Q4 2023 Teleflex Inc Earnings Call
Operator: Good morning, ladies and gentlemen, and welcome to the Teleflex fourth quarter 2023 earnings conference call. At this time, all participants have been placed in a listen-only mode.
Good morning, ladies and gentlemen, and welcome to the Teleflex fourth quarter 2023 earnings conference call.
At this time, all participants have been placed in a listen only mode.
Operator: At the end of the company's prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded and will be available on the company's website for replay shortly. And now I will turn the call over to Ms. Lawrence Keusch, Vice President of Investor Relations and Strategy Development.
At the end of the company's prepared remarks, we will conduct a question and answer session. Please.
Please note that this conference call is being recorded and will be available on the company's website for replay shortly.
And now I will turn the call over to Mr. Lawrence Curse, Vice President of Investor Relations and strategy development.
Lawrence Keusch: Good morning, everyone, and welcome to the Teleflex Incorporated fourth quarter 2023 earnings conference call. The press release and slides to accompany this call are available on our website at teleflex.com. As a reminder, a replay will be available on our website.
Lawrence Keusch: Good morning, everyone and welcome to the Teleflex incorporated fourth quarter 2023 earnings Conference call.
Speaker Change: The press release and slides to accompany this call are available on our website at Teleflex Dot com.
Speaker Change: As a reminder, a replay will be available on our website.
Lawrence Keusch: And for those wishing to access the replay, you can refer to our press release from this morning for details. Participating on today's call are Liam Kelly, Chairman, President, and Chief Executive Officer, and Thomas Powell, Executive Vice President and Chief Financial Officer. Liam and Tom will provide prepared remarks, and then we will open the call to Q&A. 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 Teleflex website. We wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties, and actual events or results may differ materially. 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. Now, I'll turn the call over to Liam for his.
Lawrence Keusch: And for those wishing to access the replay you can refer to our press release from this morning for details.
Lawrence Keusch: Participating on today's call are Liam Kelly, Chairman, President and Chief Executive Officer, and Thomas Powell, Executive Vice President and Chief Financial Officer Liam.
Liam J. Kelly: Liam and Tom will provide prepared remarks, and then we will open the call to Q&A.
Liam J. Kelly: 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.
Liam J. Kelly: The Teleflex website.
Liam J. Kelly: We wish to caution you that such statements are in fact forward looking in nature and are subject to risks and uncertainties and actual events or results may differ materially.
Liam J. Kelly: 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 now I'll turn the call over to Liam Fraser.
Liam J. Kelly: Marks.
Liam J. Kelly: Thank you, Larry, and good morning, everyone. On this morning's call, we will discuss the fourth quarter results, provide some commercial updates, and introduce our financial guidance for 2024. We had a solid finish to 2023 as momentum seen through the year continued into the fourth quarter. For the quarter, Teleflex revenues were $773.9 million, a year-over-year increase of 2.1% and an increase of 0.7% on a constant currency basis. As a reminder to invest, there were five fewer shipping days year over year in the fourth quarter.
Liam J. Kelly: Thank you Larry and good morning, everyone.
Liam J. Kelly: On this mornings call, we will discuss the fourth quarter results for.
Liam J. Kelly: Provide some commercial updates and introduce our financial guidance for 2024.
Liam J. Kelly: We had a solid finish to 2023 as momentum seen through the year continued into the fourth quarter.
Liam J. Kelly: The quarter Teleflex revenues were $773 $9 million.
Liam J. Kelly: Our year over year increase of two 1%.
Liam J. Kelly: An increase of <unk>, 7% on a constant currency basis.
Liam J. Kelly: As a reminder to investors there were five fewer shipping days year over year in the fourth quarter.
Liam J. Kelly: The shipping day impact in the quarter was estimated to be $57 million, or approximately a 7.4 percentage point reduction in constant currency growth year over year. When adjusting for the shipping day impact, the implied constant currency growth was 8.1% year over year. Fourth quarter adjusted earnings per share was $3.38, a 4% decrease year-over-year.
Liam J. Kelly: The shipping day impact in the quarter was an estimated $57 million or approximately a seven four percentage point reduction in constant currency growth year over year.
Liam J. Kelly: When adjusting for the shipping day impact the implied constant currency growth was eight 1% year over year.
Liam J. Kelly: Fourth quarter adjusted earnings per share was $3 38.
Liam J. Kelly: A 4% decrease year over year.
Liam J. Kelly: During the quarter, utilization continued to return towards normal seasonality. From a macro perspective, we witnessed a stable to improving environment for material inflation and supply chain. These dynamics generally track to our expectations for the full year. For the full year 2023, we had a strong performance with revenues reaching $2.975 billion, which represents 6.5% constant currency growth year over year, while adjusted earnings per share was $13.52. As we look to 2024, we anticipate a stable procedure environment with seasonality in line with pre-pandemic levels. Although the Teleflex portfolio is not likely to benefit from pent-up demand due to the focus on critical care procedures, we would anticipate that staffing will continue to see improvements during the year. Supply chain dynamics largely stabilized through 2023, and we expect to see continued improvements in 2024. Teleflex has broad global manufacturing capabilities, and we continue to assess vertical integration opportunities to gain further control of our supply. Turning to inflation.
Liam J. Kelly: During the quarter utilization continued to return towards normal seasonality.
Liam J. Kelly: From a macro perspective, we witnessed a stable to improving environment for material inflation and supply chain.
Liam J. Kelly: These dynamics generally track to our expectations for the full year.
Liam J. Kelly: For the full year 2023, we had a strong performance with revenues, reaching two $9 $75 billion, which represents six 5% constant currency growth year over year while.
Liam J. Kelly: While adjusted earnings per share was $13 52.
Liam J. Kelly: As we look to 2024, we anticipate a stable procedure environment with seasonality in line with pre pandemic levels.
Liam J. Kelly: Although the teleflex portfolio is not likely to benefit from pent up demand due to the focus on critical care procedures, we would anticipate that staffing will continue to see improvements during the year.
Liam J. Kelly: Supply chain dynamics, largely stabilize through 2023, and we expect to see continued improvements in 2024.
Liam J. Kelly: Teleflex has broad global manufacturing capabilities.
Liam J. Kelly: And we continue to assess vertical integration opportunities to gain further control of our supply chain.
Liam J. Kelly: Turning to inflation.
Liam J. Kelly: There were elements of improvement during 2023, including C-Phrase and Raw Materials. For 2024, we are assuming some further disinflation, but note that costs remain somewhat elevated relative to historic levels and are above 2023.
Liam J. Kelly: There were elements of improvement during 2023, including sea freight and raw materials.
Liam J. Kelly: Our 2024, we are assuming some further disinflation, but note that costs remained somewhat elevated relative to historic levels and are above 2023.
Liam J. Kelly: Now, let's turn to a deeper dive into our four-quarter revenue results. I will begin with a review of our geographic segment revenues for the fourth quarter. All growth rates that I refer to are on a constant currency basis and reflect the negative impact of five fewer shipping days year over year, unless otherwise noted. America's revenues were $450.6 million, a 1.9% decrease year over year driven by surgical and vascular, and reflective of the five fewer shipping days in the quarter. In particular, we saw year-over-year growth in our interventional anesthesia and interventional urology businesses, despite the fewer shipping days in the quarter. EMEA revenues of $152.4 million decreased 2.7% year-over-year driven by anesthesia and surgical products and reflective of the impact of the fewer shipping days.
Liam J. Kelly: Now, let's turn to a deeper dive into our fourth quarter revenue results.
Speaker Change: I will begin with a review of our geographic segment revenues for the fourth quarter.
Speaker Change: All growth rates that I refer to are on a constant currency basis and reflect the negative impact of five fewer shipping days year over year, unless otherwise noted.
Speaker Change: America's revenues were $456 million or one 9% decrease year over year, driven by surgical and vascular.
Speaker Change: And reflective of the five fewer shipping days in the quarter.
Speaker Change: In particular, we saw year over year growth in our interventional anesthesia and interventional urology businesses. Despite the fewer shipping days in the quarter.
Speaker Change: EMEA revenues of $152 $4 million decreased two 7% year over year, driven by anesthesia and surgical and reflective of the impact of the fewer shipping days.
Liam J. Kelly: Urology products, interventional, and vascular businesses generated the highest shipping days adjusted growth in the quarter. Turning to Asia, revenues were $88.3 million, increasing 12.6% year over year. Revenue growth was broad-based across the region, with strong double-digit increases in Korea, India, and China. The performance in the quarter was driven by strong commercial execution and solid underlying demand. Let's now move to a discussion on our fourth quarter revenue by global product category. Commentary on global product category growth for the fourth quarter will also be on a year-over-year constant currency basis and reflect the impact of the five viewer shipping. On a shipping day adjusted basis, the sequential growth in the fourth quarter trended in line with our expectations, with vascular and anesthesia growth rates improving while interventional and surgical slowed, starting with vascular Revenue decreased 1.2% to $186.7 million.
Speaker Change: Urology products interventional and vascular businesses generated the highest shipping days adjusted growth in the quarter.
Speaker Change: Turning to Asia.
Speaker Change: Revenues were $88 3 million, increasing 12, 6% year over year.
Speaker Change: Revenue growth was broad based across the region with strong double digit increases in Korea, India and China.
Speaker Change: The performance in the quarter was driven by strong commercial execution and solid underlying demand.
Speaker Change: Let's now move to a discussion on our fourth quarter revenue by global product category.
Speaker Change: Commentary on global product category growth for the fourth quarter will also beyond a year over year constant currency basis and reflects the impact of the five fewer shipping days.
Speaker Change: On a shipping days adjusted basis, the sequential growth in the fourth quarter trended in line with our expectations with vascular and anesthesia growth rates, improving while intervention and surgical slowed.
Speaker Change: Starting with vascular access.
Speaker Change: Revenue decreased one 2% to $186 7 million.
Liam J. Kelly: Along with the fewer shipping days, the year-over-year growth also reflected the impact of the previously announced endurance catheter regrowth. The quarter was led by year-over-year growth for EZIO and other access despite headwinds from the reduced shipping. Of note, we achieved double-digit growth in our underlying PIC business when excluding the negative impact of the endurance recall. We continue to see opportunities for share gains in the peripheral access market, and our new product initiatives will help play a role. During the quarter, we continue to execute on our launch activities for our next generation navigation device and new PICC stylus. Moving to intervention.
Speaker Change: Along with the fewer shipping days the year over year growth also reflected the impact of the previously announced endurance catheter recalls.
Speaker Change: The quarter was led by year over year growth for EZ Io and other access despite headwinds from the fewer shipping days.
Of note, we achieved double digit growth in our underlying pick business when excluding the negative impact of the endurance recall.
Speaker Change: We continue to see opportunities for share gains in the peripheral access market and our new product initiatives will help play a role.
Speaker Change: During the quarter, we continued to execute on our launch activities for our next generation navigation device and new pig dialogues.
Speaker Change: Moving to interventional.
Liam J. Kelly: Revenue was $135.6 million, up 7.2% year over year. Despite the impact of the fewer setting days, we demonstrated solid growth, which underscores our positive momentum as we continue to make good progress with our growth drivers. Turning to anesthesia,
Speaker Change: Revenue was $135 6 million up seven 2% year over year.
Speaker Change: Despite the impact of the fewer selling days, we demonstrated solid growth, which underscores our positive momentum as we continue to make good progress with our growth drivers.
Speaker Change: Turning to anesthesia revenue declined three 4% year over year to $98 2 million.
