Operator:

Good morning, ladies and gentlemen, and welcome to the Teleflex First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded and will be available on the company's website for replay shortly.

Lawrence Keusch:

Good morning, everyone, and welcome to the Teleflex Inc. First Quarter 2024 Earnings Conference Call. The press release and slides to accompany this call are available on our website at teleflex.com.

Patrick Andrew Wood:

I guess for the first one, I'm curious about OEM, another very strong quarter. There's kind of a lot of different pieces moving in there. The volume environment is very good. But equally, there's a little bit of competitive noise backwards and forwards. I'm just -- I'm curious how you see that evolving through the year.

Liam Kelly:

Patrick, thank you very much for the question. I think that OEM was definitely one of the standouts again within the quarter, but there were many standouts for Teleflex in the quarter, in my mind, a really strong quarter, a great start to the year, growing our revenues at 3.8% and growing our earnings faster than revenues at 3.9% and raising the bottom end of our earnings guide while covering some FX impact.

Liam Kelly:

No, that's a fair question, Patrick. I think that the training is going well. So we are proctoring our sales reps. We have about as we ended the first quarter, we have roughly around 40% of them trained that need to be trained in this phase. So this will be completed at the end of Q2.

Operator:

Your next question comes from the line of Jayson Bedford from Raymond James.

Thomas Powell:

Well, I wouldn't say there's anything that necessarily is pressuring over the next number of quarters other than what we already saw in the first quarter, which we've got inflationary pressures. We've got some FX, although we expect FX to improve as the quarters go on.

Jayson Bedford:

Okay. Fair enough. And then just maybe as a quick unrelated follow-up. Interventional, very strong of a tough comp Liam, you alluded to a few drivers, but just a little bit more granularity. Is this excess share gain? Is there a new product in there that's driving this growth?

Shagun Singh Chadha:

Liam, your guidance calls for about 4.25% growth in 2024 at the midpoint versus 6.5% last year and your LRP target of the low end of 6% to 7%. I know you called out some year-over-year factors to consider. But I'm just wondering what accelerates the growth profile for the company from here? How are you thinking about M&A boosting your weighted average market growth. And if you could put all this in the context of your utilization commentary, it seems like there isn't a backlog, but there is still healthy demand. That would be really helpful.

Unknown Analyst:

This is Nathan Treybeck on for Larry. Can you talk about, given the constant currency beat in Q1, what were some of the considerations for not raising the full year guide?

Unknown Analyst:

Okay. And can you talk about like the drivers of growth for Palette. Is it share gains? Is it market expansion? If you could just give some color there.

Operator:

Your next question comes from the line of Matthew O'Brien from Piper Sandler.

Thomas Powell:

Well, I would just say, first of all, we raised by $0.09 in the lower end, but $0.05 or I should say, $0.04 of that was offset by an increase in the foreign exchange rates. So again, we feel really good about the results in the first quarter. We've provided full year guidance.

Matthew O'Brien:

Okay. Fair enough. And I wanted to ask about UroLift, but I think the more pertinent questions back on Interventional, like Jason was talking about. That performance has been very strong for several quarters in a row here. You've got this focus on structural heart. It's one of the fastest growth areas in med tech. You've got Wattson coming.

Liam Kelly:

So I'll start with the last part of your question. It's definitely a focus for M&A, Matt. I've said many times that I like the cath lab as a call point. We now have a global franchise with that call point. And it is one of the key areas of focus for us when we're doing M&A. It's not the only area of focus, but it's a key area of focus.

Anthony Petrone:

And I hope everyone is doing well congrats on a strong 1Q here. Maybe a couple of questions. One, just actually focused in on the Americas. Surprised to see just regionally, Americas actually being down a touch here. And then when you sort of bridge that to some of the divisions Vascular was pretty good, OEM obviously outperformed even Interventional Urology is touch ahead of our numbers. So where specifically in the U.S., was there slippage? Was it tough comps? Or was there other stocking dynamics in the U.S.? And I'll have 1 follow-up.

Liam Kelly:

So I think that for Teleflex, we're really focused on tuck-ins and scale transactions. We have done some late-stage technologies, and we've done some investments -- early-stage investments into companies, and we'll continue to do that. We have the most important thing you need, Anthony, for M&A, which is firepower.

Operator:

[Operator Instructions] Your next question comes from the line of Mike Polark from Wolfe Research.

Liam Kelly:

Mike. Look, we have a lot of data coming out at the AUA. We have 5 different papers that are being read out and there are a number of other studies. One in particular that coming from the European group about early intervention on minimally invasive therapies and that's much better than having individuals on pharma.

And I think if I do the guidance for the full year, perhaps UroLift down 10%. And so I just want to understand:

One, for the first quarter, have I done the math correct? And you said that aligned with your internal plan, and I just want to make sure that, that's all fair; and then two, kind of the path for UroLift to be better over the course of the year. It sounds like the sales force no longer being retrained and out in the field, double bag probably is a piece of that. But anything else you might be able to offer as to kind of why we get that product line trending back up the rest of the year would be helpful.

Craig Bijou:

Liam, I know you're not going to get into the specifics on '25, but street expectations for margin expansion have come down looking at '25. So maybe if you could just talk about some of the opportunities to expand margins in '25 and how those might be lining up maybe without actually given specifics, but just kind of talking about where you could see some improvement.

Liam Kelly:

Yes. Thanks, Craig. So first of all, on the product expansion, having buttress is an important add-on to the Titan product. 60% of surgeons who do gastric sleeves use buttress. And technically, the Titan product doesn't need buttress because of the seal pressure and a very high burst pressure. But it's what they want to use.

Operator:

Your next question comes from the line of Richard Newitter from Truist Securities.

Liam Kelly:

No. They are the 2 big buckets, Sam. There's about $6 million of FX in Q2 and also there's a few million of OEM products that were originally planned to be shipped in Q2. Just bear in mind that the MSA was slightly higher in Q2, that's something just to bear in mind. And as we go through the year, you've got that dynamic of the MSA, and you also have the dynamic of Palette ramping as you go through the year. So you've hit on the 2 main impacts on Q2. $760 million, $765 million, 3.7%, and we feel good in our ability to deliver that.

Liam Kelly:

Yes, Sam. So it started very well. That's the first thing I would say. The second thing I would say, there's a lot of enthusiasm for the product. The third thing I would say, the expanding of the indications is a key strategy for us, not for this year, but in outer years to continue to grow that.

Kristen Stewart:

I just wanted to touch on the Vascular Access business that came in a little bit lighter than what I was expecting. Can you maybe just comment on the performance there in the quarter and what we should expect for the balance of the year?

Operator:

And that concludes our Q&A session for today. I would like to hand back over to Lawrence Keusch for closing remarks.

Operator:

Thank you for joining us. You may now disconnect your lines.

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. 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. Now, I will turn the call over to Mr. Lawrence Keusch, Vice President of Investor Relations and Strategy Development.

Liam 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 investors, there were 5 fewer shipping days year-over-year in the fourth quarter. The shipping day impact in the quarter was an estimated $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. 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 chain. Turning to inflation. There were elements of improvement during 2023, including sea freight 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. Now let's turn to a deeper dive into our fourth 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 5 fewer shipping days year-over-year, unless otherwise noted. Americas revenues were $450.6 million, a 1.9% decrease year-over-year, driven by Surgical and Vascular and reflective of the 5 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 and reflective of the impact of the fewer shipping days. 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 reflects the impact of the 5 fewer shipping days. 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 Interventional and Surgical slowed. Starting with Vascular Access. Revenue decreased 1.2% to $186.7 million. Along with the fewer shipping days, the year-over-year growth also reflected the impact of the previously announced Endurance catheter recall. 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 PICC business when excluding the negative impact of the Endurance recall. We continue to see opportunities for share gains in the peripheral access markets and our new product initiatives will help play a role. During the quarter, we continued to execute on our launch activities for our next-generation navigation device and new PICC stylets. Moving to Interventional. Revenue was $135.6 million, up 7.2% year-over-year. 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. Turning to Anesthesia. 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. 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 International Urology, revenue was $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 with outperformance of Barrigel. For UroLift, the office remains a challenge as we continue our efforts to stabilize this size of service. In the international markets, UroLift 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. 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 microcatheters. Fourth quarter Other revenue declined 10.2% to $68.2 million year-over-year. As previously disclosed, fourth quarter Other revenues 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. Turning to some commercial and clinical updates. 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 and issued cross-functional product sales training for selected members of our legacy UroLift 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. Barrigel is a differentiated rectal spacer that is clinically proven to significantly reduce unwanted radiation exposure. Moving to UroLift. 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 review study in the Nature Journal, Prostate Cancer and Prosthetic Diseases, that reinforces the position of the UroLift system as the goal standard in minimally invasive surgical treatment for BPH. Results suggested that within 1 year of BPH surgery, 1 in 20 patients may require retreatment regardless of whether they receive a TURP, GreenLight, Rezum or UroLift. Additionally, at 1 year, procedural complications requiring a return procedure in the outpatient setting was lowest following UroLift and highest following Rezum. The average time to the first complication was the longest for UroLift. At 5 years, retreatment was lowest for TERP and statistically similar between GreenLight and UroLift. The retreatment rate for UroLift is comparable to publish controlled trial rates, thereby underscoring the durability of the UroLift system. We continue to focus on supporting UroLift with clinical data, and note that we have 8 sponsored research abstracts that have been accepted for presentation at major urological meetings in 2024. 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. 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 FDA 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 inflated. We will initially launch with a PTCA indication, but we have completed enrollment in a vessel 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 EZ-IO business that would enable expansion of our user base, for which we expect FDA approval in 2024. We will provide more details upon launch. 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?

Liam Kelly :

Thanks, Tom. In closing, I will highlight our 3 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. 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 stable to improving macro environment provides 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.

Patrick Wood :

I guess the first one Palette, we will talk a lot about Barrigel understandably as the bulk of the business. But you obviously acquired with that a number of other urology assets that are a little bit smaller. And that combined with obviously UroLift and Barrigel, 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 like how much interest is that 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 is it you kind of now done with urology to your mind?

Patrick Wood :

And then as a quick follow-up, you've obviously got a lot of product launches moving through '24. You have things that are moving from dilutive to accretive, the inflation environment is getting a little bit better. There's 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 shock, but is that big picture why you still feel very confident in that?

Operator:

Our next question comes from the line of Jayson Bedford with Raymond James.

Thomas 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 to gross margin. What I would say is that we've got a number of headwinds, as Liam had mentioned, inflation is still higher than it had been 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 rollout in the P&L in 2024. So those are kind of a wash. In addition to the inflation headwinds, we're also experiencing a modest adverse impact from foreign exchange.

Liam Kelly :

Jason, you can definitely assume there's nothing baked into the guide. I will tell you that for UroLift, we saw a modest improvement in Q4 versus Q3. So we're monitoring that pretty closely. We still expect $66 million to $68 million for Palette. We still expect Interventional Urology will deliver approximately 7.5% revenue growth at the midpoint. The low point of our guide assumes that it will grow just a little bit above 7%. The -- and the midpoint also assumes there's no improvement on UroLift from quarter 3. And the reason we use quarter 3, it's the most recent quarter without a days impact our seasonality. 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 -- our entire guidance, I believe, is appropriately prudent, Jayson. And I think -- 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.

Shagun Singh :

I just wanted to touch on the 2024 guidance. You're calling for about 5% to 6% growth adjusted for the onetime headwind tailwinds that you called out. And I believe delivering about 1.5x EPS growth relative to sales growth. Why the conservatism, especially on the top line, given the strong exit in 2024 -- sorry, 2023? And then I have a follow-up.

Shagun Singh :

And then just on M&A, Liam, can you provide us your updated thinking there and especially how you're thinking about short-term P&L dilution relative to top line accretive M&A? And any interest in adjacencies?

Operator:

Our next question comes from the line of Matt Taylor with Jefferies.

Liam Kelly :

Yes. So I think that the low point of the year would be quarter 1, 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 1. And the reason that the quarter 1 is a little bit dampened is, as I said, there's a few tough comps in the mix there. But we would envision that once you get through to Q1, you would get back to a more normalized seasonality with quarter 4, the biggest of the year, just due to the normal seasonality and patients getting more procedures done in quarter 4, 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.

Liam Kelly :

No, 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 low point.

Larry Biegelsen :

Liam, what was price in 2023? And what are your expectations for ‘24? And I have 1 follow-up.

Larry Biegelsen :

I appreciate it. I know you just guided to 2024. I appreciate your comments about the operating margin, 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 I would imagine would come down from that $78 million and could be a nice tailwind for you? Any just high-level thoughts beyond '24.

Thomas Powell :

Sure. Well, just also talking about EPS and 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 the run rate by 2025. And then same thing with Palette, our expectation is that Palette turns to profitability by 2025. So those will be benefits. We're 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. Then with regard to interest, 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 325 basis point rate cut. So you should see an improving interest environment -- interest expense environment as we go through the year and into 2025.

Matthew O'Brien :

Just clarification upfront to make it clear for everybody on the call, 5.25% at the midpoint is the constant currency growth rate assumption, when everything is adjusted, 8.5% is the midpoint for the bottom line when everything is adjusted. I just want to make sure that's fully clear.

Matthew O'Brien :

So the Q1 guide actually was better than I was expecting because the comps are so tough, and I understand Palette is there this year, but the rest of the business would have to be doing well across Vascular, International. I don't know if there's extra selling days, but I'd 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, et cetera, but we'd just love to hear about that. And then I do have 1 quick follow-up.

Matthew O'Brien :

And then just to Larry's question on just 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 Palette or the MSAs this year, but it would seem like you're positioned for a meaningful snapback in terms of EPS growth next year. Just -- and something even in the kind of 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?

Operator:

Our next question comes from the line of Mike Polark with Wolfe Research.

Liam Kelly :

So it's more of the latter, Mike. What we discovered out 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. But it's the latter to your question.

