Haemonetics Corp (HAE) 2008 Q1 法說會逐字稿

Good morning, Ladies and Gentlemen. Welcome to the Haemonetics First Quarter Fiscal Year 2008 Conference Call. At this time, all participants have been placed on a listen only mode, and the floor will be open for your questions, following the presentation.

Let me introduce Julie Fallon, Director of Investor Relations, for Haemonetics.

Thank you, Operator. Good morning and thanks for joining Haemonetics earnings call. Today, I'm joined by Brad Nutter, President and CEO, Chris Lindop, CFO, and Lisa Lopez, Vice President of Administration.

Please note that during the course of this call, we may make statements that could be characterized as forward-looking. Our actual results may differ materially from anticipated results. Additional information concerning factors that could cause actual results to differ materially, is available in our Press Release and 10K.

Today Brad Nutter will provide an overview of our strategic progress. Chris Lindop will review the First Quarter operating performance, as well as detailed business trends.

Before I turn the call over to Brad, I want to draw your attention to a few items that affect our comparative results for the quarter. You may remember that in Fiscal '07 there were four items that impacted our results. We excluded these items from our adjusted results, for comparison purposes in Fiscal 08. The items excluded from Fiscal '07 results are first, restructuring of our international businesses, second the in process R&D charge related to our acquisition of Arryx, third, a one-time positive tax benefit, and fourth, receipt of a settlement from a legal claim.

In Q1, our Fiscal 08 adjusted results excludes $1.6 million in costs, or $.04 per share, associated with the ongoing restructuring of our international business. For the full year, these restructuring costs are expected to be $4 million to $5 million or $0.11 per share.

As is our normal practice, our Press Release and website include a complete P&L, balance sheet, and sales by product line, for the quarter. Our Press Release also includes a reconciliation between our GAAP results and our results adjusted for the items that I just mentioned, but when describing the business today, in order to give greater clarity to our operating results, we'll be speaking about the adjusted results. With that, let me turn the call over to Brad Nutter.

Thanks, Julie. Good morning, everyone, and thank you for joining our call today. For the past several years, and most recently at our May investor round table, we've articulated two strategies.

They are number one, leverage the business and number two, expand the business, by leveraging our three core competencys. In Q1 of this year, we continue to perform well against both strategies. Let me share some of our highlights.

With regard to strategy number one, leveraging the business, we're off to a good start. Our annual revenue guidance is 7% to 9% growth; however as you see our Q1 revenue growth was 10%. Plasma and software sales, were particularly strong in the quarter. We also had higher than expected equipment, and blood bank, revenues in the quarter. Chris will give you more details on these product lines in a moment.

OrthoPAT revenue growth was solid. I'm pleased that we are able to maintain disposable unit volumes, level with Q4 of last year. Now, this indicates to us that the volume growth is sustainable, but the best news is, we placed 89 new OrthoPAT devices in the quarter. So total company revenues grew 10% from strength in plasma, software, equipment, blood bank and OrthoPAT. The only area in which we need to improve, is red cell disposables. While red cell disposable revenues were under our annual guidance range, we're encouraged by the red cell equipment sales activity in the quarter, and we feel comfortable with the growth prospects for the red cell market going forward. Again Chris will provide more detail in a moment.

Finally with regard to strategy number one, I'm pleased to report continued operating income growth, and strong growth, in earnings per share. Our team has consistently achieved solid operating performance while making significant investments in the future of your company. This performance indicates the strength of our franchise, and the ability of our management team to execute on many fronts, simultaneously. In Q1 we're off to a good start.

Now let me spend a few minutes on our performance regarding strategy number two, which is to expand our business, by leveraging our three core competencys. I believe this was a solid quarter for three reasons. Number one, successful new product launches. Number two, strong performance in plasma, and number three, a strategic acquisition.

So let me give you the details. First, new products. As you know, we have launched a number of new products with market potential of more than $400 million. Now, some of you have asked if we can successfully launch multiple new products simultaneously, and the answer to that question is ye,s and our results reflect this. At the investor roundtable, we shared our annual growth goal of $6 million to $8 million in new product revenue. In the quarter, new product sales were $1.2 million, a good start particularly since we expect new product sales to strengthen later in the year, so let me share why we're confident in achieving our annual new products plan. We said we had placed 80 Cymbal devices in FY '08. As you know Cymbal is our next generation red cell collection system. In Q1 we placed 24, of the 80 planned devices for the year, so we're on plan and off to a fast start, but what's most exciting is that nine of these placements were in blood centers that had not yet introduced automated red cell collection, into their operations.

