our fiscal '22 guidance includes wider than usual ranges that reflect the uncertainty of the pace of the continuing recovery. We will narrow or update our guidance as necessary throughout the year.

Our fiscal '22 organic revenue growth is expected to be in the range of 8% to 12%. We remain confident in the continued market growth underlying the commercial plasma business and anticipate Plasma revenue growth of 15% to 25% in fiscal '22. At the low end of our guidance range, we assume that the second and third rounds of economic stimulus will continue to impact plasma collections through the first half of fiscal '22 with stronger collection volumes in the second half of fiscal '22. At the higher end of our guidance range, we assume that recovery will begin mid-second quarter with additional acceleration toward the end of the fiscal year as customers begin to replenish safety stock levels. In both cases, we expect the run rate for plasma collections to be at or above fiscal '20 levels at the end of the fiscal year.

Disposable revenue related to CSL collection volume is included in the guidance for 12 months. In fiscal '21, we recognized disposable revenue in the US from CSL of approximately $89 million. This Plasma revenue guidance also includes the net impact of initial rollouts of Persona and NexSys adoption for customers with whom we have agreements, with the majority of the benefit toward the end of the fiscal year. These benefits are partially offset by price adjustments, including the expiration of fixed term pricing on a historical PCS2 technology enhancement and a one-time safety stock order in fiscal '21.

We expect 15% to 20% organic revenue growth in our Hospital business in fiscal '22. This growth rate assumes the recovery of hospital procedures will continue to improve throughout the year and will be close to fully recovered across all geographies by the end of our fiscal '22. Our Hospital revenue guidance includes Hemostasis Management revenue growth in the mid-20s. The Cardiva Medical acquisition is anticipated to deliver $65 million to $75 million of revenue and is excluded from organic revenue growth until the anniversary of the acquisition date.

Our fiscal '22 guidance for Blood Center revenue is a year-over-year decline of 6% to 8%. The anticipated revenue decline in Blood Center reflects the annualization of business exits, primarily within North America whole blood, the non-repeating revenue related to convalescent plasma in fiscal '21 and the effects of order timing, which favorably impacted fiscal '21.

We expect fiscal '22 adjusted operating margins in the range of 19% to 20% and adjusted earnings per diluted share in the range of $2.60 to $3.00. Our adjusted earnings per diluted share guidance includes an adjusted income tax rate of approximately 21%.

In fiscal '22, we expect our Operational Excellence Program to deliver gross savings of approximately $22 million with less than half benefiting adjusted operating income due to inflationary pressures and investments in manufacturing. The program began in fiscal '20. And by the end of fiscal '22, we anticipate achieving approximately $56 million of gross savings, with about 60% of those savings benefiting adjusted operating income. The remaining year of the Operational Excellence Program is being updated as part of our comprehensive effort to address the impacts from the anticipated customer loss in early fiscal '23. We intend to communicate the updated Operational Excellence Program as part of our longer range plan. We also expect our free cash flow before restructuring and turnaround expenses in fiscal '22 to be $135 million to $155 million.

Before we open the call up for Q&A, I want to reiterate the key points that we hope you take away from today's call. First, while the pandemic continued to impact our business, we don't believe it has caused any structural changes to the end market demand for our products. By the end of our fiscal '22, we expect full recovery across all of our businesses, but the exact pace of the recovery is the biggest variable included within our guidance.

Second, we believe our product portfolio strongly positions us to capitalize on the market recovery ahead. Despite the challenges put in front of us, our teams remain focused on rationalizing our product portfolio to emphasize the products and markets that meet our strategic goals, prioritizing investment and allocating capital to strengthen the core capabilities and technology that make us distinctive.

Third, our Operational Excellence Program continues to drive transformation, primarily in our manufacturing and supply chain, as we become more agile and flexible. We made significant progress to date, which has allowed us to offset some of the headwinds due to the pandemic, and we expect to have close to 60% to 70% of the program completed by the end of our fiscal '22 with the majority of those savings benefiting our adjusted operating income.

And finally, we have a proven dedicated team, committed to driving value for our customers and our shareholders. We are proud of the way our teams have risen to meet the challenges over the past year. We recognize more challenges are ahead, including difficult donor economics and the eventual loss of CSL in Plasma. We are committed to taking action, managing costs and mitigating the impact without compromising future growth of our business. And while we have a lot of work to do in the coming quarters, we're confident that our teams' experience, resilience and agility will ensure that Haemonetics has a bright future.