Thomas Powell :

It's a non-cash item. So we essentially are exiting 1 of our pension plans where we fully funded and offered pensioners a buyout option and then we'll -- whoever it didn't take the buyout option, we'll go and put an annuity in place for them. So essentially, we're just exiting a pension plan, but it's non-cash.

Lin Zhang :

It's Lin Zhang on for Mike. So I'm just wondering what assumptions around the [inaudible] growth incorporated in the guide? And also appreciate you share your expectation of the Palette that’s the path [inaudible].

Lin Zhang :

Your assumption around direct growth you've incorporated in the guide.

Lin Zhang :

And also another 1 for me. So you just shared your expectation of slice that back in OEM growth. So how should we think about the size of the step back? Should we still think consider OEM as like low double-digit grower?

Operator:

Our next question comes from the line of Anthony Petrone with Mizuho Securities.

Liam Kelly :

Yes. 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 it. 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. And we -- as you know, Anthony, we really like that space.

Liam Kelly :

Yes. So there are a series of provinces coming together and running volume-based procurement tenders. I think we're gone through the phase of the 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, 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. Our main businesses there are in our coated 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, 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.

Craig Bijou :

I want to start with the high-growth product bucket. And what was growth in '23? How 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 considering the margin impact?

Craig Bijou :

And if I can ask a follow-up on UroLift. The office business you highlighted that's still seeing some challenges in the U.S. What about the other sites of service in the U.S.? And then on Japan, just how do we think about the launch there in the longer-term or medium-term expectations for growth?

Operator:

Our next question comes from the line of Kristen Stewart with C.L. King.

Liam Kelly :

Yes, Kristen. So it's 1 of the areas that will take a modest step back. And as I said earlier, it will 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 because you have these ebbs and flows. And they'll have a tough comp. MANTA 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, they're back in Q4. But notwithstanding that we continue to execute well there. And the lifeblood of this business unit is new products. We have a really good cadence of new products. We launched the GuideLiner Coast 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 sales force. So I'm really happy with how the Interventional business is going well. Obviously, the intraosseous on control is within there. That continues to perform very well, had a really solid quarter 4 as well to help drive the growth.

Liam Kelly :

Yes, that's what I was saying, Kristen. I mean, I think we could get there and we have a potential path to get there. Will we get there by the end of '25? It's tougher to get there by the end of '25. We really get there. It just might take a wee bit longer. And again, definitely solid path to the revenue and the 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.

Mike Matson :

Just wanted to ask on Palette with Barrigel. I know 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 trials to get those indications?

Mike Matson :

And then just on you are within China, I know you talked about the size there, and obviously, there's a ton of people there. But can you just talk about kind of the competitive landscape? And then 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 for these BPH treatments there?

Operator:

I would now like to turn the call over to Mr. Lawrence Keusch for closing remarks.

Operator:

That is all the time we have for questions this morning. Our conference for today is now concluded. Thank you all for your participation.

Operator:

Good morning, ladies and gentlemen, and welcome to the Teleflex Third Quarter 2023 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. At the end of the company’s 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 Mr. Lawrence Keusch, Vice President of Investor Relations and Strategy Development. Please go ahead.

Liam Kelly:

Thank you, Larry; and good morning, everyone. It is a pleasure to speak with you today. On this morning’s call, we will discuss the third quarter results, our acquisition of Palette Life Sciences, and our financial guidance for 2023. Turning to the third quarter. Teleflex revenues were $746.4 million, a year-over-year increase of 8.7% and an increase of 7.4% on a constant currency basis. Third quarter adjusted earnings per share was $3.64, an 11.3% increase year-over-year. During the third quarter, we experienced stable to improving macro and healthcare utilization trends. In the acute care setting, which is our primary market, utilization during the third quarter returned towards normal seasonality. From a macro perspective, we witnessed a stable to improving environment for material inflation and supply chain in the third quarter on a sequential basis. These dynamics are generally tracking to our expectations for the year. Now, let’s turn to a deeper dive into our third quarter revenue results. I will begin with a review of our geographic segment revenues for the third quarter. All growth rates that I refer to are on a constant currency basis, unless otherwise noted. Americas revenues were $428.2 million, which represents 5.5% growth year-over-year. In particular, we saw strong performance in our Surgical and Interventional businesses. EMEA revenues of $142.7 million, increased 4% year-over-year. During the quarter, Interventional led the growth, while we saw balanced performance across our other businesses. Now, turning to Asia. Revenues were $93.2 million, increasing 17.1% year-over-year. During the third quarter, we saw stable demand across the majority of the region. Revenues in China increased in excess of 20% year-over-year and reflected solid underlying demand. Given our specific portfolio of products, we have not seen any impact on our business in China as a result of government-initiated anticorruption measures. Let’s now move to the discussion of our third quarter revenues by global product category. Commentary on global product category growth for the third quarter would also be on a constant currency basis. Starting with Vascular Access. Revenue increased 0.3% to $169.9 million. As expected, the quarter was negatively impacted by the previously announced Endurance catheter recall. Initial launch activities for our next-generation Arrow VPS Rhythm DLX navigation device and the new Arrow PICC pre-loaded with the NaviCurve Stylet continue to generate a positive customer response and system placements. And we drove double-digit growth in our underlying PICC business. Moving to Interventional Access. Revenue was $134.1 million, up 22.4% year-over-year. In the quarter, we continue to drive our complex PCI and emerging structural heart portfolios. Balloon pumps, access enclosure, uncontrolled and MANTA were meaningful contributors to growth in the quarter. Turning to Anesthesia. Revenue declined 1.3% year-over-year to $97.6 million. As expected, the previously announced ET Tube recall negatively impacted year-over-year growth. In our Surgical business, revenue was $112.8 million, up 20.6% year-over-year. Among our larger franchises, ligation, staplers and instruments were notable drivers of growth. For 2023, we now expect Standard Bariatrics’ Titan Stapler revenues in the teens. For Interventional Urology, revenue was $73.6 million, representing a decrease of 6.8% year-over-year. In the U.S., the office remains the biggest challenge for UroLift. We are continuing our efforts to stabilize this side of service. In the international markets, we remain focused on driving UroLift revenue in Japan, while in China our initial launch activities have tracked to plan. OEM had another solid quarter with revenues increasing 14% year-over-year to $82.3 million. The strength in the quarter was broad-based across our portfolio, including microcatheters. Third quarter Other revenue increased 5.3% to $76.1 million year-over-year. As it relates to the Other revenues, we have been informed by Medline that they are now in a position to exit the MSA earlier in 2023 than previously anticipated. We now expect the MSA to cease earlier in December rather than December 31st. Tom will give an update on the financial impact later in the call. That completes my comments on the third quarter revenue performance. Turning to some other business updates. On October 10th, we announced the close of the acquisition of privately held Palette Life Sciences for an upfront cash payment of $600 million at closing and up to an additional $50 million upon the achievement of certain commercial milestones. Palette’s product portfolio, particularly Barrigel, will complement the UroLift system, covering the top two diseases within urology care, BPH and prostate cancer. Barrigel is a differentiated rectal spacer. The product is easily sculpted when placed between the prostate and rectum and allows the physician to achieve predictable protection of healthy rectal tissue prior to radiation therapy. There is a large and growing global market for rectal spacers. The American Cancer Society estimates that there will be 288,000 new cases of prostate cancer in the U.S. with the incidents growing 3% a year. In addition, the increasing use of hypofractionation radiation therapy is driving demand for rectal spaces to protect healthy tissue. From a strategic perspective, the addition of Palette’s portfolio complements our strong presence in the treatment of benign prostate enlargement and helps to expand the clinical landscape of our interventional urology business. Of note, urologists perform the majority of rectal space replacements, which will leverage our existing call point. We have a broad and established urology sales organization, which will be augmented by Palette’s clinical expertise in the use of rectal spacing for radiation therapy in prostate cancer treatment. The acquisition will also enable Teleflex to engage with other specialists in areas including radiation oncology, female urology and pediatric urology. We will implement strong peer-to-peer education, a patient awareness focus and leverage best practices. We also expect interest in rectal spaces to provide opportunities to cross-sell UroLift, although such synergies have not been included in our acquisition model. Finally, Barrigel has established brand success, which allows Teleflex to effectively invest in and grow within a significant new market. From a financial perspective, we expect the acquisition to be immediately accretive to revenue growth and adjusted gross margin and enhance our adjusted operating margin in the near term. Moving to the topic of GLP-1 drugs, which has been an investor focus over the past couple of quarters. We continue to evaluate clinical data and monitor the usage of GLP-1s to assess potential exposure for Teleflex. We have reviewed the markets that we serve. And, at this time, we do not expect GLP-1 to have a significant direct impact on Teleflex’s diversified product portfolio. Although our largest exposure is Standard Bariatrics with the Titan Stapler, revenues for this product are expected to account for less than 1% of Teleflex’s overall revenue in 2023. Over the past two quarters, we have seen an impact on sleeve gastrectomy volumes from the interest in GLP-1s. It is important to note that while the SELECT trial showed a 20% reduction in major adverse cardiac events over five years, a recent study from the Cleveland Clinic, which was presented at the American Society for Metabolic and Bariatric Surgery 2023 Annual Scientific Meeting showed that bariatric surgery has been associated with a 42% lower risk of major adverse cardiac events. While we continue to expect some softness to bariatric surgery volumes, we believe we will offset this due to our focus on capturing market share. We remain active in gaining back approvals and training surgeons during the quarter. We’ve also done a deep dive into our interventional business to assess the possible impact of GLP-1s in light of the results in the SELECT study, which showed an absolute reduction in the rate of major adverse cardiac events of 1.6% from approximately 8% to 6.4% over five years. When considering the types of events defined in MACE for the study and the follow-up period, the reduction in these events on an annual basis is measured in the tens of basis points. So, actually, a relatively small impact. In addition, when considering that GLP-1 patients could live longer, it may only serve to delay cardiac events. Also, demographics remain a powerful driver with global populations aging. Accordingly, we do not expect GLP-1s to have a significant impact on our Interventional business. More broadly, we sell other surgical products to bariatric surgeons, including metal ligation clips and closure devices. But the revenue associated with these projects in this surgical specialty is immaterial to Teleflex. Indeed, the vast majority of our surgical products are utilized in general, cardiac, urology and gynecological surgeries and are not expected to be significantly impacted by GLP-1 usage. Teleflex also sells hemodialysis catheters through our vascular and interventional business units. In total, hemodialysis catheter sales in North America account for less than 1% of Teleflex revenues, with the majority utilized for the treatment of acute kidney injury, or AKI, which is not expected to be impacted by GLP-1 use. It is estimated that AKI develops in up to 67% of patients admitted to the intensive care unit with the vast majority not associated with chronic kidney disease. Common causes of AKI in hospitalized patients include severe infection, low blood pressure and blockages of the renal tract, and it is often reversible. Between the businesses mentioned as well as assumptions for other discrete product categories, total sales for products that have potential direct exposure to increased use of GLP-1 drugs is approximately 1% to 2% of Teleflex revenues. That said, the potential impact should be less than that as the use of GLP-1 drugs may reduce some usage but would be unlikely to completely eliminate the need for our products exposed. Our highly diversified product portfolio is primarily focused on critical carrier procedures. And, as a result, we estimate that over 98% of Teleflex revenues should not be directly impacted as a result of increased usage of GLP-1 drugs. We will continue to evaluate clinical data and monitor the usage of GLP-1s to assess potential exposure to Teleflex moving forward. Moving to an update on our Interventional Access business. We are pleased to share that we are in the final stages of completion for the commercial launch of Wattson Temporary Pacing guidewire. Wattson is a unique bipolar guidewire used specifically for TAVR and BAV procedures and engineers to help reduce the risk of ventricular perforation while providing confidence in capture during rapid pacing. As a dual delivery guidewire and pacing wire, Wattson will complement our expanding structure and heart portfolio, which already includes demand in large foreclosure device, and the Langston Dual Lumen for contrast delivery and pressure measurement. We are building momentum with a focus on complex PCI in structural heart. Of note, we continue to drive our innovation engine, and we’ll be launching a number of new products over the coming years. That completes my prepared remarks. Now, I would like to turn the call over to Tom for a more detailed review of our third quarter financial results. Tom?

Liam Kelly:

Thank you, Tom. In closing, I will highlight our three key takeaways from the third quarter of 2023. First, our diversified portfolio and global footprint drove durable growth in the third quarter. Our execution remains strong. We are launching new products, and our margins remain healthy. Second, the strong third quarter performance and stable to improving macro environment keeps us well positioned to deliver on our updated financial guidance for 2023. As we look to close out the year, we are positioned for better than 6% constant currency growth under our revised 2023 guidance. Third, we will continue to focus on our strategy to drive durable growth. We will invest in organic growth opportunities and drive innovation, expand our margins and execute on our disciplined capital allocation strategy to enhance long-term value creation. We are excited about the close of the Palette acquisition. We believe that the acquisition will be a meaningful contributor to our growth in the coming years, be immediately accretive to adjusted gross margin and will enhance our adjusted operating margin in the near term. That concludes my prepared remarks. Now, I would like to turn the call back to the operator for Q&A.

Patrick Wood:

Amazing. Thank you so much for taking the question. I guess on the Interventional sort of things, I’m curious and maybe to some degree on Surgical. A, do you guys see any sort of a stocking benefit in the quarter, because it’s very strong numbers? And, B, was there any kind of benefit? Or are you seeing any kind of benefits? One of your peers obviously has a bit of a recall going on their side of the business on the balloon market. So, I’m just curious if you had any business doing a little bit better there? Thanks.

Patrick Wood:

Super clear. And thanks as well for the thoughtful GLP-1 commentary. That was really helpful.

Operator:

Your next question comes from the line of Jayson Bedford with Raymond James. Your line is open.

Liam Kelly:

So, are you talking about revenue, Jayson?

Liam Kelly:

Yes. So if you added both of the recalls together, you would be looking in the quarter of a revenue impact of in or around that $5-ish million, Jayson, would be what it would be. If I think of the gross margin of both of the products impacted, you’re probably looking at just modestly below company average dropping through something around there. So, just less than 60% gross margin dropping through. So, you could figure out the EPS impact on that, I would say. You would agree, Tom?