In other words, we penetrated new accounts with Cymbal. This validates our belief, that the new Cymbal system which is smaller, lighter, and battery operated, will accelerate conversion of traditional whole blood collections, to automated collections, and we anticipate the device placement, will continue to ramp up throughout the year. In fact, United Blood Services, UBS, the second largest blood collector in the nation, and one of our largest existing red cell customers, will begin trialing Cymbal in the fall. Our customer feedback on Cymbal is very positive, and we expect these device placements, will drive future disposables revenues.

Now another new product is CardioPAT and as you know CardioPAT is a surgical blood salvage system. We've placed 43 CardioPATs in the quarter, and currently have 22 new trials under way, roughly 75% of these evaluations are in the United States, and 25% are in Europe, so we're off to a good start both domestically and internationally.

Our next new product is eQue, an automated blood donor registration system. EQue supports our plasma and blood bank customers needs, for a more efficient donor recruitment and from proved regulatory compliance. The market potential for this product is $20 million. There is a significant strategic value in this, and our other software offerings. Information technology differentiates Haemonetics, from its competitors. We only need to remind you of what we've done with 5D, and how that has been a key growth driver in our plasma business. While revenues from eQue are modest, we are currently on plan, and this is a good start for this new product.

Now, moving to HARMONY this is one area we need to improve. HARMONY is a suction product used with our blood salvage system. In the quarter we placed 48 HARMONY devices, which is slightly below our plan. It's an adequate start, but not great, so here is what we're doing.

We expect to escalate launch of this product line with a new sales program to simulate revenues, starting Q2. Finally in regard to new products in the quarter, we completed our European customer acceptance trials, for SOLO, the new stand alone product.

So in summary regarding new products, let me tell you why these new product device placements are so important. As you know, device placements are followed by disposable sales. Almost 90% of Haemonetics total revenues comes from the sales of disposables, and it generally takes our customers 90 to 120 days after receiving the new device, to train their staff, implement standard operating procedures, etc. Since our new product device placements are going so well in Q1, we're delighted at the prospects for disposable growth later in the year.

Now, plasma is the best example of how device placement really drive future disposable usage, and plasma leads me to our second success, in expanding the business during Q1. We are very pleased to announce an expanded agreement with Hema AG, a large plasma customer in Europe. This is an exciting new long term contract modeled after ZLB and Talecris agreements. It will continue to drive plasma growth well into FY '09.

Now, you may recall that we communicated in May, that we anticipated placing about 1,500 incremental plasma devices this year. I'm pleased to report that in part as a result of the Hema AG contract, we now expect to place more than 2000 devices this year. Now, placements will be weighted in the second half of the year. As I said, these devices do not consume disposable sets immediately, so we'll begin to see the financial impact of these placements by Q4.

Clearly, without device placements, we would not be successful in maintaining our double digit disposable growth in the plasma business, therefore we expect that strong market growth, combined with our customer contracts with ZLB, Talecris, and now Hema AG in Europe, positions us well for double digit plasma growth, well into FY '09.

Now moving to our third near term opportunity to expand the business, we made an acquisition in Q1, which supports our vision to be the global leader in blood management solutions for our customers. Many of you know we're becoming a company that provides information technology to help improve the blood supply chain from the donor, all the way through to the patient, when transfusion occurs. Many years ago, we purchased the 5D business, where we have automated much of the information technology needs, in the commercial plasma industry. 5D clearly has been a key differentiating advantage for Haemonetics, in this key to our growth driver, in the plasma market.

In Q4 of last year, we purchased IDM, which has information technology platforms for the blood bank market, and recently , we announced the acquisition of Infinale. Infinale provides hospitals with consulting services backed by innovative IT software, that tracks blood use data. Using the Infinale system, hospitals can improve patient outcomes, and save costs by steering blood management policies and practices, to evidence based test practices.

Infinale sales are still relatively modest but the acquisition is important because it provides services and technology tools, for the hospital marketplace, which is a key link to our new vision, again, and that is being the global leader in blood management solutions for our customers. So 5D provides services and information technology for plasma. IDM provides services and information technology for blood bank, and now Infinale, provides services and information technology in the hospital environment. Now this is an exciting acquisition and is expected to be neutral to FY '08 EPS.

