Q4 2024 Teleflex Inc Earnings Call

Please stand by.

Speaker Change: Good morning, ladies and gentlemen, and welcome to the Teleflex 4th Quarter 2024 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode.

Speaker Change: At the end of the company's prepared remarks, we'll conduct a question and answer session.

Speaker Change: 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 Keusch, Vice President of Investor Relations and Strategy Development.

Speaker Change: Good morning, everyone, and welcome to the Teleflex Incorporated fourth quarter 2024 earnings conference call.

Speaker Change: The press release and slides to accompany this call are available on our website at teleplex.com.

Speaker Change: As a reminder, a replay will be available on our website. Those wishing to access the replay can refer to our press releases from this morning for details.

Liam Kelly: Participating on today's call are Liam Kelly, Chairman, President, and Chief Executive Officer, Thomas Powell, Executive Vice President and Chief Financial Officer, and John Darin, Corporate Vice President and Chief Accounting Officer.

Liam Kelly: Liam, Tom, and John will provide prepared remarks and then we will open the call to Q&A.

Speaker Change: 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.

Speaker Change: We wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties in actual events where results may differ materially.

Speaker Change: The factors that could cause actual results or events to differ materially include, but are not limited to factors referenced in our press release today, as well as our filings with the SEC, including our Form 10-K, which can be accessed on our website.

Speaker Change: Now, I'll turn the call over to Liam for his remarks.

Thank you, Larry, and good morning, everyone.

Speaker Change: First, I would like to discuss a transition in the senior leadership at Teleflex.

Speaker Change: Tom Powell, Executive Vice President and Chief Financial Officer, has informed the board of his intention to retire effective April 1st, 2025. Tom has been a trusted partner and I want to thank him for his contributions to Teleflex.

Speaker Change: Over the past 13 years, Tom has played a major role in driving our adjusted operating margins, which have increased by 800 basis points from 2012 to 2024.

Speaker Change: As we've grown, TAM has also built an outstanding global finance team that will be instrumental in keeping us well positioned for the future.

I also want to highlight Tom's focus on succession planning.

ensuring a smooth transition in finance leadership.

Speaker Change: Finally, thank you for your agreement to stay on in a consulting capacity over the next 12 months.

Liam Kelly: I am pleased to announce that John Dern, Corporate Vice President and Teleflex's Chief Accounting Officer, will succeed Tom as Executive Vice President and Chief Financial Officer, effective April 2nd, 2025. I look forward to working closely with John.

Liam Kelly: With an extensive knowledge of Teleflex and over 30 years of financial management and reporting experience for public companies, John will be instrumental as we continue to execute on our growth strategy.

Moving on now to financial results.

For the fourth quarter, Teleflex revenues were $795.4 million.

Liam Kelly: Up 2.8% year-over-year on a gap basis and an increase of 3.2% on an adjusted constant currency basis.

Speaker Change: Are interventional and surgical businesses executed well in the fourth quarter with adjusted constant currency growth of 18.7% and 12.3% respectively?

Speaker Change: Paulette Life Sciences revenues exceeded the high end of our $73-$75 million guidance for 2024.

Speaker Change: Notwithstanding these strong performances, adjusted constant currency revenues for the fourth quarter were $10.2 million below the low end of our revenue expectations, of which approximately half was attributable to interventional urology.

Speaker Change: The remaining revenue shortfall was due to lower year-over-year hospitalizations due to flu and COVID-19 impacting our CBC business negatively in our vascular business units.

Speaker Change: In the fourth quarter, adjusted earnings per share grew 15.1% to $3.89.

Tom Powell: I would now like to turn it over to Tom for his remarks.

Tom Powell: Thanks, Liam. I have enjoyed a long and fulfilling career, including over 20 years as a public company CFO.

Tom Powell: I particularly enjoyed the past 13 years spent with Teleflex and I'm extremely proud of what we have accomplished as a team during my tenure, having successfully grown into our position as a leading global provider of medical devices.

Tom Powell: After first consulting with my family, we felt that this was the right time for my retirement.

Tom Powell: My decision was significantly aided by the fact that, over the past several years, I have worked through our internal planning process to develop a strong bench with internal succession candidates.

Tom Powell: Following a formal search, which included qualified internal and external candidates and in which our board participated, it was determined that John Darin was the right choice for Teleflex.

Tom Powell: I have a high level of confidence in the Teleflex management team and look forward to Teleflex's continued success in the future.

Speaker Change: As disclosed in this morning's 8K, following my retirement, I have agreed to serve as a consultant to the company through March 31, 2026 to support continuity and a smooth transition.

Speaker Change: I will now turn to a review of the fourth quarter, beginning with gross margin given the previous discussion of revenues.

Speaker Change: For the quarter, adjusted gross margin was 60.1%, which was flat versus the prior year period, as the benefits of M&A, mix, and price were largely offset by inflation and foreign exchange.

Speaker Change: Adjusted operating margin was 27.6% in the fourth quarter, up 130 basis points year over year as tight spending controls contributed to lower operating expense as a percentage of sales.

Turning to our 2024 results.

Speaker Change: For the full year 2024, adjusted constant currency revenues increased 3.1% year-over-year, while adjusted earnings per share was $14.01.

Speaker Change: Our interventional and AMEA businesses both had strong performances in 2024 with adjusted constant currency growth of 14.8% and 7.3% respectively.

Speaker Change: Surgical also continued to execute well with 6.1% adjusted constant currency growth with continued contributions from the Titan stapler.

Speaker Change: Interventional urology revenue increased 3.7% adjusted concurrency with growth in Palette largely offset by softness in the urolith business.