Liam Kelly:

That’s fair.

Jayson Bedford:

Okay. And then just more on UroLift. I know, it’s only been a month, but, Liam, are you seeing any cross-selling opportunities here between Palette and UroLift?

Operator:

Your next question comes from the line of Shagun Singh with RBC. Your line is open.

Liam Kelly:

No. That’s okay, Shagun, and thank you again for the question. So, I’ll go through a few pieces of it. So, our updated guidance is 6.4% to 6.6%. If you look at that on a constant currency basis, that’s 0.4% to 1.2%. Then, if you take into account the billing days that as you would have heard in Tom’s remarks, is $53 million or around 7%, that is an underlying growth of 7.4% to 8.1%. Then as you also heard from Tom, we’ve added in the Palette that closed earlier but also the MSA that leaves earlier. So, the MSA is approximately $4 million, and that is slightly shy of half of what we bring in from the Palette acquisition. So that’s how I would look at it. So, I would say that it’s not at all decelerating. If you take in today’s the account, the days – the lower end of our guidance into the Q4 would employ 7.4% to 7.4%, and the upper end would obviously show some acceleration. And, I think, as I said in my opening, that is truly, Shagun, a reflection of our performance through three quarters and our enthusiasm of what we see in front of us for the fourth quarter, I think, we’ve executed pretty well through three quarters. This is the third quarter in a row, we’ve been in a position to call up revenue. And I think we have a significant step up from the beginning of the year, and I just like to throw out one more number. At the beginning of the year, the low end of our guidance range was 4.75%. As we go now into the fourth quarter, the low end of our guidance range of 6.4%, a significant uptick.

Thomas Powell:

Well, on the margin, what’s driving it is, largely, we’re seeing favorable results in pricing, mix and some manufacturing-related variances in the third quarter. As expected, inflation improves in the third quarter, both sequentially and year-over-year. Foreign exchange was a bit of a headwind in the quarter relatively – and, candidly, if you go back in time, it was actually a benefit earlier in the year has shifted to a headwind of sorts. So, those are some of the drivers that we saw in the third quarter, and we see continued improvement and stabilization in the macro environment, if you will, with regards to inflation and logistics costs and timing that we expect to play through into the fourth quarter as well. And then as it relates to margins for next year, we’re still working through our annual planning process and really aren’t in a position today to be providing guidance for next year at this point.

Unidentified Analyst:

Hi. This is [Elaine] [ph] on for Rich. So, first question, I recall, last quarter, you kind of pinned on longer VAC Committee approval for Titan. Just wondering if it’s improving there? Or, like, any color you can provide on the trend there? Thanks.

Unidentified Analyst:

Great. That’s very helpful. Thank you. Also, on OEM, it appeared that it’s strong. So, do you have the confidence in this trend going into 2024? Thank you.

Unidentified Analyst:

Thank you.

Mike Sarcone:

Good morning. This is Mike Sarcone on for Matt today. Thanks for taking the questions.

Mike Sarcone:

Hello. Just a follow-up on Standard Bariatrics, and thanks for all your commentary on the GLP-1 impact. Do you think you can give a little more color on the reduction you’re seeing in sleeve gastrectomy volumes? Any quantification would be helpful. And then just given that, what kind of share gain do you expect you need to at least offset the reduction versus your prior expectations for the volumes?

Mike Sarcone:

Great. Thanks, Liam. We’re on board with you in that kind of 10 to 20 bps per year impact. And just – my second question is just on the ASP pricing that you’re taking. Is it possible to quantify the level of price you’re taking and how sustainable that is or your thoughts about your ability to take price in 2024 and beyond?

Operator:

Your next question comes from the line of Larry Biegelsen with Wells Fargo. Your line is open.

Liam Kelly:

So, I’ll cover the M&A first, and then I’ll ask Tom to cover the tax question that you had, Vik. So, on the M&A, as we said in our prepared remarks, pro forma, we’re at 2.1 times levered. So, we have lots of firepower. Depending on what EBITDA the asset would bring, that would put you up towards the $2 billion mark of firepower available to Teleflex as we sit here today. Regarding the interest rate environment, interest rates were high at the time when we bought Palette, we’re still able to get to our internal cost of capital by year five. We still found a really attractive asset. We still found an asset that is going to continue the transformation of Teleflex. It’s going to augment our topline growth. It’s got really attractive margins as we’ve been through previously. And if you could find another Palette in the morning, I wouldn’t blink twice. I would be all in to execute on that. As I sit here today, we’re talking to more than a handful of companies. They range from anything from $100 million potential price to over $1 billion in potential purchase price. And I think the environment is still pretty attractive to companies like Teleflex who have the balance sheet to execute. Obviously, interest rates, we’ll remain disciplined. We’ve always remained disciplined through every cycle. When interest rates were low, we were disciplined; when interest rates are higher, we’re going to be disciplined. Nothing will change in that regard. And I’ll ask Tom to answer the question on the tax, if you don’t mind, Tom.

Operator:

Your next question comes from the line of George Sellers with Stephens Inc. Your line is open.

Liam Kelly:

Thanks, George, and good morning. So, we’re not ignoring the radiation oncologists, let me assure you of that. We have actually a dedicated team that are exclusively dedicated to the training of the rad onc as we go through this process. It’s around 70 plus percent of the procedures are done by the urologist as compared to the rad oncs, but we’re addressing both sides of service. I think, what’s important about Barrage is the uniqueness of the product, George. It’s sculptable, which means that you can actually then mold the product around the area you’re trying to protect and the most – for prostate you’re trying to protect the anus, so you’re able to mold it around the prostate to make sure that you’re getting protectability. There is no injectable time constraints. It’s highly visible. It’s a one-step assembly. It’s – you don’t have to do any hydrodissection. If you go into the wrong area, unfortunately, it happens from time to time with some of the products on the market, it’s reversible, which is unique to this particular product. And I think all of that makes it compelling. You’re right, and as I said earlier, it’s only 20% of our current UroLift customers that use Barrigel. So, for us, it’s really about expanding the market and growing the market rather than taking share. I think, this is a unique opportunity for Teleflex given our footprint in that area. The sales process, once a urologist or a rad onc comes forward, there’s a little bit of anatomy training, and then they’re proctored and helped over four or five cases. And after that point, then they would be deemed to be fully trained and qualified to place the product.

Liam Kelly:

So, it’s a $600 million market for internal and external split about half of each. We just got a new cardiac indication that expanded the market by about $50 million, George. So that takes us up to around $650 million market. MilTac in general is a key customer of ours. Because of some of the budgetary constraints, it has kind of been under our expectations through the first three quarters of the year. I would expect that that might rectify itself now though unfortunately, because of what’s going on in different parts of the world. So, we would imagine that that will get back to our original plan in the fourth quarter, and that’s anticipated within our guidance that we just outlined.

Liam Kelly:

All right, George.

Anthony Petrone:

Thanks for getting us in here. Maybe, I’ll stick with Barrigel and actually ask also about pipeline as well. I know, you mentioned at the time of the transaction, $0.15 in 2023 and $0.35. I guess when we stack it up from a growth and margin perspective, is there anything you can share just on how Barrigel is growing? I know they have two other products in there as well, Deflux and Solesta in pediatric indications. What is the overall growth profile of the portfolio? And is it margin accretive to the overall corporate average? And then I’ll have a couple of follow-ups.

Anthony Petrone:

Okay. And then the follow-up would be, maybe I’ll go back to Titan and GLP-1. Of course, out of the gate here, a lot of folks are talking about headwinds to bariatrics in the near term, but there is chatter from folks in the space that when you think of the contraindicated patients at the very upper end of the BMI scale, some of those may be able to come into the fold as they take Ozempic or Mounjaro, et cetera, GLP-1. So, do you think as this cycle plays out that you could potentially see a tailwind, although, of course, it will take some time? What are your views on the potential for GLP-1 to actually expand the market in bariatrics? Thanks.

Operator:

Your next question comes from the line of Matthew O’Brien with Piper Sandler. Your line is open.

Liam Kelly:

So, from the – just to be clear, the MSA, the manufacturing service agreement?

Liam Kelly:

Okay. So, as Tom said in his prepared remarks, the early close will lose about $4 million in revenue. From an EPS impact, it’s around $0.01 or thereabout.

Liam Kelly:

Minimal, yes. So, it’s around – it’s fairly minimal from an EPS perspective, this year, and most investors will know that the MSA has now gone completely, and there was around $70 million in revenue in a full year and around $0.25 in earnings in a full year. So, that will help individuals with their modeling. So, I think the greater impact to earnings per share in this year is, obviously, the early close of Palette, which costs around $0.10. And then FX has cost us, Tom, I think another approximately $0.05 or thereabout?

Liam Kelly:

Okay.

Operator:

Your next question comes from the line of Craig Bijou with Bank of America Securities. Your line is open.

Liam Kelly:

Yes. So, MANTA is obviously launching in many jurisdictions and geographies, right now. We saw some nice strength as we’ve gone through the three quarters in Asia. And we believe it will be a multiyear driver for us, Craig. It’s a unique product. It’s – I don’t think we’re gaining honestly from any type of surge – any type of procedural rebound, because we’re still penetrating the market, still bringing it to new customers. And the uniqueness of the product, it still gives us a significant benefit and it will be a multiyear driver for us. We’re absolutely – within the high-growth portfolio, if you look at it, you’ve got some really nice products within their, you’ve got MANTA, you’ve got the Vidacare portfolio, you got our PICCs, you got Z-Medica. You’ve got Titan that had a little bump along the road. You got UroLift that had a bump, but now you’ve got Barrigel and the whole Palette and interventional urology within that high growth. So, feel really good about MANTA. And I suppose you’re right. It doesn’t get as much attention as it used to when it started its journey.

Operator:

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. You may now disconnect.

Operator:

Good morning, ladies and gentlemen, and welcome to the Teleflex's Second Quarter 2023 Earnings Conference Call. [Operator Instructions]. And now I will turn the call over to Mr. Lawrence Keusch, Vice President of Investor Relations and Strategy Development.

Liam Kelly:

