The operator introduces the Teleflex First Quarter 2024 Earnings Conference Call and reminds participants that the call is being recorded. Lawrence Keusch, Vice President of Investor Relations and Strategy Development, welcomes everyone and introduces Liam Kelly, Chairman, President and CEO, and Thomas Powell, Executive Vice President and CFO. Keusch also mentions that the call will contain forward-looking statements and reminds listeners to refer to the company's website for a replay and to access the SEC filings for more information. Kelly then begins his remarks.

In the first quarter of 2024, Teleflex had a solid start with revenues of $737.8 million, a 3.8% increase year-over-year. Adjusted earnings per share also increased by 3.9%. Utilization for their products is back to pre-pandemic levels and raw material inflation is tracking towards expectations. Freight expenses are also showing positive trends despite the conflict in the Middle East. In the first quarter, Americas revenues decreased by 1.5% year-over-year.

In the first quarter, the company saw a 9.7% increase in EMEA revenues, with growth in most product families. Asia also saw a strong 11.2% increase, led by China, India, and Southeast Asia. Looking at global product categories, vascular access revenue increased by 2%, while interventional revenue increased by 15.4%, driven by growth in balloon pumps, MANTA, and complex catheters. Anesthesia revenue increased by 3.2%, with continued recovery from the ET Tube recall. Surgical revenue increased by 7.1%, despite a tough comparison. Overall, the company's underlying trends in core product categories were solid.

In the first quarter of the year, the company saw growth in its chest drainage and ligation products, as well as in its interventional urology segment following the acquisition of Palette Life Sciences. However, UroLift growth was impacted by challenges in the office side of service and sales force training. The OEM segment also had a strong quarter, with double-digit growth in its three largest product categories. Other revenue declined due to the planned exit of the MSA by Medline. The integration process for Palette Life Sciences is progressing as planned, with cross-functional training and proctoring for the UroLift sales force. The company remains on track to fully integrate the sales force by the end of 2024.

The company has made updates to two of its product lines, including the release of the Wattson Temporary Pacing Guidewire and the availability of the Titan SGS Stapler with GORE, SEAMGUARD, Bioabsorbable Staple Line Reinforcement material. They also plan to launch a new product, the Ringer Catheter, in the second half of 2024. The company also provided a regulatory update, including a voluntary recall and field advisory notice for certain catheter kits.

The FDA has not yet issued a recall classification for a potential issue with Intra-Aortic Balloon pump therapy, but has issued a field advisory notice with additional instructions for use. The company does not expect a significant financial impact from this voluntary action. In terms of financial results, adjusted gross margin increased by 170 basis points due to various factors, while adjusted operating margin increased by 80 basis points. Net interest expense also increased due to higher interest rates and debt used for the acquisition of Palette Life Science.

In the first quarter of 2024, the company's adjusted tax rate increased due to additional costs and discrete items. Adjusted earnings per share also increased, but was partially diluted by the acquisition of Palette Life Sciences. Cash flow from operations and cash balance also increased, while net leverage remained low. The company is maintaining its 2024 revenue growth guidance, which includes the loss of MSA revenues and the addition of Palette's revenues.

In 2024, the company expects a negative impact of $12 million from foreign exchange, compared to their previous guidance of $5 million. This is due to a lower average euro exchange rate of $1.07. The company predicts reported revenue growth of 3.35% to 4.35% for 2024, with gross margin expected to be between 60% to 60.75%. Operating margin is expected to be between 26.25% to 26.75%, reflecting the impact of gross margin and investments. Net interest expense is expected to be approximately $78 million, mainly due to borrowings for the Palette acquisition and higher interest rates.

In the first quarter of 2024, the company's tax rate is expected to be around 12%, with a $0.05 increase in adjusted earnings per share. However, there are some headwinds, such as dilution from the acquisition of Palette and the termination of the MSA, as well as a higher tax rate and foreign exchange impact. Despite these challenges, the company remains confident in meeting its financial guidance for the year and will continue to focus on driving sustainable growth through their strategy.

The company plans to invest in growth opportunities and innovation to increase long-term value. The acquisition of Palette Life Sciences is expected to contribute to growth. The operator then asks a question about the strong performance of the OEM division, and the company expects some phasing in the second quarter but overall strong growth for the year.

The order bank for thin-walled microcatheters is strong due to the HPC acquisition. Demand for catheter extrusions is also strong. The OEM business is dilutive to gross margins but accretive to operating margins. The training for the urology sales force is going well and is expected to be completed by the end of the year. The first quarter gross margin was higher than expected, and revenue is expected to increase.

In the next three quarters, there are no major pressures on gross margin, although there are some inflationary and FX pressures. The company had a strong start to the year and is confident in achieving their full year guidance. The Interventional segment had a tough comp, but saw strong growth from products like MANTA and complex catheters. Procedural volumes in the cath lab are back to pre-pandemic levels, and the upcoming launch of the Wattson product is expected to further drive growth.

