Q1 2023 Teleflex Inc Earnings Call
Speaker 1: Please stand by. Good morning ladies and gentlemen. Welcome to the teleflexed first quarter 2023 earnings conference call. At this time, all participants have been placed in a listen-only mode. At the end of the company's prepare remarks, we will conduct a question in our session. Please note that this conference call is being reported and will be available on the company's website for replay shortly.
Speaker 1: And now I will turn the call over to Mr Lawrence Cash, First President of the Festivals and Strategy Development.
Speaker 2: Good morning, everyone, and welcome to the Teleflex Incorporated first quarter 2023 earnings conference call.
Speaker 2: The press release and slides to accompany this call are available on our website at teleflex.com
Speaker 2: Please note that webcast viewers have the ability to advance the presentation slides on their own.
Speaker 2: Simply follow along with the presentation as we proceed through the call.
Speaker 2: As a reminder, a replay will be available on our website. Those wishing to access the replay can refer to our press release from this morning for details.
Speaker 2: Participating on today's call are Liam Kelly, Chairman, President, and Chief Executive Officer, and Thomas Powell, Executive Vice President and Chief Financial Officer.
Speaker 2: Liam and Tom will provide prepare remarks and then we'll open the call to Q&A.
Speaker 2: Before we begin, I'd like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events as outlined in the slides posted to the Investor Relations section of the Teleplex website.
Speaker 2: We wish to caution you that such statements are backed forward looking in nature and are subject to risks and uncertainties and actual events or results made differ materially.
Speaker 2: The factors that could cause actual results or events to differ materially include, but are not limited to, factors referenced in our press release today, as well as our filings with the SEC, including our Form 10-K , which can be accessed on our website.
Speaker 2: Now I'll turn the call over to Liam for his remarks.
Speaker 3: Thank you, Larry, and good morning, everyone. It is a pleasure to speak with you today. GBA, available.
Speaker 3: For the first quarter, Teleflex revenues were $710.9 million.
Speaker 3: A year-over-year increase of 10.8% on a reported basis and an increase of 13.2% on a constant currency basis.
Speaker 3: First quarter adjusted earnings per share was $3.09, a 7.3% increase year over year.
Speaker 3: We had a strong start to 2023 as momentum exiting last year continued into the first quarter.
Speaker 3: Even when excluding the impact of five extra shipping days in the first quarter, our underlying growth was robust at 7.1%.
Speaker 3: As a reminder to investors, a day is typically worth approximately 1% revenue growth in a quarter.
Speaker 3: For the first quarter of 2023, each extra day was the actuality slightly in excess of 1% growth. And when strung together, the five extra shipping days added approximately 6% to our constant currency growth.
Speaker 3: In the quarter, both the high-growth portfolio excluding Eurolift and the durable core grew in the low double digits year over year excluding the 5 extra shipping days in the quarter.
Speaker 3: Behind an improving procedure environment, we executed well during the quarter, with all global product categories driving growth.
Speaker 3: The balance performance in the border continues to demonstrate the benefit of telephlexes diversified product or folio and broad geographic footprint.
Speaker 3: In the border, we saw strong contributions from our interventional, surgical, and OEM product categories.
Speaker 3: From a geographic perspective, Europe was in line with expectations while Asia remains a key growth driver. From a macro perspective, we are seeing a stabilization in inflation and supply chain as expected.
Speaker 3: On note, we have seen some easing in supply constraints for Tyvek during the first quarter and continue to expect the situation to further improve in the second half of the year as additional industry capacity comes online. We are also seeing a continued improvement in staffing challenges in the hospital setting.
Speaker 3: This was evident in our first quarter revenue growth as the majority of telephonic products are exposed to the hospital setting.
Speaker 3: All growth rates that I refer to are on a constant currency basis unless otherwise noted.
Speaker 3: America's revenues are $411.9 million, which represents 9.2% growth year-over-year.
Speaker 3: We saw growth across the majority of our businesses, including double-digit increases in intervention and surgical revenues. In addition, the results included the impact of the five extra shipping days. The EMEA revenues of $143.3 million increased 10.5% year-over-year.