Thank you, Larry, and good morning, everyone. It is a pleasure to speak with you today. On this morning's call, we will discuss the second quarter 2023 results, our pending acquisition of Palette Life Sciences and our financial guidance for 2023. Turning to the second quarter, Teleflex revenues were $743.3 million, a year-over-year increase of 5.5% on a reported basis and an increase of 5.9% on a constant currency basis. Second quarter adjusted earnings per share was $3.41, a 0.6% increase year-over-year. We saw stable utilization in the acute care setting in our global markets. The balanced performance in the quarter continues to demonstrate the benefits of Teleflex's diversified product portfolio and broad geographic footprint. From a macro perspective, we continue to see sequential stabilizations with respect to material inflation, and we'll continue to monitor trends during the second half of 2023. Our supply chain remained stable in the second quarter, although we are still not yet at normal levels. As expected, we witnessed a continued stabilization in hospital staffing. This was evident in our second quarter revenue growth as most Teleflex products are exposed to the hospital setting. Conversely, we are still experiencing geographic pockets that are encountering more persistent staffing disruption in the ASC and office side of service, but note that bottlenecks are seeing some easing. Now let's turn to a deeper dive into our second quarter revenue results. I will begin with a review of our geographic segment revenues for the second quarter. All growth rates that are referred to are on a constant currency basis unless otherwise noted. Americas revenues were $424.7 million, which represents 3% growth year-over-year. In particular, we saw strong performances in our Vascular, Interventional and Surgical businesses. EMEA revenues of $147.8 million increased 0.7% year-over-year. During the quarter, we saw strength in our vascular and urology drainage businesses. Turning to Asia. Revenues were $86.7 million, increasing 19.1% year-over-year. During the second quarter, we saw stable demand across the region, including growth in excess of 20% in China. From a product perspectives, we saw a strong double-digit growth in Interventional Access and Interventional Urology in the region. Let's now move to a discussion on our second quarter revenues by global product categories. Commentary on global product category growth for the second quarter will also be on a constant currency basis. Starting with Vascular Access. Revenue increased 6.6% to $173.8 million. We executed well during the second quarter. Initial launch activities for our next-generation Arrow VPS Rhythm DLX navigation device and the new Arrow PICC pre-loaded with the NaviCurve Stylet have generated a positive customer response. Over the long term, we remain positioned for dependable growth with category leadership in Central Venous Catheters and midlines, anticipated share gains with our novel coated PICC portfolio and new product introductions. Moving to Interventional Access. Revenue was $124.8 million, up 9.6% year-over-year. Procedure volumes remained stable in the quarter, and we continue to benefit from our diversified portfolio. Balloon pumps, right heart catheters and access and closure all grew at double-digit rates. MANTA continues on a trajectory for strong double-digit growth in 2023. Turning to Anesthesia. Revenue was $100.8 million, down 3.6% year-over-year. A tough year-over-year comp due to timing of military orders in the prior year period impacted results. In our Surgical business, revenue was $106 million, up 7.7% year-over-year. In the quarter, we advanced our integration of Standard Bariatrics and training of new surgeons on the use of the Titan SGS Stapler in sleeve gastrorectomy procedures is accelerating. For Interventional Urology, revenue was $77.8 million, representing a decrease of 2.3% year-over-year. Once again, we witnessed year-over-year growth for UroLift in the hospital setting, but the office side of service remains challenging. The overseas launch activities continue to progress in line with expectations with Japan UroLift usage growing in line with our expectations. OEM revenues increased 19.8% year-over-year to $84.1 million. The strength in the quarter was broad-based across our portfolio, with the double-digit growth in all of our product categories, including micro catheters. We continue to have good visibility into the business and see solid demand dynamics throughout 2023. Second quarter other revenue increased 4.8% and to $76 million year-over-year. We continue to expect all MSA revenues to cease at the end of 2023. That completes my comments on the second quarter revenue performance. Turning to some commercial updates. On July 26, we announced a definitive agreement to acquire privately held Palette Life Sciences for an upfront cash payment of $600 million at closing and up to an additional $50 million on the achievement of certain commercial milestones. The acquisition will expand Teleflex Interventional Urology to include a portfolio of fast-growing Non-Animal Stabilized Hyaluronic Acid or NASHA spacer and tissue bulking products that improve patient outcomes in urology, urogynecology disorders, colorectal conditions and radiation oncology procedures. Palette is estimated to generate net sales of approximately $56 million on a stand-alone basis in fiscal year 2023. We believe Palette will contribute meaningfully to our growth in the coming years with revenue growth in the high-teens to low-20% range year-over-year in 2024. The strong growth profile for Palette gives us further confidence in our ability to deliver on our 2023 to 2025 LRP growth objectives. The Barrigel rectal spacer is the flagship product for Palette and generates the majority of the company's revenue. Barrigel is a NASHA spacer with a compelling value proposition, driven by a reduction in radiation delivered to the rectum during prostate cancer radiation therapy, while increasing tumor control and patient quality of life. In addition, the Palette Life Sciences portfolio also includes Deflux and Solesta, which are NASHA-based tissue bulking agents designed to treat pediatric vesicoureteral reflux and fecal incontinence, respectively. The acquisition of Palette Life Sciences will allow us to incorporate this exciting high-growth and high-margin technology into our Interventional Urology business units along with our well-established global call points. We are focused on bringing urologists and other specialists more innovative technologies that can positively impact patient care. The acquisition of Palette is attractive for 3 primary reasons. First, Barrigel is a differentiated rectal spacer with a strong growth profile following FDA clearance in May of 2022 and represents a highly complementary product to our existing Interventional Urology business. In recent years, the treatment of prostate cancer has increasingly utilized hypofractionated radiation therapy, which uses higher doses of radiation in fewer treatments. In order to reduce radiation associated complications, usage of temporary rectal spacers has grown as a way to protect healthy rectal tissue from harmful radiation. Barrigel has grown by expanding market adoption, since its launch due to its unique product features. Unlike other technologies, Barrigel is easily sculpted when placed between the prostates and rectum, providing comprehensive protection from radiation therapy. The culpability allows the physician to achieve predictable protection of healthy rectal tissue prior to radiation therapy. Barrigel is also highly visible on transrectal ultrasound, which aids accurate placement is biodegradable and offers an one-step assembly of the delivery device in all sites of service. Second, there is a large and growing global market for rectal spacers. The American Cancer Society estimates that there will be 288,000 new cases of prostate cancer in the United States with the incidents growing 3% a year. In addition, the increasing use of hypofractionated radiation therapy is driving demand for rectal spacers to protect healthy tissue. Barrigel was cleared for marketing in the United States and Australia and is CE Marked. We expect to gain market clearance in additional geographies over the coming years. Third, the acquisition of Palette is reflective of our disciplined capital deployment strategy. From a strategic perspective, the addition that Palette's NASHA portfolio complements our strong presence in the treatment of benign prostate enlargement. Of note, urologists performed the majority of rectal space replacements, which will leverage our broad and established sales organization. Today, 97% of physicians using UroLift also treat prostate cancer. In addition, the treatment of prostate cancer is not deferrable. So we are adding another durable growth driver to our portfolio. We also expect interest in rectal spacers to provide opportunities to cross-sell UroLift. From a financial point of view, the transaction is consistent with our strategy to acquire assets that are accretive to Teleflex's growth rate and margins. Palette's adjusted gross margin will be accretive to both the corporate average and the Interventional Urology business unit. In addition, we expect Palette operating margin to enhance the corporate average in the near term. Finally, post close, our balance sheet will remain sound, allowing us to continue to execute on our long-term capital deployment strategy. The acquisition is subject to customary closing conditions, including receipts of certain regulatory approvals and is expected to be completed in the fourth quarter of 2023. We look forward to welcoming the Palette employees to Teleflex. Turning to an update on the Titan SGS stapler. We continue to execute on our commercial strategy for the Titan SGS power stapling device for use in sleeve gastrorectomy procedures to treat obesity. Feedback for the Titan stapler remains positive, and we remain confident in the value proposition for the Titan SGS stapler. The 23-centimeter continues staple line enables ideal pouch creation and no overlapping staples that are common with traditional powered staplers. We are optimistic that over time, we will be able to generate data that shows a reduction in complications and meaningful time savings per procedure. Despite the continued positive feedback from the field, we now expect Titan stapler revenues to be in the high-teens for 2023, which is lower than what our original guidance for 2023 had assumed. Value Analysis Committee clearance has taken longer than we anticipated, which has slowed our ability to train surgeons. We have learned from the early experience and have refined our strategies for gaining VAC approval. Our efforts are taking hold with more than 2x the number of surgeons trained in the second quarter of 2023 versus the first quarter of the year. Moreover, we have a strong pipeline of surgeons in queue to be proctored. So we expect further improvement through the year. We continue to monitor the usage of GLP-1 drugs in treating obesity. Based on our market checks, it is our sense that GLP-1s had some impact on bariatric surgery volumes in the second quarter. It remains too early to assess the long-term impact on the market given questions on reimbursement and safety profile. In the interim, we remain acutely focused on penetrating a large sleeve gasterectomy market that is in excess of 120,000 procedures in the United States given the very early stages of the Titan stapler launch. We remain confident that the Titan stapler will be a meaningful contributor to our high-growth portfolio through the LRP period. That completes my prepared remarks. Now I would like to turn the call over to Tom for a more detailed review of our second quarter financial results. Tom?

Liam Kelly:

Thanks, Tom. In closing, I will highlight our 3 key takeaways from the second quarter of 2023. First, our diversified portfolio and global footprint drove durable growth in the second quarter. Our execution remains strong. We are launching new products and our margins remain healthy. Second, the solid second quarter performance keeps us well positioned to deliver on our financial guidance for 2023. As we look into the second half of 2023, we anticipate stable to improving macro conditions. Third, we will continue to focus on our strategy to drive durable growth. We will invest in organic growth opportunities and drive innovation, expand our margins and execute on our disciplined capital allocation strategy to enhance long-term value creation. We are excited about the acquisition of Palette Life Sciences. We believe that the acquisition will be a meaningful contributor to our growth in the coming years, be immediately accretive to gross margins and will enhance our adjusted operating margins in the near term. In turn, we have further confidence in our ability to deliver on our 2023 to 2025 LRP revenue objectives. That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q&A.

Shagun Chadha:

So by our math, the acquisition would add about 50 basis points to overall Teleflex growth and 400 basis points to Interventional Urology segment. Just is that in the ballpark? And does this help offset some of the weakness in UroLift? Or is your 8% to 9% LRP still intact?

Shagun Chadha:

And just as a follow-up on UroLift, can you just elaborate on trends you're seeing? I know that the patient volume comps were a little easier this quarter. But just on a comp-adjusted basis, can you elaborate on trends you are seeing?

Operator:

Our next question comes from Jayson Bedford of Raymond James.

Liam Kelly:

Yes, Jayson. I mean, obviously, our initial expectation at the low end was $30 million. It's now in the high-teens. We still expect Titan to be a significant contributor to the LRP. The pushback as we go through the VAC committees and the VAC committees have the knock-on effect of having an impact on the proctoring. Now as I also said in my prepared remarks, we doubled the number of surgeons we proctored from Q1 to Q2, so that's encouraging. It's just time, Jayson, is the biggest issue. We would have thought that this product because it's functioning exceptionally well. That's what's very encouraging. The product is doing exactly what it's supposed to do. I think what's also important is that it's a very, very big end market, $300 million. So once we get through the value analysis committees, the product gets adopted and it's going pretty well. It's just taking us longer than we thought. It's early in the ramp. It's a big market. We have a path forward. We know what we need to do. It's just taking us longer to get there as we go through that adoption curve. And I think that it's also a -- having the buttress material for the entire year 2024 will be an important factor for us. Technically, our product doesn't need buttress because it's a complete line of staples. But 60% of Bariatric surgeons use buttress when they do a gastric sleeve and it is the standard of care. And a surgeon will tell you, I use buttress because I want to sleep at night. And it's just a standard of care. And I think having that in 2024 will also help get us through. But it's simply time, Jayson. There's no major pushback. It's not a pricing issue. It's not a product performance issue. We've got the clinical data that we need. So we have everything that we need to get through, but it's just taking longer for these VAC committees to come together and allow us through the system.

Liam Kelly:

Yes. I think OEM has performed exceptionally well, not just this year, but over the last 2 years as well, coming in just shy of 20% stellar performance. This is a business that we have really good visibility into. There are no one-time stocking major items to answer your question directly. This is pure performance. It's taking share from other competitors in the market. It is also that acquisition that we did a number of years ago, really helping us go along, but it's really good performance by Greg and the entire team in the OEM division. And I do believe that OEM will have good solid double-digit growth this year, and I do believe that the future is good for that over the foreseeable future with the visibility we have.

Anthony Petrone:

Maybe, Liam, just to pivot to Standard Bariatrics. Just an update on traction in the quarter, expectations through the end of the year for Standard. We've been hearing obviously some noise on the GLP-1s impacting Bariatric from Intuitive. So just an update on bariatric and then I'll have a follow-up on earnings.

Anthony Petrone:

And then maybe for Tom, just on margins and the progression here, revised 26% to 26.75%. And maybe just a recap on looking out through the LRP as we look forward to '24, '25, just how we should be layering margin expansion in according to or based on what's still out there for the LRP and how we can translate that into earnings power? Now it's a little bit confounded down to the earnings line with the Palette acquisition and some of the below-the-line sort of moving parts. So how do we layer in? How do we think about margin expansion from here based on the current guidance out through the LRP? And how does that play in the earnings power now that we have an additional drivers in the nonoperating lines?

Operator:

Our next question will come from Larry Biegelsen of W. F.

Liam Kelly:

Yes, Nathan, thank you very much for the question. So we see this as a market development opportunity. If you look at our existing interventional urology customer base, only 20% of them use the Barrigel spacing technology today and 97% of them actually treat prostate cancer. So this is a market expansion opportunity for us in the domestic market within the United States. The product is approved in EMEA, and it's also approved in Australia. We will be expanding approvals into other geographies as we take this under our wing. But we definitely see this as a margin expansion opportunity. And we definitely see there's an opportunity to leverage our existing sales force and leverage that channel. We have a super global channel now into the urologist, and we believe that we can expand the market. There's other spacing technologies out there. I think between having another company talking about spacing and other company raising awareness. We believe we have a better product than anything that's out in the market today. It's sculptable. It is visible. It is easy to inject. It doesn't solidify overly quickly. It's a one-step process. it's reversible. We've had excellent clinical data. There have been zero embolisms that have been 0 device-related adverse events, and we have robust clinical data to support the product. We love the growth profile. We love the margin profile and we love the synergies within our sales force. And we're not going to build this into our model, but there is the potential that it could have also a halo effect for UroLift in expanding into urologists that previously may not have been open to trying a new technology like UroLift.

Liam Kelly:

Yes. Nathan, we're not going to get into 2024 on today's call. We're halfway through the year. We've raised our revenue guidance for the second quarter in a row. We feel really confident about where we're at as a company. We've also -- we've maintained this year's earnings per share guidance even with the $0.15 dilution that's coming from Palette. So we feel really good about where we're at, and we'll get into 2024 guidance when we get to February next year. I've already had made comments on the LRP about our belief and confidence in being able to achieve all aspects of the revenue profile with Palette within our LRP 6% and all the components within that I just laid out.

Matthew O'Brien:

Liam, just in talking about Palette a little bit here that the Barrigel product got approved in May of last year. You're saying it at least the majority of revenue total per Palette now. So I don't have the numbers, but I'm assuming it's $30 million or $40 million of revenue in a year basically that they've generated already. And then you're saying kind of in high-teens to low-20% growth for next year. I would think that just if they've been able to grow that quickly that you guys at Teleflex to be able to grow it at a similar rate. So why is high-teens, low-20% is the right number? Why isn't it 30%, 40%, 50%? I know you have to integrate it, but why wouldn't it be significantly higher than that, just given how well they did with it on their own?

Jayson Bedford:

Got it. That's understandable. I appreciate that. And then just back to UroLift, I know it's getting to be a smaller part of the overall business, but there's other areas of med tech that just have not recovered from the pandemic. I can think of women's health as one area. Is this a category that especially in the outpatient setting and the physician's office setting that is just probably structurally different from now on and let most likely will not reaccelerate? Hence, the 8% to 9% that you talked about last quarter, probably is it going to happen in the future?

Operator:

Our next question will come from Craig Bijou of Bank of America Securities.

Liam Kelly:

Yes. I mean I think -- I'll start with the first part of your question. And your assumption and your math is, I can't fault it, you're absolutely correct. But that's why I'm so confident in the 6% LRP. I'm not expecting any here or I'm not expecting anything from UroLift within the LRP right now. The international market is strong. If the domestic market recovers, it's great for investors. It's great for Teleflex, and it's great for our LRP. The margin profile is strong. So in effect, in my mind, this basically takes UroLift off the table in regards to the LRP. With regard to Standard Bariatrics, like I said earlier, it's a huge market. Once we get through the VAC committees and the proctoring of the surgeons. Our goal here is to continue with the performance of the product to continue to take our appreciated share in the bariatric sleeve market. Bariatric sleeve market isn't going away because of GLP-1s, it's going to be there forever. There is a place for this. If you talk to any surgeons, they will tell you that. So I do believe that it's going to be a meaningful contributor to the LRP for our '24 and '25 as we grow into that huge market.

Liam Kelly:

So I'll let Tom comment on the EPS. I mean, I think you've hit the 2 main ones that I think the Street needs to think about. Obviously, the MSA, the $70 million of revenue that goes away next year, then you layer in -- and that's at very low margins and has an impact on EPS of about $0.25. But then you layer in the Palette acquisition, and of course, Palette acquisition adds back in $56 million of revenue on the base year and obviously then growing at high-teens to low-20s. So that -- those are the puts and takes on the top line. And I don't -- I'm not expecting Tom to get into any real details about 2024 EPS, but I think those are the 2 main ones, Tom, aren't they?

