Strata Critical Medical Q2 2026 Earnings Call Transcript

Strata Critical Medical (NASDAQ: SRTA ) released second-quarter financial results and hosted an earnings call on Tuesday. Read the complete transcript below. This content is powered APIs. 5 million, driven by clinical and logistics growth.

9% year-over-year increase. 3 million, while also strengthening its competitive positioning. 4% in Q2 2026, impacted by higher fuel surcharges and customer mix shifts, but initiatives are underway to restore margins to the 20% target by 2027. 2026 revenue guidance was raised to $285-$295 million, with adjusted EBITDA guidance increased to $33-$35 million, reflecting accelerated clinical growth and acquisition synergies.

The company anticipates strong performance from its clinical segment, projecting 20% sequential revenue growth in Q3 2026, while logistics faces short-term revenue headwinds. Management highlighted the integration of recent acquisitions and the company's differentiated logistics offerings, including its captive fleet and compatibility with machine perfusion devices. Full Transcript OPERATOR Good morning, ladies and gentlemen, and welcome to the Strata Critical Medical fiscal second quarter 2026 earnings release conference call. At this time, all participants are in a listen-only mode.

Later, we will conduct a question-and-answer session, and instructions will follow at that time. As a reminder, this call is being recorded. I would now like to turn the conference over to Matt Schneider, CFO of Clinical Services and Vice President of Finance and Investor Relations. Matt Schneider, CFO of Clinical Services and Vice President of Finance and Investor Relations Thank you for standing by and welcome to Strata Critical Medical's conference call and webcast for the quarter ended June 30, 2026.

We appreciate everyone joining us today. Before we get started, I would like to remind you of the company's forward-looking statement and safe harbor language. Statements made in this conference call that are not historical facts, including statements about future time periods, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties, and actual future results may differ materially from those expressed or implied by the forward-looking statements.

We refer you to our SEC filings, including our Annual Report on Form 10-K and our Quarterly Report on Form 10-Q, each as filed with the SEC, for a more detailed discussion of the risk factors that could cause these differences. Any forward-looking statements provided during this conference call are made only as of the date of this call. As stated in our SEC filings, Strata Critical Medical disclaims any intent or obligation to update or revise these forward-looking statements except as required by law. During today's call, we will also discuss certain non-GAAP financial measures which we believe may be useful in evaluating our financial performance.

A reconciliation of the most directly historical, comparable consolidated GAAP financial measures to those historical non-GAAP financial measures is provided in our earnings press release and investor presentation. com. These non-GAAP measures should not be considered in isolation or as a substitute for financial results prepared in accordance with GAAP. Hosting today's call are our co-CEOs, Will Haberg and Melissa Tom Keel.

I'll now turn the call over to Melissa. Melissa Tom Keel, Co-CEO Thank you, Matt, and good morning, everyone. We are pleased to report strong results for the second quarter of 2026, highlighted by accelerating growth in our clinical business, increased cash flow generation, and great progress on our capital deployment plan. 1% in Q2 2026, up from 25% in Q1.

9 million of free cash flow in the quarter, our second consecutive quarter of cash generation, and we expect even stronger cash generation in the second half of the year. This strength was partially offset by a softer result in logistics this quarter, driven largely by significantly reduced flying with one non-exclusive customer towards the end of the period. We expect the customer's lower flying levels to persist, which are specific to just one of the customer's transplant programs and involve a unique set of circumstances that we don't expect to be replicated elsewhere.

In Q3, we will see the full-period impact of the volume reduction, which represents about 3% of our logistics revenue, before we expect it to be largely mitigated through organic growth and new customer wins during Q4. Though this is an unfortunate bump in the road, we view the impact as simply a delay in our logistics growth plan for one or two quarters, and our long-term outlook for logistics and the business as a whole remains very positive. Our capital deployment plan is running well ahead of schedule.