Speaker 3: The year-over-year growth includes the benefit of the five extra shipping days in the water. While the underlying performance reflects continued improvement, in the year-over-year procedure volumes, that fueled broad-based revenue growth across our product portfolio.
Speaker 3: Now turning to Asia. Revenue is worth $78.7 million, increasing 22.8% year over year. We saw strength across the region with all geographies posting solid growth during the first quarter. China remained a solid contributor with very high singles digit growth.
Speaker 3: Looking forward, we would expect growth in China to accelerate during the remainder of 2023.
Speaker 3: Let's now move to a discussion on our first core of the revenues by Global's product category.
Speaker 3: Commentary on global product category growth for the first quarter will also be on a constant currency basis.
Speaker 3: and global product, Catery Grigorges, for the first quarter, would also be on a constant currency basis. Starting with vascular access.
Speaker 3: Revenue increased 9.2% to $177.7 million.
Speaker 3: The performance was solid across the portfolio and we are now past the top COVID comparisons experience during 2022.
Speaker 3: As I noted earlier in the call, we saw some improvement in TIVAC supplies in the first quarter, and expect further availability in the second half of the year as additional manufacturing capacity for the industry comes online.
Speaker 3: Of note, our PIC portfolio returned to double-digit growth in the quarter.
Speaker 3: Over the long term, we remain positioned for dependable growth with category leadership in central Venus catheters and midlines, anticipated share gains from our novel code in Big Fort Bolio and new product introductions. Moving to interventional access. Thank you.
Speaker 3: Revenue was $116.9 million, up 23.3% year over year. We continued to benefit from our diversified portfolio and saw strength across our largest product categories, including complex catheters, balloon pumps, and on-control. Manta continues to penetrate the large foreclosure market globally.
Speaker 3: Turning to anesthesia, revenue was $93.3 million, up 9.9% year over year. Of our larger franchises, hematotic products, regional anesthesia, and endotracheal tubes, all that had strong performances in the first quarter.
Speaker 3: Partly offset by LMA single use map.
Speaker 3: In our surgical business, revenue was 99 million dollars.
Speaker 3: of 14.3% year over year.
Speaker 3: Among our largest product categories, metal ligation clips and instrument revenue increase double digit year over year.
Speaker 3: In the border, we advance our integration of standard bariatrics and train new surgeons on the use of the Titan SGS stapler in sleeve gastrectomy procedures.
Speaker 3: We showcase Titan at the recent stages to medical conference and the surgeon's feedback was overwhelmingly positive.
Speaker 3: For interventional urology, revenue was $75.4 million.
Speaker 3: representing an increase of 0.9% year over year. We witnessed growth for Uralicht in the hospital setting, but the Office of Cytus Service continues to be impacted by stopping shortages. We continue to expect the US end market for Uralicht continues to improve as we progress through 2023. 23.
Speaker 3: The overseas launch activity in Japan and China are progressing in line with expectations.
Speaker 3: OEM revenues increase 34.5% year-over-year to $77 million.
Speaker 3: The strength in the quarter was broad-based cross-art for Bolio with double digit growth in all product categories.
Speaker 3: We continue to have good visibility into the business and see solid demand dynamics throughout 2023.
Speaker 3: First quarter, other revenue increased 6.4% to $71.6 million a year over year. We continue to expect all MSA revenues to cease at the end of 2023, implying no MSA revenue in 2024.
Speaker 3: That completes my comments on the first quarter revenue performance. Turning to some commercial and clinical updates.
Speaker 3: We continue to execute in our commercial strategy for the Titan SGS powered stapling device for use in sleeve gastrectomy procedures to treat obesity.
Speaker 3: We recently announced a supply agreement with W.L. Gore and Associates to use the company's Gore SeamGuard Biosorbible Stable Line Reinforcement Material in a staple line reinforcement device designed by Teleplex for use with the Titan SGS Stable.