Operator:

Our next question comes from Kristen Stewart of CL King.

Thomas Powell:

Well, it's a fair question. As we think about what's happened is that we looked at all the puts and takes of the quarter and there are end of the year. And so if you -- if you think about what we've commented on, the EPS range was really driven by adding in the incremental dilution from Palette of $0.15. And then associated with the recalls in the second quarter, we had another $0.15 of expense. The FX, as I mentioned, has improved. And as a result of both second quarter and full year expected benefit. That actually is an offset of $0.15. And then the balance is a combination of improved operating performance in the second quarter and second half. So essentially, a number of changes since our last guidance, that pretty much net out. As Liam commented, we are covering the dilution associated with the Palette acquisition and still maintaining guidance. So we're -- we're effectively raising, if you will, from that standpoint that we're covering something new. But as we continue to monitor the year, we'll look at it and reevaluate the range in the third quarter.

Unidentified Analyst:

It's Ling on for Rich. So maybe I'm wondering if you could provide some color on the trends in your high-growth portfolio, like including MANTA thermostatic devices, et cetera.?

Unidentified Analyst:

That's great. So maybe I'll follow-up on margins. Could you walk us through the cadence of gross margin operating margin throughout the year?

Unidentified Analyst:

Correct.

Thomas Powell:

Yes, absolutely. Well, I think first of all, one thing that you may want to understand is just that FX has got a pretty meaningful impact on how margins actually play out. We actually saw foreign exchange have a meaningful positive impact in the first quarter. It turned slightly negative in the second quarter as it impacts gross margin. And then the third and fourth quarter, we expect after the FX impact -- or I should say we expect the FX impact to be even greater to gross margins. So if you were to strip out the foreign exchange impact, what you'd see is a sequentially improving gross margin throughout the year with a fairly sizable improvement from the first to the second quarter and then again from the third to the fourth quarter. If you were to maintain the FX in there, what you're going to see is a gross margin that is about the same each quarter, a little bit softer in the third, a little bit stronger in the fourth as what we experienced here in the second quarter. In the second quarter, we had a couple of puts and takes. Obviously, we had the recall expense. Foreign exchange, as I mentioned, was modestly negative impact, but we also had favorable pricing and some credits from foreign countries that provided some benefit. So overall, I would say that pay attention to how FX may play out. And if you were to strip that out, you'd see sequentially improving gross margin. And it's very similar on the operating margin. If you strip out the FX impact, you would see sequentially improving op margin throughout the year. Obviously, we do have to consider FX. And as a result, what you're going to see is by a little bit softer gross margin in the third quarter and something the same or a little bit stronger in the fourth quarter as what we saw in the second.

George Sellers:

I guess switching back to Palette quickly. With the 97% of UroLift users, that are also treating prostate cancer. And I believe you said 20% already used Barrigel. Are they also already using a space or product? Or is this more of a white space opportunity?

George Sellers:

Okay. That's really helpful. Switching to the OEM segment, this continues to really perform exceptionally well. And it sounds like you've got visibility to that continuing the remainder of the year. But could you just give some additional detail on the pieces driving that outperformance? And how should we be thinking about that sustainability over the LRP?

Operator:

That is all the time that we have for questions this morning. I would like to turn the conference back to Lawrence Keusch for closing remarks.

Operator:

You may now disconnect.

Operator:

Good morning, ladies and gentlemen. Welcome to the Teleflex First Quarter 2023 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. At the end of the company's 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 Mr. Lawrence Keusch, Vice President of Investor Relations and Strategy Development.

Liam Kelly:

Thank you, Larry, and good morning, everyone. It is a pleasure to speak with you today. For the first quarter, Teleflex revenues were $710.9 million, a year-over-year increase up 10.8% on a reported basis and an increase of 13.2% on a constant currency basis. First quarter adjusted earnings per share was $3.09, a 7.3% increase year-over-year. We had a strong start to 2023 as momentum exiting last year continued into the first quarter. Even when excluding the impact of five extra shipping days in the first quarter, our underlying growth was robust at 7.1%. As a reminder to investors, a day is typically worth approximately 1% revenue growth in a quarter. For the first quarter of 2023, each extra day was in actuality slightly in excess of 1% growth. And when strung together, the five extra shipping days added approximately 6% to our constant currency growth. In the quarter, both the high-growth portfolio, excluding UroLift, and the durable core grew in the low-double-digits year-over-year, excluding the five extra shipping days in the quarter. Behind an improving procedure environment, we executed well during the quarter with all global product categories driving growth. The balanced performance in the quarter continues to demonstrate the benefit of Teleflex's diversified product portfolio and broad geographic footprint. In the quarter, we saw strong contributions from our interventional surgical and OEM product categories. From a geographic perspective, Europe was in line with expectations, while Asia remains a key growth driver. From a macro perspective, we are seeing a stabilization in inflation and supply chain as expected. Of note, we have seen some easing and supply constraints for Tyvek during the first quarter and continue to expect the situation to further improve in the second half of the year as additional industry capacity comes online. We are also seeing a continued improvement in staffing challenges in the hospital setting. This was evident in our first quarter revenue growth as the majority of Teleflex products are exposed to the hospital setting. Conversely, we are still experiencing geographic pockets that are encountering more persistent staffing disruptions in the ASC and office site of service. Now let's turn to a deeper dive into our first quarter revenue results. I will begin with a review of our geographic segment revenues for the first quarter. All growth rates that I refer to are on a constant currency basis unless otherwise noted. Americas revenues were $411.9 million, which represents 9.2% growth year-over-year. We saw growth across the majority of our businesses, including double-digit increases in interventional and surgical revenues. In addition, the results included the impact of the five extra shipping days. EMEA revenues of $143.3 million increased 10.5% year-over-year. The year-over-year growth includes the benefit of the five extra shipping days in the quarter, while the underlying performance reflects continued improvement in the year-over-year procedure volumes that fueled broad-based revenue growth across our product portfolio. Now turning to Asia. Revenues were $78.7 million, increasing 22.8% year-over-year. We saw strength across the region with all geographies posting solid growth during the first quarter. China remained a solid contributor with very high single-digit growth in the quarter. Although surgical procedure activity in China has not yet returned to normal levels following the termination of the zero-COVID policy in late 2022, we saw improvement as we progressed through the quarter. Looking forward, we would expect growth in China to accelerate during the remainder of 2023. Let's now move to a discussion on our first quarter revenues by global product category. Commentary on global product category growth for the first quarter will also be on a constant currency basis. Starting with Vascular Access. Revenue increased 9.2% to $177.7 million. The performance was solid across the portfolio, and we are now past the tough COVID comparisons experienced during 2022. As I noted earlier in the call, we saw some improvement in Tyvek supply in the first quarter and expect further availability in the second half of the year as additional manufacturing capacity for the industry comes online. Of note, our PICC portfolio returned to double-digit growth in the quarter. Over the long-term, we remain positioned for dependable growth with category leadership in central venous catheters and midline, anticipated share gains from our novel coated PICC portfolio and new product introductions. Moving to Interventional Access. Revenue was $116.9 million, up 23.3% year-over-year. We continue to benefit from our diversified portfolio and saw strength across our largest product categories, including complex catheters, balloon pumps and OnControl. MANTA continues to penetrate the large foreclosure market globally. Turning to Anesthesia. Revenue was $93.3 million, up 9.9% year-over-year. Of our larger franchises, hemostatic products, regional anesthesia, and endotracheal tubes all had strong performances in the first quarter, partly offset by LMA single-use masks. In our Surgical business, revenue was $99 million, up 14.3% year-over-year. Among our largest product categories, metal ligation clips and instrument revenue increased double digits year-over-year. In the quarter, we advanced our integration of Standard Bariatrics and trained new surgeons on the use of the Titan SGS Stapler in sleeve gastrectomy procedures. We showcased Titan at the recent Sages Medical Conference, and the surgeon feedback was overwhelmingly positive. For Interventional Urology, revenue was $75.4 million, representing an increase of 0.9% year-over-year. We witnessed growth for UroLift in the hospital setting, but the opposite of service continues to be impacted by staffing shortages. We continue to expect the U.S. end market for UroLift continue to improve as we progress through 2023. The overseas launch activity in Japan and China are progressing in line with expectations. OEM revenues increased 34.5% year-over-year to $77 million. The strength in the quarter was broad-based across our portfolio with double-digit growth in all product categories. We continue to have good visibility into the business and see solid demand dynamics throughout 2023. First quarter other revenue increased 6.4% to $71.6 million year-over-year. We continue to expect all MSA revenues to cease at the end of 2023, implying no MSA revenue in 2024. That completes my comments on the first quarter revenue performance. Turning to some commercial and clinical updates. We continue to execute in our commercial strategy for the Titan SGS powered stapling device for use in sleeve gastrectomy procedures to treat obesity. We recently announced a supply agreement with W. L. Gore & Associates to use the company's GORE, SEAMGUARD Bioabsorbable Staple line reinforcement materials in a staple line reinforcement device designed by Teleflex for use with the Titan SGS stapler. Buttress material is commonly used by surgeons to reduce leaks and bleeding and strengthen the staple line by redistributing the pressure exerted by an individual staple over a wider area as well as provide reinforcement for friable tissue. The ability to offer synthetic buttressing materials alongside the unique features of the Titan stapler should enable Teleflex to further address surgeon clinical needs and preference in the sleeve gastrectomy market. We anticipate launching the Teleflex applicator with Gore buttress materials by year-end 2023. Moving to our hemostatic product portfolio. We have received FDA 510(k) clearance for the QuikCLot Control+ for minor to moderate bleeding in cardiac procedures and bone bleeding following sternotomy. This new indication expands upon the prior indication for temporary control of internal organ space bleeding for patients displaying severe bleeding. The expanded indication follows the completion and analysis of an IDE study that examined the rate at which subjects achieve hemostasis through 10 minutes of hemostatic application and compression at the bleeding site. The study concluded that the quick cost controls plus hemostatic device was superior in achieving clinical hemostasis in cardiac surgery for mild and moderate bleeding. The expanded indications enable QuikClot Control+ utilization across a wider patient population and breath of surgical procedures and expand our global market opportunity for our portfolio of hemostatic products. We will begin promoting our new indication in the coming month. Now moving to an update on the Interventional Access business. We are excited about our building momentum for 2023 with a focus on complex PCI and structural heart. Of note, we continue to focus on driving our innovation engine, and we'll be launching a number of new products over the coming years. Augmenting our channel presence in complex PCI, we recently commenced a limited market release for the GuideLineor Coast with positive initial feedback from physician users. GuideLiner Coast builds upon our successful GuideLiner extension catheter franchise with the addition of a hydrophilic coating to improve deliverability. In addition, we will initiate a limited launch for the Triumph micro-catheter during the second quarter. The Triumph is a unique catheter design that will be supported by a chronic total occlusion clinical study which is planned to enroll patients in 2023. We also continue to advance our Ringer perfusion balloon catheter with two clinical studies currently enrolling patients. Separately, we continue to expand our structural heart presence. Our dedicated salesforce is currently selling MANTA and the Langston dual lumen catheter. Looking forward, we are actively engaged in expanding our product portfolio with the Watson, representing the next product anticipated to launch. The Waston is a unique dual delivery guidewire and pacing wire for use in TAVR procedures. Lastly, I will provide an update on our Vascular Access business. We are excited to announce that we have launched two new devices designed to enhance PICC insertion procedures and reduce the chance of complications. First, we have launched the next-generation Arrow VPS Rhythm DLX device, which provides real-time PICC catheter tip location information using a patient's cardiac electrical activity. The device also features an optional integrated ultrasound module to assist with vascular access, coupled with our tip tracker technology, use of the DLX eliminates the need for confirmatory x-ray, which reduces time to therapy and cost. In addition, we have launched a new Arrow PICC preloaded with the NaviCurve Stylet. The NaviCurve Stylet features an anatomical curb and flexible tip that are designed to self-orientate to patient's anatomy for enhanced PICC advancement into the superior vena cava for successful insertion. That completes my prepared remarks. Now I would like to turn the call over to Tom for a more detailed review of our first quarter financial results. Tom?

Liam Kelly:

Thanks, Tom. In closing, I will highlight our three key takeaways from the first quarter of 2023. First, we started 2023 with a strong performance as momentum continued from the end of last year. We executed well across our global business and continued to effectively manage the macro headwind. Second, the solid first quarter performance keeps us well positioned to deliver on our financial guidance for 2023. We see an increasingly stable environment for health care utilization. In turn, we expect improving performance of our high-growth portfolio as we move through 2023 in addition to continued strength in our durable core. Third, importantly, we will continue to focus on our strategy to drive durable growth. We will invest in organic growth opportunities and drive innovation, expand our margins and execute on our disciplined capital allocation strategy to enhance long-term value creation. That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q&A.

Cecilia Furlong:

Good morning and thank you for taking the questions. Liam, I wanted to start just some of your comments on what you're seeing from a recovery standpoint, hospital versus ASC and an office-based setting. But specific to UroLift, can you just speak to what you've seen, where you are from a recovery standpoint in the hospital setting versus ASC office based? And then how do you look through the balance of the year to relative to that 8% to 9% longer-term CAGR for the business? How do you look at where you are today and tracking relative to that growth rate?

Operator:

The next question comes from Shagun Singh from RBC. Shagun your line is open. Please go ahead.

Liam Kelly:

Okay. I'll ask Tom to comment on the EPS in a moment. I'll answer your question regarding the revenue. Shagun, we were very clear in the first quarter that our plan is front-end loaded. And if I'm an investor, I would want to have a front-end loaded plan from a company rather than a back-end loaded plan for a company. There are a few dynamics that play into that in certain parts of our businesses. Obviously, as we go through the year, we have some tougher comparables as you get into the back half of the year. Obviously, this is a day's impact. You've got five additional days in the first quarter. You've got five less days in quarter four. But we feel really good about the full-year. Starting off strong gives us increased confidence in our ability to deliver on our guidance as we go through the year. And also, it's one quarter. It's the first quarter of the year. It's great to have a good solid start. We'd like to get another couple of quarters tucked under our belt, and then we'll see where we land. But we do feel there is an increased momentum behind Teleflex and our momentum within the marketplace just based on the procedural dynamic based on some of our key business units and regions performing exceptionally well. Businesses like OEM, Interventional Access had really strong margins at the month of March. It's really good to see Vascular get back to growth as expected. We told investors that Vascular will get back to growth. It's great to see it getting back to growth. The high-growth portfolio had a really solid first quarter. And durable core, as expected, outperformed in the first quarter just due to that whole procedural volume. I'll ask Tom to discuss briefly the other part of your question around EPS.