Speaker Change: 2024 margin expansion was solid, with adjusted gross margin expanding 120 basis points and adjusted operating margin increasing 60 basis points year over year.

Thank you.

Speaker Change: Drivers of Adjusted Gross Margin Expansion included the termination of the MSA and the acquisition of Palette and favorable pricing.

Speaker Change: While Adjusted Operating Margin Expansion was primarily driven by the flow-through of Adjusted Gross Margin.

Cash flow from operations was strong.

increasing 24.7% year-over-year to $638.3 million in 2024.

compared to 511.7 million in the prior year period.

Speaker Change: The year-over-year improvement in cash flow from operations benefited from improving operating performance,

Speaker Change: and a benefit of $37 million from the termination of our U.S. pension plan.

Speaker Change: Net leverage at quarter end was approximately one and a half times.

Speaker Change: Lastly, in connection with the performance of the fourth quarter 2024 Annual Impairment Test for Goodwill,

Speaker Change: We determined that the carrying value of the Interventional Urology North America Reporting Unit

included within our America's operating segment.

Speaker Change: exceeded its fair value as a result of a prolonged period of subdued revenue growth due to persistent end-market challenges and changes in competitive pressures in the short to mid-term.

Speaker Change: Consequently, we recognized a non-cash goodwill impairment charge of $240 million for the fourth quarter of 2024.

John Dara: Now we'd like to turn the call over to John Dara.

John Dara: Thanks, Tom. I appreciate the confidence and trust in me from Liam, Tom, and the board as I take on the role of Chief Financial Officer for Teleflex.

John Dara: It's an incredible honor to step into this role, and I'm excited for the opportunity.

John Dara: Tom's leadership over the years has set a solid foundation and I'm committed to building on that as we move into this next chapter.

John Dara: With the strength of our talented management team, I'm confident we can continue driving success at Teleflex.

John Dara: Before I get started with guidance, I would like to comment on the accelerated share repurchase we announced this morning. The $300 million accelerated share repurchase will be effective tomorrow, February 28th. We expect the accelerated share repurchase to be completed in the second quarter of 2025.

John Dara: With that, I would like to turn now toward 2025 financial guidance.

John Dara: We are expecting 2025 adjusted constant currency growth of 1 to 2 percent. Note this range excludes 13.8 million negative impact from the Italian measure incurred in the second quarter of 2024.

John Dara: We are assuming approximately 55 million or a 180 basis point headwind to revenue from foreign exchange translation in 2025 based on a euro to dollar exchange rate of 103.

John Dara: For 2025, our outlook assumes continued pressure on our interventional urology business due to softness in Urolift.

John Dara: In our OEM business, we have now started to increasingly see what is expected to be a temporary delay in customer orders due to a focus on inventory management, as well as the contract loss discussed at the time of third quarter 2024 earnings, resulting in negative growth for the year.

John Dara: Additionally, we expect an impact from volume-based procurement on our surgical business in China during the year.

John Dara: We expect 2025 adjusted earnings per share to be in the range of $13.95 to $14.35.

John Dara: We have established our fiscal year revenue and adjusted EPS expectations to reflect what we believe are realistic and achievable low ends of each range, both of which we have a high level of confidence in the team's ability to deliver in 2025.

John Dara: For your modeling considerations, our 2025 guidance range assumes the following.

Adjusted gross margins in the range of 60.25% to 61%.

Adjusted operating margin of 26.6% to 27%.

John Dara: Net interest expense of approximately $75 million, which includes the impact from the accelerated share repurchase.

John Dara: In addition, I would note that we will update the interest expense expectation for 2025 following the close of the vascular intervention acquisition.

an adjusted tax rate of approximately 13.5 percent.

John Dara: and approximately 45.5 million average-weighted shares inclusive of the $300 million accelerated share repurchase.

John Dara: Our 2025 guidance includes tariffs currently enacted, but does not contemplate newly proposed tariffs.

John Dara: Our most significant exposure to tariffs on U.S. imports is associated with our manufacturing facilities in Mexico.

John Dara: Any implementation of tariffs on medical device products in this geography would have a negative impact on the financial results and may impact our 2025 guidance as set forth today.

John Dara: Finally, our full year revenue guidance assumes first quarter revenue declines of 3-4% on a constant currency basis, excluding an estimated $14 million negative impact from changes in foreign currency exchange rates compared to the prior year.

John Dara: The first quarter of 2025 year-over-year decline reflects continued challenges related to the headwinds previously discussed.

Liam Kelly: I will now turn back to Liam to discuss the updates to our strategic framework and focus on shareholder value creation.

Thanks, John. Turning now to our value creation framework.

We have four pillars that support our corporate strategy.

Liam Kelly: These include a focus on driving sustainable revenue growth and achieving earnings and margin expansion.

Liam Kelly: Today, we are excited to announce that TeleFlex has entered into a definitive agreement with

Liam Kelly: to acquire substantially all of the Vasseler Intervention business of privately held Biotronic SE and company KG for an estimated cash payment at closing of approximately €760 million that certain adjustments as provided in the purchase agreement including certain working capital, not transferring and other customary adjustments.

Liam Kelly: The Teleflex interventional portfolio has long been a cornerstone of growth and innovation within our diversified product portfolio.

Liam Kelly: With the opportunity to drive sustainable revenue growth and improve margins, the Basler Intervention acquisition is a key part of the value creation strategy that will allow us to further build upon this strong foundation.

Liam Kelly: With the acquisition of Biotronic products, we believe Teleflex will gain meaningful scale, expand its presence in the cath lab, and be positioned for continued healthy growth.