Speaker 3: Boatrice material is commonly used by surgeons to reduce leaks and bleeding and strengthen the staple line by redistributing the pressure exerted by an individual staple over a wider area, as well as provide reinforcement for friable tissue.
Speaker 3: We anticipate launching the telephlex applicator with Gorg-Butris materials by year-end 2023.
Speaker 3: anticipate launching the telephlex applicator with Gorg-Butrus materials by year-end 2023. Moving to our human-static product portfolio.
Speaker 3: We have received FDA-FITLINK clearance for the Quick-Club Control Pulse for miles to moderate bleeding in cardiac procedures and bone bleeding following sternotomy. This new indication expands upon the prior indication for temporary control of internal organs-based bleeding for patients displaying severe bleeding.
Speaker 3: The expanded indication follows the completion and analysis of an IDE study that examined the rate at which subjects achieved hemostasis through 10 minutes of hemostatic amplification and compression at the bleeding site. The study concluded that the quick clark control plus hemostatic...
Speaker 3: and breath a surging good procedures.
Speaker 3: and expand our global market opportunity for our portfolio of hemostatic products.
Speaker 3: We will begin promoting our new indication in the coming months.
Speaker 3: Now, moving to an update on the Interventional Access Business. We are excited about our building momentum for 2023 with a focus on complex BCIs and structural hard. Of note, we continue to focus on driving our innovation engine.
Speaker 3: and will be launching a number of new products over the coming years. Of mending our channel presence in complex PCI, we recently commenced a limited market release for the guideline or cost with positive initial feedback from physician users. Guidelines or cost builds upon our successful guideline or extension capital franchise.
Speaker 3: supported by a chronic total occlusion clinical study which is planned to enroll patients in 2023.
Speaker 3: We also continue to expand our ringer perfusion balloon catheter with two clinical studies currently in rolling patient.
Speaker 3: Separately, we continue to expand our structural hard presence. Our dedicated Salesforce is currently selling Manta and the Langston Dual Lumen Catheter. Looking forward, we are actively engaged in expanding our product portfolio with the Watson medicine.
Speaker 3: representing the next product anticipated to launch.
Speaker 3: The Watson is a unique dual delivery guide wire and pacing wire for use in tabar procedures. Lastly, I would provide an update on our vascular access business. We are excited to announce that we have launched two new devices designed to enhance pick insertion procedures.
Speaker 3: reduce the chance of complications. First, we have launched the next generation Arrow VPS rhythm DLX device.
Speaker 3: which provides real-time picked catheter tip location information using a patient's cardiac electrical activity. The device also features an optional integrated ultrasound module to assist with vascular access.
Speaker 3: Couples with our tip tracker technology use of the DLX eliminates the need for confirmatory X-ray which reduces time to therapy and cost.
Speaker 3: In addition, we have launched a new Arrow Pick preloaded with the NaviCurve Stylest. The NaviCurve Stylest features an anatomical curve and flexible tip that are designed to self-orientate to patient anatomy for enhanced pick advancement into the superior Vena Keva for successful insertion.
Speaker 3: That completes my prepared remarks. Now I would like to turn the cold over to Tom for a more detailed review of our first quarter financial results. Tom? Thanks William and good morning.
Speaker 2: Given the previous discussion of the company's revenue performance, I'll begin with margins.
Speaker 2: For the quarter, adjusted growth margin was 59.4%, or 100 basis point increase versus the prior year period.
Speaker 2: The year-over-year increase was primarily due to price, lower logistics and distribution-related costs, and favorable fluctuations in foreign currency exchange rates.
Speaker 2: partially offset by continued cost inflation, including raw materials and labor costs.
Speaker 2: Of note, we maintained our pricing discipline in the first quarter and continue to expect at least 50 basis points of positive price year over year in 2023.
Speaker 2: The just an operating margin was 25.8% in the first quarter.
Speaker 2: The 10 basis point year over year increase was the result of the flow through of the gross margin partially offset by headcount and employee related expenses investments to grow the business and the inclusion of standard barri-atrix
Speaker 2: That interest expense totaled $17.5 million in the first quarter, an increase from $10.2 million in the prior year period.