Liam J. Kelly: Revenue declined 3.4% year over year to $98.2 million. Among our larger product categories, hemostatic products performed well in the quarter with strong double-digit growth, partially offset by declines in atomization and ET tubes, as we recover from the recall which occurred earlier in 2023. In our surgical business, revenue was $109.6 million, down 2% year-over-year, against a tough comparison. However, our underlying trends in our core surgical franchise continue to be solid, including our ligation portfolio. For 2023, Titan generated revenues in excess of $12 million. For interventional urology, revenue is $93 million, representing an increase of 4.2%. Starting with Palette, which we acquired in October 2023, revenues in the fourth quarter were modestly better than expectations without the performance of Barragee. For Eurolift, the office remains a challenge as we continue our efforts to stabilize this site of service.
Speaker Change: Among our larger product categories hemostatic product performed well in the quarter with strong double digit growth.
Speaker Change: Actually offset by declines in atomization, and ETE tubes, as we recover from the recall, which occurred earlier in 2023.
Speaker Change: In our surgical business revenue was $109 $6 million down.
Speaker Change: Down 2% year over year against a tough comparison.
Speaker Change: Our underlying trends in our core surgical franchise continue to be solid, including our legation portfolio.
Speaker Change: For 2023, Titan generated revenues in excess of $12 million.
Speaker Change: For interventional urology revenue was $93 million, representing an increase of four 2%.
Speaker Change: Parting with <unk>, which we acquired in October 2023 revenues in the fourth quarter were modestly better than expectations with outperformance of Berry Joe.
Speaker Change: For your lift the office remains a challenge as we continue our efforts to stabilize this size of service.
Liam J. Kelly: In the international markets, Eurolift revenue saw healthy growth in Japan, while in China, our initial launch activities remain on plan with a focus on training surgeons and gaining reimbursement. OEM had another solid quarter, with revenues increasing 10.9% year over year to $82.6 million. The strength in the quarter was broad-based across our portfolio, with all product categories recording year-over-year growth, including continued strength in micro-categories. However, fourth quarter other revenue declined 10.2 percent to 68.2 million dollars year over year. As previously disclosed, fourth quarter other revenue reflects the early December 2023 exit of the MSA by Medline and accounted for the majority of the year over year revenue decline. That completes my comments on the fourth quarter revenue performance. Now, turning to some commercial and clinical.
Speaker Change: In the international markets Euro lift revenue saw a healthy growth in Japan, while in China. Our initial launch activities remain on plan with a focus on training surgeons and gaining reimbursement.
Speaker Change: OEM had another solid quarter with revenues, increasing 10, 9% year over year to $82 6 million.
The strength in the quarter was broad based across our portfolio with all product categories recording year over year growth, including continued strength in micro catheters.
Speaker Change: Fourth quarter other revenue declined 10, 2% to $68 $2 million year over year.
Speaker Change: As previously disclosed fourth quarter. Other revenues reflects the early December 2023 exits of the MSA by Medline and accounted for the majority of the year over year revenue decline.
Speaker Change: That completes my comments on the fourth quarter revenue performance.
Speaker Change: Turning to some commercial and clinical updates.
Liam J. Kelly: Following the acquisition of Palette Life Sciences on October 10, 2023, I am pleased to report that the integration is tracking to our expectations. We have completed initial cross-functional product sales training for selected members of our legacy Eurolift sales force, and our dual bag reps are now interacting with clinicians in the field. Our focus remains on expanding the use of rectal spacing in the treatment of prostate cancer, and we are engaging with urologists and radiation oncologists. Paragel is a differentiated rectal spacer that is clinically proven to significantly reduce unwanted radiation exposure.
Speaker Change: Following the acquisition of <unk> Life Sciences on October 10th 2023, I am pleased to report that the integration is tracking to our expectations.
Speaker Change: We have completed initial cross functional product sales training for selected members of our legacy Urolith Salesforce and our dual by grips are now interacting with clinicians in the field.
Speaker Change: Our focus remains on expanding the use of breakfast spacing in the treatment of prostate cancer, and we are engaging with urologists and radiation oncologists.
Speaker Change: <unk> is a differentiated rectal spacer that is clinically proven to significantly reduce unwanted radiation exposure.
Liam J. Kelly: Moving to EuroLift. We continue to expand our foundation of clinical data that supports the use of Urolift as a safe and effective minimally invasive treatment for BPH. In November 2023, we highlighted a new peer-reviewed study in the Nature Journal, Prostate Cancer and Prosthetic Diseases, that reinforces the position of the Urolift system as the gold standard in minimally invasive surgical treatment for BPH.
Speaker Change: Moving to your lift.
Speaker Change: We continued to expand our foundation of clinical data that supports the use of euro lift as a safe and effective minimally invasive treatment for BPH.
Speaker Change: In November 2023, we highlighted at our new peer reviewed study in the nature Journal prostate cancer on prosthetic diseases that reinforces the position of the euro lift system as the gold standard in minimally invasive surgical treatment for BPH.
Liam J. Kelly: Results suggested that within one year of BPH surgery, one in 20 patients may require retreatment, regardless of whether they receive a TURP, green light, resume, or urology. Additionally, at one year, procedural complications requiring a return procedure in the outpatient setting were lowest following Urolift and highest following Resume. The average time to the first complication was the longest or eerilest.
Speaker Change: Results suggested that within one year of BPH surgery. One in 20 patients may require re treatment, regardless of whether they receive a TARP greenlight resume our euro lift.
Speaker Change: Additionally, at one year procedural complications requiring a return procedure in the outpatient setting was lowest following euro lift and highest following resume.
Speaker Change: The average time to the first complication was the longest or euro lift.
Liam J. Kelly: At five years, retreatment was lowest for TERP and statistically similar between Greenlight and Eurolet. The Retreatment Rate for Urolift is comparable to published controlled trial rates, thereby underscoring the durability of the Urolift. We continue to focus on supporting Urals with clinical data and note that we have eight sponsored research abstracts that have been accepted for presentation at major urological meetings in 2020. Turning to an update related to our surgical business unit, we have completed the launch activities for the Gore SeamGuard Bioabsorbable Staple Line Reinforcement Material to be used with the Titan stapler. The ability to offer synthetic buttressing material alongside the unique features of the Titan stapler should enable Teleflex to further address surgeon clinical needs and preferences in the sleeve gastrectomy market.
Speaker Change: At five years re treatment was lowest for TARP and statistically similar between Green light and your lift.
Speaker Change: There are treatment rate for euro lift is comparable to published controllers trial rates, thereby underscoring the durability of the euro lift system.
Speaker Change: We continue to focus on supporting Europe with clinical data and note that we have eight sponsored research abstracts that have been accepted for presentation at major urological meetings in 2024.
Speaker Change: Turning to an update related to our surgical business units.
Speaker Change: We have completed the launch activities for the GOR seem guard bias Saar ruble staple line reinforcement material to be used with the tightened stapler.
Speaker Change: The ability to offer synthetic buttressing material alongside the unique features of the tightened stapler should enable teleflex to further address surgeon clinical needs and preferences in the sleeve gastrectomy markets.
Speaker Change: Lastly, as we look into 2024, we will continue to advance our new product introductions with a number of launches across our business units.
Speaker Change: In our interventional business, we expect to receive FDA marketing clearance and launch the ringer catheter in the second half of 2024.
Liam J. Kelly: Lastly, as we look into 2024, we will continue to advance our new product introductions with a number of launches across our business units. In our interventional business, we expect to receive FTA marketing clearance and launch the Ringer catheter in the second half of 2024. Ringer incorporates a unique balloon design that allows blood to flow through a vessel while the balloon is in place.
Speaker Change: Ringer incorporates a unique balloon design that allows blood to flow through a vessel while the balloon is in places.
Speaker Change: We will initially launch with a ptca indication.
Speaker Change: But.
Speaker Change: We have completed enrollment in events with perforation trial that will be utilized to seek FDA label expansion.
Speaker Change: In our surgical business, we anticipate launching new ligation products, including an automated polymer clip applies here in the second half of 2024.
Liam J. Kelly: We will initially launch with a PTCA indication. What? We have completed enrollment in a vascular perforation trial that will be utilized to seek FDA label expansion. In our surgical business, we anticipate launching new ligation products, including an automated polymer clip applier, in the second half of 2024. We will also continue to refresh our laryngoscope families with a series of launches during the year. Our anesthesia business unit is also on track for new product launches, including updated technology in our EGIO business that would enable an expansion of our user base, for which we expect FDA approval in 2024. We will provide more details upon request. That completes my prepared remarks; now I would like to turn the call over to Tom for a more detailed review of our fourth quarter financial results. Tom said,
Speaker Change: We'll also continue to refresh our laryngoscope families with a series of launches during the year.
Our anesthesia business unit is also on track for new product launches, including updated technology in our <unk> business that would enable expansion of our user base for which we expect FDA approval in 2024.
Speaker Change: We will provide more details upon launch.
Speaker Change: That completes my prepared remarks, now I would like to turn the call over to Tom for a more detailed review of our fourth quarter financial results Tom.
Tom: Thanks, Liam and good morning Gil.
Tom: Given the previous discussion of the company's revenue performance I'll begin with margins.
Tom: For the quarter adjusted gross margin was 61%.
10 basis point increase versus the prior year period.
Tom: The year over year increase was primarily due to favorable price.
Thomas E. Powell: Thanks, Liam, and good morning. Given the previous discussion of the company's revenue performance, I'll begin with margin. For the quarter, Adjusted Gross Margin was 60.1%, a 10 basis point increase versus the prior year period. The year-over-year increase was primarily due to favorable price benefits from Cost Improvement Initiatives. Lower Logistics and Distribution-Related Costs and the Pollett Acquisition, partially offset by continued cost inflation and unfavorable fluctuations in foreign exchange rates. Adjusted operating margin was 26.3% in the fourth quarter. 160 basis point year-over-year decrease is primarily driven by the inclusion of Paulette Life Science operating expense, employee related expenses, and Investments to Grow the Business, partially offset by the flow-through of the year-over-year increase in gross margins. Net interest expense totaled $22.5 million in the fourth quarter, an increase from $18.7 million in the prior year period.
Tom: Benefits from cost improvement initiatives.
Tom: Lower logistics and distribution related costs and the <unk> acquisition.
Tom: Partially offset by continued cost inflation and unfavorable fluctuations in foreign exchange rates.
Yeah.
Tom: Adjusted operating margin was 26, 3% in the fourth quarter.
Tom: 160 basis point year over year decrease was primarily driven by the inclusion of palette life science operating expenses.
Tom: Employee related expenses and investments to grow the business.
Tom: Partially offset by the flow through of the year over year increase in gross margin.
Tom: Net interest expense totaled $22 5 million in the fourth quarter.
Tom: An increase from $18 7 million in the prior year period.
Tom: The year over year increase in net interest expense reflects higher interest rates versus the prior year and higher average debt outstanding utilized to fund the acquisition of <unk>.
Tom: Partially offset by increased interest income.
Tom: Our adjusted tax rate for the fourth quarter of 2023 was 11, 6% compared to 13, 6% in the prior year period.
Tom: The year over year decrease in our adjusted tax rate is primarily due to an increase in tax deductions as a result of additional amortization of R&D costs, which as a result of a U S tax law change resulted in capitalization of such costs starting in 2022.
Tom: At the bottom line fourth quarter adjusted earnings per share was $3 38.
Tom: A decrease of 4% versus prior year.
Tom: The year over year decrease in EPS reflects dilution from the acquisition of <unk> life Sciences, and the related incremental borrowings.
Tom: Turning now to select balance sheet and cash flow highlights.
Tom: Cash flow from operations for the 12 months was $511 7 million compared.