Liam Kelly: The product portfolio expected to be acquired includes a broad suite of vascular intervention devices, such as drug-coated balloons, drug-eluting stents, covered stents, balloon and self-expanding bare metal stents, and balloon catheters.

Liam Kelly: Turning to the Strategic Rationale for the Acquisition of the Vascular Intervention Business.

Liam Kelly: Similar to the Vascular Solutions acquisition in 2017, the acquisition of the vascular intervention business will once again allow Teleflex to increase its scale in the cath lab.

Liam Kelly: In this case, we are acquiring a broad portfolio of interventional therapeutic devices that will complement the company's well-established complex percutaneous coronary intervention access products.

while building upon and enhancing the legacy interventional sales force.

Liam Kelly: The vascular intervention acquisition significantly expands Teleflex's market presence with a combined coronary and peripheral interventional business.

Liam Kelly: Investment in internal R&D will remain a priority, with opportunities for expansion given the increased scale of the combined businesses.

Liam Kelly: The peripheral intervention market is growing rapidly, with global growth estimated to be in the high single-digit range.

Liam Kelly: We believe the addition of the vascular intervention business will allow Teleflex to establish a footprint in the adjacent peripheral markets and complement our growing position in coronary interventions.

Liam Kelly: Our existing complex PCI portfolio has products that are utilized in difficult coronary interventions.

Liam Kelly: and by adding the portfolio of innovative products that we expect to acquire, we will be able to advance our technology offering with relevant coronary and peripheral interventions.

Liam Kelly: The ability to participate in combined coronary strategies with drug-coated balloons, drug-eluting stents, and the emerging potential of resorbable scaffold technologies will expand our current available procedure base.

Liam Kelly: We have a range of products in our current portfolio which have peripheral indications.

Liam Kelly: This acquisition will provide a sales channel to sell these products.

Liam Kelly: In addition, the expansion of our product portfolio will enable our salesforce to leverage their clinical knowledge and increase clinician interactions.

Liam Kelly: We see opportunities to expand the presence of the products anticipated to be acquired in the U.S. through our commercial initiatives and investment in new product registrations.

Liam Kelly: Likewise, we see the ability to expand our complex PCI franchise in Europe given the strong market presence of the Vassar intervention business in this geography.

Liam Kelly: Robust research and development, clinical expertise, and global manufacturing capabilities are key elements of the bachelor intervention business that we expect to acquire.

Liam Kelly: All of which are expected to further strengthen Teleflex's innovation pipeline and enable the company to bring new products to market and improve the care of patients.

Liam Kelly: We will continue to invest in developing highly competitive interventional products, including differentiated new technologies including the resolvable metallic scaffold.

Liam Kelly: Coupled with our extensive global reach, we aim to deliver innovative technologies to interventionalists, advancing clinical benefits and safety for both physicians and patients.

Liam Kelly: The acquisition of the vascular intervention business will also allow Teleflex the opportunity to invest in and expand the clinical trial program for Biotronix free cells.

a sirolimus-eluding, resorbable, metallic scaffold technology.

including possible pursuit of the U.S. market.

Liam Kelly: FreeSolve has the potential to advance the trend in interventional coronary and endovascular procedures to leave less permanent hardware behind.

Liam Kelly: We believe Freesol shows early potential to address the limitations of previous polymeric resorbable scaffolds.

achieving more rapid absorption, thinner struts and metallic mechanical performance.

Liam Kelly: Pre-salve has already demonstrated compelling clinical data in the Biomag 1 study, a first in human study at 14 European centers.

Liam Kelly: PreSolve received CE mark for treatment of de novo coronary stenosis in February 2024, based substantially on the safety and efficacy of its predecessor, Magmaris.

Liam Kelly: The European Pivotal Biomag2 study is now enrolling, with initial results expected in the 2020 survey.

Liam Kelly: Turning to the financial profile for the business expected to be acquired.

Liam Kelly: We expect to close the acquisition by the end of the third quarter of 2025, subject to customary closing conditions, including receipt of certain regulatory approvals.

Liam Kelly: Assuming this timeline, we intend to update our guidance on the 3rd Quarter 2025 Earnings Conference Call.

Liam Kelly: The Biotronic products that we expect to acquire delivered a constant currency revenue tagger of 5.4% since 2022.

Liam Kelly: Based on the expected timeline for closing, the Biotronic products are expected to generate approximately €91 million in revenues in the fourth quarter of 2025.

Liam Kelly: Beginning in 2026, the Biotronic Acquisition is expected to deliver constant currency revenue growth of 6% or better.

Liam Kelly: Adjusted gross margin for the products expected to be acquired is comparable to the Teleflex corporate average.

Liam Kelly: The acquisition is expected to be dilutive to Teleflex-adjusted operating margins, driven by continued robust investment to advance the pipeline and Fresolve.

Liam Kelly: As revenues associated with the Biotronic acquisition grow, we expect operating margin leverage over time.

Liam Kelly: On the bottom line, we expect the transaction to be approximately 10 cents accretive to our adjusted earnings per share in the first year of ownership from the date of close and to be increasingly accretive thereafter.

Liam Kelly: The acquisition of the Vassler Intervention Business is expected to drive double-digit ROIC early in year four following the close of the transaction.

Liam Kelly: We plan to initially finance the acquisition through a new term loan and revolving borrowings under our existing senior credit facility and cash on hand.

Liam Kelly: Additionally, we entered into foreign exchange derivative contracts to economically hedge against the foreign currency exposure associated with the cash consideration needed to complete the acquisition.

Liam Kelly: In parallel with the process to acquire the Biotronic Bachelor Intervention Business, we have conducted a comprehensive business portfolio evaluation.