Speaker 2: The year-over-year increase in net interest expense reflects higher interest rates versus the prior year, partially offset by a reduction in average debt outstanding. Our adjusted tax rate for the first quarter of 2023 was 11.8%, compared to 11.9% in the prior year period. The year-over-year increase in net interest expense reflects higher interest rates versus the prior year period. Our adjusted tax rate for the first quarter of 2023 was 11.9%, compared to 11.9% in the prior year period.
Speaker 2: At the bottom line, first quarter adjusted earnings per share was $3.09, an increase of 7.3% versus prior year.
Speaker 2: Turning out a select balance sheet and cash flow highlights.
Speaker 2: Cash flow from operations for the first quarter was $84.3 million compared to $62.1 million in the prior year period.
Speaker 2: The increase was primarily due to favorable changes in working capital driven by higher accounts receivable collections, partially offset by an increase in inventories to maintain high customer service levels during a period of elevated global supply chain volatility.
Speaker 2: Moving to the balance sheet, our financial position continues to provide us the flexibility to operate the business and execute on our Displend Capital allocation strategy. At the end of the first quarter, our cash balance was $264.1 million as compared to $292 million dollars.
Speaker 2: as of year end 2022.
Speaker 2: The reduction cash on hand is primarily due to $75 million of payments on our senior credit facility.
Speaker 2: Net leverage at quarter-end was approximately 1.7 times, which remains well below our 4.5 times covenant.
Speaker 2: at quarter end was approximately 1.7 times, which remains well below our 4.5 times covenant. Turning now to financial guidance.
Speaker 2: We are very pleased with our first quarter financial performance. Of note, we have seen a recovery in surgical procedures, most notably those that are performed in the hospital. Staffing shortages continue to improve in the hospital and inflation and supply chain headwinds have stabilized.
Speaker 2: Given the solid start to the year, we are updating our 2023 financial guidance. Specifically, we are raising the low end of our 2023 constant currency revenue and now its back growth of 5% to 61.4%.
Speaker 2: Given the solid start to the year, we are updating our 2023 financial guidance. Specifically, we are raising the low end of our 2023 constant currency revenue and now expect growth of 5% to 6 and 1 quarter percent. Turning to foreign exchange.
Speaker 2: We now assume a foreign exchange translation headwind of approximately 35 basis points in 2023.
Speaker 2: Our prior guidance of a 50 basis point headwind for 2023 assumed a $14 million negative impact of foreign exchange for the full year of which $17 million was expected in the first quarter.
Speaker 2: The actual first quarter headwind was approximately 4 million less than was expected. A revised foreign exchange guidance for 2023 captures the actual rates for the first quarter, while the foreign exchange assumptions set at the beginning of 2023 remain unchanged for the balance of the year.
Speaker 2: Considering the revised foreign exchange headwind, we expect reported revenue growth of 4.65% to 5.9% in 2023, implying a dollar range of $2.921 billion to $2.956 billion.
Speaker 2: We are reiterating our 2023 guidance for adjusted earnings per share of $13 to $13.60.
Speaker 2: We are lowering our GAAP adjusted earnings per share outlook to $8.14 to $8.74 primarily due to a one-time tax item.
Speaker 2: All other elements of our adjusted financial guidance for 2023 remain unchanged, including our outlook for adjusted growth in operating margins.
Speaker 2: That concludes my prepared remarks. I would now like to turn it back to Liam for closing commentary. Thanks, Don. In closing, I will highlight our three key takeaways from the first quarter of 2023.
Speaker 3: First, we started 2023 with a strong performance as momentum continued from the end of last year. We executed well across our global business and continued to effectively manage the macro-pedwin. Second, the Southern First Quart performance keeps its well-position to deliver
Speaker 3: our financial guidance for 2023. We see an increasingly stable environment for healthcare utilization. In turn, we expect improving performance of our high-growth portfolio as we move through 2023 in addition to continued strength in our durable core.
Speaker 3: Third, importantly, we will continue to focus on our strategy to drive durable growth.