Thomas E. Powell: The year-over-year increase in net interest expense reflects higher interest rates versus the prior year and higher average debt outstanding utilized to fund the acquisition of POLEC, partially offset by increased interest income. Our adjusted tax rate for the fourth quarter of 2023 was 11.6% compared to 13.6% in the prior year period. The year-over-year decrease in our adjusted tax rate is primarily due to an increase in tax deductions as a result of additional amortization of R&D costs, which, as a result of a U.S. tax law change, will result in capitalization of such costs starting in 2022. On the bottom line, fourth quarter adjusted earnings per share was $3.38.
Tom: Compared to $342 8 million.
Tom: In the prior year period.
Tom: $168 9 million increase was primarily attributable to lower tax payments favorable changes in working capital.
Tom: <unk> operating results.
Tom: The favorable changes in working capital were primarily driven by lower inventory purchases stemming from the buildup of inventory in the prior year due to elevated global supply chain volatility.
Tom: Moving to the balance sheet.
Tom: At the end of the fourth quarter, our cash balance was $222 8 million.
Tom: As compared to $292 million as of the end of 2022.
Tom: For the 12 months the decrease in cash is primarily due to payments to fund the <unk> acquisition.
Tom: Partially offset by net proceeds from borrowings and operating cash flow.
Tom: Net leverage at quarter end was approximately one nine times.
Tom: Inclusive of the acquisition of <unk> Life Sciences, our financial position remains sound and continues to provide us flexibility to execute on our long term capital allocation strategy.
Tom: Turning now to financial guidance.
Thomas E. Powell: A decrease of 4% versus the prior year. The year-over-year decrease in EPS reflects elution from the acquisition of Pellet Life Sciences and the related incremental borrowing. Turning now to the Select Balance Sheet and Cash Flow Highlights
Tom: Starting with a couple of discrete items for 2024.
Tom: First we continue to expect the palette acquisition to be 35 dilutive to the company's adjusted earnings per share in 2024.
Tom: Beginning in fiscal year 2025, the transaction is expected to be increasingly accretive to adjusted EPS.
Tom: Second as previously disclosed the manufacturing transition services agreement with Medline associated with our sale of certain respiratory assets included in December 2023 of.
Thomas E. Powell: Cash flow from operations for the 12 months was $511.7 million compared to $342.8 million in the prior year period. The $168.9 million increase was primarily attributable to lower tax payments, favorable changes in working capital, and favorable operating results. The favorable changes in working capital were primarily driven by lower inventory purchases stemming from the buildup of inventory in the prior year due to elevated global supply chain volatility.
Tom: Of note Teleflex generated $75 7 million in revenues from the MSA in 2023, which will not repeat in 2024.
Tom: Moving to our outlook for 2024.
Tom: We are expecting 2020 for constant currency revenue growth of 375% to 475%.
Tom: The year over year growth includes the loss of the $75 $7 million and MSA revenues partly.
Tom: Partly offset by the incremental revenues from Colette.
Tom: Turning to foreign exchange.
Tom: We assume approximately $5 million or 15 basis points headwind to revenue from foreign exchange translation in 2024.
Thomas E. Powell: Moving to the balance. At the end of the fourth quarter, our cash balance was $222.8 million as compared to $292 million as of the end of 2022. For the 12 months, the decrease in cash is primarily due to payments to fund the Pellet Acquisition, partially offset by net proceeds from borrowings and operating cash flow.
Tom: Our outlook for foreign exchange includes a euro to dollar exchange rate of approximately $1 eight.
Tom: Netting the loss of MSA revenues, the incremental <unk> sales and foreign exchange headwinds represents an approximately 100 basis point year over year headwind to growth in 2024.
Tom: Considering the foreign exchange outlook, we expect reported revenue growth of three 6% to four 6% in 2024.
Tom: Implying a dollar range of $3 $2 billion to 311 1 billion.
Tom: Turning to margins, we expect 2020 for gross margin to be in the range of 60% to 60, 75%.
Thomas E. Powell: Net leverage at quarter end was approximately 1.9 times. Inclusive of the acquisition of Palette Life Sciences, our financial position remains sound and continues to provide us flexibility to execute on our long-term capital allocation strategy. Turning now to the Financial Guide, starting with a couple discrete items for 2024.
Tom: Our gross margin guidance reflects the year over year positive impacts from the termination of the MSA manufacturing efficiencies price and the <unk> acquisition.
Tom: Partially offset by inflation and the impact of changes in foreign currency exchange rates.
Tom: We expect operating margin to be in the range of $26 two 5% to.
Tom: The 26, 75% for 2024.
Tom: Our guidance reflects the flow through of gross margin and the positive impact of restructuring offset by the inclusion of operating expenses for life Sciences and investments to grow the business.
Thomas E. Powell: First, we continue to expect the Pollett acquisition to be 35 cents dilutive to the company's adjusted earnings per share in 2024. Beginning in fiscal year 2025, the transaction is expected to be increasingly dilutive to adjusted EPS. Second, as previously disclosed, the Manufacturing Transition Services Agreement with MEDLINE associated with our sales of certain respiratory assets concluded in December of 2023.
Tom: Moving to items below the line.
Tom: Net interest expense is expected to approximate $78 million for 2024.
Tom: The majority of the year over year increase in our net interest expense outlook reflects the impact of borrowings associated with the <unk> acquisition.
Tom: Partially offset by planned debt repayments during 2024.
Tom: Our tax rate is expected to be approximately 12% for 2024.
Tom: Which reflects favorable mix offset by discreet items in 2023 that will not repeat in 2024.
Thomas E. Powell: Of note, Teleflex generated $75.7 million in revenues from the MSA in 2023, which will not repeat in 2024. Moving to our Outlook for 2020, we are expecting 2024 constant currency revenue growth of 3.75% to 4.75%. The year-over-year growth includes the loss of $75.7 million in MSA revenues, partly offset by the incremental revenues from Pollack. Turning to Foreign Exchange.
Tom: And the impact of pillar two global minimum tax.
Tom: We estimate.
Tom: The impact of pillar two to add approximately 150 basis points to the 2020 for tax rate.
Tom: Turning to earnings we expect 2024 adjusted earnings per share in a range of $13 55.
Tom: The $13 95.
Tom: Our adjusted EPS outlook reflects 35 of dilution from the acquisition of <unk>.
Tom: 26 of dilution from the termination of the MSA.
Tom: And a 23% headwind associated with the year over year increase in our tax rate, primarily due to the pillar two minimum tax.
Thomas E. Powell: We assume approximately $5 million, or 15 basis points, to revenue from foreign exchange translation in 2024. Our outlook for foreign exchange includes a euro to dollar exchange rate of approximately 1.08%, netting the loss of MSA revenues. The incremental pullback in sales and foreign exchange headwinds represents an approximately 100 basis point year-over-year headwind to growth in 2024. Considering the foreign exchange outlook, we expect reported revenue growth of 3.6% to 4.6% in 2024, implying a dollar range of $3.082 billion to $3.111 billion. Turning to the margins.
Tom: Relative to foreign exchange or there is a negligible impact on revenue the headwind to earnings per share is approximately 24.
Tom: Year over year.
Tom: Based on current foreign exchange rates, we expect roughly half of the headwind to EPS to fall in the first quarter of 2024.
Tom: When adjusting for these items, including the negative impact of foreign exchange.
Tom: The underlying adjusted constant currency EPS growth is approximately 7% at the low end of guidance and 10% at the high end of guidance.
Tom: Although we do not provide quarterly guidance for your modeling purposes, We expect reported revenues for the first quarter to be in a range of $725 million to $730 million, including a negligible foreign exchange impact year over year.
Speaker Change: That concludes my prepared remarks.
Speaker Change: I would now like to turn it back to Liam for closing commentary.
Liam: Thanks, Tom.
Liam: In closing I will highlight our three key takeaways from the fourth quarter of 2023.
Liam: First we delivered on our financial commitments for 2023 for the year constant currency revenues increased six 5% and adjusted earnings per share were $13 52.
Thomas E. Powell: We expect 2024 gross margin to be in the range of 60% to 60.75%. Our gross margin guidance reflects the year-over-year positive impacts from the termination of the MSA, manufacturing efficiencies, price, and the pull-out acquisition, although partially offset by inflation and the impact of changes in foreign currency exchange rates.
Liam: Compared to our initial 2023 guidance constant currency revenue growth exceeded our guidance, while adjusted earnings per share was the high end of our range.
Liam: Our execution remains strong we are launching new products and our margins remain healthy.
Liam: Second the fourth quarter performance and stable to improving macro environment provides a solid foundation for growth as we head into 2024.
Thomas E. Powell: We expect operating margin to be in the range of 26.25% to 26.75% for 2024. Our guidance reflects the flow through of gross margin and the positive impact of restructuring offset by the inclusion of operating expenses for Palette Life Sciences and investments to grow the business. Moving to items below the line.
Liam: Third we will continue to focus on our strategy to drive durable growth, we will invest in organic growth opportunities and drive innovation over time expand our margins and execute on our disciplined capital allocation strategy to enhance long term value creation.
Liam: The integration of <unk> is progressing well and we expect the acquisition to be a meaningful contributor to our growth in the coming years.
Thomas E. Powell: Net interest expense is expected to approximate $78 million for 2024. The majority of the year-over-year increase in our net interest expense outlook reflects the impact of borrowings associated with the Pellet Acquisition, partially offset by planned debt repayments during 2024. Our tax rate is expected to be approximately 12% for 2024, which reflects a favorable mix offset by discrete items in 2023 that will not repeat in 2024 and the impact of Pillar 2 Global Minimum Task. We estimate the impact of Pillar 2 to add approximately 150 basis points to the 2024 tax rate.
Speaker Change: That concludes my prepared remarks, now I would like to turn the call back to the operator for Q&A.
Speaker Change: Thank you.
Speaker Change: If you'd like to ask a question. Please press star one on your telephone keypad.
Speaker Change: If you're using a speaker phone.
Speaker Change: Sure. Your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: We do ask that you limit yourself to one question and one follow up.
Speaker Change: If you would like to ask additional questions. We invite you to add yourself to the queue again by pressing star one.
Speaker Change: Our first question comes from the line of Patrick Wood with Morgan Stanley. Please go ahead.
Patrick Wood: Amazing moaning and thanks, thanks for taking the questions.
Patrick Wood: I guess the first one palette will talk a lot about barge al Understandably is the bulk of the business that you obviously acquired with that.
Patrick Wood: Number of other urology assets, they are a little bit smaller and that combined with Elvis you're left in barge out you've got a bit of a platform youre kind of building up on that side of things. So my question is essentially like how much interest is that for you guys longer term and scaling up in that market overall, just given it's quite a fragmented industry and there's quite a lot.
Thomas E. Powell: Turning to earnings. We expect 2024 adjusted earnings per share to be in a range of $13.55. $13.95. Our adjusted EPS outlook reflects 35 cents of dilution from the acquisition of Pellet.
Thomas E. Powell: Twenty-six cents of dilution from the termination of the MSA and a 23-cent headwind associated with the year-over-year increase in our tax rate, primarily due to the Pillar 2 minimum tax. Relative to foreign exchange, although there is a negligible impact on revenue, the headwind to earnings per share is approximately 24 cents year-over-year. Based on current foreign exchange rates, we expect roughly half of the headwind to EPS to fall into the first quarter of 2024. We're adjusting for these items, including the negative impact of foreign exchange. The underlying adjusted constant currency EPS growth is approximately 7% at the low end of guidance and 10% at the high end of God's guidance, although we do not provide quarterly guidance. For your modeling purposes, we expect reported revenues for the first quarter to be in a range of $725 million.
Patrick Wood: Of interest in different areas is that something that's kind of crossed your mind or is that you kind of know dominick urology due to your mines.