Liam Kelly: Following our review, we are announcing today that the Teleflex Board of Directors has authorized management to pursue a plan to separate the company into two independent publicly traded companies, Remainco and Neuco.

Liam Kelly: The separation of the company is consistent with our stated corporate strategy to optimize our product portfolio and drive adjusted margins and adjusted earnings per share expansion.

Liam Kelly: The separation is designed to deliver greater value for all Teleflex shareholders.

Liam Kelly: Creating two independent publicly traded companies will position each to accelerate growth with a simplified operating model and enable increased management focus.

Liam Kelly: The separation will allow for improved allocation of resources to the unique strengths and opportunities of each business, which will offer investors a more targeted investment opportunity.

Liam Kelly: This structure will also facilitate distinct capital allocation strategies that better align with the specific growth philosophies and objectives of each independent company.

I will now provide an overview of the transaction.

Liam Kelly: Teleflex will create a new independent publicly traded company with urology, acute care, and OEM businesses.

Liam Kelly: The transaction is intended to be a distribution of newly issued shares of NewCo to shareholders that is tax-free for U.S. tax purposes.

Liam Kelly: As mentioned, the separation will position each company to accelerate growth with a simplified operating model and increased management focus.

Liam Kelly: Each of Romenco and Yuko are expected to be appropriately capitalized with distinct and disciplined capital allocation priorities.

Liam Kelly: At the time of separation, RemainCo is expected to deliver 6% plus revenue growth on a constant currency basis and be accretive to Teleflex's adjusted growth margin.

Liam Kelly: initially neutral to Teleflex's adjusted operating margin, partially as a result of higher anticipated investment in R&D.

Liam Kelly: In the first full year post-separation, we expect to drive double-digit adjusted earnings-per-share growth.

Speaker Change: I will continue to lead Romenco as its Chairman, President, and CEO.

Speaker Change: New co-leadership will be announced in the coming months and we expect to complete the transaction in mid-2026 subject to market regulatory and certain other conditions.

Speaker Change: Moving to a deeper dive into the benefits of establishing two leading focused independent companies.

Speaker Change: For Remainco, the separation will create a streamlined portfolio focused on highly complementary business units.

vascular access, interventional and surgical.

Speaker Change: Of note, the acquisition of substantially all of the Biotronic bachelor intervention business is an important element of the strategy to build a business with meaningful global presence in the catheterization lab with enhanced investment to drive the new technology pipeline.

Speaker Change: This Focused Portfolio will better position RemainCo to capitalize on high-growth, high-acuity, hospital-focused end markets.

Speaker Change: We believe this more nimble operating model and simplified manufacturing footprint will unlock margin expansion opportunities over time and create capacity for increased and highly focused R&D investment.

Finally,

Speaker Change: Remainco will be able to fully align its capital allocation philosophy with its growth strategy, increasing its ability to pursue business development opportunities to more effectively compete in high innovation end markets.

Moving to new code.

Speaker Change: The operational structure will allow management to have an undivided focus on unlocking new course potential through a simplified operating model.

Speaker Change: NUCO will participate in Attractive End Markets in Urology, Acute Care, and OEM, and will be positioned to leverage its established market positions in its respective markets.

Speaker Change: The company will be able to identify, invest in, and capitalize on opportunities that are unique to the urology, acute care, and OEM end markets through its tailored capital allocation and investment strategy to drive innovation and growth.

Speaker Change: There remain significant growth opportunities in the urology markets, while OEM will have flexibility to further expand its customer base and enhance its capabilities that were not available while part of Teleflex.

Speaker Change: The separation will position both RemainCo and NuCo for greater corporate clarity and enhanced strategic focus.

Speaker Change: Remenko, with approximately $2.1 billion in 2024 revenue pro forma for the acquisition of the vascular intervention products from Biotronic.

Speaker Change: will be better positioned to capitalize on attractive, high-growth end markets addressing emergent procedures performed primarily in the hospital setting across the intensive care unit, emergency department, cath lab and operating room.

Speaker Change: The RemainCo product portfolio will be highly complementary, with significant breadth across the hospital, with leading market positions and opportunities for growth across three distinct business units – vascular, interventional and surgical.

Speaker Change: Vascular access will include products primarily consisting of our Arrow branded catheters, catheter navigation, and tip positioning systems, and our intraosseous access systems.

Speaker Change: Post-separation vascular access will also include our emergency medicine portfolio, including our hemostatic products branded under our Quick Cloth trade name.

Speaker Change: Interventional will primarily consist of a variety of coronary catheters, structural heart support devices used by interventional cardiologists, interventional radiologists, and vascular surgeons.

Speaker Change: The interventional product category will also include the Biotronic Vascular Intervention business, the agreed-upon acquisition of which we announced today, and expect to close by the end of the third quarter of 2025, significantly expanding our portfolio in both coronary and peripheral cath lab procedures.

Speaker Change: Surgical would include single-use and reusable devices designed for use in a variety of surgical procedures.

primarily consisting of metal and polymer ligation clips.

Speaker Change: facial closure surgical system used in laparoscopic surgical procedures, percutaneous surgical systems, a power bariatric stapler, and other surgical instruments used in ear, nose, and throat, and cardiovascular and thoracic procedures.

Speaker Change: Newco with approximately 1.4 billion in 2024 revenue will have enhanced ability to identify, invest in, and capitalize on opportunities unique to the company's business units and end markets.

Speaker Change: NUCO will be a diversified acute and extended care company with a focus on neurology, acute care and OEM markets.

Speaker Change: Urology will include the company's interventional urology and bladder management portfolios.