Speaker 3: We will invest in organic growth opportunities and drive innovation.
Speaker 3: expand our emergence and execute on our disciplined capital allocation strategy to enhance long-term value creation.
Speaker 1: That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q&A. Thank you. If you'd like to ask a question, please press star 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow up.
Speaker 4: Liam, I wanted to start just some of your comments on what you're seeing from a recovery standpoint, hospital versus ASC and in-office setting, but specific to your list, can you just speak to what you've seen, where you are from a recovery standpoint in the hospital setting versus ASC office-based? And then as you look through the balance of the year, too, relative to that 8 to 9 percent where the family levels are, is basically 12 to 14 percent increase. That's because the tally is healthy and some are laxed, not perhaps due to the reporting, but just because we know that we are.
Speaker 3: was ahead of our expectation. X the days that came in, over 7%. We're really pleased with the first quarter, when our guide at the midpoint was approximately 6%. Overall procedure volume within the hospital has continued to move forward and to progress.
Speaker 3: We're seeing that in particular in the Americas and in EMEA. And what we see overseas in APAC is a strong environment. And we see, especially as you got through March, we saw China start to pick up. For eurolift specifically, we saw growth again in the hospital size of service, and that's what we're seeing in the Americas and in EMEA.
Speaker 3: that the patient flow dynamic really started to have an impact as you went into the latter half of the year. It began as you went through Q2 into Q3, so we would still anticipate an improving environment for uralip as we go through the year. Within the quarter, uralip came in as expected in the first quarter of this year and we feel that we're building good for uralip.
Speaker 5: So, the 2023 revenue guidance, it implies a step down and growth for the balance of the year. So, what is driving that outlook as it conservatism or is there anything else to call out? And how should we think about the cadence for the balance of the year? Also, it's been looked at EPS, you held EPS despite the Q1 beep. I'm just wondering if there are any PNL offsets to consider.
Speaker 3: due to which you did not know the EPS range. Okay, I'll ask Tom to comment on the EPS in a moment. I'll answer your question regarding the revenue. Shagun, we were very clear in the first quarter that our plan is front-end loaded. And if I'm an investor, I would want to have a front-end loaded plan from a company rather than a back-end loaded plan for a company. I'll answer your question regarding the EPS range.
Speaker 3: There are a few dynamics that play into that in certain parts of our businesses.
Speaker 3: Obviously, as we go through the year, we have some tougher comparables as you get into the back half of the year. Obviously, there's the day's impact. You've got five additional days in the first quarter. You've got five less days in quarter four. But we feel really good about the full year. Starting off strong gives us increased confidence in our ability to deliver on our guidance as we go through the year.
Speaker 3: based on some of our key business units and regions performing exceptionally well. Businesses like OEM, Interventional Access had really strong marches at the month of March. It's really good to see Vascular get back to growth as expected. We told investors that Vascular would get back to growth. It's great to see.
Speaker 2: EPS, okay, just as it relates to EPS. So keep in mind that, first of all, we didn't provide quarterly EPS guidance for the first quarter. And in the quarter, our EPS results came in very much in line with our internal expectations. So we remain very confident in the full year EPS guidance outlook.
Speaker 1: question comes from Chris Campbell from Jefferies. Chris, your line is open. Please go ahead.
Speaker 6: Hey, how are you doing? This is Chris. I'm from Matt Taylor. You touched a little bit on Eurolift growth. I was wondering if you could dig a little bit deeper on the high growth portfolio and some of the trends you're seeing there, including the standard bariatrics acquisition.
Speaker 3: Yeah absolutely Chris thanks for the question. So I will tell you that Titan had a really strong start to the year. We still expected to do 30-35 million. Mantic came in online and is on track for the full year. Hemostats did really really well in the first quarter. Came out of the blocks fast and intro...
Speaker 3: performance and we would expect that to continue as we go through the year. I would anticipate many of the parts of the high growth portfolio to continue to accelerate as we go through the year. That would speak to Eurolift, Manta, Titan, the picks and also some of the interosseous portfolios.