We closed three bolt-on acquisitions during Q2, all of which fit squarely within our capital allocation framework at mid-single-digit acquisition multiples and are highly strategic in nature. Within our other clinical business line, we completed the acquisitions of Louisville Perfusion Services and Ohio Valley Perfusion Associates, both regional providers of perfusion services to cardiac surgery programs that together will strengthen our competitive positioning and enable further organic growth through new customer wins. In addition, these acquisitions serve to expand our national footprint of staff and equipment available to support organ transplant customers.

In our transplant clinical business, we completed the acquisition of Heart and Lung Transplant National Recovery Program, a provider of surgical organ recovery services. This acquisition strengthens and adds scale to our platform by increasing our network of experienced surgeons available to complete recoveries, especially in key markets such as Florida and California. In addition to these deals, we signed an agreement to take over Statline's transplant center organ placement customer relationships on a rolling basis over the next year.

Though this is not material to our financial picture today, it's a great example of how we can be creative to help industry participants continue the life-saving work they do while creating opportunities to win additional business in the future. In this situation, Statline's parent company was seeking to exit organ placement, which is non-core to their broader mission. We worked hand in hand with the Statline team and their customers to develop a structure that prioritizes continuity for both transplant centers and Statline employees during the transition of this mission-critical service.

We landed on a rolling transition structure over the next 12 months where we will pay Statline a fee per contract when and if customers and employees sign on our paper, with unit economics that are consistent with our current business. Operationally, this is just like onboarding a new customer rather than making an acquisition. The maximum aggregate potential fee, which approximates a low single-digit multiple of the contract's contribution margin, is under $1 million.

But what we're really excited about is that this arrangement brings long-term, contracted attachment points with up to eight new customers that could lead to incremental clinical or logistics business over time. Following these acquisitions, Strata Critical Medical has a more attractive growth margin and cash generation profile. We're also more diversified, with increased exposure to the fastest-growing parts of the transplant ecosystem. We expect our business mix in the back half of the year to be roughly 40% clinical on a revenue basis versus 30% in Q1 2026, and nearly 50% clinical on a gross profit basis versus 35% in Q1.

As a reminder, our clinical business is less capital intensive and has higher gross margins compared to logistics, in the mid- to high-20% range overall, with transplant clinical in a 30% range. In addition, these acquisitions have made us a stronger, more capable, and more cost-effective partner to the hospitals, transplant centers, and organ procurement organizations we serve. Our broader geographic footprint means our clinicians spend more time in operating rooms and less time on airplanes, reducing the bill for customers and maximizing the productivity of our surgeons and perfusionists.

Our captive transplant logistics services are highly differentiated versus competitors that are primarily brokers of non-exclusive aircraft. Our captive fleet of 35 aircraft includes 10 that are owned, and 25 that are contractually 100% dedicated to Strata Critical Medical across approximately 20 air bases. We have a network of 55 ground vehicles across approximately 11 hubs and a 24/7 logistics operations center staffed with highly trained coordinators leveraging our purpose-built technology platform.

What's more, our integrated offering is compatible with a growing list of machine perfusion devices that have been recently approved and that we work with every day, and even more that are expected to be approved over the coming years. Today, no one machine perfusion device represents more than a mid-single-digit percentage of our overall air trips, highlighting the importance of our equipment-agnostic strategy.

Altogether, we believe the actions we've taken this quarter—expanding our clinical footprint, executing on our M&A strategy, and continuing to generate cash flow—puts Strata Critical Medical in a much stronger position with a more diversified business, setting us up for even more success in the long term. With that, I'll turn the call over to Will. Matt Schneider, CFO of Clinical Services and Vice President of Finance and Investor Relations Thank you. As Melissa highlighted, our strategic expansion into clinical services is running well ahead of schedule after our accelerated progress on both organic growth and M&A execution in Q2 this year.

3 million of projected annualized adjusted EBITDA. At our targeted mid-single-digit acquisition multiples, we're well ahead of the capital deployment pace we targeted in our value creation plan, and we have even more great opportunities in the pipeline. 5 million that we believe we are on track to receive in full by year-end. On the industry front, we've seen a continued recovery in DCD donors versus the low point in Q3 2025, with a low-single-digit sequential increase in Q2 2026.