So in summary, Q1 was a good quarter. It is a strong start for the balance of the year. I believe that you can see that we've made excellent progress in positioning ourselves for the long term as well. Now, I'll turn the call over to Chris Lindop, to run through the numbers, and give you more detail on our fine Q1 start. Chris.

Thanks, Brad, and good morning, everyone. Let me begin by highlighting certain elements of our revenue growth. As we emphasized with our investor roundtable, Haemonetics through its diverse products and markets, has several ways to grow the top line and create shareholder value. Q1 is a good example of this. In the previous 16 quarters we've achieved double digit revenue growth only three times, so we're pleased with 10% growth in Q1.

In the quarter, our strong revenue performance was driven by four things. First, plasma disposables which grew 13%. Second, our software and service business which grew organically 26% and 56% when we include the revenues of the IDM acquisition. Thirdly, blood bank disposables grew 5% and fourth, equipment sales which grew 24%.

So let me review the growth drivers for the quarter and then I'll comment on our other product lines. With regard to plasma sales, as Steve Swenson shared with many of you previously, for every 1,000 devices we place contributes $13 million in annual disposable sales, upon full utilization. Let me repeat, for every 1,000 devices, we gain $13 million in disposable sales, and in the past three years, we've doubled our installed device base. In FY '06 we added ZLB as a very significant plasma customer. Last year, we added Talecris, and now as Brad noted, we have signed an expanded agreement with Hema AG. This agreement will strengthen our plasma market position in Europe. Hema AG, will be a strong contributor, as we place incremental plasma devices, which will begin to contribute disposables revenue later in the year. So we feel pretty good about both Q1 revenue growth of 13%, and the potential for strong revenue growth in the plasma market through FY '09.

Moving on to software and services. 56% revenue growth in the quarter, driven by strong organic growth, and the IDM acquisition. We've seen strong consistent growth in the software and services business, over the past few years. This part of the business, is now larger than the OrthoPAT business, and just shy of the red cell business. In the quarter, 5D implemented, donor management systems at two large plasma customer sites, and increased services to the U.S. Department of Defense. IDM which we acquired in January contributed $1.9 million in sales. With regard to blood bank disposables, as you may recall, we guided towards level sales for the year. Now, we're pleased to report that we had a successful quarter in blood bank, with 5% growth driven by Europe and Asia.

You may recall that over the past year, we've been focusing efforts on restructuring our international businesses similar to what we did in our U.S. business several years ago, in order to drive stronger international revenue growth.

A year ago, we restructured our Asian business, under the leadership of Brian Concannon and Ramie Carlet who leads our Asia Pacific business. Asia, which was about a $32 million business in Fiscal 2007, is now growing almost double digits. As a matter of fact, total Asia sales grew 9% in Q1, mostly from blood bank products, so our restructuring efforts in FY '07 and Asia Pacific, are paying off as we establish a presence closer to our customers, in key markets.

As we've mentioned before, Brian is undertaking a similar restructuring in our European business. We're seeing early signs of progress here as well with a 14.4% growth overall in the quarter, and double digit growth in our blood bank plasma, and surgical product lines, so we're off to a good start.

Now let me take a moment to comment on Japan where we enjoy strong market share. As anticipated the Japanese market stabilized, and total Japan disposables volume, are essentially level with last year. We've now returned to our historic blood bank, or specifically, platelet market share levels, of approximately 70%, from a period of higher than normal share, caused by a competitors quality issue.

And the last growth driver for quarterly revenues was equipment sales. Equipment sales were particularly strong, up 24% and driven by sales of our red cell collection systems in the United States. We're pleased to benefit from this, and expect it to continue, but at a slower rate, throughout the year. As a result, equipment sales should be up about 10% for the full year, rather than flat, as we had originally planned.

Now I'll spend a few minutes discussing our OrthoPAT and red cell product lines. Let me start with OrthoPAT. Our 8.4% revenue growth for OrthoPAT in the quarter, is lower than our annual guidance but we're pleased with placing 89 OrthoPAT devices. Now let me put some added perspective on that. In the quarter, in addition to placing 89 devices, we also contracted with 28 new evaluations in the United States. New evaluations can take from one to six months to decide on, and implement new technology, but we've been successful at converting approximately 80% of OrthoPAT trial accounts, into customers. As a result, we expect to see the disposable sales benefit from our early placements, in the second half of the year. It's also important to remember, that we've maintained our premium pricing in OrthoPAT, so we're confident in delivering good sales growth for the year.