Speaker 7: Thanks for taking my questions. So I want to ask one on your list. Did you see the same degree of selling day impact there that you saw in the rest of the business? Because if you did, that would sort of imply fairly decent decline again there, kind of mid single digits, I think.
Speaker 7: Or is there some reason it didn't kind of fit your list?
Speaker 3: Yeah, so Mike, the day's impact for your lift is similar to the rest of the business, so that would, you're absolutely correct, that would show some modest decline. But Mike, that's what we were expecting in the first quarter. And it came in exactly as we would have anticipated. We did get some analysis on the day's impact. We have it through January and February , as pardon me, on the patient flow impact.
Speaker 3: in Q3 where we had double digit declines in patient flow. Once we get through that comparable we would anticipate as we go through the year an improving environment for your lift.
Speaker 7: And then just the MSA headwind, can you just quantify that for us again just as a reminder so we can make sure we incorporate that correctly into our models?
Speaker 3: Oh yeah, the MSA headwind as you go from 23 into 24 is approximately 70 million dollars, Mike. So, but that's low margin revenue going away. So you lose the 70 million in revenue, but as you go down through the income statement, you will pick up approximately 100 basis points on gross.
Speaker 3: 2024 as we that complete low-growth areas gone out of our portfolio. The MSA is gone out of our portfolio and you'll see an impact on gross margins and a chunk of that dropping through to off margins in 24 as well.
Speaker 1: The next question comes from Jason Bedford from Raymond James. Jason, your line is open. Please go ahead. Good morning. Just a couple of questions here. OEM and interventional were quite strong with outsize growth. I just want to make sure there's no kind of one-timers in there. And then just secondly on OEM.
Speaker 3: four and a half percent obviously you got to take that some the day's impact out of that it it it was across the board we were really strong on catheters we were really strong on extrusion sutures performed very well the acquisition we did a couple of years ago HPC continues to perform exceptionally well and allow us to sell some of our products through to other customers
Speaker 3: And they did have a prior year easier comping in Q1 which helped them, but the momentum that they carried in from Q4 continued into Q1 and is performing exceptionally well. And candidly OEM has been performing exceptionally well for
Speaker 3: the last three years now. This isn't just a one-quarter phenomenon even though it's a little bit better this quarter. Within interventional access, again, a very strong performance, over 23% growth. The return of Langston really helps complex catheters, the guideline or track line or turnpike to perform well. A lot of procedural volume bring us through there.
Speaker 3: As we go through the year, in Q3 they'll comp the Langston return to the market, but notwithstanding that this is going to be a nice solid growth driver with really good margins. And as we went through in our prepared remarks, a really nice setup with new products coming through with the Guideline or Coast, with the Watson, with the Ringer, and with the Triumph that now coming to market. So the lifeblood of this business in the past has been new products.
Speaker 3: And some of the changes we made in our R&D processes have really started now beginning to show bear fruit as you heard during my prepared comments. So OEM and IA, you're right, Jason Ardowons, that kind of really drove the upside from the expected 6% to 7% within Q1. And the visibility. I know we have. Visibility in OEM is excellent. Sorry, thanks, Larry. Visibility on OEM, it's one of the businesses where we've
Speaker 8: we started in vascular and eventually a lot of data points in the quarter that we've certainly gotten to a new level for procedure volumes in particular. Not necessarily that staffing issues have improved to normal, but that workflow at hospitals has improved. So maybe just a little bit on the sustainability of procedure volumes.
Speaker 8: broadly as it you know relates to the other businesses in the hospital not specifically outpatient and then I'll have a follow up as well thanks.
Speaker 3: Yeah Anthony, I mean obviously within the quarter growing 7% coming off a Q4 at 4.3% and a full year last year adjusted at 4.3% you can see the progress. I mean it's more than just procedural volumes. A lot of the new products that we're talking about are building momentum within the business.
Speaker 3: Obviously having standard barri-actrix and the Titan product is helping us, but I've been saying this for many quarters. Now if you're in the hospital over the last period of time and I think it's going to be sustainable for sure over a number of quarters, procedure of volume is really strong. There's...