Operator:

The next question comes from Kris Campbell from Jefferies. Kris, your line is open. Please go ahead.

Liam Kelly:

Yes, absolutely. Chris, thanks for the question. So I will tell you that Titan had a really strong start to the year. We still expect to do $30 million, $35 million. MANTA came in online is on track for the full year. Hemostats did really, really well in the first quarter. It came out of the blocks, passed an intraosseous and did in line. And PICCs, great to see PICCs come back to growth. As we told investors, once the Tyvek situation started to get better, we would expect PICCs to return to growth, and that's exactly what happened within the quarter. PICCs came back very solid performance, and we would expect that to continue as we go through the year. I would anticipate many of the parts of the high-growth portfolio to continue to accelerate as we go through the year. That would speak to UroLift, MANTA, Titan, the PICCs and also some of the intraosseous portfolio. So that would be our expectation, and that's what's contemplated within our guide.

Mike Matson:

Yes, good morning. Thanks for taking my questions. So I wanted to ask one on UroLift. Just did you see the same degree of selling day impact there that you saw in the rest of the business? Because if you did, I would sort of imply a fairly decent decline again there, kind of mid-single digits, I think. Or is there some reason that didn't benefit UroLift?

Mike Matson:

Okay. I understand. And then just the MSA headwind. Can you just quantify that for us again, just as a reminder, so we can make sure we incorporate that correctly into our models?

Operator:

The next question comes from Jayson Bedford from Raymond James. Jason, your line is open. Please go ahead.

Liam Kelly:

So our OEM business had a stellar start, 34.5%. Obviously, you've got to take some -- the days impact out of that. It was across the board. We were really strong on catheters. We were really strong in extrusion. Sutures performed very well. The acquisition we did a couple of years ago, HPC, continues to perform exceptionally well and allow us to sell some of our products through to other customers. We would still expect the OEM business to be high single, low double-digit grower, probably now leaning more to the low double digits, given this really strong start to the year. They had a really nice March performance, came in a little bit better than we were expecting. And they did have a prior year easier comp in Q1, which helped them. But the momentum that they carried in from Q4 continued into Q1 and is performing exceptionally well. And candidly, OEM has been performing exceptionally well for the last 3 years now. This isn't just a one quarter phenomenon, even though it's a little bit better this quarter. Within Interventional Access, again, a very strong performance over 23% growth. The return of Langston really has complex catheters, the GuideLiner, TrapLiner, Turnpike performed well. A lot of procedural volume bring us through there. As we go through the year, they -- in Q3, they'll comp the Langston return to the market. But notwithstanding that, this is going to be a nice, solid growth driver, really good margins. And as we went through in our prepared remarks, a really nice setup with new products coming through with the GuideLiner Cost, with the Watson, with the Ringer and with the Triumph now coming to market. So the lifeblood of this business in the past has been new products. And we -- some of the changes we made in our R&D processes have really started now beginning to show bear fruit, as you heard during my prepared comments. So OEM and IA, you're right, Jayson, are the ones that kind of really drove the upside from the expected 6% to 7% within Q1.

Liam Kelly:

Visibility in OEM is, sorry. Thanks, Larry. Visibility on OEM, it's one of the businesses where we have the longest visibility. So I see a very stable environment for that business over the next period of time.

Anthony Petrone:

Thanks, good morning, everyone. Maybe Liam or Tom, just high-level comments on procedure volumes. Certainly, we saw it in Vascular and Interventional, a lot of data points in the quarter that we've certainly gotten to a new level for procedure volumes in particular. Not necessarily that staffing issues have improved to normal, but that workflow at hospitals has improved. So maybe just a little bit on the sustainability of procedure volumes broadly as it relates to the other businesses in the hospital, not specifically outpatient. And then I'll have a follow-up as well. Thanks.

Anthony Petrone:

That's great. And then the follow-up would be maybe just your views here most recently on the M&A environment. We're seeing transactions come through within the space. Maybe just updated thoughts on valuations? And then just also the cost of funding. I mean, how does that change the equation now just where the debt markets are when Teleflex thinks about M&A? Thanks.

Thomas Powell:

Well, I was just going to say that, yes, while certainly, the cost of funds are up from where they were a couple of years ago or just a year ago, they're still fairly reasonable levels overall based on where we're currently looking at as a cost of funds relative to where it's been over the past 10 years or 20 years. So I don't believe right now that, that will be an inhibitor to our ability to identify assets. So right now, our focus is really as we input on finding the right strategic fit that makes sense for us and the cost of funds will certainly be a component, but not a limiting component.

Craig Bijou:

Good morning, guys. Thanks for taking the question. I wanted to touch on margin. Obviously, you raised revenue guidance, but the margin guidance didn't change. So I wanted to see if you could walk through the cadence of gross margin operating margin throughout the year. And then given the Q1 performance in both gross margin and operating margins seem to be better than the prior year, which is trending ahead of your overall guidance for '23. So why couldn't we potentially see upside to your margin guidance? And what are some of the things that we should be considering with margins for the rest of the year?

Thomas Powell:

Sure. So on the gross margin front, you should expect to see a pretty stable gross margin throughout the remainder of the year. It will move up and down, but not significantly from where it is right now. On the op margin, what you should expect to see is a sequentially improving operating margin as we go throughout the year. A couple of things you probably want to keep in mind is that as you look at the kind of comparison to prior year or for the gross margin, we had a more favorable comp in the first quarter than we're going to have for the balance of the year. So when looking at year-over-year comparisons, that certainly comes into play. We also are expecting foreign exchange headwinds on gross margin as we go throughout the year. In the first quarter, we actually had a nice benefit. But if you recall last year, the dollar moved significantly beginning in the second and third quarters. And as a result, that's going to prove to have a more difficult comparison. So those are some of the factors I think about. But again, gross margin is pretty stable throughout the year and operating margin will show sequential improvement.

George Sellers:

Hey, good morning. Congrats on the quarter and thanks for taking the question. I guess maybe a smaller question on the Titan stapler. I know it's still a relatively small piece of the business. But with the Gore buttress material, what are some of the implications on the gross margin for that device? And also for the manufacturing of that, is there an opportunity to, over time, bring that in-house? Thanks for the question.

Operator:

[Operator Instructions] And the next question comes from Mike Polark from Wolfe Research. Mike, your line is open. Please go ahead.

Liam Kelly:

Yes, Mike, we don't break it out specifically in revenue terms. Obviously, we are confident on the $30 million to $35 million for the product. And I will tell you, as I said a little earlier, it is one of those products that will continue to ramp as you go through the year. But again, we had a really nice start in quarter one. So therefore, it reinforces our confidence on the $30 million to $35 million for the full-year, and the product is performing very well. We actually showed it at Sages, and we had a lot of really, really positive feedback from the product at Sages. It is addressing a lot of the unmet needs that bariatric surgeons has. And the buttress that we're adding to it just overcomes one of those hurdles. Some surgeons just like to use buttress when they're sealing. And it's probably not as much needed with the Titan as it is with the other technologies. But if that's the process they want to use, then we're going to support them in doing that. So I think that it all bodes well for the Titan over a multiyear period.

Liam Kelly:

Yes. I'll use your expression. It's pretty darn close to getting back to normal. It's not quite back to normal yet, Mike, but it is moving positively in the right direction. And it is better than we had anticipated in the first quarter. You are correct. Once we get to the back half of the year, new supply comes on from the provider of Tyvek, and that will eliminate the issue. The two lines that are impacted, the two is really in our Vascular business. It's to a lesser extent, our CVCs because we prioritize the supply, we had to keep our market share position in CVCs. What it has done, it has prevented us from converting PICC accounts. And as you heard in my prepared comments, it was nice to see PICCs getting back to double-digit growth in the quarter as we're able to go back out and start converting those accounts. Just to remind investors, our PICC portfolio is unique in so far is that it has an antimicrobial and an anti-thrombogenic coating. So therefore, that's why we're getting broad adoption for that portfolio globally and in particular, in the United States, where we're not the market leader, we see a great opportunity to continue to take share.

Richard Newitter:

Hi, thanks for taking the question. Just one for me. On UroLift, I guess, the comments about still some lag on patient flow. I guess, even some of the other subcategories in med tech that improved, but are lagging things, like elective procedures, like knees and hips, even those kind of saw some of the patients coming back into the channel for doctor visits and things of that sort. I'm just curious, is there anything specific about UroLift that contrast to some of those other procedures, not UroLift, sorry, but the doctor visit and patient flow? Just trying to get a sense for why maybe certain neurological procedures like this would be still lagging to such an extent versus the rest of the kind of the med tech environment. Thanks.

Operator:

[Operator Instructions] As we have no further questions, I'll hand the call back to Lawrence Keusch for any concluding remarks.

Operator:

This concludes today's call. Thank you very much for your attendance. You may now disconnect your lines.

Operator:

Good morning ladies and gentlemen and welcome to the Teleflex Fourth Quarter 2022 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. 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'll turn the call over to Mr. Lawrence Keusch, Vice President of Investor Relations and Strategy Development.

Liam Kelly:

Thank you, Larry and good morning everyone. For the fourth quarter, Teleflex revenues were $758 million, a year-over-year decline of 0.5% on a reported basis and an increase of 3.7% on a constant currency basis. Compared to the prior year period, revenue under the manufacturing and supply transition agreement associated with our prior divestiture of our Respiratory assets negatively impacted growth by 0.6% in the quarter, implying underlying constant currency growth of 4.3%. Adjusted earnings per share declined by 2.2% year-over-year to $3.52. In reviewing the quarter, our fourth quarter constant currency revenue growth remained durable despite an unexpected subcomponent supply chain issue in our Surgical business that resulted in an approximately $3.5 million headwind during the quarter. The solid performance in the quarter continues to demonstrate the benefits of Teleflex's diversified portfolio that has been purposely built to target the care of critically-ill patients. Of note, our Interventional Surgical and OEM product categories generated double-digit constant currency year-over-year revenue growth during the fourth quarter. Encouragingly, we witnessed improving monthly growth on a sequential basis with December representing the strongest month of the quarter as health care utilization continues to normalize. From a geographic perspective, Asia generated strong results and continues to be an important growth driver for Teleflex. Raw material inflation and supply chain challenges remained headwinds for the business during the fourth quarter. Tyvek continues to be in short supply and has primarily impacted our Vascular and Interventional businesses. Turning to the full year of 2022. When adjusting for the divestiture of the Respiratory assets and one less shipping day, constant currency revenue growth was 4.3% for 2022 as healthcare utilization improved through the year and demand for Teleflex products accelerated. Our high-growth revenue portfolio maintained momentum across the majority of growth drivers. Although UroLift constant currency revenue declined 5% year-over-year in 2022, the remainder of products in the high-growth portfolio continued to show healthy gains with approximately 14% constant currency growth for the year. Moving over to durable core revenues. In 2022, durable core revenue grew approximately 5% on a constant currency basis as compared to the prior year period, reflecting improvement in procedural volumes, strong global execution, new product introductions and positive price. Our other category which includes our Respiratory and drainage catheter business as well as revenue from the MSA, we entered into with midlines in connection with the sale of our respiratory business declined just under 10% year-over-year in 2022. Now, let's turn to a deeper dive into our fourth quarter revenue results. I will begin with a review of our geographic segment revenues for the fourth quarter. All growth rates that are referred to are on a constant currency basis unless otherwise noted. Americas revenues were $458 million which represents 1.7% growth year-over-year against a tough comp in the year ago period. Excluding the impact of the year-over-year decline in MSA sales, Americas revenue grew 2.7% in the quarter. Interventional and Surgical recorded double-digit growth offset by declines in other areas of the business including Interventional Urology. EMEA revenues of $147.8 million increased 1.4% year-over-year. We continue to see procedure volumes improve year-over-year. Now turning to Asia. Revenues were $78.5 million increasing 13.3% year-over-year. We saw strength across the region with all geographies posting solid growth during the fourth quarter. China growth approached 7% despite COVID-associated disruptions towards the end of the quarter. Let's now move to a discussion of our fourth quarter revenues by global product category. Commentary on global product category growth for the fourth quarter will also be on a constant currency basis. Starting with Vascular Access. Revenue increased 0.5% to $186.4 million. As we anticipated, the performance in the quarter demonstrated a return to growth for Vascular Access despite a tough comp per central venous catheters due to the year-over-year reductions in COVID patients in intensive care units in the United States. Although we made sequential progress on back orders, supply chain is still not yet back to normal. As previously discussed, the vascular business has the greatest exposure to Tyvek packaging for our kits and trays. Tyvek shortages are anticipated to improve in the second half of 2023, as additional supply for the industry comes online. Over the long-term, we remain confident that our category leadership in central venous catheters and midlines along with our novel coated PICC portfolio continued to position us for dependable growth. Moving to Interventional Access. Revenue was $125.1 million, up 13.4% year-over-year. We saw sequential improvements in constant currency revenue growth through 2022 as procedures moved back to pre-pandemic levels. In the quarter, our diversified portfolio served us well with Balloon Pumps, OnControl and MANTA all contributing to growth. Turning to Anesthesia. Revenue was $99.6 million up 2% year-over-year. Of our larger franchises hemostatic products, LMA single-use masks and endotracheal tubes all had strong performances in the fourth quarter, partially offset by regional anesthesia. In our Surgical business, revenue was $110.4 million representing another solid performance with 10.4% growth year-over-year, despite the aforementioned supply chain disruption due to a specific subcomponent supplier. Among our largest product categories, skin stapling and our ligation portfolio contributed to growth. In other developments, we closed the acquisition of Standard Bariatrics early in the fourth quarter and Titan Stapler revenue drove a significant portion of the year-over-year growth in the Surgical business. For Interventional Urology revenue was $89.2 million, representing an increase of 13.1% sequentially and a decrease of 3.6% year-over-year. Interventional Urology continued to be impacted by a year-over-year decline in patient visits to urologists and staffing shortages. Although, the overall environment for elective BPH procedures has not yet returned to normal, there were signs of improvement during the fourth quarter. Third-party data indicates that overall patient business to urologists were down in the 3% to 4% range year-over-year in the fourth quarter, which marks a sequential improvement from the high single-digit year-over-year decline witnessed in the third quarter of 2022. OEM revenues increased 12% year-over-year to $73.7 million despite a very difficult comparison to last year. Our order book remains well positioned, as customers recognize our broad competencies with competitive capabilities, including fast growth markets for thin walls interventional microcatheters to access small vessels and fine wire for sensing and ablation technology. Fourth quarter other revenue declined 7.1% to $73.6 million year-over-year. We continue to expect all MSA revenues to cease at the end of 2023. That completes my comments on the fourth quarter revenue performance. Turning to some commercial and clinical updates. As mentioned earlier we completed the acquisition of Standard Bariatrics early in the fourth quarter of 2022. Standard Bariatrics commercialized the Titan SGS Stapler for use in sleeve gastrectomy procedures to treat morbid obesity, and we are excited to have the product in the Teleflex Surgical portfolio. We are proceeding with our integration activities and remain on track with our objectives. Of note, we have completed the training of the Teleflex sales force on the Titan Stapler enabling us to double the size of the selling organization as compared to Standard Bariatrics on a stand-alone basis. We also recently announced that Teleflex was rewarded a group purchasing agreement with Premier for the Titan Stapler. The agreement will make the Titan Stapler available to surgeons affiliated with Premier and provide access to this innovative technology for use in gastric sleeve surgeries. Turning to UroLift. We reached our objective to convert the vast majority of users to UroLift two during 2022, which will free up time for our sales organization to dedicate increased time to market development activities in 2023. Training of new physicians continued in the fourth quarter, and we reached our targets for the year. Of note, the number of physicians trained in 2022 remains largely consistent with historic levels implying continued interest in adding UroLift to the BPH treatment paradigm. To support new physician onboarding for UroLift we hosted live BPH summit training sessions in the US, Australia and Japan during 2022. Our direct-to-consumer program remains an important investment and achieved its pre-specified performance metrics for 2022. We will continue to invest in DTC initiatives for UroLift including a refreshed television and digital campaign that launched in February of 2023. Now moving to an update of our international strategy for UroLift. We made considerable progress in the geographic expansion for UroLift with entry into several new markets during 2022 including Japan and China. Starting with Japan. We had strong launch execution with UroLift gaining sequential traction through 2022. Revenues exceeded our expectations for the year, and we see continued momentum into 2023. Turning to China. We initiated UroLift cases in the fourth quarter as anticipated. We will be methodical in our launch activities and follow a similar playbook to the one that has served us well in Japan. In turn, we will spend 2023 training surgeons, building our presence in key cities and continuing to engage with the Chinese Urological Society to build acceptance. Now for an update on Vascular business. The Vascular business unit continues to align its portfolio and clinical education offering with the evolving customer needs. Today, Teleflex is well-positioned to serve as a trusted partner with Vascular access clinicians in their goal of zero catheter-related complications. We are helping to standardize outcomes by providing protection during and after vascular access procedures and establishing a predictable insertion process across the hospital. This approach continues to solidify our significant market share in CVCs and drive revenue growth through the highly successful launch of the CVC ErgoPack complete portfolio offering a complete vascular access insertion system designed to help clinicians comply with current guidelines and standards. We also continue to prioritize growth in the PICC and midline categories with the most recent advancement being the launch of the new Arrow Pressure Injectable Midline portfolio in North America in the fourth quarter of 2022. The new offering is designed to help alleviate risk associated with line misidentification. Without quick and easy identification between midlines and PICCs, medication may mistakenly be infused through midlines that should only be infused through a central venous access device potentially causing complications and disruption in patient therapy. We are still in the early phase of the launch, but have seen a great level of interest from customers thus far. Additional innovation and PICC placement and positioning devices can be expected in 2023 as we continue to drive toward growth and share gain in this segment. Turning to the Interventional Access business. I am pleased that the relaunch of the Langston catheter has progressed through the fourth quarter with product availability in the US, Canada Australia and New Zealand. The Langston catheter is a unique diagnostic tool that has clinicians determine the degree of aortic stenosis, which might result in a subsequent TAVR procedure. Our clinical and medical affairs team works to reeducate the market on this product including through a panel discussion at TCT and a webinar held in December. The Langston catheter continues to build value for our customers, enhance our engagement with clinicians in TAVR and demonstrates our relevance in the structural heart space. We expect further product launches in our interventional business over the coming years; including complex catheters in the structural part market. Finally, some comments on the outlook for 2023. We witnessed improving stabilization in healthcare utilization over the course of 2022 and would expect a further sequential stabilization in healthcare utilization in 2023. Indeed the majority of the procedure markets that we serve are now back at or above 2019 levels. Conversely, some of the more deferrable disease states reflects patient visits to physicians that remain below pre-pandemic levels including urology. We anticipate that as COVID has become increasingly endemic and staffing shortage bottlenecks gradually ease patients will increasingly seek medical interventions during 2023. Turning to the macro environment. 2022 had its share of operational challenges including inflation and supply chain disruptions. For 2023, we are prepared for some level of continued volatility although we would expect incremental inflation to be at levels lower than 2022 and supply chain challenges to improve through the year. We remain focused on our global operations and we'll look for ways to become more efficient as we work through the macro environment. 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?

Liam Kelly:

Thank you, Tom. In closing, I will highlight our three key takeaways from the fourth quarter of 2022 and our 2023outlook. First, our fourth quarter results were solid and driven by an improving end market for the majority of our businesses. Second, we are confident in our outlook for 2023. Our outlook reflects the diversification of the Teleflex portfolio through the combination of our growth drivers and stability of durable core revenues. Importantly, we will continue to focus on investment in our future growth drivers to enhance long-term value creation. Third, we are focused on achieving our objectives in 2025. We have a balanced approach to top line growth as we invest in our growth drivers and optimize the performance of the durable core. We see opportunities to drive margin expansion through mix shift, restructuring and price. And finally, we will remain disciplined in our capital allocation strategy, with a focus on executing on our M&A strategy. That concludes my prepared remarks. Now, I would like to turn the call back to the operator for Q&A.

Cecilia Furlong:

Great. Good morning, and thank you for taking the question. Liam, I wanted to start with '23 guidance and if you could walk through relative to the updated LRP and those CAGRs, how we should think about contributions both from the durable core high-growth assets in UroLift. And specifically on UroLift with the 8% to 9% CAGR, how you're thinking about cadence over the next three years?

Cecilia Furlong:

Great. Thank you, Liam. And then if I could follow up on gross margin as well, just the outlook that you put out for '23, if you could walk through both what you're expecting from continued inflation benefit of pricing. And then also just UroLift 2 conversion impact that's having on gross margin alongside Standard Bariatrics?

Thomas Powell:

Okay. So for 2023, our guidance is 59 to 59.5 or about five basis points at the midpoint. And for 2023 we expect to realize meaningful margin accretion from the combination of mix price manufacturing cost improvement programs and our footprint restructuring programs. However as we've spoken about in 2022, we continue to expect inflation largely to offset these gains. And additionally we're expecting a modest gross margin headwind from foreign exchange. If we were to look at what are the drivers of the accretion, the largest being the cost improvement programs accounting for some 40% of the positives and then mix price and the footprint about 20% each of the increase. And then as we look at what is offsetting that, it's largely the inflation, which accounts for 80% of the offset. And then as mentioned it's a little bit from foreign exchange as well and some miscellaneous other items. So really it's a story of really good underlying margin expansion opportunities. As we've mentioned we still feel very good about the long-term prospects. However, inflation is having an impact and largely offsetting those nice gains in the underlying business.

Mike Sarcone:

Hey, thank you. This is Mike Sarcone on for Matt today. Good morning, everyone.

Mike Sarcone:

Good morning. So just two follow-ups on Cecilia's questions. Just first on the UroLift growth CAGR of 8% to 9% over the next three years. By any chance could you parse out how you're thinking about US growth versus OUS growth?

Mike Sarcone:

Got it. That's very helpful. And then just one follow-up on the gross margins for 2023. Do you think you could help us think about the quarterly cadence through the year and just how we should flow gross margin through?

Operator:

Our next question comes from Shagun Singh with RBC. Please go ahead. Your line is open.

Liam Kelly:

Okay. Shagun, thank you for the questions. I'll let Tom answer the EPS range in a moment, but let me begin with UroLift. So obviously, we feel confident on the 8% to 9% for UroLift within our LRP. We do believe it will be improving, as we go through the LRP. And as I said earlier, nothing has changed in our assumptions for the international markets and we continue to anticipate that the international markets will do well. And we do feel good about the global growth for the UroLift franchise based, on all of that and based on the improving environment that we anticipate, as we said in our prepared remarks. And this gives us the confidence in the LRP growth of 8% to 9% CAGR, between now and 2025. With regard to your question regarding patient returns, there's two elements I think is going to need to be taken into account is, patient returns and staffing shortages. And we have seen -- in the fourth quarter, we saw a 13% sequential improvement from Q3 to Q4. We did see across all of our businesses an improvement, as you went through the fourth quarter as we said in our stated -- in our prepared remarks. That was also true of UroLift, as you went through that fourth quarter. You saw improvements, as you went through the three months of the fourth quarter. I was actually -- and ultimately we beat the UroLift -- our expectations for UroLift, by in excess of $3 million in the fourth quarter, which is the first time we've done that in a couple of quarters now, which gives us some encouragement as we move forward. I was out on the road last week, I spent a few days with our urology sales force with UroLift and meeting with customers. And while we're seeing some improvement in staffing levels in hospitals, we're still not seeing it in the ASC and in the office environment. I do anticipate that that will improve as we go through this year 2023. And I also believe, that patient flow will begin to return to the office. We're going to help that by continuing to train urologists. And we trained close to around 400 urologists, last year. Everything that's within our control, we're managing I think really well. We're going to continue with our DTC campaign. And we have, a new ad that we just launched. And let's not forget BPH isn't going away. 12 million men with BPH, are still there. It's deferrable, but it's not gone. And we remain the premier product for the treatment of BPH. And we are in effect the market leader in the treatment of BPH, which gives us confidence for that CAGR for UroLift over the LRP.

Operator:

The next question comes from Mike Polark with Wolfe Research. Please go ahead, Mike.

Liam Kelly:

So, Mike, thanks for the question. You are absolutely, correct. It is the base with the revised UroLift CAGR and the inclusion of Standard Bariatrics. That is the only change, we've made. That's accurate.

Liam Kelly:

You have.

Liam Kelly:

Thanks, Mike.

Jayson Bedford:

Good morning. So I wanted to ask about operating margin the fourth quarter was strong but the 2023 op margin guidance was a bit softer. And the heaviness seems all to be in the operating line OpEx. It implies a pretty sharp step-up in OpEx and I assume some of the restructuring helps this line. But I guess my question is where is the reinvestment occurring. And how much of this is kind of structural inflation-driven or discretionary?

Jayson Bedford:

What's the expected dilutive impact from Standard Bariatrics in 2023?

Thomas Powell:

$0.10 to $0.15.

Operator:

Our next question comes from Lawrence Biegelsen with Wells Fargo. Lawrence, please go ahead.

Liam Kelly:

So I'll take that one instead of Tom, if you don't mind Larry. So really you have a year-over-year, comp is one of the reasons for it. If you recall, there was Omicron last year which had a slight impact on some of the procedures that we're getting done. We also expect in Q1 to see a good solid performance as – in the overseas markets and in OEMs so – just because of that, impact in the prior year period. So, that's why it's a little bit front-end loaded in that regard Larry. And I think most investors would prefer to see a front-end loaded revenue plans and a back-end loaded revenue plan in my experience at least. So I think coming out of the blocks pretty well at a 6% growth with the guidance that – with the midpoint of our full year guidance at 5.5% I think should be seen as a positive for the investment community.

Liam Kelly:

Okay. So I'll cover the LRP, and Tom will cover the margin question. But I know, what Tom's answer is it's going to be really focused on inflation Larry, which should be no surprise to anybody given the environment that we're in. But let me cover the revenue. It's all constant currency. So what I'm going to talk about is constant currency. So the first year of the LRP will be 5.5%. We're at the -- we're guiding to the low end of our LRP which is 6%. So you are correct. There is a modest up-tick in revenue as you go from this year 2023 and to 2024 and 2025. And why is that? One of the main reasons for that is the improving macro environment that we expect to see beginning as we go through 2023 and continuing into 2024 and 2025. The second factor that will help that is the international expansion of some of our high-growth portfolio not just UroLift but also the international expansion of PICCs the international expansion of the intraosseous portfolio the international expansion of the hemostatic products that will bring accelerated growth in the latter half of the LRP. And we feel pretty confident in that. It's not a managed step-up. We're going from 5.5% to a 6% CAGR over the horizon of the LRP. And I think the other comment that I will make, that nobody has picked up on so far in their questioning is, durable core was 4% to 5%. While we've been micro-focused on one element of Teleflex the durable core has been improving all this time. And now the durable core for the LRP is now 5% at the upper end of the original guide of 4% to 5%, through excellent execution by the businesses globally. And the margins on a high-portion of that durable core are fairly substantive and helpful to Teleflex. And it's a $14 billion global TAM, for the high-growth and we're only 5% penetrated. So the opportunities for us to continue to grow into that are significant. But I'll let Tom address the margin question that you had Larry. And thanks for the questions.