Speaker Change: Acute care will include the majority of Teleflex's anesthesia product category, as well as our respiratory product category, portfolio of intraortic balloon pumps, and select other products.

Speaker Change: OEM will remain focused on the design, manufacture, and supply of devices and instruments for other medical device manufacturers.

Speaker Change: The OEM business specializes in custom extrusions, microcatheters, and specialized sutures.

Speaker Change: Remainco and EUCO will benefit from more nimble operating models and simplified manufacturing footprints.

Speaker Change: The operating model will be simplified from seven product categories today to three product categories in each company post separation.

Thank you.

Speaker Change: From a manufacturing footprint perspective, the separation results in significantly streamlined operations for both companies.

Speaker Change: Remainco will have a simplified and nimble operating model with a streamlined manufacturing footprint.

Speaker Change: transitioning from 19 anticipated manufacturing facilities at Teleflex inclusive of the Biotronic Vascular Interventions business as of year-end 2025

Speaker Change: to seven facilities at Remainco post-separation, with the remaining 12 to transfer to Newcastle.

Speaker Change: Importantly, the structure and locations of the new co-businesses and manufacturing footprint will help to ease the separation process.

Moving now to additional information on Remainco.

Speaker Change: Remainco will be focused on highly complementary business product categories within hospital-focused end markets.

Speaker Change: The market serves, including vascular access, interventional, and surgical, approximates $32 billion in size and are growing in the mid-single-digit-plus range.

Speaker Change: Following the separation, Remainco is expected to generate constant currency revenue growth of 6% plus.

Speaker Change: be immediately accretive to teleflex-adjusted gross margin with a mid-60% profile and is initially expected to be neutral to teleflex-adjusted operating margin partially as a result of higher anticipated investment in R&D.

Speaker Change: The simplified operating model will provide opportunities for margin improvement over time and will create capacity for additional focused R&D investment.

Speaker Change: The transaction is also expected to deliver double-digit adjusted earnings per share growth in the first full year post-separation.

Turning to RemainCo's Capital Allocation Strategy

Speaker Change: With an enhanced financial profile following the separation, Remainco will have an increased flexibility to better align its capital allocation philosophy and growth strategy.

The company will remain disciplined.

Speaker Change: planning to prioritize allocating capital to internal investment into high ROI growth drivers.

Speaker Change: Growth of creative acquisitions to help the company more effectively compete in highly innovative end markets.

Speaker Change: repaying debt as appropriate to optimize the leverage profile and continuing to return capital to shareholders by a quarterly dividend and opportunistic share repurchase.

Speaker Change: As part of this capital allocation strategy, Teleflex is targeting a net leverage ratio below three times through 2026.

Moving to NUCO.

Speaker Change: NewCo will have a strong portfolio in established and markets that are expected to grow in the low to mid single-digit range and total over 40 billion dollars.

Speaker Change: The company will have strong call points in the hospital, AFC and office sites of service.

Speaker Change: Additionally, through NUCO's OEM business, the company is anticipated to have strong relationships with other medical device manufacturers that use its strong design and manufacturing competencies.

Speaker Change: Following the separation, NewCo is expected to generate low single-digit constant currency revenue growth with a mid 50% gross margin profile.

Speaker Change: Over the medium term, NUCO will have the potential to accelerate growth

to low to mid-single digits as the Eurolift business recovers.

Speaker Change: Barragell momentum remains strong with the opportunities to expand the addressable market through new FDA cleared indications and the OEM business seeks to return to historical growth

Speaker Change: empowered by greater flexibility to further expand the customer base and enhanced capabilities.

Speaker Change: The company will benefit from a simplified operating model that will enable targeted investment for growth drivers and capital allocation for its investors.

As mentioned,

MUCO has the potential to improve growth.

Speaker Change: to low single digit to mid single digit from the low single digit at the time of separation with urology and OEM as key drivers.

Speaker Change: In urology, the focus will be on stabilizing urolip beyond 2025.

Speaker Change: This year marks the final year of the phased reimbursement reduction in the United States Office-Site Service.

Speaker Change: The team is focused on driving usage through site-of-service specific strategies and continued development of EURLIFT 3, which we believe will drive improved economics and maintaining the base of strong scientific evidence that supports the use of the technology.

Speaker Change: Pellet revenue modestly exceeded the high end of the 2024 guidance of $73-$75 million, implying growth over 30%. Looking forward, we continue to expect healthy double-digit growth.

Speaker Change: In OEM, we expect the dynamics impacting revenue growth in 2025 to be transitory following a long period of revenue increases with a 9.5% TAGR from 2014 to 2023.

Speaker Change: The impact from the customer vertical integration will anniversary in the middle of 2025, and customer inventory management should largely run its course during the year.

Speaker Change: Post-separation, OEM will have the flexibility to further expand the customer base and enhance capabilities.

Speaker Change: That concludes my prepared remarks. Now I'd like to turn the call back to the operator for Q&A.

Speaker Change: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you are using a speakerphone, make sure your mute function is turned off to allow your signal to reach our equipment.

Speaker Change: We ask that you please 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 1.

Patrick Wood: And our first question will come from Patrick Wood with Morgan Stanley. Your line is open.

Beautiful. Thank you so much. Busy morning for you guys.

Patrick Wood: I guess maybe I'd love to start with kind of a why now and a genesis of getting to the point where we're at now. I'm just curious, you know, what prompted the review, you know, how you landed at now being the right strategic timing for all this, because it's a lot of changes, of course, and I'd love a little bit of a timeline there, and then I had a quick follow-up.

performed a lot of acquisitions and divestitures in the 2000s.