Patrick Wood: Sure lift in 2017, we knew the urology coal point very well because of our surgical business there isn't a radical prostatectomy done in the world that doesn't use one of our surgical products, we built on that with the pilots.
Patrick Wood: <unk> acquisition the main product in there is is the barrier gel for rectal spacing is performed.
Beyond our expectations in the first quarter of ownership.
Patrick Wood: That momentum.
Speaker Change: As Harry that on.
Speaker Change: We will.
Speaker Change: Integrate palette before we do anything else in the urology space, but urology is definitely an area of area of interest to us Patrick in particular men's health.
Speaker Change: There are areas within men's health that are open for disruption.
Speaker Change: There are some parts of men's health that happened had innovation, our new technologies in a number of years similar to the fact that there had been no disruption to BPH until euro lift came onto the market. So we think there are areas for disruption within men's health and it is an area of focus for us probably not in the next six months Patrick to be.
Liam J. Kelly: $730 million dollars, including a negligible foreign exchange impact year over year. That concludes my prepared remarks. I would now like to turn it back to Liam for closing comments.
Patrick Wood: Fair as we integrate <unk> into teleflex, but thereafter, our balance sheet. As you know is in great shape. So we would see that as a definite area of expansion for <unk>.
Liam J. Kelly: Thanks, Tom. In closing, I will highlight our three key takeaways from the fourth quarter of 2023. First, we delivered on our financial commitments for 2023. For the year, constant currency revenues increased 6.5%, and adjusted earnings per share were $13.52.
Speaker Change: Super interesting. Thank you and then as a quick follow up you've obviously got a lot of product launches moving through 'twenty four.
Speaker Change: Things that are moving from dilutive to accretive the inflation environment is getting a little bit better. If there's things that are moving considerably under your direction as we move through 'twenty four is that environment part of what gives you confidence around the 25 LLP not to jump the shark, but is that big picture why you still feel very confident in that.
Operator: Compared to our initial 2023 guidance, constant currency revenue growth exceeded our guidance while adjusted earnings per share was at the high end of our range. Our execution remains strong, we are launching new products, and our margins remain healthy. Second, the fourth-quarter performance and the stable to improving macro environment provide a solid foundation for growth as we head into 2024. Third, we will continue to focus on our strategy to drive durable growth. We will invest in organic growth opportunities and drive innovation over time, expand our margins, and execute on our disciplined capital allocation strategy to enhance long-term value creation. The integration of Palette is progressing well, and we expect the acquisition to be a meaningful contributor to our growth in the coming years. 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're using a speakerphone... Make sure your mute function is turned off to allow your signal to reach our equipment.
Speaker Change: Yes.
Speaker Change: Feel really good about the RFP if you start with the revenue in our first year. We did six 5% obviously our guide this year is $3 75 to $4 75, but with 100 basis point headwind. So the underlying growth that we're expecting this year is $4 75 to 575 adjusting for though.
Speaker Change: Those headwinds and <unk>.
Speaker Change: As we head into the second year of DLR P. I feel confident in our ability to deliver the current guidance and that would be the springboard into into next year. The final year of TLLP for me. It's all about execution I think we executed really well in 2023 and my goal is to continue to <unk>.
Speaker Change: Execute as we did in 2023 through 2024 at a minimum each quarter, achieving and hopefully, beating our goals as we migrate through the year.
Speaker Change: And then on the margins I think.
Speaker Change: We've taken we're going to take a step up again this year in gross margins.
Speaker Change: And it'll be tougher for us to get to the op margin goal.
Speaker Change: In all transparency and I think the investment community know that we've had more inflation than we thought and we brought in a great asset.
Operator: We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star one. Our first question comes from the line of Patrick Wood with Morgan Stanley. Please go ahead.
Speaker Change: Part of that but that acid brought some opex, but we still think they are the right numbers for us and we feel we have a path to get there.
Speaker Change: Our next question comes from the line of Jayson Bedford with Raymond James. Please go ahead.
Jayson Bedford: Good morning, maybe just on.
Jayson Bedford: Gross margin in the fourth quarter was strong I wanted to ask about the 24 guide.
Jayson Bedford: Yes, you did what 59 and a half in 'twenty three.
Patrick Wood: Morning, and thanks for taking the questions. I guess the first one, you know, Paulette, we all talk a lot about Barragel, understandably, as the bulk of the business, but you obviously acquired with that a number of other Eurology assets that are a little bit smaller. And that combined with, obviously, Eurolift and Barragel, you've got a bit of a platform that you're kind of building up on that side of things. So my question is, essentially, how much interest is there for you guys longer term in scaling up in that market overall, just given it's quite a fragmented industry, and there's quite a lot of interest in different areas? Is that something that's kind of crossed your minds? Or are you kind of done with Eurology now?
Jayson Bedford: The MSA adds 100 basis points and then you have Colette do you have a bigger revenue base. So I guess my question is is the gross margin headwind on the FX side are there any new pressures that you are contemplating here.
Speaker Change: Well to your point, we get a nice benefit in 2024 from both the acquisition of Paulette and from the exit from the MSA. So those are both accretive to gross margin.
Speaker Change: What I would say is that we've got a number of headwinds as Liam had mentioned inflation is still higher than.
Speaker Change: It had been pre pandemic and if you look at the total of our favorable pricing savings from manufacturing cost improvement savings from footprint programs.
Speaker Change: They were able to offset those inflationary pressures as well as some capitalized balances that are on the balance sheet and our rollout in the P&L in 2024. So those are kind of a wash.
Liam J. Kelly: Eurolift in 2017, we knew the urology call point very well because of our surgical business. There isn't a radical prostatectomy done in the world that doesn't use one of our surgical products. We built on that with the Palette acquisition. The main product there is the Barrett gel for rectal spacing.
Speaker Change: In addition to the inflation headwinds, we're also experiencing a modest.
Speaker Change: Adverse impact from foreign exchange.
Speaker Change: Okay. Thank you and then just maybe to pile on the last line of questioning on the urology selling effort have you seen any selling synergies between bearish Alan your lift and can we assume that theres nothing baked into the guide.
Liam J. Kelly: It performed beyond our expectations in the first quarter of ownership, and that momentum, we will carry that on. We will integrate Palette before we do anything else in the urology space, but urology is definitely an area of interest to us, Patrick, in particular men's health. There are areas within men's health that are open for disruption.
Speaker Change: Jason you can definitely assume theres nothing baked into the guide I will tell you that for your lift we saw a modest improvement in Q4 versus Q3.
Speaker Change: So we're monitoring that pretty closely.
Liam J. Kelly: There are some parts of men's health that haven't had innovation or new technologies in a number of years, similar to the fact that there had been no disruption to BPH until Urolift came onto the market, so we think there are areas for disruption within men's health, and it is an area of focus for us. Probably not in the next six months, Patrick, to be fair, as we integrate Palette into Teleflex, but thereafter, our balance sheet, as you know, is in great shape, so we would see that as a definite area of expansion for Teleflex. Super interesting, thank you.
Speaker Change: Are we still expect 66 to 68 million <unk>, we still expect interventional urology will deliver.
Speaker Change: Approximately 75% revenue growth at the midpoint, the low point of our.
Speaker Change: Our guide assumes that it will grow just a little bit above 7%.
Jason: At the end the midpoint also assumes there is no improvement on your lift from quarter three and the reason we use quarter. Three is the most recent quarter without a day's impact our seasonality.
Patrick Wood: And then as a quick follow-up, you know, you've obviously got a lot of product launches moving through 24, you know, you have things that are moving from dilutive to accretive, the inflation environment's getting a little bit better, there are things that are moving considerably in your direction as we move through 24. Is that environment part of what gives you confidence around the 25 LRP? Not to jump the shark, but is that the big picture why you still feel very confident in that? Yeah, I feel really good about the LRP.
Jason: They have a tough comp in Q1 right out of the gate, but after that I would expect that they would continue to show some improvement as we go through the year, but I think that the guidance that our entire guidance I believe is appropriately prudent Jason.
Jason: I think our as I said earlier, our goal is to execute against that as we go through the year and as a team I think we feel really confident in our ability to deliver on all aspects of it.
Jason: Yes.
Speaker Change: Our next question comes from the line of shaken thing with RBC capital markets. Please go ahead.
Alright. Thank you so much for taking the question I just wanted to touch on the 2024 guidance, you've got you're calling for about 5% to 6%.
Liam J. Kelly: If you start with revenue, in our first year, we did six and a half percent. Obviously, our guide this year is between 3.75 and 4.75, but with a 100 basis point headwind. So the underlying growth that we're expecting this year is 4.75 to 5.75, adjusting for those headwinds. And as we head into the second year of the LRP, I feel confident in our ability to deliver the current guidance. And that will be the springboard into next year, the final year of the LRP. For me, it's all about execution.
Shaken Thing: Adjusted for the onetime headwind tailwind that you've called out and I believe delivering about one five time EPS growth relative to sales growth why the conservatism.
Speaker Change: Actually on the top line given the strong exit in 2024, I'm, sorry, 2023, and then I have a follow up.
Speaker Change: Thank you should look at it we're really happy with where we landed at the end of 2023 in quarter four.
Speaker Change: If you adjust for the days, we delivered a robust eight 1%.
Speaker Change: Growth in the fourth quarter and in the entire year, we delivered six 5% I will say should goon that if you look at the low point of our guide this year at 375% and you add back that percent to get to the 475. It's the exact same starting point at the low point.
Liam J. Kelly: I think we executed really well in 2023. And my goal is to continue to execute as we did in 2023 through 2024, at a minimum each quarter, achieving and, hopefully, beating our goals as we move through the year. And then on the margins, I think we're going to take a step up again this year in gross margins, but it'll be tougher for us to get to the margin goal in all transparency. And I think the investment community knows that we've had more inflation than we thought. And we brought in a great asset in Palette, but that asset brought some opex.
Speaker Change: As we had last year.
Speaker Change: That the guide is prudent I think the guide sets us up so that we can execute as we go through the year and I think that it allows us.
Speaker Change: As we go through the year as a company to do what we did in 2023 and that has always been our goal now there are a couple of moving pieces within the guide should go on from the different business units I would expect APAC OEM in IAA and sorry did you want to take a modest step back surgical because they'll have anniversaried.
Liam J. Kelly: But we still think they're the right numbers for us, and we feel we have a path to get there. Our next question comes from a line from Jason Bedford with Raymond James. Please go ahead. Uh, good morning. Um, maybe just on...
Speaker Change: The Titan acquisition, and then I would expect modest step forward in growth rate for EMEA, interventional urology vascular and anesthesia.
Speaker Change: And I think that I feel as I said, good about the way, we've guided and I feel good about our ability to deliver.
Jason Bedford: Gross Margin, the fourth quarter was strong. I wanted to ask about the 24 guide. Yeah, you did what 59 and a half and 23.
Speaker Change: Got it and then just on M&A can you provide us your updated thinking there and especially how youre thinking about.
Speaker Change: Short term P&L dilution relative to top line accretive M&A.
Speaker Change: Any interest in adjacency. Thank you for taking the questions.
Speaker Change: Yes. Thank you well I think as I say always the most important thing you need when you're doing M&A firepower and we have that we're at one nine times leverage which gives us lots of ability without raising our leverage.
Thomas E. Powell: I thought the MSA adds 100 basis points and then you have Paulette; you have a bigger revenue base. So I guess my question is, is the gross margin headwind all on the FX side? Or are there any new pressures that you're contemplating?
Speaker Change: Too much.
Speaker Change: We are conscious of dilution.
Speaker Change: Our investors have given us feedback.