With that, I will turn the call back to the operator for Q&A.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from Anthony Petrone with Jefferies. Your line is open.

Anthony Petrone -- Jefferies -- Analyst

Thank you. And a couple of questions to start on guidance, and then I'll shift to Plasma. Maybe starting with earnings guidance out of the gate, maybe just a recap of what is baked in for the Cardiva dilution to the earnings line in fiscal '22. That would be the first question. And then, offsetting that, how much gain are you getting from the restructuring? And then, perhaps maybe to round out the earnings question, you referenced price several times. How much price erosion is baked into the earnings line? And then, I'll ask a couple more on Plasma.

William P. Burke -- Executive Vice President, Chief Financial Officer

Hi, Anthony, it's Bill. I can take your first one there. So on the guidance, your first question was on Cardiva. We have $65 million to $75 million of Cardiva revenue in the guidance. It's in line with what we had in the deal model. It is -- there is dilution included in the EPS numbers. It's -- we haven't disclosed exactly what that's going to be, and we're going to stay away from the exact dilution that's in there. But it is slightly dilutive both on the operating income level and in EPS.

Your second part of the question, I think it was related to the...

Anthony Petrone -- Jefferies -- Analyst

Yeah, the earnings line. Yeah, how much is baked in for restructuring gains? And then offsetting that, to what extent is price impacting earnings?

William P. Burke -- Executive Vice President, Chief Financial Officer

Yeah. So our -- let me just give you an overview of our Operational Excellence Program. So, through the end of fiscal '21, we recognized $34 million of gross savings with about half of that dropping through to adjusted operating income. In FY '22, we're anticipating an additional $22 million of gross savings. And we've stated that about -- less than half of that will drop through to adjusted operating income because there's inflationary pressures and some investments in manufacturing that we've netted into the -- or against the gross savings. But in total, the $56 million of gross savings will be 60% to 70% of the overall program savings through the end of FY '22.

Anthony Petrone -- Jefferies -- Analyst

Okay. And then, just pivoting to Plasma, maybe a little bit on the 15% to 25% organic guide, just to slice [Phonetic] that, what's in there for COVID headwind? It sounds like that's still lingering certainly through the first half. But you also referenced last quarter contract wins, as well as in today's prepared remarks. So how much headwind is baked in there from a basis point standpoint, offset by contract gains?

And I'll just throw the last one in for Chris. Just maybe high level on the strategic sort of comments today, we have a new competitor coming in, Terumo. I'm just wondering if you could provide a little bit more detail on kind of the strategic thoughts that are going on internally and some potential countermeasures, at least as you look at how the landscape is shifting here early on. Thanks.

Christopher Simon -- President and Chief Executive Officer

Yeah. Why don't I -- you want to start off?

William P. Burke -- Executive Vice President, Chief Financial Officer

Yeah, I'll take the Plasma guidance question. So, the range that we provided was 15% to 25%. And what's included in the range there and is most impactful in the guidance is the pace of the recovery related to the pandemic. And coming out of Q4, we still have seen some weakness. Chris mentioned in his in his remarks that we haven't seen really a recovery coming out of the fourth quarter. So through this -- through our Q1 in FY '22 so far, the volumes have still been down versus the prior year. So, that's reflected in our, in our guidance. And at the low and high end of the guidance, there are just slightly different assumptions on the recovery. So, at the low end of the guidance, we have recovery not beginning until late in the second quarter and then accelerating throughout the back half of the year. In the high end of the guidance, we're a bit more optimistic, and we are assuming that we see volumes recover earlier in the second quarter. In both cases, though, we do expect that coming out of FY '22 on a run rate basis that we would be at or above the volumes that we were experiencing back in fiscal '20.

And then, one other thing that is affecting the guidance range, early in the year, in FY '21, we referred to a stocking order of about $6 million, and that stocking order has about a 3% or 4% impact, a downward impact on the guidance range this year.

Anthony Petrone -- Jefferies -- Analyst

Okay.

William P. Burke -- Executive Vice President, Chief Financial Officer

Okay?