Moving to red cells, with growth of 3.2% we're well below our red cell poseable sales plan; however, total red cell product line revenues including equipment are up 16.1%. Now, let me explain the distinction. What's different is the mix of where the sales are coming from. More sales are coming from equipment sales, than from disposable sales right now.

We see two trends. One short-term, and one longer term, playing out in our Q1 results. First, over the past quarter, U.S. Blood suppliers have experienced more intensive donor shortages, with an increasing number of blood centers reporting less than, one day supply of blood, and because of seasonal impacts on donor availability, we don't see this trend reversing before the end of Q2.

As many of you know, the vast majority of blood collected in the United States is through traditional whole blood collections, but when there's an immediate need for blood, the short-term response by many blood collectors, is to make blood appeals, to that community that focuses on traditional whole blood donations. After all, traditional whole blood collections, are what blood collectors and donors know best, and it's what is easiest to ramp up quickly in times of acute shortages.

The good news and the longer term trend I referred to, is that our customers seem to understand, that the most effective way to address donor shortages in the long term, and to avoid inventory swing, is to use automation to get more blood, from the fewer donors who are able, or willing to donate. The red cell equipment sales we saw in the quarter, are an indication that customers are willing to make the necessary financial, and operational investments, in establishing or growing their automated collection. We are comfortable with the FY '08 growth prospects for the total red cell product line when we include equipment revenue, and as a result we currently estimate that annual red cell disposables, will grow about 10% for the full year, but that the total red cell product line which includes the sale of red cell equipment, should grow the anticipated 15% to 20% in FY '08.

So to summarize my comments on revenue growth, we have a robust product portfolio. We executed well on plasma, software, blood bank, and equipment in OrthoPAT, and on our new product lines. And this is not precisely the sales mix we had expected but most companies don't execute exactly to their product line plans, each quarter. Good companies have diverse products, and geographic portfolios, which permit them to manage the ups and downs of business segments, and this quarter, is an excellent example of this, where one segment did not perform as well as usual, other parts of the business made up for this performance. So we're very pleased to report total company revenue growth of 10%.

Now, a few comments on gross margins. Equipment and plasma disposables, are amongst our lower gross margin contributors. With our success in these sales, in the quarter, the mix challenges that we experienced in FY '07 continue, and resulted in a gross margin in the quarter of 50.4%. Now this is lower than we guided through for the year overall, and contributed to lower than expected, gross profit in the quarter. Adjusted operating expenses, were 44.1% at 1 million excuse me growing $3.1 million year-over-year. It's important to note that this increase comes from two things. Our planned ERP spending, as we achieved our first major go live milestones, and the acquisitions of Arryx and IDM, which expenses were not included in Q1 of last year, because we didn't own them. And by the way, our ERP implementation remains on time, and on budget.

For those of you familiar with our mantra of positive drop through, you'll recall we planned to manage our expense growth for the year, to roughly 65% of the growth in gross profit. With a compression of our gross margin in the quarter, we saw less leverage, but let me remind you that this team has a four year track record of fiscal discipline. We have programs, which we're executing to, to manage both gross and expenses, to achieve our annual leverage goals, even as we make the right long term investments in our infrastructure, to support robust organic and strategic growth. And ongoing discipline has delivered 10% revenue growth, 13% increase in net income, and 15% increase in earnings per share, year-over-year.

Turning to cash flows, we generated $4 million of free cash flow, reflecting our positive operating results, which is net of fixed asset additions of roughly $10 million. After spending $25 million in our share buyback, and receiving cash generated from employee stock compensation activity, our balance sheet is still very strong with $191 million of net cash, available for future expansion opportunities.

Now a couple of points regarding the historical revenue trends in our business. First, our second quarter tends to be the lightest in revenue growth due to mild seasonality in our business. Specifically, blood donations and voluntary surgeries, declined in summer months, and second, our revenues tend to be weighted 48.5% in the first half of the year, and 51.5% in the second half. And we expect these trends to continue again, this year. So it was a good quarter, and a strong start to the year. Now let me reiterate, that our annual guidance was 7% to 9% revenue growth, delivering positive drop through, to operating income growth of 10%. Earnings per share are expected to be between $2.02 to $2.12. Again, this includes stock option expense.