Speaker Change: We believe that this is the appropriate time, particularly with the addition of Biotronic Vascular Intervention in this business that we are also announcing today.

Patrick Wood: it clear to us that we would truly have two businesses within with different

Patrick Wood: growth strategies, different goals, capital allocations, proprieties, priorities, both of which would benefit from being independent companies. If you look at RemainCo and YouCo, they have fundamentally different growth and profitability profiles, with the value not fully realized within either of them when they're combined within within Teleflex.

Patrick Wood: Once we came to that realisation, we started to look at this from a logistical standpoint and it was actually a pretty clean separation. Our manufacturing footprint and operations today are already largely aligned to this separation. The urology business and OEM business are easily separable entities within Teleflex today, so the strategic rationale was there and then when we actually looked at how feasible it would be logistically and operationally, the pieces all really fell into place.

Patrick Wood: So, after looking at multiple ways to drive value with these businesses, we felt that a separation at this time is the most significant way we can drive value for our shareholders, our businesses, and our team members.

Patrick Wood: Super helpful and then just as a quick follow-up, you know, we obviously together chat about VASTA a few times and that side of things How are you thinking about?

Speaker Change: The relative like sales force and the access because obviously Biotronics is very very strong in EMEA

Speaker Change: and I'm just trying to think you've obviously you've got a bigger bag for the reps is there any ability to consolidate the reps or is this a situation where because of the geographic split being a little bit different between the two of you you keep them all on you just increase the size of the bag

I'll give you one small example. There are zero...

Speaker Change: Drugs Alluding Stent is really suitable for those tortuous coronary arteries because of its flexibility and my ability to place it. That is where a broad part of our portfolio is used every single day, gaining access to place these products.

Speaker Change: The next question comes from Matthew O'Brien with Piper Sandler. Your line is open.

Speaker Change: Morning, thanks for taking the questions and Tom, best of luck to you in the future. I guess, Liam, as I think about the asset that you're acquiring here,

Speaker Change: You know, Freesolve seems interesting, although it's been difficult with these bioresorbable products historically. Just talk about the asset that you're bringing in, the confidence in being able to deliver the kind of growth you're talking about.

From it, I don't know if it's more OUS expansion.

Speaker Change: of it going forward, but then also just the ability to kind of layer on.

Speaker Change: from, you know, from when you get this in-house, when you have RemainCo.

Speaker Change: in the future and what that could look like, you know, going forward. Because I think some people would be a little bit skeptical, just given the fact that you're rolling in some, you know, some technologies that are a little bit older, I guess, in nature, for lack of a better term.

Speaker Change: So, if you look at the portfolio, there are some key products within there. You've got the PK Papyrus, which is a covered stent, which is actually one of the only covered stents and unique in its applicability. You've got the Pantera, the Pantera Pro drug-coated balloon with a really solid kager over the last couple of years. And you've got the Peripheral Pasero drug-coated balloon with really solid rates.

Speaker Change: The Free Solve. I would like to point out that the older products were polymer, whereas this one is metallic, and I think this gives us nice optionality on revenue growth.

Speaker Change: in the future as we go through the clinical trial. If we look at the CAGR of the portfolio that we're acquiring, and to be clear, Matt, we're not acquiring all of the portfolio of the vascular interventions business.

Speaker Change: But if you look at the CAGR of that portfolio over the last couple of years, it's been 5.4%. And even within that, there's volume-based procurement impacts in late 2024 in China. And if you normalize for that, the CAGR of this portfolio will be in excess of 6%.

Speaker Change: So, it's got a solid growth profile already, it's got some innovative products, and it's very complementary to Teleflex, both geographically and synergistically with the portfolio that we have. And it gives us a much bigger presence in the cath lab in both Europe and the United States, and it will unlock the opportunity for some potential Go Directs very similar

Thank you. Have a great day. Thank you.

Speaker Change: Got it. And then just to follow up on the acquisition as well, just can you talk a little bit more about the...

Speaker Change: the actual sales numbers. I don't know if you or Tom must talk about this, but the sales numbers, margin profile, and then just why you guys think, you know, you can really, you know, grow this business at a better rate than what Biotronic was doing. Thanks.

Speaker Change: euros in the fourth quarter. There isn't that much seasonality with this business, a little bit in the summer, but if you, so therefore you just take that 91 million euros, which is approximately 94 million dollars, that would equate to around 375 million in a full year basis, and our expectation because of the synergies of bringing this product family into Teleflex, that it will grow six percent or better from 2026 on, and then as I said, you have the option.

and the functionality of PreSolve into the future.

Thank you. Thank you.

Speaker Change: The next question comes from Jason Bedford of Raymond James. Your line is open.

Good morning, and Tom, congrats on the retirement.

Speaker Change: Maybe I'll ask two questions both up front. Liam, I'd love to hear from you why you're staying with RemainCo versus NuCo. Then secondly, as part of the comprehensive business review, did you actively explore divesting pieces of the business versus spin? Thanks.

Speaker Change: Douglas Goldstein, CFP®, is the director of Profile Investment Services and the host of the Goldstein on Gelt radio show. He is a licensed financial professional both in the U.S. and Israel. His book Building Wealth in Israel is available in bookstores, on the web, or can be ordered

Speaker Change: We determined that the most efficient way to unlock shareholder value is to separate these two businesses. We are very focused on creating that shareholder value and our base case for the separation, as we are announcing today, is intended to be a tax-free distribution via spin-off.

Speaker Change: But, Jason, as you are aware, recently a number of transactions of this nature that have been announced, they started off as a spend and they ended up being sold. And candidly, if that opportunity presents itself and creates more value for shareholders, we're going to be open to pursuing it.