Speaker Change: In 2024, Unfortunately always doing the right thing by Teleflex, but two things hitting in the one year has caused a lot of dilution and as Tom walked you through the bridge our underlying earnings per share growth is really strong it's really.
Thomas E. Powell: Well, to your point, we get a nice benefit in 2024 from both the acquisition of Palette and from the exit from the MSA. So those are both accretive gross margins. What I would say is that we've got a number of headwinds, as Liam mentioned; inflation is still higher than it was pre-pandemic. And if you look at the total of our favorable pricing, savings from manufacturing cost improvements, savings from footprint programs, they're able to offset those inflationary pressures as well as some capitalized balances that are on the balance sheet and will roll out into the P&L in 2020. So those are kind of a wash.
Speaker Change: Positive.
Speaker Change: But you obviously have the MSA, which is causing some dilution there and also you have plaque, causing some dilution in FX.
Speaker Change: And you add all of those up in the mid point of our growth is are the range of our growth is 7% to 10% if you exclude those.
Speaker Change: So we are cognizant of that we arent out there in the marketplace looking at assets. Our M&A team is busy and there are attractive assets in the marketplace that we believe would fit well within the teleflex family and we will continue to execute that.
Speaker Change: That's hard to investor feedback on dilution.
Jason Bedford: In addition to the inflation headwinds, we're also experiencing a modest adverse impact from foreign... And then, just maybe, to pile on the last line of questioning, on the urology selling effort, have you seen any selling synergies between Barigel and Urolift, and can we assume that there's nothing baked into the guide? Jason, you can definitely assume that there's nothing baked into the guide. I will tell you that for EuroLift, we saw a modest improvement in Q4 versus Q3, so we're monitoring that pretty closely. We still expect 66 to 68 million for Palette. We still expect interventional urology to deliver approximately 7.5% revenue growth at the midpoint, while the low point of our guide assumes that it will grow just a little bit above 7%. And the midpoint also assumes there's no improvement on EuroLift from Q3, and the reason we use Q3 is that it's the most recent quarter without a day's impact or seasonality.
Speaker Change: Our next question comes from the line of Matt Taylor with Jefferies. Please go ahead.
Speaker Change: Hey, Good morning. This is Mike Sarcone on for Matt. Thanks for taking my question.
Mike Matson: Just a first one on on guidance understanding that you provided in <unk>, which is helpful. But do you think you can elaborate a little more on phasing through the year. I know you mentioned kind of seasonality consistent with pre COVID-19 levels, but is that a bunch of moving pieces, particularly big shifts sort of swings and selling.
Speaker Change: Dave.
Speaker Change: 2023 base period, so any more color you could provide on how youre thinking about phasing through the year.
Speaker Change: Yes, so I think that the low point of the year it would be quarter. One and then you would see improvement as you go through the remainder of the year from the revenue side and it would be fairly consistent after quarter one.
Speaker Change: And the reason that quarter, one is a little bit dampened is as I said, there's a few tough comps.
Speaker Change: In the mix there, but we would envision that once you get through to Q1, you would get back to a more normalized.
Speaker Change: Seasonality with quarter four the biggest of the year just due to the normal seasonality.
Liam J. Kelly: They have a tough comp in Q1 right out of the gate, but after that, I would expect that they would continue to show some improvement as we go through the year. Our entire guidance, I believe, is appropriately prudent, Jason. As I said earlier, our goal is to execute against that as we go through the year. As a team, I think we feel really confident in our ability to deliver on all aspects of it. Our next question comes from the line is from Shagun Singh with RBC Capital Markets. Please go ahead.
Speaker Change: Patients getting more procedures done in quarter four and this has been a phenomenon for a number of years now since obamacare came into being so that would be our expectation on the revenue line.
Speaker Change: Got it and just a quick follow up there when you say improvement in sales each year do you think <unk> could be above <unk> in terms of sales dollars.
Speaker Change: I'm talking in general is that once you get through the low point of Q1 that Q2, Q3, and Q4 would be above Q1, with Q4 always being the biggest quarter from a revenue perspective, just due to that normal seasonality.
Shagun Singh: Thank you so much for taking the question. I just wanted to touch on the 2024 guidance. You're calling for about five to six percent growth adjusted for the one-time headwinds and tailwinds that you called out, and I believe that delivering about one and a half times EPS growth relative to sales growth. Why the conservatism, you know, especially on the top line, given the strong exit in 2024? Sorry, 2023, and then I have a follow-up. Thank you, Shagun.
Speaker Change: Mike The point I was trying to make is that Q1 would be the low point.
Speaker Change: Our next question comes from the line of Larry <unk> with Wells Fargo. Please go ahead.
Larry: Good morning, Thanks for taking the question.
Speaker Change: Liam.
Larry: Was price.
Larry: In 2023, and what are your expectations for 'twenty, four and I had one follow up.
Larry: Alright. Thanks for the question. So we had a good year with price in 2023, we exceeded our goal of 50 basis points and came in above that our goal for 2020 for us to deliver another 50 basis points and I would be hopeful that this is the third year of the pricing cycle. So I would be hopeful that we'd be able to at least at least deliver that 50 basis points again.
Speaker Change: That's helpful. So I appreciate it I know you just guided to 2024 I appreciate your comments about the operating margin.
Liam J. Kelly: So look, we're really happy with where we landed at the end of 2023, in quarter four. You know, if you adjust for the days, we delivered a robust 8.1% growth in the fourth quarter, and in the entire year, we delivered 6.5%. I will say, Shagun, that if you look at the low point of our guide this year at 3.75%, and you add back that percent to get to 4.75%, it's the exact same starting point at the low point as we had last year. I think that the guide is prudent.
Speaker Change: <unk> being a bit challenging for 25.
Speaker Change: So I guess my question is is the 7% to 10% underlying EPS growth in 2024, the right weighted to think about 25 and are there any moving pieces to consider like interest expense, which I would imagine would come down from that $78 million and it could be a nice tailwind for you.
Speaker Change: Just high level thoughts beyond 24. Thank you, yes, thanks, Larry I mean, the reason that we're calling out the underlying earnings per share is because underlying and that's what the business is doing and therefore, we do believe that our business is well capable of.
Liam J. Kelly: I think that this guide sets us up so that we can execute as we go through the year. And I think that it allows us, as we go through the year as a company, to do what we did in 2023, and that has always been our goal. Now, there are a couple of moving pieces within the Guide, Shagun, from the different business units. I would expect APAC OEM and IA and Surgical to take a modest step back, Surgical because they'll have anniversaryed the Titan acquisition, and then I would expect a modest step forward in growth rate for EMEA, interventional urology, vascular, and anesthesia. And I think that I feel, as I said, good I got it.
Speaker Change: Driving that high single digits into the double digits.
Speaker Change: <unk>.
Speaker Change: Even though the op margin targets will be a challenge I do still think that they're doable for the business when will we get there if we don't get there in 2025, then get there. Shortly thereafter I might ask Tom just to give a bit of color on the interest Tom If you don't mind sure well just also talking about EPS.
Tom: What will play well into 2025 is the fact that we've got some dilution in 2024 from the MSA going away and that will be in our run rate by 2025, and then same thing with Paulette. Our expectation is that paulette turns to profitability by 2025. So those will be benefits were all.
Tom: Also seeing inflation coming down kind of in the marketplace, but just the way it flows through our inventory. It takes some time to clear the P&L. So if trends continue on the inflation front, we should see improving benefits by 2025 in that area.
Anthony Petrone: And then, just on M&A, Liam, can you provide us with your updated thinking there, and especially how you're thinking about, you know, short-term P&L dilution relative to, you know, top-line accretive M&A and any interest in adjacencies? Thank you for taking the questions. Yeah, thank you.
Tom: Then with regard to interest.
Tom: Right now our expectation is that we will be using free cash flow in 2024 to continue to pay down some of our pre payable debt.
Liam J. Kelly: Well, I think, as I always say, the most important thing you need when you're doing M&A is firepower. And we have that. We're 1.9 times leveraged, which gives us lots of ability without raising our leverage to too much. We are conscious of dilution.
Tom: So that will reduce our debt outstanding each quarter of the year and then we also in.
Tom: In our guidance, we're assuming $3 25 basis point rate cuts. So you should see an improving interest environment interest expense environment as we go through the year and into 2025.
Liam J. Kelly: Our investors have given us feedback that in 2024, unfortunately, always doing the right thing by Teleflex, but two things hitting in the one year have caused a lot of dilution. And as Tom walked you through the bridge, you know, our underlying earnings per share growth is really strong and really positive. But you obviously have the MSA, which is causing some dilution there, and also you have Pellet, which causes some dilution and FX.
Tom: Our next question comes from the line of Matthew O'brien with Piper Sandler. Please go ahead.
Matthew Mishan: Alright, Thanks for taking the question just a clarification upfront to make it.
Matthew Mishan: Claire for everybody on the call 525 at the midpoint is the constant currency growth rate assumption when everything's adjusted eight five is the midpoint for the bottom line and everything's adjusted metrics to make sure that's fully clear.
Claire: Yes, I think your math is good mass as always those would be the adjusted top line.
Speaker Change: And bottom line mid points. Thank you for clarifying that that's good of you.
Speaker Change: Got it and Thats to start the year, which is what you guys typically they've got it so.
Liam J. Kelly: And you add all of those up, and the midpoint of our growth is, the range of our growth is 7 to 10% if you exclude those. So we are cognizant of that. We are out there in the marketplace looking at assets. Our M&A team is busy.
Speaker Change: So the Q1 guide actually was better than I was expecting because the comps are so tough and I understand <unk> in there this year, but but the rest of the business would have to be doing well across vascular interventional I don't know if theres extra selling days, but I'd, just love to hear a little bit about the comfort.
Liam J. Kelly: And there are attractive assets in the marketplace that we believe would fit well within the Teleflex family. And we will continue to execute on that with thought to investor feedback on dilution. Our next question comes from the line of Matt Taylor with Jeffries. Please go ahead. Hey, good morning.
Speaker Change: On the outlook for Q1, specifically and then I think it implies actually an acceleration in two year stacked growth over the remainder of the year. So again I don't know if thats, new products et cetera, but would just love to hear about that and I do have one quick follow up.
Speaker Change: Yes.
Speaker Change: So our guidance would assume everyone put it into percentages assume roughly 2% to 3% for Q1 growth.
Matt Taylor: This is Mike Sarkona from ADD. Thanks for taking my questions. Just a first one on guidance. I understand that you provided one cue, which is helpful, but do you think you can elaborate a little more on phasing through the year? I know you mentioned kind of seasonality consistent with pre-COVID levels, but we've got a bunch of moving pieces, particularly big shifts or swings in selling days in the 2023 base period. So any more color you could provide on how you're thinking about phasing through the year? Yeah, so I think that the low point of the year would be quarter one, and then you would see improvement as you go through the remainder of the year from the revenue side. And it would be fairly consistent after quarter one.
Speaker Change: Underlying would be three five to four 2% normalized for the MSA in FX and the other moving pieces.
Speaker Change: Earlier <unk> be a wee bit later, just because of the tough comp.
Speaker Change: And.
Speaker Change: And also you'd have to pull that ramp as you go through the year vascular it would be a little bit lighter in the first quarter just due to the recall and to your point the new product ramps in particular in basket or is important this year as we go through the year, we've launched a number of new products into the <unk> franchise and as they ramp through the year rigor.
Speaker Change: Our degree of confidence in hitting the first quarter.
Speaker Change: Towards the back end of February.
Speaker Change: We as a team would feel confident in our ability to deliver in that first quarter number and as I said.
Speaker Change: We've done four for four.