Liam Kelly, CEO of Teleflex, responds to a question about the company's growth projections. He explains that the midpoint of their guidance for 2024 is 4.25%, which is lower than last year's 6.5% and their long-term target of 6% to 7%. However, he notes that there are factors to consider, such as the impact of recent acquisitions. He also mentions that certain areas of the business, such as OEM and interventional access surgical, are performing well. Overall, Kelly is optimistic about the company's growth potential and believes they are on track to meet their long-term plan.

In response to a question about the company's decision not to raise their full-year guidance despite a strong Q1 performance, Liam Kelly, the company's spokesperson, explains that the decision was based on several factors. These include the fact that it is still early in the year and that the company had a particularly strong March. Additionally, some OEM orders were pulled in from Q2 to Q1, and the company has updated for FX. Kelly expresses confidence in the company's performance and notes that the growth of their Palette product is primarily driven by market expansion rather than share gains. He also mentions that the sales force is positive about the product and will be actively selling it in Q3.

The company has initiated a study to expand the market for Barrigel and plans to begin enrollment soon. They are not satisfied with the current market and want to create more white space for growth. During the Q&A, the company was asked about their conservative guidance for the year and they explained that they had raised the lower end of their guidance by $0.09, but foreign exchange rates offset $0.04 of that. They feel confident in achieving their full year guidance but want to see how the year plays out. The focus then shifted to the strong performance of Interventional and their upcoming product, Wattson, in the structural heart market.

Liam Kelly, CEO of Teleflex, discusses the potential for growth in the cath lab market and the company's focus on this area for M&A. He believes that with their current portfolio and upcoming product launches, the cath lab market can sustain above-average growth for the company over the next few years. However, this growth has come from significant investment in R&D. In the first quarter, the Americas region saw a slight decline in sales.

Liam Kelly, the CEO of Teleflex, responded to a question about the company's performance in the Americas. He explained that the biggest impact was due to the MSA, which was booked in the Americas. If the MSA is excluded, the growth in the Americas would have been around 3.5%. Kelly also mentioned that the Endurance recall had a significant impact on the Americas, but it will be anniversaried in the coming quarters. He assured that the environment in the Americas will improve as the year progresses. In response to a follow-up question, Kelly discussed the company's M&A strategy and mentioned that they prioritize growth accretive deals and are open to various sizes of transactions.

Liam Kelly of Teleflex discusses the company's focus on tuck-ins and scale transactions for M&A, mentioning their strong financial position and disciplined approach. He also notes that the current market environment has tempered multiples for high-growth assets. A question is raised about the upcoming CLEAR trial comparing UroLift and Rezum, and its potential impact on the market.

At the upcoming AUA conference, there will be five papers presented on UroLift and other BPH treatments. One study will focus on early intervention and minimally invasive therapies, while another will compare UroLift to Resume and assess postoperative experiences. There will also be a study on retreatment rates and complications of BPH treatments. The sales force is looking forward to the conference and believes the data presented will be helpful for their sales efforts. In the first quarter, UroLift sales were down high teens and are expected to be down 10% for the full year. The sales force is no longer being retrained and the double bag is expected to improve UroLift sales over the course of the year.

In response to a question about the decline in the Interventional Urology product line, Liam Kelly, a representative from Teleflex, stated that the company will not provide specific revenue details for individual product categories. However, he did provide some insight, saying that they are confident in delivering 7.5% growth in 2024 and that the decline in UroLift was expected due to cross-training and office closures. Kelly also mentioned that they expect the cross-training to be completed by Q3 and that they are on track for 7.5% growth for the full year. In response to another question, Kelly stated that the company will not provide specific details on 2025 margins, but that Street expectations for margin expansion have decreased.

Liam Kelly, CEO of Teleflex, discusses the company's plans to expand margins in 2025. He mentions the key role of gross margins and the potential for improvement through continuous improvement programs, the completion of the Palette MSA, and positive pricing. He also expects leverage to the operating margin through disciplined OpEx. Overall, he is confident in the company's ability to achieve 6% top line growth and 10% EPS growth.

Liam Kelly, CEO of Teleflex, discussed the company's expansion of its product offerings with Standard Bariatrics and Titan. He mentioned that the addition of buttress to the Titan product has been well received by the bariatric community and is expected to contribute to growth in 2021 and beyond. However, there has been a decline in gastric sleeve procedures, which may affect the market size for Teleflex. Kelly also mentioned that there has been robust training and education for surgeons in the quarter.

During an analyst call, an unidentified analyst asked about the company's 2Q guidance and specifically mentioned the impact of foreign exchange and OEM pull forward. The company's CEO explained that these were the main factors affecting the guidance and also mentioned the dynamic of the MSA and Palette ramping up throughout the year. When asked about the potential for an increase in the range for Palette, the CEO expressed confidence in the product's performance and its expanding indications, which will be unique to the market. The product's visibility, ability to be molded, and lack of urgency in its use are also resonating well with the radiation oncology and urology communities.

The speaker discusses the company's revenue projections for the next quarter and addresses a question about the lower-than-expected performance of their Vascular Access business. They attribute the decline to a recall and anticipate improvement in the following quarters. They also mention solid growth in their PICC and CVC products. The Q&A session ends and the conference call is concluded.

This summary was generated with AI and may contain some inaccuracies.