Speaker Change: The next question comes from Shagun Singh with RBC. Your line is open.

Shagun Singh: Great, thank you so much for taking the question. I guess I was hoping you could comment a little bit on your 2025 guidance of 1 to 2 percent constant currency, you know, which surprised me a little bit. You know, what has driven such a drastic revision in your business? You know, can you maybe talk to Q4 Trends and, you know, some of the outlook for 2025? And then just on

Thank you for taking the question.

Speaker Change: Okay Shagun, let me take the second part of that first and what gives us the confidence that Remainco will be able to grow six percent plus growth? Well if you look at our guidance for 2025 and our plan for 2025, x the impact of the volume-based procurement in China, that business is growing in the high fives. Obviously also within our plan the Remainco is challenged and I'll get into that now as I go through the guidance.

Speaker Change: So our guidance of 1-2%, it honestly reflects the trading environment we see for the 12 months. Our guidance expecting the Americas in APAC will grow low single digits while EMEA will grow in the mid-single digits.

Speaker Change: EuroLift is continued, we anticipate to be challenged as we go through the year and we also expect Palette to grow in line with our previous expectations but we've communicated many times the investment community in 2025 we're not expecting an improvement in the environment for EuroLift. This is the last year of reimbursement so that that could be something that would change going forward.

for OEM.

Speaker Change: We are now expecting tighter inventory management by our customers in 2025. We have reached out to all of our customers to get order levels.

Speaker Change: and the impact of bi-volume based procurement in our surgical business in 2025.

Speaker Change: This, again like the OEM impact, we believe will be transitory and be largely plushed through in 2025 and therefore that's what's reducing our expectation for APAC growth to the lower single digits.

Shagun Singh: and the impact is within China. If you take those three buckets of headwinds, Shagun, that's approximately $100 million, with Eurolift being the largest, OEM being next, and volume-based procurement being the third.

Shagun Singh: The next question comes from Larry Beagleson with Wells Fargo. Your line is open.

Good morning. Congratulations, Tom.

Shagun Singh: A couple of questions for me. I guess one on biotronic and one on the separation.

Shagun Singh: So Liam, maybe just specifically on the Biotronic products, can you resurrect or siro, what's the plan for Pantera Lux in the U.S. and FreeSolve in the U.S., when can you start the Pivotal trial? And I had one follow-up on the separation.

Speaker Change: Okay, so with regards to the question on the Orsera product...

Speaker Change: The we've signed the agreement today. We're not going to have the product in closed until late the end of q3 our expectation for free solve is that we will continue with the the the the clinical study in Europe Get that through and we'll update the investment community in our plans for free solve for the United States as we go through 2026

Speaker Change: But it is a nice revenue optionality for us within the future.

Larry.

Okay, that's helpful. And then second...

Speaker Change: For the separation, the margins of each business today, I didn't see the operating margin for Spinco and you talked about Remainco being kind of neutral with increased investments. Can you kind of give us the pieces today so obviously we can create, you know, separate models and just any color on stranded and stand-up costs for each, should we just look at recent precedents? Thank you.

Speaker Change: with the potential to improve as the teurology business and the OEM business improves over time. It will have mid-50s gross margin. Obviously, a lot of the other information will be disclosed in Form 10, but I think you should consider it.

Speaker Change: To be similar to similar car votes, Larry, it's a good benchmark to use.

Speaker Change: The next question comes from Anthony Petron with Mizuho Financial Group. Your line is open.

Anthony Petron: Thanks, and Tom, congratulations. Good luck on the transition. Maybe sticking on the structure of the spin, Liam, will the parent retain, you know, any ownership in the spin?

Anthony Petron: How will that work out? Any comments on the capital structures?

Speaker Change: of the two businesses. The consolidated business is holding around $1.65 billion in debt, so any early views on how debt for each of the stand-alone businesses will play out. And I'll have one quick follow-up on Biotronic.

Speaker Change: Yeah, just regarding the capital structures, all of that will be determined as we go through, Anthony. And also the determination as to what holding that RemainCo would hold within YouCo. And obviously all that would be disclosed in the Form 10.

Speaker Change: It is our intent to set up two very successful companies.

Speaker Change: and all of this will be defined over the next several quarters. We do want to have a RemainCo and a NuCo with a strong viable future, both making independent decisions for their companies to extract shareholder value from both RemainCo and NuCo.

Speaker Change: And then just on Biotronic, maybe a little bit on top-line synergy.

Speaker Change: potentials as well as cost synergy. You know at the top line certainly that there are channel overlaps with

vascular access, maybe to some extent

surgical may be separate and then

Speaker Change: and then just on cost synergy. So just a little bit on the sales synergy of Parenco with Biotronic as well as cost synergy. Thanks.

Speaker Change: Yeah, thanks Anthony. As I said a little earlier, we have a range of our current products.

Speaker Change: that have an indication for peripheral but we haven't had a channel to sell those products together. I think there's a significant opportunity for us in combining the sales forces in both

the U.S. and in Europe.

Speaker Change: to have a larger bag and be more relevant within that Cat Lab call point. We've said many times that the Cat Lab is a call point that we really want to continue to explore and we want to continue to invest behind the new product innovation. That's the lifeblood of these products. So we'll have a whole suite of products now available with a full bagged sales organization in the Cat Lab for both coronary and peripheral indications

Speaker Change: have a peripheral indication through that sales channel gaining synergies in that regard.

Speaker Change: So, your analysis and perception is absolutely correct. There will be opportunities as we combine the bags of both companies and the sales forces of both companies to help drive that growth of 6% or better as we move forward.