Anthony Petrone -- Jefferies -- Analyst

Yes, thank you.

Christopher Simon -- President and Chief Executive Officer

Yeah. So, Anthony, on your questions regarding longer-term perspective, we remain very bullish on 8% to 10% growth in collection volumes to meet the demand for IG worldwide. Clearly, the pandemic has depleted inventories. So, we fully expect as they are -- our collection customers to drive higher volumes of collections as they did in prior years, pre-COVID, to make up for that gap. So, we don't see any structural change. We're excited about this. The actual recovery in the third quarter of last year is a good reference point in that regard. When we look at that recovery, clearly, stimulus is the single largest factor. And as Bill just articulated, it's just difficult to know exactly when the influence of stimulus is going to wane. So, what we're forecasting is that mid to latter part of our second quarter with robust recovery into the latter part of the year probably offsetting seasonality or any other changes you would otherwise expect. So, we fully anticipate but we think it's going to be delayed.

We overlay on top of that what we're doing with our portfolio, which we remain very confident in the value proposition of that portfolio. The NexLynk DMS conversions continue full stride. We expect to have that completed by year-end. As I mentioned in the prepared remarks, that is for most of our customers, a precursor to NexSys. All of those customers are -- have agreed to adopt NexSys, either US or globally, with the exception of CSL. So those conversions are under way. They begin increasing in earnest on the other side of NexLynk. And we expect to have our existing base converted to NexSys by mid-year 2023, right? So we're enthusiastic about that, and we are overlaying Persona with its 9% to 12% yield on top of that, which again, we described previously as a game changer in terms of excitement within the industry. So from our vantage point, we double down on technology and innovation and drive that adoption through the market, paced by our customers whose first, second and third priority understandably is recovery from the pandemic.

Anthony Petrone -- Jefferies -- Analyst

I'll get back in queue. Thanks.

Operator

Thank you. Our next question comes from Larry Keusch with Raymond James. Your line is open.

Larry Keusch -- Raymond James -- Analyst

Great, thanks. Good morning, everyone. I guess I have two questions here. First for Chris. Look, I think part of what's reflected in the stock price is concerns from investors that you sort of got blindsided by what CSL wound up doing with its contract and the potential for other customers to move in that direction. So I'm just curious as to your thoughts as to, again, how you fit into the equation here. And what can you tell us, I guess, specifically about the contracts in perhaps some longevity that could give people some comfort that this can't [Phonetic] necessarily change there months from now?

Christopher Simon -- President and Chief Executive Officer

Yeah, Larry, so we're in constant dialog with our customers, conducting business reviews, planning for recovery. All of those customers, as we've said, with the exception of CSL, though CSL has agreed to adopt in Europe and that's under way, all of those customers have agreed to adopt NexSys in the US or globally. And the conversations we're having with them is about how to make that rollout as minimally disruptive as possible for their ongoing business, given the heightened urgency around recovery. So, we are under contract. We feel great about what the competitive position of the product and what it means for them. They're excited about the adoption, and that's what our conversations are focused on.

Larry Keusch -- Raymond James -- Analyst

And, Chris, just a quick follow-up on that. When you talk about deployment of NexSys into your customers, can you help us understand sort of how broad that is within those customers in terms of the agreements and the deployment there? And can you even provide any sort of, even at a high level, some thoughts on the longevity of your contracts to help give investors some comfort that there's some runway here?

Christopher Simon -- President and Chief Executive Officer

Larry, I want to stay away from specific conversations around customer contracts. It's confidential and proprietary. And candidly, in a tightly contested market like this, it's not helpful. All right? So as a general course, we don't talk about individual customers. We're not going to talk about the details of those contracts. What I can tell you is that the change out of a network is no small feat for us or our customers. So, the agreements we have in place cover all of the existing PCS2 devices and the associated disposables in the US or globally, as mentioned. I don't think we or our customers take those change-outs slightly. It's predicated upon a belief on the value proposition of the product, first and foremost, and how it will enhance their collection capabilities, the yield, the cycle time, the connectivity and the donor satisfaction. And then, I think, increasingly, it's predicated upon our commitment, innovation and technology. We're not in any way, shape or form resting on our laurels. Through the pandemic, we introduced not only Persona, but the Donor360 app that's having meaningful benefit for all of our customers. We rolled it out industrywide. We're not backing off of our technology. We'll double down and we have through the pandemic and beyond.