Now with regard to our outlook, we now expect revenues to come in towards the high end of the range. Revenue growth will be offset, by some ongoing margin compression, due to product mix, but we continue to be confident about achieving the gross profit range of $248 million to $253 million which we guided to in the original P&L scenarios presented at our investor conference in May. And certainly, we also remain confident in achieving our original operating income, and EPS guidance.

With that, let me hand it over to Brad, for some concluding remarks. Brad.

Thanks, Chris. So let me wrap up with this very quick summary. Q1 was a good start for your company. Operationally, plasma, software, blood bank, and equipment, which represents about 70% of the total revenues of the company, all contribute to strong revenue growth during the quarter. Financially, our 10% revenue growth, coupled with a 13% net income growth, and a 15% growth in EPS, is a strong financial start for FY '08.

Strategically, new product launches are going very well. The new expanded Hema AG agreement, strengthens our growth in the plasma market, well into FY '09 and the acquisition of Infinale, builds out our hospital information technology platform. The point is, Q1 was a strong quarter. Your Management team performed well operationally, financially, and strategically.

In conclusion, our vision is clear, and we have executed well. Your company is the global leader in blood management solutions for our customers, and with that, Operator, we'll turn the call over to questions.

Thank you. The floor is now open for questions. (OPERATOR INSTRUCTIONS). Your first question is coming from Larry Solow with, CJS Securities.

Good morning, guys.

Good morning, Larry.

Would it be reasonable to expect kind of accelerating both red cell, and plasma disposable growth, through the year?

Yes.

That would probably be a reasonable assumption? Okay, great. And then I know you guys give some nice color on Asia and on Japan, but would it also be reasonable to assume that revenues actually grew in Japan, after falling kind of in the high single digits last year, or did they make a nice actual positive contribution, especially on the platelet side?

No. Remember we're returning to those historical levels so Japan was flat in constant currencys and down a little bit in the reported currency.

On the currency, what was the overall impact from currency in the quarter? Do you have that?

Yeah, we do, and on a high level, it was mildly negative on the top line, so our sales in constant currency grew about 10.5%, and it reported about 10.2% and at the operating income line, we had a bigger negative effect from currency.

Okay, and then your outlook for the rest of the year on currency?

It's a little bit negative Q2 and then a little bit positive in the remainder of the year, so it's a wash.

I'd just like to make a comment on Japan. As all of you might remember, our guidance for the year, at the beginning of the year was flat sales and we performed to that this year. We have 70% platelet market share, and about 80% plasma market share, so that's a non-growth market for us, but I'm delighted with our growth in Asia, growing as Chris indicated, just shy of 10%, 9% over prior year. This is the first time in a long time, we've seen that kind of performance in Asia, and as Chris indicated, our growth in Europe of 14% is a tremendous start for us. Europe was not a strong grower last year, and they've rebounded under the leadership of the restructuring efforts. Brian Concannon has led that team through, so we're very pleased with that double digit growth in Europe.

Thank you. Your next question is coming from Dave Turkaly, with Susquehanna.

Thanks a lot. When you talked about the new contract with Hema AG, can you remind us, how big a player they are,and did you have anything in place with them, in the past?

Dave, we did have something with them in the past. This is an expanded agreement, however. It's for an additional five years. We expect over the term of the agreement, that it will be about $20 million in total revenue, but it's an expanded agreement. They are primarily throughout Germany, and we're really looking forward to this new plasma collector, coming on board in a more extensive way.

We'll see some Q4 increase in equipment, as we begin implementing this agreement, and as you know, the global plasma market is continuing to grow very, very rapidly, and this is an example of them expanding their relationship with us, built on the need for growth, to support the plasma collection to them.

Thank you. Your next question is coming from Joshua Zable, with Natexis.

Hi, guys, congratulations and thanks for taking my call.

Thanks, Josh.

Couple of questions here. Can you just talk strategically a little bit? I know you said you with were going to step up, or escalate the launch of HARMONY. Just kind of maybe talk a little bit strategically, about doing that, and then sort of, how that will or won't, affect the other launches ?

Josh, we have pretty aggressive plans as you know on HARMONY. We placed 48 units in the quarter, which we pleased with, but we had internal plans that exceeded that,and what we are are seeing with this product line, as you remember, is a suction device, attached to our OrthoPAT or CardioPAT, is that our customers are looking for, different kinds of options, versus sale, versus placement, so we're looking right now at how we might provide them different financing options, sale versus placements, and that's the effort that we're ongoing in Q2.