Liam J. Kelly: And the reason that quarter one is a little bit dampened is, as I said, there are a few tough comps in the mix there. But we would imagine that once you get through to Q1, you would get back to a more normalized seasonality with quarter four being the biggest of the year, just due to the normal seasonality and patients getting more procedures done in quarter four. And this has been a phenomenon for a number of years now since Obamacare came into being. So that would be our expectation on the revenue line. I got it.
Speaker Change: All of 'twenty three we at least reached if not exceeded our revenue and EPS for four quarters in a row and as a team we're United and the fact that we are not going to be happy until we go.
Speaker Change: Five for $5 six for six and ultimately <unk> and then reset the goal into the following year and that's what we're planning to do.
Speaker Change: Okay I appreciate that and then just to Larry's question on on.
Speaker Change: Just some of these headwinds on the EPS side that you're facing this year I don't suspect there is a lot of upside that the letter of the Msas. This year, but it would seem like you are positioned for a meaningful snapback in terms of in terms of EPS growth next year. So.
Matt Taylor: Just a quick follow-up there. When you say improvement in sales each year, do you think 3Q could be above 2Q in terms of sales dollars? I'm talking in general that once you get through the low point of Q1, that Q2, Q3 and Q4 would be above Q1, with Q4 always being the biggest quarter from a revenue perspective just due to that normal seasonality. Mike, the point I was trying to make is that Q1 would be the lowest point. Our next question comes from a line from Larry Biegelsen with Wells Fargo; please go ahead. Good morning.
Speaker Change: Just just.
Speaker Change: Something even in the kind of low to mid teens EPS growth is that.
Speaker Change: Am I way off base in thinking that just given all of these headwinds that you're facing this year.
Lawrence H. Biegelsen: Thanks for taking the question. Liam, what will the price be in 2023? And what are your expectations for 2024? And I had one follow-up.
Liam J. Kelly: Yeah, Larry, thanks for the questions. We had a good year of prices in 2023. We exceeded our goal of 50 basis points and came in above that. Our goal for 2024 is to deliver another 50 basis points. And I'd be hopeful that this is the third year of the pricing cycle. So I'd be hopeful that we'd be able to at least deliver that 50 basis points again. That's helpful.
Speaker Change: Hold on a we're looking at and you'll always to be better on sourcing and supply chain.
Speaker Change: So it's it's more of the latter Mike what we discovered out the other side of the pandemic and as supply chain disruption. His was that if it was within our control we were able to manage it an awful lot better than when we were reliant on third party vendors and there are some sub components that we feel.
Lawrence H. Biegelsen: So I appreciate it. I know you just got it to 2024. I appreciate your comments about, you know, the operating margin, and LRP being a bit challenging for 25. So I guess my question is, is the 7 to 10% underlying EPS growth in 2024 the right way to think about 25? And are there any moving pieces to consider like interest expense, which, you know, I would imagine would come down from that $78 million and could be a nice tailwind? Any just high-level thoughts, you know, beyond 24?
Speaker Change: We have the ability to bring in house overtime.
Speaker Change: So it's really looking at <unk>.
Speaker Change: Component suppliers within our supply chain it would help our margins that's.
Speaker Change: Given as we bring it in and that's obviously an attractive element to it as well.
Speaker Change: But it's the latter to your question.
Speaker Change: I appreciate that the follow up.
Speaker Change: An item and the gap to non-GAAP reconciliation for 2024, there's a pension charge $2.85. It is not an insignificant.
Liam J. Kelly: Thank you. When will we get there? If we don't get there in 2025, then we will get there shortly thereafter. I might ask Tom just to give a bit of color on the interest, Tom, if you don't mind.
Speaker Change: Number $150 million, if I had the map corrected what's going on there is that a cash item or is that a non-cash item it as a non-cash items. So we we.
Speaker Change: Essentially are exiting one of our pension plans, where we fully funded and offered.
Thomas E. Powell: Sure. Well, also talking about EPS, you know, and what will play well into 2025 is the fact that, you know, we've got some dilution in 2024 from the MSA going away. That will be in the run rate by 2025. And then, same thing with, you know, Paulette. Our expectation is that Paulette turns into profitability by 2025. So those will be benefits. We're also seeing, Transcripts provided by Transcription Outsourcing, LLC.
Speaker Change: Pensioners, a buyout option and then will whoever it didn't take the buyout option will go in.
Speaker Change: Put in annuity in place for them. So essentially we're just entered exiting a pension plan.
Speaker Change: But it is non-cash.
Speaker Change: Our next question comes from a line of Richard New Winter was tourists Securities. Please go ahead.
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Speaker Change: I'm just wondering.
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Speaker Change: Okay and also.
Speaker Change: <unk> <unk> Oh.
Speaker Change: Mmm.
Speaker Change: Sure.
Speaker Change: I'm sorry, the line is incredibly bad and we're having great difficulty hearing you.
Speaker Change: Assumption on what growth.
Speaker Change: Can you hear me now.
Speaker Change: That's a little better.
Speaker Change: Hello can you hear me now.
Speaker Change: That's that's better so the assumption on which growth was your question.
Operator: Then with regard to interest, you know, right now, our expectation is that we will be using free cash flow in 2024 to continue to pay down some of our prepayable debt. So that will reduce our debt outstanding each quarter of the year. And then we also, in our guidance, we're assuming three 25-basis point rate cuts. So you should see an improving interest environment, an interest expense environment, as we go through the year into 2024. Our next question comes from the line of Matthew O'Brien with Piper Sandler. Please go ahead.
Speaker Change: Sorry about that <unk> <unk>.
Speaker Change: Yes. Thank you I I apologize, we couldn't hear you that well so the Titans stapler, we do assume that will grow in in 2024.
Speaker Change: Not at the levels, we thought that when we acquired it.
Speaker Change: In all transparency.
Speaker Change: We we now have the impact of the G. O P ones are a good portion of the impact of G. L. P ones in our run raises we've been through 2023, and our expectation is that it will return to growth or continue to grow I should say in 2024.
Matthew O'brien: Thanks for taking the question. Just clarification up front to make it, you know, clear for everybody on the call. 5.25 at the midpoint is the constant currency growth rate assumption when everything's adjusted. Eight and a half is the midpoint for the bottom line when everything's adjusted.
Speaker Change: We are continuing to Proctor surgeons the product is performing exceptionally well no issues with the tightened product itself and now with the launch a buttress 60% of surgeons will use buttressed technically arthritis doesn't need it but it's it's how surgeons do the procedure and therefore, having buttressed will give us access to greater power.
Liam J. Kelly: I just want to make sure that's fully clear. Yeah, I think your math is good, Matt, as always. Those would be the adjusted top line and bottom line midpoints.
Speaker Change: The markets and R. R. R. Procter ring in in as recently as January was well in line with our expectations and we continued to bring on new surgeons.
Speaker Change: Great. That's helpful and also another one for me so your <unk> your expectation.
Matthew O'brien: Thank you for clarifying that. That's good of you, got it and that's to start the year which is, So, the Q1 guide actually was better than I was expecting because the comps are so tough and I understand Paulette's in there this year, but the rest of the business would have to be doing well across vascular, interventional, I don't know if there's extra selling days, but I just love to hear a little bit about the comfort on the outlook for Q1 specifically, and then I think it implies actually an acceleration into your stack growth over the remainder of the year, so again, I don't know if that's new products, etc., but we just love to hear about that, and then I do have one quick follow-up.
Speaker Change: <unk> <unk> <unk> <unk> <unk>.
Speaker Change: How should we think about the fries.
Speaker Change: Should we start think considerately and like no double digit gorilla.
Speaker Change: Well I think that it's going to take.
Speaker Change: Clinton is a modest step back you know so it grew around 18 or 19% last year, so it'll it'll come back into the <unk>.
Speaker Change: Into the double digits area.
Speaker Change: And as we continue to execute so low double digits isn't about starting point, but just bear in mind that those modest step box will be offset by step ups in businesses like vascular.
Speaker Change: Like anesthesia and also geographically like EMEA.
Speaker Change: Our next question comes from the line of Anthony <unk> was Mizuho Securities. Please go ahead.
Matthew O'brien: Yeah, Matt, so our guide would assume, if I put it into percent, it would assume roughly two to three percent for Q1 growth. The underlying would be three and a half to 4.2 percent normalized for the MSA and FX and the other moving pieces. You know, as I said earlier, IUB would be a wee bit lighter just because of the tough comp, and also you'd have the Palette ramp as you go through the year.
Anthony: Good morning, Thanks for piping us in in nice underlying print here, maybe just starting with you know just procedure volumes we've been seeing.
Anthony: A lot from the managed care companies on MLR losses.
Anthony: Talking about procedures running hot we've seen it you know across a few the Prince I think the underlying.
Anthony: Excluding days here for Teleflex also shows that so maybe just the state of the Union on procedure volumes specific to the U S. And then I'll have one O U S geographic question as a follow up thanks.
Liam J. Kelly: Vascular would be a little bit lighter in the first quarter just due to the recall, and to your point, the new products ramped up, in particular in vascular, are important this year as we go through the year. We've launched a number of new products into the PIC franchise, and as they ramped through the year. Regarding our degree of confidence in hitting the first quarter, you know, we're towards the back end of February, Matt, and we as a team would feel confident in our ability to deliver that first quarter number. And as I said, we've done four for four. All of 23, we at least reached, if not exceeded, our revenue in EPS for four quarters in a row, and as a team, we're united in the fact that Okay, I appreciate that.
Speaker Change: Yeah sure Anthony So what we are seeing is solid procedure volumes in the acute hospital. We continue to see that we're back to pre pandemic levels I think we're executing well against this.
Speaker Change: We're also benefiting from a plethora of new product launches.
Speaker Change: And those product launches will continue into 2024 and help even augment but we're seeing from a procedural point of view within the hospital. So it's a very positive environment in the acute care hospital.
Speaker Change: And and we as you know Anthony we really liked that that space.
Speaker Change: Mmm no very helpful. There for the color and then you know pivoting.
Speaker Change: <unk>, China, we're still.
Speaker Change: You know hearing different things about D B P.
Speaker Change: Different programs that are coming out at the various provincial levels.
Speaker Change: <unk> do you have any update yeah from the Teleflex standpoint on China V B P and and more of a broader question.
Matthew O'brien: And then just to Larry's question about, well, I'm curious about some of these headwinds on the EPS side that you're facing this year. I don't suspect there's a lot of upside to pull out of the MSAs this year, but it would seem like you're positioned for a meaningful snapback in terms of EPS growth next year. So, you know, even in the, you know, kind of the low to mid-teens kind of EPS growth. Is that... Am I way off base in thinking that, just given all these headwinds that you're facing this year?
Speaker Change: This is really come up on a lot of conference calls, but everyone's so doggedly focused on D. V. D. B P near term, but should we be modeling you know medium term that China is just the down pricing market.
Speaker Change: Over the next three to five years, just given you know where things are geopolitically. Thanks.
Speaker Change: Yeah. So there are a series of provinces coming together and running volume based procurement tenders.
Speaker Change: I think we're gone through the phase of the National tenders and now you have amalgamations of provinces. We saw that in in 2023, and we participated in some of those in 2023.
Liam J. Kelly: Well, I'll tell you, Matt, I'd appreciate it if you'd be a little bit patient with us and let us execute through 24 forks before we start guiding to 25. But you know, we would anticipate... Look, I'll go back to the underlying. The underlying EPS growth, if you exclude the headwinds, is good and solid. And, as Tom went through, you have a few factors that will help on top of that, such as the palette and interest and so on and so forth.
Speaker Change: While that was happening.