Larry Keusch -- Raymond James -- Analyst

Okay. That's really helpful. And then, I guess for Bill, just trying to again wrap my arms around the guidance for fiscal '22. I'm wondering, Bill, if you can just sort of help bridge the operating margin assumption that you've got in the guide, that 19% to 20% versus the 2020 operating margin, which was closer to 22%. Just trying to understand the downward pressures there from what you achieved in 2020 to the guide for 2022.

William P. Burke -- Executive Vice President, Chief Financial Officer

Yeah, thanks, Larry. The largest contributors of the difference between FY '20 and our guidance for this year would be the -- first and foremost is the Plasma volume, right? We all know that Plasma volume is highly leveraged at the operating margin level. When Plasma is off, we're not -- we said we would be at the end of FY '22 run rates equal to FY '20, but we still for the year be down, and that's putting pressure on the operating margins. The second piece is the Cardiva dilution. And then, our operating expenses are, I would call it, neutral. And I want to say that because we are in the process of getting back our operating expenses to levels where they were in FY '20 after being significantly down in FY '21 because of our cost containment efforts.

Larry Keusch -- Raymond James -- Analyst

Okay. And just as we try to dial in the right operating expenses here, can you help us think a little bit about, Bill -- again, I know you said that Cardiva would be dilutive. But can you help us think a little bit about the incremental opex that's coming through on that acquisition? Thanks.

William P. Burke -- Executive Vice President, Chief Financial Officer

Yeah. So, I would -- when you look at our Q4 in FY '21, that could essentially be your starting point for expenses, give or take. And then, when you look at Cardiva, we know -- we said $65 million to $75 million of revenue. So, use a midpoint, apply somewhere in the 75% margin range, and if we're negative on the operating income line, you can back into an expense amount that gives you an idea where it should be.

Larry Keusch -- Raymond James -- Analyst

Great. Thanks very much. Appreciate it.

William P. Burke -- Executive Vice President, Chief Financial Officer

Yeah, you got it.

Operator

Thank you. Our next question comes from Larry Solow with CJS Securities. Your line is open.

Larry Solow -- CJS Securities -- Analyst

Great. Good morning. Thanks for taking the question. Just a couple of follow-ups on the Cardiva piece. First, I thought when you guys made that acquisition, it was going to be sort of, I think, $0.10 to $0.20 dilutive in the year. Is that in the first year. And most of that, I anticipated at the time, was going to be interest expense, which was before you did the convert. So, can you help me just bridge that? Has that changed at all? I guess you're not -- I gather you're no longer giving that guidance. You're not giving specific guidance on Cardiva. So, it seems like the operating expenses are higher than initially thought. Or can you just give a little more color on that?

William P. Burke -- Executive Vice President, Chief Financial Officer

So, Larry, the revenue range is similar to what we provided. And you're correct on the EPS range what we gave initially. We subsequently have done the convertible debt offering, which did remove some of the interest expense related to that. But still on the operating income line, we are negative. We're anticipating the amount on operating income to be negative. But we'd probably at the -- on an EPS basis, we'd be at the lower end of the range that we had provided before on the EPS line.

Larry Solow -- CJS Securities -- Analyst

Okay. And then, just to clarify on Plasma, so Chris, it sounds like you're pretty confident that by the end of fiscal '23, the majority, if not all, of your customers will have converted to NexSys with the exception of CSL, who in theory wouldn't be a customer then anyhow, in the US at least, I should say. Is that correct?

Christopher Simon -- President and Chief Executive Officer

Yeah. With your clarification that we are under contract with CSL for Europe and that conversion has already begun and we intend -- both parties have communicated their intent to honor the contract, which is a long-term agreement.

Larry Solow -- CJS Securities -- Analyst

And the numbers this year, it sounds like you probably -- timing-wise, maybe you get some conversions at year-end. But I guess, you mentioned in guidance, maybe at the high end of that Plasma range, you're putting in a little bit of conversion there. Is that sort of...