We're giving our customers more flexibility at either model versus our original model which is sale only.

And we don't expect that to impact any of our other product launches.

Okay, great. And then just how should we think about gross margin? I know there's a lot of moving parts here. Obviously with the Hema AG equipment coming on at the end of the year, and with new product launches, sort of weighted today back half of the year, should we think of sort of gross margin flat across the year, and just a function of revenues, sort of stepping up?

Yeah, that's a good way to model it, yeah, absolutely, and we did put out, some revised revenue scenarios on the website if you take a look at them, but overall the gross profit, is still in that target range. $248 million to $253 million.

Your next question is coming from Todd Bioli, with Cane Anderson.

Hi. I was wondering to what extent do you have pricing power in your high market share markets so that on the disposables, so that you can grow at least an inflation rate?

Todd, in Japan, we have an effort under way this year to launch two new products. One both in the platelet market and one in the plasma market. These have enhancements to the existing product line, and per the terms of our agreement with the Japanese Red Cross, we are expecting slight premiums, on those two products upon launch. Now those will happen in the back half of the year, so we'll see some opportunity for increased revenues in the back half of the year, over prior years, so that's primarily where we'll see it.

I'll comment broadly on price increases, because it's a very good question. In the commercial plasma market, many of our agreements that we have negotiated, have annual price improvement opportunities, once they get up to full utilization. So we expect that we'll be able to do a number of things, over the term of these agreements in commercial plasma.

I would also mention, in that marketplace, we are expanding our manufacturing capability in our Pittsburgh plant, and we'll be spending about $10 million to expand that plant to meet the contractual demands of our plasma customers, and we're bringing a number of automation techniques into that plant expansion, where we expect that our cost of goods will be reduced on our bowl, fairly substantially. So that will be a margin opportunity in FY '09, '10, and '11, in commercial plasma.

And finally in terms of price increases, our sales force is compensated on gross margin, and gross margin improvement, so every time they want to improve their commissions, they have an opportunity to do so, by raising prices, and you might remember that Pete Allen indicated at the investor round table, just in his business, he expects to get $1.4 million of price increases, in the donor division this year, and he's right on target to do that through Q1. So that might give you a flavor, of more broadly of price opportunities, across the business.

What are your average selling prices for your disposables?

It depends on marketplace and product line. For example, if you look at the commercial plasma market, that is a very simple set. It has a bowl, a bottle, and some tubing, versus a platelet set which is much more complex, involving filters. So generally, the commercial plasma product lines are sold for between $10 to $20 per set, and a platelet set can be sold for $80 to $100.

I might also comment on other product lines. The OrthoPAT product line, as you know, as we've taken that direct over the past year and a half, that product line has more than a $500 set price, so hopefully that will give you a sense of our pricing of the product lines.

Thank you. Your next question is coming from John Putnam, with Dawson James Securities.

Thanks and hi, everyone.

Hi, John.

Two questions I guess. One is congratulations on the Hema AG.

Thank you very much. It's a great opportunity for us.

But one of the things I thought you said was that it's primarily in Germany, and I guess my question is, are there other opportunities like this either in Europe, or Asia, that you might be able to tap into?

In the Asia market, it would be limited, John. We've seen over the years, in specifically the Chinese marketplace, where copiers have knocked off our technology, so we don't have a lot of growth opportunity there. There are some marketplaces throughout Korea that we do well. Of course you know we do very very well in Japan.

Right.

In Europe, there are some additional opportunities primarily in Eastern Europe, and there are some in Western Europe, as those contracts and opportunities for negotiation continue, we'll continue to work there.

One of the things that has differentiated Haemonetics so substantially, and we have not seen any abatement in this, is the customers need for 5D information technology, and that's really been the value-added service that we provide, for the commercial plasma market.

And as you know, we've doubled the number of machines we have placed, over the last couple of years because we've coupled the 5D information technology services business, with our ability to provide a great disposable product line, and be very responsive to that growing market, so we feel very good about the commercial plasma market now with the Hema AG agreement, and potentially others in the future, that this market will be very very stable through FY '08, '09 and perhaps beyond.

That's great. My follow-up question can you comment on the sustainability of the equipment sales, on a sequential basis?