Speaker Change: The next question comes from Richard Newitor with Truist Securities. Your line is open.

Hi, thanks for taking the questions.

Tom, I echo my congrats into your retirement.

I just have a couple...

up front here.

Speaker Change: Please forgive me that with all the news flow, these might feel like kind of old topics,

Speaker Change: Any update on the incinerator balloon pump forecast horizon and views on the competitive dynamics in that market and your opportunity to gain share there?

I'd also...

I'd like to just ask how, if at all,

Speaker Change: Power of Exposure is contemplated in the Outlook for 25, and if you could just remind us, you know, how that runs through your business and what your exposure is there. And then just lastly, any insight on who's going to run NuCo? Are you going to go internal or external, or is it too early? Thanks.

Speaker Change: Okay, so I'll take two and I'll ask John to cover the tariffs.

Speaker Change: as we've gone through Q4 and into early Q1 have remained robust, and we see that the opportunity through Q1 and Q2 is as we had communicated before. And I'll ask John to give you some more colour on the tariffs.

John Dara: Tariffs that have been currently enacted we have in our plan and in place. Tariffs that have been

John: proposed several times by the Trump administration but that have not been put in place or not in our plan. Our biggest exposure remains if the if the tariff is put in place for Mexico as we have significant operations in Mexico and that would have the largest impact to the company.

Thank you.

John: The next question comes from Craig Bijoux with Bank of America. Your line is open.

Good morning, guys. Tom, congrats on the retirement.

Craig Bijoux: A couple quick ones for me, maybe just a follow-up on Rich's question on tariffs. I mean, would it be possible to size the exposure?

Craig Bijoux: to, you know, if the Mexican tariffs went into place. And then on the OEM business...

and your comments there, Liam.

Speaker Change: I guess I just wanted to understand, do you think it's a broad...

Speaker Change: a broader inventory work down, or are there specific products within your portfolio that are maybe being targeted by your customers to work down that inventory? Thanks.

complex extrusions and we're seeing a slightly outsized

Speaker Change: Normalization in that area. With regard to the tariffs, there's a lot of variability.

Speaker Change: in relation to those. It's not really clear, will there be exceptions for medical devices? Is it value-add only impact? How's the Maquiladora arrangement being managed?

Speaker Change: And it's difficult to run your business forecasting all of these based on the tweet of the day. Obviously, we saw last night there's now an intent on Europe, and again, there's a complete lack of clarity as to how that's all. To give you a more wholesome answer, we really need more information. Obviously, we're taking actions. We've moved inventory north of the border. And as you probably are aware, Craig, if tariffs did hit, a lot of it would be capitalized

Speaker Change: So, difficult to give you specifics on the various different tariffs, but as John said earlier, all tariffs that are in place as of right now are contemplated within the guide that we provided.

Speaker Change: The next question comes from Michael Pollack with Wolf Research. Your line is open.

Speaker Change: Thank you. The balloon pumps are going to NUCO. Why not keep them in Romainco?

Thank you very much.

Speaker Change: Similar question for the follow-up, but on anesthesia, I always viewed this as fairly complementary to vascular access, similar call point, critical care settings, ICU, emergency med.

Speaker Change: What have I missed there? Is it a separate sales effort? Is it a materially lower margin profile, price risk?

Why separate those two? Thank you.

Speaker Change: So the anesthesia business is broadly regional anesthesia and ICU slash operating room.

Speaker Change: Not that much synergies with the vascular business, candidly, Mike. The one piece of the business that does have synergy with the vascular business is the emergency medicine part of that and obviously that is staying with Remainco and obviously the margin profile and growth profile of anesthesia without the emergency medicine side of it would probably fit better in Newco than in Remainco.

Mike Mattson: Our final question comes from Mike Mattson with Needham. Your line is open.

Yeah, thanks for putting me in.

Mike Mattson: want to ask one on the Biotronic deal. So I think you said that the

The gross margin of that business is similar to the...

current corporate gross margin, is that right?

Mike Mattson: It's a bit lower than I would have thought. Is that maybe because they're more exposed to OUS and Europe in terms of their sales mix? And is there an opportunity there that then if you start selling more of those products in the U.S. at higher prices to get some gross margin accretion there?

Mike Mattson: Yeah, so it is equal to the Teleflex. You heard that correctly and that is correct. There is a fair amount of investment into the business right now in regard to the pipeline, in particular with the optionalities I pointed out to FreeSolve. And I think your observation is correct as we can accelerate growth.

Mike Mattson: In the United States and as we accelerate some of the new product pipeline There is the potential to improve that gross margin over time and obviously definitely an opportunity to improve operating margin over time

Speaker Change: Okay, got it. Next, and then just on FreeSolve, I apologize if you already answered this, but do you need to, would you need to run a U.S. pivotal trial if you decide to try to commercialize that in the U.S. or those trials you're running adequate?

Speaker Change: So, the current trial that's running is for Europe, so yes, that is accurate. We would have to run a trial for the U.S., and as I said earlier, we'll update the investment community as we go through 2026 as to our optionality on that.

Speaker Change: have gotten a lot more patients enrolled in the trial in Europe at that stage and will have much better visibility as to what the path forward is in the U.S. at that stage.

Speaker Change: This concludes the question and answer session. I'll turn the call to Lawrence Keusch for closing remarks.

Lawrence Keusch: Thank you, Sarah, and thank you to everyone that joined us on the call today. This concludes the Teleflex Incorporated fourth quarter 2024 Irvings Conference Call.

Thank you. You may now disconnect.

Please wait, the conference will begin shortly.