While still down year-over-year due to a tough comp, we should start to see year-over-year industry donor growth in the second half of the year. Heart, liver, and lung transplants continue to grow thanks in large part to rising penetration rates of NRP, which, as a reminder, has been shown to result in approximately 50% more usable organs per DCD donor on average. In fact, NRP penetration continued its march forward this quarter, rising to approximately 59% of DCD donors in Q2 2026 versus 57% in Q1 2026. 9% as we lapped two new large customer wins that started in Q2 2025.

Logistics revenue increased approximately 1% sequentially versus Q1 2026, which was somewhat below our expectations. The dynamic of shorter trips that we called out last quarter continued into Q2 2026, driven by strength in our organ procurement organization customers along with some softness in transplant centers. As Melissa highlighted earlier, we're expecting a roughly 3% logistics revenue headwind driven by a non-exclusive customer that significantly reduced their flying with us for one organ type starting in June.

We believe that the circumstances around this situation are unique and that the high customer retention rate we've experienced historically will persist moving forward. Our pipeline of new logistics customers remains strong, and we expect contributions from new customers as well as growth from existing customers to largely bridge the gap by the end of the year. 3% in Q1 2026 and our expectation of approximately 20%. There were several factors driving the lower-than-expected logistics gross margin, including a higher fuel surcharge.

As a reminder, our logistics contracts typically contain a fuel surcharge provision where we pass through fuel costs above an agreed-upon threshold, usually in the low $4 per gallon range. The fuel surcharge increases our revenue but has no impact on our gross profit dollars, reducing our gross margin. Our gross margin excluding fuel surcharge revenue and cost was 19% in Q2 2026. While we have fuel surcharge provisions in all of our logistics contracts, we have a small number of contracts where the pass-through mechanism either kicks in at a higher price above current levels or is capped.

This lowered gross margin by approximately 30 basis points. Lastly, customer mix shift remained unfavorable with a larger concentration of short, lower-margin trips this quarter. We also experienced lower profitability on our owned fleet, driven in part by higher-than-average unscheduled maintenance expenses and lower ground margins compared to the year-ago period due to a mix shift to lower-margin third-party vehicles, which we expect to correct in the coming quarters. 5% to 20% range in the second half of the year, but we are confident in our ability to restore logistics gross margin solidly to our 20% target for 2027.

We'll always see some volatility in logistics margin, particularly given the inherently unpredictable nature of unscheduled maintenance. However, we have several initiatives underway to structurally increase logistics gross margins back to our target, largely driven by the elimination of less efficient, higher-cost operators and favorable changes to our supply contracts as we allocate more hours to better-performing providers. I'll now turn to the clinical segment and the company's overall performance.

1 million in the prior-year period, driven by organic growth in logistics, the addition of our clinical business through the acquisition of Keystone in Q3 2025, and the contribution from clinical acquisitions completed during Q2 2026. 8 million in Q1 2026. 5%. 2 million in Q2 2026 versus $9 million in the prior-year period, driven by the addition of our clinical business and the contribution from clinical acquisitions completed during Q2 2026.

This was partially offset by a modest decline in logistics gross profit. As previously discussed, gross margin increased 100 basis points to 21% in Q2 2026 versus 20% in the prior-year period, driven primarily by the positive mix impact from the addition of our clinical business and the contribution from clinical acquisitions completed during the quarter, partially offset by the decline in logistics gross margin. 3 million in Q2 2026 versus $5 million in Q1 2026. 1% in Q2 2026 versus 25% in Q1 2026.

As we noted in recent quarters, given the noise associated with last year's transactions, year-over-year comparisons of SG&A and adjusted EBITDA are not particularly meaningful, so we'll discuss those results on a sequential basis. 2 million in Q1 2026, primarily driven by the timing of expenses in each period. 4 million in Q1 2026. 5% in Q1 2026.

The 140 basis point sequential increase in adjusted EBITDA margin was driven by the increase in clinical gross margin and the mix shift to clinical, partially offset by the reduction in logistics gross margin. 7 million in Q2 2026.