Yes, we can. I think we're going to see strong sales in our Cymbal product line. I'm very very pleased with the launch of that product line. Pete Allen and his team, have done a very nice job with that. You know our plan is to place 80 units for Cymbal this year. We've placed 24 out of the get go, and I would remind all of you that we didn't get FDA approval, until very very late in Q4, so we had 90 days to really step on the accelerator, and the team did very well there.

So I would expect that we'll see continuing interest in the part of customers to buy that equipment. That's a trend that we see in Q1, and I would expect that to continue going forward in Q2.

John, let me just add a little color to that. Probably a couple of data points in the script that I'd highlight for you. One, you may recall that we guided revenues from equipment flat at the beginning, or at the investor conference, and we're now guiding, they will be around 10%, so that's an element of the change.

The other point I would highlight is, that we're guiding red cell disposables now 10%, which is obviously ramping from a fairly low growth in the first quarter over the course of the year, but that all in red cell disposables and equipment will be in that 15% to 20% range so if you run through those numbers I think you'll see the order of magnitude.

Thank you. Ladies and Gentlemen, the floor is still open for questions. (OPERATOR INSTRUCTIONS). Your next question is coming from David Lewis, with Morgan Stanley.

Good morning, guys.

Good morning, David.

I have a bunch of questions, but I waited patiently until the end.

You only get one and a follow-up. [LAUGHTER].

Okay, I'll pay extra. But a couple things here, a couple financial, and a few strategic. I guess you talked to like, a lot of great detail here on the call. Just specifically maybe I missed it, the inverse between your red cell consumables being a little slower, and platelet s being a little faster, if you had to point to one or two reasons, what do you think they were in both red cells and platelets?

Well red cells really it happen in the U.S. And it was donor shortages. Our customers tell us that they are having acute donor shortages, and the evidence that we see, and the data that's available is the inventory levels are shrinking in the system.

So that was the short-term trend, and we see that continuing a little bit into Q2, and it really will start to change when people get back from vacation, and the kids get back into college, and so on, and obviously that is somewhat mitigated by the fact that we had strong red cell equipment sales in the quarter.

The platelet strength was really in Europe and in Asia, and we attribute that to the re-energizing of the organization, or the reorganization that Brian has done, in Asia working with Remi and his team in Europe, which has really got those sales organizations motivated. They are focused and they are delivering good results.

Yeah, I would just add to Chris's point, David, that we're delighted with the performance in Asia, and in Europe. These are two marketplaces that have gone through, or are going through their restructuring efforts, and we're beginning to see strong double digit, or just about double digit in Asia performance, for those two businesses, and those businesses are are areas where we have strong market share in platelets, so that 5% growth as Chris indicated, is really a strong reflection of growth there, and hopefully with this reorganization, we'll continue to perform very well.

As a matter of fact, our international business grew 4.4% in the quarter over prior year, and the previous two years we've been growing less than 2%, so we're starting to see those areas that have been not growing at double digit, growing at double digit, and that's a wonderful trend.

So at the highest level, David, we see the decline, or less growth in the red cells than we had expected, due to external forces, and the increase beyond, what we had expected in platelets due to internal dynamics.

That's very helpful and I'd say incrementally good news.

Yes, it is.

On the plasma front, you've talked about a $60 million incremental opportunity for Talecris. Should we assume the sequential acceleration is tied mostly to Talecris, and can you give us an updated 24 month plasma backlog number with the addition of Hema AG?

In terms of Talecris, Steve Swanson would tell you as he did during the investor conference, for every thousand devices we place, we generate about $13 million in incremental revenue, and once we're up to full utilization, Talecris is moving appropriately on their schedule, to get up to speed, bringing all of their centers up.

We're not at full utilization yet. We won't be until around Q4 of this year, yet we've performed very well, and expect to continue to perform well, at the higher end of our plasma range, throughout the year, David, so we feel real good about that.

In terms of specific data, I haven't modeled out exactly what the impact will be beyond there, other than the fact that we look at the device placement driving turns, so I don't have specific information on the second part of your question.

Thank you. There are no further questions at this time. Here is Mr. Nutter with closing comments.

Thank you very much, Operator. As many of you have indicated in your questions, Q1 was in fact a strong quarter for your company. The management team has performed very well operationally. We've performed well financially, and most importantly, we've performed well strategically. We'll look forward to updating you on Q2. Thanks very much.

Thank you. And this concludes today's Haemonetics First Quarter Fiscal Year 2008 Conference Call. You may now disconnect your lines and have a pleasant day.