Christopher Simon -- President and Chief Executive Officer

Yeah, that's exactly right. We've got to continue to power through, which is challenging in a pandemic environment. The NexSys -- NexLynk DMS software upgrades, we've done well with that. We continue to do well with that. We anticipate completion as scheduled by the end of this year. For anybody who's converted, we are actively moving on the NexSys PCS. And the pace of that conversion is really, as it has been from the outset, dictated by our customers. We stand ready to go, and they need the plasma. So anything we can do to pull that forward, we'll take advantage of. But our guidance reflects the likelihood that both the recovery itself and the conversions are a second half event and then into '23.

Larry Solow -- CJS Securities -- Analyst

Right, OK. And then, just shifting gears, just on the cost structure, and I know you're not ready to sort of give your outlook for fiscal '23, but Chris, obviously you've done a great job and rightsizing the Company since you came in five, six years ago. Just from a high level -- I guess, it's a two-part question. On the Operational Excellence Program, getting that remaining $25 million to $35 million targeted savings, which maybe is a little bit lower now because of inflation, is that going to be an achievable number still? Because I know, part of that sort of $80 million, $90 million was predicated on volume gains in Plasma. So clearly, you're not going to get those...

Christopher Simon -- President and Chief Executive Officer

What I would say about the program, Larry, is we're really proud of what that team has done. It is not just global manufacturing and supply, it's R&D, it's quality assurance, it's our business services. Collectively they've made tremendous strides despite whatever the world has thrown at them. We did take a view at that which said, we're going to capitalize on high volume and throughput businesses. That's changed somewhat as a result of CSL's decision. So, that team is in the process of reexamining what are the levers that we can pull intelligently. The first priority of that initiative is to ensure continued world-class product quality, and we're not going to compromise that. The second priority is world-class customer service. We're not going to compromise that. We then look at the savings, what we've signed up for to date and the pass-throughs, etc. That's hardwired. What we intend to do and what Bill explained I think in his prepared remarks is, we will now step back with the adjusted volume that will begin in our FY '23 with the loss of CSL's US PCS2 supply agreement, when we look at that, we'll figure out what OEP needs to become as a result of it. And as you said, I think this is a team through complexity reduction, through OEP, through the cost management during the pandemic, that's demonstrated their commitment to being good stewards financially. And we're going to continue to do so here. But we're not going to do it in a way that's going to compromise our leadership position in the markets where we compete.

Larry Solow -- CJS Securities -- Analyst

Absolutely. Okay, great. Fair enough. I appreciate the color. Thanks so much.

Christopher Simon -- President and Chief Executive Officer

Thanks.

Operator

Thank you. Our next question comes from Mike Matson with Needham & Company. Your line is open.

Mike Matson -- Needham & Company -- Analyst

Yeah, thanks. So, with regard to the NexSys upgrades, you're saying you expect those to be completed by mid, I think, fiscal '23. So, is that right? And then, what is your expectation around Persona? Is that going to be kind of beyond that? Is that like another upgrade on top of NexSys, I assume?

Christopher Simon -- President and Chief Executive Officer

Yeah, Mike, you have it exactly right. It's mid '23, fiscal '23. And the Persona discussions are going great. We're having those in parallel. I think different customers will view the upgrade to Persona differently. There's a series of clarifications, tests, etc., given the magnitude of the change for them. So, we're working our way through that. What's reflected in our guidance is the contracts we've already reached. And as we get closure and pull some of the additional opportunity in, we'll communicate through our guidance accordingly.

Mike Matson -- Needham & Company -- Analyst

Okay, thanks. And then, I don't know if you know the answer to this, but just with regard to the stimulus program, there's the cash payments, but there's also this extended unemployment that I think goes through September. So do you have a feel for whether it's the -- just the cash one-time stimulus payments versus the added unemployment payments that have caused the pressure on the collection volumes? Because if it is the unemployment, we're looking at like September time frame. But if it was the stimulus, then it could occur earlier. Maybe that's why your guidance is so wide and you're uncertain about the timing.