Speaker Change: China continued to be a real solid double digit growth for teleflex. So we have strategies around volume based procurement and I think that for teleflex, we only sell the most unique of our products in China, we sell very very little of our anesthesia portfolio. There we sell practical.
Speaker Change: Nothing of our drainage urology portfolio in China, our main business as there are in our coldest cvc's our intervention of business in our surgical business.
Speaker Change: And there will be an impact from V b P, but because of our differentiation of our products of discount levels are a little bit less for teleflex and they are being offset by by volume and as you know we had positive pricing is a company. So we're we're more than capable of managing what's going on.
Matthew O'brien: So we'll guide to 25 a little bit later in the year, Matt, if you don't mind. Our next question comes from the line of Mike Polark with Wolf Research. Please go ahead. Hey, good morning.
Michael K. Polark: Thank you. Liam, in your prepared comment, you mentioned you're continuing to assess vertical integration opportunities to gain further control of your supply chain. I'm curious what that means. Is that, is that an interest in doing more M&A in the OEM space, or is that just a comment on, hey, we're looking at any and all ways to be better at sourcing and supply chain? So it's more the latter, Mike.
Speaker Change: Within China with certain of our strategies around volume based procurement, so I'm still positive on China as a geography for teleflex as a company and I think that it's one that will provide a growth in the longer term for the company.
Speaker Change: Our next question comes from the line of Craig <unk> with the Bank of America. Please go ahead.
Craig: [noise]. Thanks, you guys for taking the questions Uhm, let's start with the high growth product bucket and.
Liam J. Kelly: What we discovered on the other side of the pandemic and as supply chain disruption hit was that if it was within our control, we were able to manage it an awful lot better than when we were reliant on third-party vendors. And there are some subcomponents that we feel we have the ability to bring in-house over time. So it's really looking at subcomponent suppliers within our supply chain. It would help our margins. That's a given as we bring it in, and that's obviously an attractive element to it as well.
Craig: What was what was grossing and 23.
Craig: Think about expectations for growth in 24, 25, and I think Tom made a comment about.
Craig: Investments to grow so maybe more broadly how do you think about your need to invest behind some recycled products and.
Craig: Considering the marches.
Craig: Margin impacted.
Craig: Yes, and I I gross product portfolio performed.
Michael K. Polark: But it's the latter to your question. Appreciate that. The follow up. An item in the gap to non-gap reconciliation for 2024. There's a pension charge of $2.85.
Craig: Very well in in 2023.
Craig: There were some really stand though contributions.
Craig: Thinking, particularly of the Interosseus the hemostatic portfolio Manta really continues to penetrate that market. If you look forward into the high growth for 2024, we would expect a high growth to grow in the region of 10 to 11, and a half 12, 8% somewhere around there we.
Thomas E. Powell: It's not an insignificant number, $150 million, if I have the math correct. What's going on there? Is that a cash item, or is that a non-cash item? It's a non-cash item.
Thomas E. Powell: So we essentially are exiting one of our pension plans where we fully funded and offered pensioners a buyout option, and then whoever didn't take the buyout option will go in, put an annuity in place. So essentially, we're just exiting the pension. Non-cash.
Craig: We would expect the <unk> to do a little bit better again this year than it did last year and the 5% to 6% range and obviously the offset as in the other category because of the MSC and that's going to decline in or around that Turkey ish percent.
Craig: Regarding the investment behind us, it's easier to invest behind the high growth Craig transparency, just because it is much better marriages. So you get the dropped roof top margin from the gross even with the additional investment and our focus of our investment has always been and this has been for the last number of years behind those high.
Richard Newitter: Our next question comes from Richard Newitter with Trurist Securities. Please go ahead. Hi, it's Linh Phuong from Reddit, so I'm not sure if I'm... I'm just wondering what assumptions around bariatric growth you incorporated in the guide. And also, I appreciate you shared your expectation of the slide at the back in OEM.
Craig: With buckets because of the margin profile and the benefits that it brings to mix within our income statement.
Liam J. Kelly: How should we think about... I'm sorry, the line is incredibly bad, and we're having great difficulty hearing you. Assumption on what road? Can you hear me now?
Interviewer: Great and if I can ask follow up on on Euro lift.
Interviewer: The office business, you highlighted that still assuming some challenges.
Interviewer: Can the U S. What about the other sites of service in the U S and then <unk> just.
Operator: That's a little better. Hello, can you hear me now? Okay, that's better. So the assumption on which growth was your question? Sorry about that.
Speaker Change: How do we think about the launch Sir.
Interviewer: Longer term or medium term expectations for for Bill.
Speaker Change: Yeah, I'll I'll start with Japan, then I'll talk about the site to serve as so Japan is doing exceptionally well, it's really in line with our expectations. What we told investors Japan would do Japan is doing the team. There is executing very well also geographically we're very early in Taiwan in India.
Operator: Your assumption around bariatric growth has been incorporated in the guide. Yes, thank you. I apologize. We couldn't hear you that well.
Liam J. Kelly: So the Titan stapler, we do assume that it will grow in 2024, but not at the levels we thought when we acquired it, in all transparency. We now have the impact of the GLP-1s, or a good portion of the impact of the GLP-1s in our run rate as we went through 2023, and our expectation is that it will return to growth, or continue to grow, I should say, in 2024. We are continuing to recruit surgeons. The product is performing exceptionally well; there have been no issues with the Titan product itself, and now, with the launch of buttress, 60% of surgeons will use buttress. Technically, our product doesn't need it, but it's how surgeons do the procedure, and therefore, having buttress will give us access to greater parts of the market, and our piloting as recently as January was well in line with our expectations, and we continue to bring on new surgeon Great, that's helpful. And also another one for me.
Speaker Change: We're ramping and those geography as they are smaller herbs for sure and we're very early days in China, We continue to work on China.
Speaker Change: Getting the product listed in the public system and that the inflection point for China will be 2025, once we start to get it listed in more more of the products with regard to the site to service. We again grew in the hospital.
Speaker Change: Service in queue for but it's again the office Unfortunately.
Speaker Change: Instead of challenging for us just because the reimbursement change that was made there.
Speaker Change: Our next question comes from the line of Christian Stuart with C. L. King. Please go ahead.
Kristen Stewart: Hi, Thanks for taking my question the international business grew very nicely in this quarter and 15% for the full year on a constant currency basis.
Kristen Stewart: Have you had mentioned manti with continuing to do very well there can you just expand upon what's driving that correct.
Kristen Stewart: You feel it is going into 2024.
Kristen Stewart: So you just shared your expectation of a slight step back in OEM growth. So how should we think about the size of the step back? Should we start to consider OEM as a low double-digit grower? Well, I think that, you know, it's going to take, I coined it as a modest step back, you know, so it grew around 18 or 19% last year. So it'll come back into the double-digit area as we continue to execute. So low double digits isn't a bad starting point, but just bear in mind that those modest step backs will be offset by step ups in businesses like vascular, like anesthesia, and also geographically, like EMEA. Our next question comes from the line of Anthony Petrone with Mizuho Securities. Please go ahead. Good morning.
Speaker Change: Yeah of course, and so it's one of the areas that will take a modest step back and as I said earlier to be offset by the other businesses that they'll take a step forward I mean that that's why we're a portfolio company at the end of the day.
Kristen Stewart: Because you you you have these ebbs and flows.
Kristen Stewart: Have a tough comp mantle have a tough cop next year. It will continue to grow but it will it will have have have that aspect.
Kristen Stewart: We continued to see him really nice growth in the pump business.
Kristen Stewart: The the competitive is off the market was back in Q3, they're back in queue for but notwithstanding that we continue to execute well there and the lifeblood of this this business unit is new products, we have a really good cadence of new products, we launched the guideline or coast.
Kristen Stewart: Last year, we've got the ringer coming as we go through the year and over the next number of years, we have a really nice suite of products going into the hands of this salesforce.
Kristen Stewart: So I I'm I'm really happy with how the intervention of business is going well, obviously the interosseus uncontrolled is within their that continues to perform very well I had a really solid court before as well to help drive the growth.
Liam J. Kelly: Thanks for piping us in, and nice underlying print here. Maybe, Liam, just starting with, you know, just procedure volumes. We've been seeing a lot from the managed care companies on MLR losses, talking about procedures running hot. We've seen it, you know, across a few of the prints.
Kristen Stewart: Perfect.
Speaker Change: Okay, I just want to make sure I understand your comments around 25 fine I'll R. P. So it sounds like he feel pretty confident about being able to hit that gross margin line that operating margins are gonna be tougher okay.
Kristen Stewart: Keep that forecast is that correct.
Anthony Petrone: I think the underlying excluding days here for Teleflex also shows that. So maybe just the State of the Union on procedure volumes specific to the U.S., and then I'll have one OUS geographic question as a follow-up.
Speaker Change: Yeah, that's what I was saying Christian I mean.
Speaker Change: I think it.
Speaker Change: We could get there and we have a potential path to get there when we get there by the end of 25.
Speaker Change: It's tougher to get there by the end of 25, we really got there it just might take us a wee bit longer and again.
Liam J. Kelly: Thanks. Yeah, sure, Anthony. So what we are seeing is solid procedure volumes in the acute hospital. We continue to see that. We're back to pre-pandemic levels, and I think we're executing well against it.
Speaker Change: Really solid path to the revenue.
Speaker Change: This other parts of the gross margin line and underlying EPS as we've gone through with a couple of your colleagues underlying EPS and solid.
Speaker Change: Okay. Thank you very much for your questions first question.
Speaker Change: Our final question comes from the line of Mike Maxon with Needham and company. Please go ahead.
Liam J. Kelly: We're also benefiting from a plethora of new product launches, and those product launches will continue into 2024 and help even augment what we're seeing from a procedural point of view within the hospital. So it's a very positive environment in the acute care hospital.
Mike Matson: Yeah. Thanks, just wanted to ask on your <unk> with very gel you know, even though obviously, there's a big opportunity within prostate that you're going after but I think you've talked about potential to expand into other types of cancer. So can you talk about the timing, there and whether or not you have to do trial.
Speaker Change: To get those indication.
Speaker Change:
Speaker Change: We are expanding the indication it is within our model we will have to do.
Anthony Petrone: And we, as you know, Anthony, we really like that space, it's very helpful there for the color, and then, pivoting to China, we're still hearing different things about VBP, different programs that are coming out at various provincial levels. So maybe, do you have any update from the Teleflex standpoint on China's VBP? And more of a broader question, and I don't think this has really come up on a lot of conference calls, but everyone's so doggedly focused on VBP near-term, but should we be modeling, you know, medium-term, that China's just a down-pricing market, you know, over the next three to five years, just given where things are geopolitically? Thanks.
Speaker Change: Clinical trials in order to get there.
Speaker Change: We have begun mapping out and enrolling the investigators that would help us with that.
Speaker Change: And obviously as we build the <unk> the the relationship with radiation oncologists, they would be a key part of that as well as urologist in order to get this expanded indication I don't want to go into details on the call Mike about what indication.
Speaker Change: Because we are [laughter] as you're very aware in the in the in the city you live in we have competitors.
Mike: Yeah, I understand and then just on your list and China I know you talked about the five there obviously, there's a ton of people there, but you know can you just talk about kind of the competitive landscape and then you know I'm not even sure whether this is something that's covered by government of hers insurance or is it something that's out of pocket you know for these P. P.
Liam J. Kelly: Yeah, so there are a series of provinces coming together and running volume-based procurement tenders. I think we've gone through the phase of national tenders, and now you have amalgamations of provinces. We saw that in 2023. And we participated in some of those in 2023 while that was happening.
Speaker Change: Treatment there.