Speaker 3: a lot of impetus to get procedures done. We're seeing it broadly within EMEA and within the Americas. And as I said a little earlier, with China coming back on stream, we would anticipate getting additional growth out of procedure volume coming through from that lockdown practice within APEC and specifically within China.
Speaker 3: in the near term and I think it's very encouraging what we're seeing in the in the hospital side of service. So I see it as pretty sustainable over a multi-quarter period Anthony but I wouldn't want you to go away thinking it's just procedural volume. There are some things that we're doing uniquely within Teleflex is driving a lot of our momentum as well.
Speaker 8: That's great. And then the follow-up would be maybe just your views here most recently on the M&A environment. We're seeing transactions come through within the space. You know, maybe just updated thoughts on on valuations and then just also, you know, the cost of funding. I mean, how does that change the equation?
Speaker 3: now just where the debt markets are when Teleflex thinks about M&A. Thanks. Yeah, Anthony, so we're very active within the market. Our leverage is now 1.7 times, so we have the most important thing you need when you're doing M&A. We have firepower. So right now we would have the potential, not saying we're going to do this, but we would have to do this.
at tokens, we're looking at scale, we're looking at late-stage technologies across the board. I'll talk a little bit about the cost of funds, but maybe I'll ask Tom to add a comment as well.
But I think what we're seeing is the cost of funds is improving somewhat. So the environment we think is a little bit better than it was even a number of months ago. And with regard to valuations, I think valuations are where they were over the last number of quarters. They've come back from the heady days halfway through 2021.
and I think it's an environment that's very attractive to Teleflex. But Anthony, we will continue to be disciplined. Investors should know that when we do announce a deal and we bring something into Teleflex, we've done our appropriate work and it's the right deal for Teleflex. Anthony, you want to add on the cost of funds, Tom? Well, I was just going to say that, yes, well, certainly the cost of funds are up from where they were a couple of years ago or just a year ago.
you know, assets. So right now our focus is really is as we input on finding the right strategic fit that makes sense for us.
And the cost of funds will certainly be a component, but not a limited component. The next question comes from Craig Beeson from Bank of America. Craig Golan is open. Please go ahead.
Good morning, guys. Thanks for taking the question. One of the touch on margins. Obviously, you raised reverted guidance, but the margin guidance didn't change. So, we're going to see if you could walk through the cadence of gross margin and operating margin throughout the year. And then given the Q1 performance, it involves gross margin and operating margin. It seems to be better than the prior.
with the start that we had to the year both on revenue on margins and on earnings. My mother god rest her used to say a good start is half the battle and we've had a good start but I'll let Tom give you a little bit more details on some of the margin impacts if you don't mind Tom. Sure so on the gross margin front you know you should expect to see a pretty steep...
the comparison to prior year or...
year
For the gross margin, we had a more favorable comp in the 1st quarter than we're going to have for the balance of the year. So, when looking at year over year comparisons that certainly comes into play. We also are expecting.
foreign exchange headwinds on gross margin as we go throughout the year. In the first quarter we actually had a nice benefit, but if you recall last year the dollar moved significantly beginning in second and third quarters and as a result, you know that that's going to prove to have a more difficult comparison. So those are some of the factors I think about but again, you know gross margin is pretty stable throughout the year.
the year and operating marginal show sequential improvement. The next question comes from George Sellers from Stevens. George Hulana's open, please come ahead. Hey, good morning. Congrats on the quarter. And thanks for taking the question. I guess maybe a smaller question on the Titan.
I know it's still a relatively small piece of the business, but with the Gore buttress material, what are some of the implications on the gross margin for that device and also for the manufacturing of that? Is there an opportunity to, over time, bring that in-house? Thanks for the question.
Yeah, George. Thank you very much. So first of all, I'd say we're really pleased with the performance of Titan in the first quarter. I drove a lot of the positivity on the surgical business and saw our surgical business perform really, really well. As a result coming in a 14% growth, the buttress material will have no impact on the margin expectations for this business. We still expect.