Christopher Simon -- President and Chief Executive Officer

Yeah, Mike, it's -- that is a driver of the 15% to 25% range on our guidance for growth in revenue on Plasma, and it's really a function of when does that kick in. And you are right, there are multiple components of this, whether we're looking at the federal dollars or the state dollars, whether we're talking about one-time payments, whether we're talking about the weekly unemployment additional subsidies. There's even provisions for tax credit to get factored in beginning mid-year calendar year. So it's a complicated confluence of different factors. We've worked hard to model that. We're having conversations obviously with our customers about that to understand their perspective and how much of that's reflected in the forecast they submit to us. At the end of the day, what we're trying to get to is, what is disposable income, what is household savings rates, net of all this? And I think we have some good learnings from the past year. And while I think we struggled to be precise in the forecasting of it, in both directions candidly, I think we've learned a bunch. And that's reflected in the range that we put forth.

Mike Matson -- Needham & Company -- Analyst

Okay, thanks. And then, I just had one clarification question on the PCS2 tech enhancement pricing issue. Can you maybe elaborate on that a little? I didn't understand what that was. It sounds like it's some sort of headwind on pricing on the legacy PCS2 units or something.

Christopher Simon -- President and Chief Executive Officer

Yeah, there is -- it's a legacy agreement, long-dated agreement that was sunset here just recently, and it's just a change to -- there's an enhancement we made. We got priced for it at the time, years ago. It was a time-bound agreement, and the agreement expired.

Mike Matson -- Needham & Company -- Analyst

Okay. And is that with all the customers, or just one customer?

Christopher Simon -- President and Chief Executive Officer

It was with one customer.

Mike Matson -- Needham & Company -- Analyst

Okay, got it. Thanks.

Operator

Thank you. Our next question comes from Drew Ranieri with Morgan Stanley. Your line is open.

Drew Ranieri -- Morgan Stanley -- Analyst

Hi, Chris. So, you talked before about your focus on M&A to really diversify the portfolio. You've also completed several divestitures, strategic exits to just get out of lower-growth, lower-margin businesses. So, as you kind of look ahead, and I know there's still a lot of unknowns here, but do you feel more compelled to prune the portfolio in greater magnitude to just give yourself maybe more flexibility or to drive further growth and profitability enhancements?

William P. Burke -- Executive Vice President, Chief Financial Officer

Yeah, Drew, appreciate the question. From our vantage point, at one level, this doesn't change anything, right? We are focused on growth, organic, inorganic, shareholder value creation long term. We still have aspects of this portfolio that are probably not part of the future of this company. And intelligently and thoughtfully, when we can do so, in transactions that are value-creating, we'll address. In the interim, we are highly focused on delivering full value for our customers across all of our customer base. So I'm impressed and pleased by what the team was able to get done this year, the divestitures that we called out in terms of very antiquated software in our US Blood Center donor market and some stuff that was very isolated for Europe. We are highly committed to software as a growth lever for the Company as our customers demand it. But those programs were just not that. They were very antiquated. I think similarly, the divestiture of the Fajardo manufacturing facility for whole blood filters, we were able to transition that to a world-class supplier who will do great things with this, and we got back operating agility in our manufacturing network. We'll continue to look at those type of opportunities for sure.

In terms of the acquisitions, we've been busy. We done a bunch of things, culminating in Cardiva. There was a discussion earlier about Cardiva, and what I think could potentially get lost in all of this because of our reporting, we are very pleased with the work so far to integrate and assimilate, right? We closed the transaction in March and we have been full steam ahead. We've gone out of our way to avoid any disruption to that business. And the results that we have seen through the first three months of the year clearly are evidence of that. This is an exciting opportunity. It's a jolt of energy, not only to the Cardiva team, but also to our own Hospital business unit. And I think you're seeing that in our results in terms of the pace of recovery and the growth therein. So electrophysiology, interventional cardiology, exciting growth segments for us. And we really like our chances with what's happening with the VASCADE portfolio.

Drew Ranieri -- Morgan Stanley -- Analyst

Got it. Thank you. And actually, on that topic, just touching on your outlook for Cardiva for fiscal 2022, I see your guidance is $65 million to $75 million. I know you mentioned that they did about $8 million in March, given your financials. But I just kind of want to better understand kind of the run rate there. I mean it sounds like it's over a $20 million quarterly run rate. So, you can just help us better understand that in the context of your $65 million to $75 million guidance. And then, is fiscal '22, is it more focused on kind of going deeper in existing accounts with Cardiva? Or are you thinking more of commercialization across a broader account base? Just getting -- trying to get a better sense of the commercial investments in the year. Thank you.