Speaker Change: Yeah. So that the landscape is similar to where it is everywhere else insofar as that TARP is the is the main.
Speaker Change: A procedure that is used on men within China.
Speaker Change: The nuance in China is that they don't tend to be as firm a focused.
Liam J. Kelly: China continued to be a real solid double-digit grower for Teleflex. So we have strategies around volume-based procurement, and I think that for Teleflex, we only sell the most unique of our products in China. We sell very, very little of our anesthesia portfolio there. We sell practically nothing of our drainage urology portfolio in China.
Speaker Change: Insofar as that they will try other herbal remedies within that but you're right. It's such a huge huge population Ah.
Speaker Change: Hey, It works within China is your first step is to get it listed on all of the the the regional tenders. So we're going through that process now in Shanghai and Beijing.
Liam J. Kelly: Our main businesses there are in our coded CVCs, our interventional business, and our surgical business. And there will be an impact from VBP, but because of our differentiation of our products, the discount levels are a little bit less for Teleflex, and they're being offset by volume. And as you know, we had positive pricing as a company, so we're more than capable of managing what's going on within China with certain of our strategies around volume-based procurement. So I'm still positive on China as a geography for Teleflex as a company, and I think that it's one that will provide growth in the longer term for the company. Our next question comes from the line of Craig Bijou with the Bank of America. Please go ahead.
Speaker Change: Those two big provinces that would be an obvious place to start and then thereafter you apply for reimbursement the reimbursement never covers in any procedure the toward the cost of the procedure. Mike is always some out of pocket and the general.
Speaker Change: General population in China is used to have to pay out of pocket when they go to a hospital.
Speaker Change: Okay. Thank you.
Speaker Change: I would now like to turn the call over to Miss Lawrence Curse for closing remarks.
Lawrence Keusch: Thank you a deep and thank you to everyone that joined us on the call today.
Lawrence Keusch: This concludes the Teleflex incorporated fourth quarter 2023 things conference call.
Lawrence Keusch: That is all the time, we have for questions. This morning, Our conference call for today has now concluded. Thank you all for your participation.
Craig William Bijou: Thanks guys for taking the questions. I want to start with the high growth product bucket, and you know, what was growth like in 23? You know, I had to think about expectations for growth in 24 and 25, and I think Tom made a comment about investments to grow. So maybe more broadly, how do you think about your need to invest behind some of these high-growth products and consider the margin impact? Yeah, so the high growth products portfolio performed very well in 2023. There were some really standout contributions. I'm thinking particularly of the intraosteous, the hemostatic portfolio.
Speaker Change: Please wait the conference will begin shortly.
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Liam J. Kelly: Manta really continues to penetrate that market. If you look forward into high growth for 2024, we would expect high growth to grow in the region of 10 to 11 and a half, 12 ish percent somewhere around there. We would expect the durable core to do a little bit better again this year than it did last year in the five to 6% range.
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Liam J. Kelly: And obviously, the offset is in the other category because of the MSA, and that's going to decline by around that 30 ish percent. Regarding the investment behind it, it's easier to invest behind the high growth, Craig, in all transparency, just because it has much better margins. So you get the drop through top margin from the growth even with the additional investment.
Speaker Change: Uh-huh.
Speaker Change: Yeah.
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Liam J. Kelly: And our focus of our investment has always been, and this has been for the last number of years, behind those high growth buckets because of the margin profile and the benefit that it brings to mix within our income statement. Great. And if I can ask you a question as a follow-up on EuroLift,
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Speaker Change: Mhm.
Speaker Change: [music].
Liam J. Kelly: You know, the office business, you highlighted that it is still seeing some challenges in the U.S. What about the other sites of service in the U.S.? And then on Japan, just, you know, how do we think about the launch there and the longer term or medium term expectations for growth? Yeah, I'll start with Japan, and then I'll talk about the sites of service. So Japan is doing exceptionally well. It's really in line with our expectations.
Patrick Wood: Mhm.
Liam J. Kelly: Okay.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Liam J. Kelly: Okay.
Liam J. Kelly: Mhm.
Liam J. Kelly: What we told investors Japan would do, Japan is doing. The team there is executing very well. Also, geographically, we're very early in Taiwan and India, and we're ramping up in those geographies. They're smaller, for sure.
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Liam J. Kelly: Okay.
Liam J. Kelly: [music].
Liam J. Kelly: And we're in the very early days in China. We continue to work on China, getting the product listed in the public system. And the inflection point for China will be 2025 once we start to get listed in more products. With regard to the sites of service, we again grew in the hospital site of service in Q4. But again, the office, unfortunately, is still challenging for us, just because of the reimbursement change that was made there. Our next question comes from the line of Kristen Stewart with C.L. King
Liam J. Kelly: Yeah.
Liam J. Kelly: Mhm.
Liam J. Kelly: Uh-huh.
Liam J. Kelly: Yeah.
Liam J. Kelly: Yeah.
Liam J. Kelly: Yeah.
Liam J. Kelly: Uh-huh.
Speaker Change: Please wait the conference will begin shortly.
Kristen Stewart: Please go ahead. Hi, thanks for taking the question. The interventional business grew very nicely in this quarter and 15% for the full year on a constant currency basis.
Liam J. Kelly: [music].
Liam J. Kelly: You mentioned Manta was continuing to do very well there. Can you just expand upon what's driving that growth and how sustainable you feel it is going into 2024? Yeah, Kristen, so it's one of the areas that will take a modest step back. And as I said earlier, it'll be offset by the other businesses that will take a step forward. I mean, that's why we're a portfolio company at the end of the day.
Kristen Stewart: Okay.
Liam J. Kelly: Mhm.
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Liam J. Kelly: Yeah.
Liam J. Kelly: Yeah.
Liam J. Kelly: Uh-huh.
Liam J. Kelly: Yeah.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Liam J. Kelly: Because you have these ebbs and flows, and they'll have a tough comp, Mantel will have a tough comp next year, it will continue to grow, but it will have that aspect. We continue to see really nice growth in the pump business. The competitor that was off the market was back in Q3, and they're back in Q4.
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Liam J. Kelly: Mhm.
Liam J. Kelly: Uh-huh.
Liam J. Kelly: [music].
Liam J. Kelly: But notwithstanding that, we continue to execute well there. And the lifeblood of this business unit is new products. We have a really good cycle of new products. We launched the Guideliner Coast last year, and we've got the ringer coming as we go through the year. And over the next number of years, we have a really nice suite of products going into the hands of this sales force. So I'm really happy with how the interventional business is going. Obviously, the intra-osteos on control is within there, and that continues to perform very well. It had a really solid quarter four as well to help drive the growth.
Liam J. Kelly: Yeah.
Liam J. Kelly: Yeah.
Liam J. Kelly: Yeah.
Liam J. Kelly: Yeah.
Liam J. Kelly: [music].
Liam J. Kelly: So.
Liam J. Kelly: Yeah.
Liam J. Kelly: [music].
Liam J. Kelly: Ooh.
Liam J. Kelly: [music].
Liam J. Kelly:
Liam J. Kelly: Uh-huh.
Liam J. Kelly: [music].
Liam J. Kelly: Okay.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Kristen Stewart: Perfect. I just want to make sure I understand your comments around 25s in the LRP. So, it sounds like you feel pretty confident about being able to hit the gross margin line, but operating margins are going to be tougher to achieve that forecast. Is that correct? Yeah, that's what I was saying, Kristen.
Liam J. Kelly: Yeah.
Kristen Stewart: Mhm.
Kristen Stewart: Okay.
Kristen Stewart: Mhm.
Kristen Stewart: [music].
Kristen Stewart: Okay.
Kristen Stewart: [music].
Kristen Stewart: Yeah.
Kristen Stewart: Yeah.
Liam J. Kelly: I mean, I think we could get there, and we have a potential path to get there. But when we get there by the end of 25, it's tougher to get there by the end of 25. We will get there. It just might take us a wee bit longer. And again, definitely a solid path to revenue and a solid path to the gross margin line and underlying EPS. As we've gone through with a couple of your colleagues, underlying EPS is solid. Okay, thanks very much for the questions.
Kristen Stewart: Yeah.
Liam J. Kelly: Uh-huh.
Speaker Change: Please wait the conference will begin shortly.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Mike Matson: Our final question comes from the line of Mike Matson with Needham & Company. Please go ahead. Yeah, thanks.
Mike Matson: Oh man.
Mike Matson: And.
Liam J. Kelly: I just wanted to ask about, you know, Pallette with Berrygel, obviously, there's a big opportunity within prostate cancer that you're going after, but I think you've talked about the potential to expand into other types of cancer. So can you talk about the timing there and whether or not you have to do trials to get those indications? We are expanding the indication. It is within our model.
Mike Matson: Yeah.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Liam J. Kelly: We will have to do clinical trials in order to get there, and we have begun mapping out and enrolling the investigators that would help us with that. And obviously, as we build the relationship with radiation oncologists, they would be a key part of that, as well as urologists, in order to get this expanded indication. I don't want to go into details on the call, Mike, about what indication we will have, because, as you are very aware, in the city you live in, we have competitors. Yeah, I understand. And then just on your list in China, I know you've talked about the size there.
Liam J. Kelly: [music].
Liam J. Kelly: Mhm.
Liam J. Kelly: Uh-huh.
Liam J. Kelly: [music].
Liam J. Kelly: Yeah.
Liam J. Kelly: Yeah.
Mike Matson: And obviously, there are a ton of people there. But, you know, can you just talk about the competitive landscape? And then, you know, I'm not even sure whether this is something that's covered by government payers insurance, or is it something that's out of pocket, you know, for these BPH treatments there? Yeah, so the landscape is similar to where it is everywhere else, insofar as TORP is the main procedure that is used on men within China. The nuance in China is that they don't tend to be as pharma-focused, insofar as they will try other herbal remedies within that.
Liam J. Kelly: Yeah.
Liam J. Kelly: Yeah.
Mike Matson: [music].
Mike Matson: So.
Mike Matson: Mhm.
Mike Matson: [music].
Liam J. Kelly: But you're right, it's such a huge, huge population. The way it works within China is that your first step is to get it listed on all of the regional tenders. So we're going through that process now in Shanghai and Beijing, in those two big provinces; that would be an obvious place to start. And then, thereafter, you apply for reimbursement. The reimbursement never covers, in any procedure, the total cost of the procedure, Mike. There's always some out-of-pocket expenses, and the general population in China is used to having to pay out-of-pocket when they go to a hospital.
Liam J. Kelly: Uh-huh.
Liam J. Kelly: [music].
Liam J. Kelly: Okay.
Liam J. Kelly: [music].
Liam J. Kelly: Okay, thank you, www.telegraph.com. I would now like to turn the call over to Ms. Lawrence Keusch for closing remarks. Thank you, Mandeep, and thank you to everyone that joined us on the call today. This concludes the Teleflex Incorporated fourth quarter 2023 conference. That is all the time we have for questions this morning. Our conference call for today is now concluded. Thank you all for your participation.
Liam J. Kelly: Mhm.
Liam J. Kelly: [music].
Liam J. Kelly: Okay.
Liam J. Kelly: Uh-huh.
Liam J. Kelly: [music].
Lawrence Keusch: Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. [inaudible] Please wait. The conference will begin shortly. [inaudible] Please wait.
Lawrence Keusch: And.
The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait. The conference will begin shortly. Please wait; the conference will begin shortly.
Lawrence Keusch: Uh-huh.
Lawrence Keusch: Yeah.
Lawrence Keusch: And.
Lawrence Keusch: Yeah.
Lawrence Keusch: Uh-huh.
Lawrence Keusch: Please wait the conference will begin shortly.
Lawrence Keusch: [music].