This business as we go through 24 become accretive to Teleflex's gross margin and then to really leverage thereafter our expectation is to continue to have this party or have this product manufactured as we have right now And we have no plans to make any changes to that at this stage
35 million in revenue this year and that volume will help us obviously leverage the gross marriage and we're going to 24 George and thanks for the question.
As a reminder, that's star followed by one on your telephone keypad to enter the queue. And the next question comes from Mike Pollak from Wolf Research. Mike, your line is open. Please go ahead. Hey, good morning. Thank you. Maybe follow up there on standard bariatrics. And if you said it, I missed it. But can you quantify revenue contribution in the quarter? I know...
We are confident on the 30 to 35 million for the product. And I will tell you, as I said a little earlier, it is one of those products that will continue to ramp as you go through the year. But again, we had a really nice start in quarter one. So therefore it reinforces our confidence on the 30 to 35 million for the full year. And the product...
of the bootrests when they're sealing. And it's probably not as much needed with the Titan as it is with the other technologies, but if that's the process they want to use, then we're going to support them in doing that. So I think that it all builds well for the Titan over a multi-year period. Thank you. If I can follow up, my other topic was Tyvek.
if memory serves, you know, I thought maybe the second half of the year is when that situation might get a little bit better for the industry. It sounds like it's improving in real time. So, you know, what's driving that way? Are you just seeing, um, kind of more supply come online and, you know, how
I thought maybe the second half of the year is when that situation might get a little bit better for the industry. It sounds like it's improving in real time. So what's driving that? Are you just seeing more supply come online?
How is it trended and are you back to normal there or pretty darn close in any kind of framework for where we are? And then the related question is, can you just remind us the revenue, the segment lines that have been most impacted by that situation? And so the comps are where the comps are easiest as supply improves. Thank you. Yeah, I'll use your expression. It's pretty darn close to getting back to normal. It's not quite back to normal yet.
our market share position in CBCs, what it has done, it has prevented us from converting pick accounts. And as you heard in my prepared comments, it was nice to see picks getting back to double digit growth in the quarter as we were able to go back out and start converting those accounts. Just to remind investors, our pick portfolio is unique and so far as that it has an antimicrobial and an antitrombogenic coating.
So therefore, that's why we're getting broad adoption for that portfolio globally. And in particular in the United States where we're not the market leader, we see a great opportunity to continue to take share. Next question comes from Richard.
on patient flow. I guess even some of the other subcategories in MedTech that improve but are lagging things like elective procedures like knees and hips, even those kind of saw some of the patients coming back into the channel for doctor visits.
things of that sort. I'm just curious, is there anything specific about your lift that contrast to some of those other procedures? Not your lift, sorry, but the doctor visit in patient flow. Just trying to get a sense for why maybe, you know, certain neurological procedures like this would be...
still lagging to such an extent versus the rest of the kind of the Medtech environment. Thanks. Well, there's a couple of things I point out, Rich. First of all, when you're doing hips and knees, you're not doing them to yourology patients. So it is unique to the Eurology specialty. There's a few things with Eurologist. The average age of Eurologist within the United States is...
in the Eurology call point, as investors familiar with teleplex will know, about 30% of our Eurodiff Revenue is generated within the office. And I can tell you that the data that we have will tell us that patient flow declined 3.7 percent through January and February . Now the good news rich is that once we get into the latter half of the year, we're going to be able to see the results.
I was there in Chicago earlier this, in late April , and compared to a year ago there was way more attendees, it really felt good, it was buoyant. We had a lot of education seminars with a lot of podium presence at that and it was almost-
It was back to the good old days of Eurolift, I would say, at that conference. We do anticipate somewhat of a bounce from that and we do anticipate the back half of the year being better.
And a final reminder, that's star followed by one on your telephone keypad to ask a question today. As we have no further questions, I'll hand the call back to Lawrence Kirsch for any concluding remarks.
Thank you, Adam, and thank you to everyone that joined us on the call today. This concludes the Teleflex and Corporate First Quarter 2023 Earnings Conference call.
This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.