Christopher Simon -- President and Chief Executive Officer

Sure. I understand the question. From our vantage point, we've spent a lot of time in diligence. We put together what we think is a very robust deal model. The $65 million to $75 million is a direct take from that. And it's early days. We're excited by what we see. We understand if you annualize that March number, you get to a different place. We're not ready yet. This is a rapidly growing product. It grew 50% year-over-year last year under Cardiva's leadership. And we need to spend a little bit more time with this to truly understand the forecast and the growth potential. As we learn more, we'll share more and, if need be, adjust accordingly. From what we're seeing, the primary benefit is twofold. We are -- that team is hyper-focused on driving penetration in the top 600 US-based interventional cardiology and electrophysiology hospitals, right? And there's some back and forth around us and geographic expansion. But the bottom line is, that team is executing in a very powerful way against the opportunity that's right in front of it. And we see a lot of excitement there. In parallel, we are looking for opportunities to augment that and pull aspects of the plan forward where that presents itself. That's something we're going to be talking about more in the coming months across our entire portfolio, in part with response to changes in the plasma landscape. So we will seek out opportunities to do more and to do it sooner, and Cardiva will be a place that we look for that type of opportunity. But what we're excited about is what they're doing with the resources they have. We think they can do more with additional resources. What you don't see in the results but is equally important is the investments that our combined teams are making clinically and more broadly to build out our footprint and our potential outside the US. So I think that will come to fruition. When we have a chance to sit down and talk more broadly about the portfolio, we'll provide additional clarity. That's a result of diligence in the early work together with the Cardiva team. But it's exciting. We're delighted to have them on board, and they're delivering accordingly.

Drew Ranieri -- Morgan Stanley -- Analyst

Thanks for taking the questions.

Operator

Thank you. Our next question is a follow-up from Anthony Petrone with Jefferies. Your line is open.

Anthony Petrone -- Jefferies -- Analyst

Thanks. Just a couple of quick follow-ups on cadence in Plasma. First would be just on CSL. They have the one-year option extension to June '23. I'm just trying to kind of run through that scenario. When would they have to sort of indicate to the Company that they would have to sign on for that? And maybe what are your thoughts on the probability that they resign for '23? And then, the last one on Persona. It sounds like discussions are ongoing. When we think about upgrades to Persona and timing, is there the potential for any in fiscal '22? Or do you think that's a beyond fiscal '23 event? Thanks again.

Christopher Simon -- President and Chief Executive Officer

Yeah, thanks Anthony. In terms of the agreement with CSL, we've communicated a lot about that. So I'll stay on that because we have spoken about it. The agreement has one additional extension that is at CSL's discretion. They would need to notify us in writing by the December 31 of this year if they intend to go beyond June of next year. And they have one more of those extension periods available. In terms of likelihood of that, it's a question best directed to CSL.

In terms of Persona, we have included a handful of signed agreements and planned rollouts, some of which have already happened, some of which will happen over the course of the year. We are obviously in discussion with -- we are in discussion with others, and we will obviously be excited to pull those forward. In some cases, it's very straightforward. In other cases, there's important underlying science in terms of handling a bottle. That is a third larger understanding, the implications for fractionation, given the higher yields and testing, which we've done, what the customers need to do because of their fractionation formulas with regards to higher -- what is the protein concentration. We are working collaboratively with customers through all that. The pace of that makes a little difficult to predict. But as we reach closure on those and pull them in, some of which we would hope will happen in FY '22, that's what pushes us toward the upside of our guidance. And if it goes beyond that, we'll talk about that then.

Anthony Petrone -- Jefferies -- Analyst

Thank you.

Operator

Thank you. And I'm currently showing no further questions at this time. [Operator Closing Remarks]

Duration: 63 minutes

Call participants:

Olga Guyette -- Director, Investor Relations

Christopher Simon -- President and Chief Executive Officer

William P. Burke -- Executive Vice President, Chief Financial Officer

Anthony Petrone -- Jefferies -- Analyst

Larry Keusch -- Raymond James -- Analyst

Larry Solow -- CJS Securities -- Analyst

Mike Matson -- Needham & Company -- Analyst

Drew Ranieri -- Morgan Stanley -- Analyst

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