Operator:

The next question comes from Michael Matson with Needham & Company. Michael, please go ahead.

Liam Kelly:

So, we began the year in 2022, expecting 50 basis points of positive pricing and we exceeded that goal in 2022, Mike. So we came in comfortably above the 50 basis points. We would expect again to be above 50 basis points and to deliver a minimum of 50 basis points of pricing this year. And we have a pathway to that. We have some carryover from the prior year and we have some additional pricing opportunities that -- some of which we've already executed.

Thomas Powell:

That is existing programs. We have a number of footprint programs that are still finalizing and will be largely done by 2025. And then we introduced a new program in the fourth quarter of 2022 that will be complete by 2024. So everything I spoke about are known and existing programs that frankly we're managing to expectations.

Matthew O'Brien:

Good morning. Thanks for taking the question. So, Liam, as I think about UroLift and this new 8% to 9% CAGR through the LRP, I think that's about $90 million to $100 million of incremental revenue through that time frame by 2025. So if I remember correctly, Japan and China were supposed to be pretty sizable contributors, I think, in the out years, maybe half of that $90 million to $100 million, maybe a little bit more than. So it would imply some fairly modest improvement here domestically. First of all, am I right about that? And then, secondly, how conservative is that? Does it make sense to be doing these DTC, or making this DTC spend, if you don't think the domestic business can really accelerate over the next several years?

Matthew O'Brien:

Okay. Appreciate that, Liam. And then, as far as the high-growth portfolio goes as well, coming down a little bit from -- I think, it was 14% to 15% before and now its 12% to 13%, still implies the rest of the portfolio outside of UL is strong. Can you talk about some of those components, what you're seeing from MANTA, EZ-IO, PICCs, et cetera, that are giving you the confidence to reiterate the strength in that segment of the business over the next several years? Thank you.

Operator:

Our next question comes from Anthony Petrone with Mizuho. Please go ahead, Anthony.

Liam Kelly:

Yes. And well done Anthony. Thanks for asking. So I'll answer the last part of your question first. Yes it will be margin-accretive by the end of the LRP. We expect it to become margin-accretive as we exit 2024. What you should expect from Standard Bariatrics is that it will deliver between $30 million and $35 million this year as we stated in our prepared remarks. And then as we said previously it should add approximately 50 basis points of growth to Teleflex year-over-year thereafter from an organic perspective. So that's what you should expect from Standard Bariatrics. Rough math should be around $60 million by the end of 2025.

Liam Kelly:

Yes. Sure, Anthony. So I expect the overall environment for urology patients and staffing to continue to improve as we go through 2023. When it's going to be 100% normal Anthony, it's difficult for me to actually pinpoint that right now in all fairness. But I do anticipate to continue to improve. And why do I say that? The staffing levels in hospitals began to improve in Q4. I expect that to continue into Q1 this year. And once staffing levels start to improve in hospitals it will ultimately then begin to improve in ASCs and ultimately in offices thereafter. And I think the patient flow as I said earlier there's still 12 million men suffering from BPH. If you walk into a urologist office and there's 100 men in the urology waiting room, 40 of them are there because they got BPH roughly. So it's still the number one reason why a man goes to the urologist. So the size of the market is a significant driver to my belief that it will return to normal as we go through the LRP at some stage. With regard to M&A, clearly, we have the most important thing that you need. We have a very strong balance sheet. For M&A, we're about 1.75 times levered at the end of the fourth quarter. We are active out there looking at opportunities. We have a lot of lines in the water. We're fishing hard Anthony. Very difficult for me to say and we're going to get a fish on the hook and into the boat. But there are targets out there that we are interested in. There are targets out there that we are actively pursuing. And we do believe that we are an attractive acquirer and there are assets that we feel would fit very well in the Teleflex family.

Craig Bijou:

Good morning, guys. Thanks for taking questions. One let me just start with UroLift. And I did want to ask I know Japan was better than expected. Was Japan in the quarter -- was the 89 versus the 86 that was implied by your guidance was that Japan, or I guess if you could just kind comment on what drove the few million beat. Was that US or on the international side?

Craig Bijou :

Got it. Thanks, Liam. And then on your comments on the durable core and appreciate that -- how that's kind of moved up in terms of the LRP growth. Maybe, I mean what are some of the products the categories that are really driving that and that you see driving that LRP growth for the next several years?

Operator:

Our next question comes from George Sellers with Stephens. George, please go ahead.

Liam Kelly :

So George, as you know it takes two to get married. So we're a willing groom or bride whichever way you want to put us. And it's a question of finding the other party. I will tell you the valuations from the heady days of 2021 have moderated somewhat. And high-quality assets are still not – inexpensive, but that's why they're high-quality assets and those are the assets that we're going after. But you can -- we will remain disciplined George and investors can expect us to remain disciplined. We will look for assets that are accretive to our top line growth. We look for assets that are accretive to our gross margins. We look for assets that will become accretive to our op margins and earnings pretty quickly after we acquire them. We will -- we're very disciplined on our return on capital and getting above our internal cost of capital by at least year five. We've always been able to do that in year four. But the hurdles will remain the same for Teleflex in finding good assets, bringing them into the family and integrating them into Teleflex and obviously, assets that are unique in the marketplace in segments that are growing faster than that core segments within Teleflex.

Matt Mishan:

Great. Thanks for taking the questions. Just a quick clarification for Liam, and then I'll have a follow-up for Tom. On the low end of the 6% to 7% from '22 to '25, does that include the inorganic contribution of Standard Bariatrics in 2023?

Matt Mishan:

Okay. And then just for Tom, on the tax rate, 10.25% to 10.75% for 2023 is pretty low, especially compared to historical standards. What's driving that for 2023? And how should people think about the sustainability of that tax rate moving forward into the next couple of years?

Liam Kelly:

And Matt, I just want...

Liam Kelly:

Sorry, Tom. Yes. And Matt, I just want to circle back on the Standard Bariatrics question. The difference between pro forma and Standard Bariatrics as is isn't that significant, given that the product is only recently on the market and the growth has been driven by Teleflex, following the training of our sales force. So we've doubled the sales force. So, it isn't that significant, the difference one way or the other, Matt, is what I would tell you.

Lawrence Keusch:

Thank you, Emily, and thank you to everyone that joined us on the call today. This concludes the Teleflex Incorporated Fourth Quarter 2022 Earnings Conference Call.

Operator:

Good morning, ladies and gentlemen and welcome to the Teleflex Third Quarter 2022 Earnings Conference Call. [Operator Instructions] 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.

Liam Kelly:

Thank you, Larry and good morning, everyone. For the third quarter, Teleflex revenues were $686.8 million, a year-over-year decline of 1.9% on a reported basis and an increase of 2.4% on a constant currency basis. Compared to the prior year period, revenue under the manufacturing and supply transition agreement associated with our prior divestiture of the Respiratory assets negatively impacted growth by 1.3% in the quarter, implying underlying constant currency growth of 3.7%. Adjusted earnings per share declined by 6.8% year-over-year to $3.27. In reviewing the quarter, the majority of our business units executed well. When excluding UroLift and adjusting for the Respiratory divestiture, the remaining 88% of the business grew at an underlying rate of 4.3% in the third quarter. This solid performance continues to reflect the benefit of Teleflex's diversified portfolio that has been purposely built to target the care of critically ill patients. We saw improvement in revenues as the third quarter progressed with September strengthening over July and August. Our OEM business unit drove double-digit constant currency year-over-year revenue growth. While the Interventional business unit grew approximately 9%. Our Surgical business turned in another solid performance with mid-single-digit constant currency growth year-over-year. From a geographic perspective, we saw strong results in Asia which continues to be an important growth driver for Teleflex. Conversely, Interventional Urology continues to be impacted by patient business to urologists that remain down year-over-year and staffing shortages, with third quarter revenues modestly missing internal objectives. In the quarter, our high-growth revenue which includes UroLift, MANTA, hemostatic products, EZ-IO, on controls and PIC maintained momentum across the majority of growth drivers. For the 9 months, UroLift has declined 5.8% year-over-year. While the remainder of products in the high-growth portfolio continues to show healthy gains with 14% growth. Moving over to durable core revenues which accounted for more than 60% of revenues in 2021. In the first 9 months of 2022, the durable core has generated 4.6% growth compared to the prior year period. Turning to inflation; there are elements of stabilization during the quarter with some areas of improvement. In particular, sea freight costs declined in line with our internal expectations. We continue to see elements of elevated supply-chain disruption during the third quarter. Availability of select raw materials and components are not yet back to normal. This dynamic resulted in some greater-than-anticipated backorder levels during the third quarter, especially in our Vascular and Interventional businesses. Looking forward, we expect a portion of those unanticipated back orders to flush through by the end of 2022. Now, let's turn to a deeper dive into our third quarter revenue results. I will begin with a review of our reportable segment revenues for the third quarter. All growth rates that I referred to are on a constant currency basis unless otherwise noted. Americas revenues were $405.1 million which represents a 2.7% decline year-over-year against a tough comp in the year ago period. Lower revenue from the manufacturing supply-and-transition agreement associated with our prior divestiture of the Respiratory assets negatively impacted Americas growth by 2.1%, implying a flattish underlying performance for the quarter. Interventional recorded high single-digit growth, offset by declines in Vascular and Interventional Urology. In addition, we did experience some supply-chain disruption during the third quarter. EMEA revenues of $128.4 million increased 3.4% year-over-year. We continue to see procedure volumes improve year-over-year. Now turning to Asia; revenues were $82 million, increasing a robust 20.5% year-over-year. We saw strength across the region with all geographies posting growth during the third quarter. China had a very strong performance with growth exceeding 19%. Let's now move to a discussion of our third quarter revenues by global product category. Consistent with my prior comments regarding our reportable segments, commentary on global product category growth in the third quarter will also be on a constant currency basis and ranked by size of our business units. Starting with Vascular Access; revenue decreased 0.8% to $167.1 million. The performance in the quarter in part reflects a tough comp due to the year-over-year reduction in COVID patients in the intensive care unit in the United States. As previously noted, there was some elevation in backorder during the quarter due to raw material shortages. Of note, the vascular business has the greatest exposure to tieback packaging for our kits and trays. We anticipate that tieback shortages will abate in 2023 as additional supply for the industry comes online. We remain confident that our category leadership in central venous catheters and midlines, along with our novel coated PICC portfolio continued to position us for dependable growth. Moving to Interventional; revenue was $108.7 million, up 8.9% year-over-year. We saw strong performances across our diversified portfolio during the third quarter, with balloon pumps on control, MANTA and complex catheters all contributing to growth. We continue to see some elements of supply-chain disruption during the quarter. Turning to anesthesia; revenue was $97.6 million, up 5.8% year-over-year. The business had a challenging comparison with 26.6% growth last year. Of our larger franchises, regional anesthesia, hemostatic products, endotracheal tubes, all contributed double-digit growth in the third quarter. In our Surgical business; revenue was $93.1 million, representing another solid performance with 6.2% growth year-over-year. Among our largest product categories, skin stapling led the growth for the quarter, while metal and polymer ligation clip growth accelerated sequentially, following COVID-related lockdowns in China during the second quarter. Of note, there are no revenues in the third quarter surgical results from the Standard Bariatrics acquisition. For Interventional Urology, revenue was $79 million, representing a flattish performance sequentially and a decrease of 4.6% year-over-year and slightly below our internal expectations. The overall environment for elective BPH procedures has not yet returned to normal. Third-party data indicates that overall patient visits to urologists were down high single digits year-over-year in the quarter which has impacted the funnel for BPH procedures. In addition, staffing shortages remain a constraint. In a Teleflex survey of U.S.-based urologists, conducted in August of this year, 52% of the 125 respondents reported having experienced staffing issues. The survey also indicated that office-based urologists are experiencing significantly more patient cancellations per week than hospital-based urologists. OEM revenues increased 14.4% year-over-year to $71.3 million despite a tough comparison to last year. Our order book remains well positioned as customers recognize our broad competencies with competitive capabilities, including fast growth markets for thin wall interventional microcatheters to assess small vessels and fine wire for sensing and ablation technology. Third quarter, other revenue declined 9.9% to $69.9 million year-over-year. The majority of the decline reflects lower manufacturing and supply transition agreement revenues year-over-year. We continue to expect all MSA revenues to cease at the end of 2023. That completes my comments on the third quarter revenue performance. Turning to some commercial and clinical updates. On September 28, we closed on our acquisition of Standard Bariatrics for an upfront cash payment of $170 million with additional consideration of up to $130 million payable upon the achievement of certain commercial milestones. Standard Bariatrics has commercialized the Titan SGS stapler which is an innovative powered stapling technology specifically designed for sleeve gastrerectomy. We estimate that there were 120,000 sleeve gastrectomy procedures in 2020. We are very excited about the acquisition of Standard Bariatrics for a number of reasons. First, the Titan stapler addresses unmet needs in sleeve gastrectomy by offering surgeons the longest continuous push and staple line of 23 centimeters. It is designed to help surgeons achieve more consistent and symmetrical sleep pouch anatomy, setting their patients up for optimized outcomes. While every patient's anatomy is different, the Titan's long staple line enables surgeons to plan and place staples in one firing, minimizing variations sometimes associated with the use of multiple overlapping short cartridge staple firing. Additionally, the design may result in a more secure staple line and fewer chances of leaks, as evidenced with higher burst pressures. Second, we believe that we can compete effectively stapling share in the sleep gastrectomy market. Following a third quarter 2020 U.S. launch, we expect Titan stapler revenues to be approximately $15 million in 2022. With the Titan stapler now part of the Teleflex surgical portfolio, we expect continued momentum going forward. The Titan Stapler products [indiscernible] into our existing bariatric surgery call point in our Surgical business and complements our ligation clip portfolio, MiniLap percutaneous surgical system and Weck EFx special closure portfolio. In addition, the inclusion of the Standard Bariatrics sales team doubled our commercial team addressing the sleeve gastrectomy market. We have the capability to flex higher with existing Teleflex reps as demand grows which would more than triple the stand-alone sales force of Standard Bariatrics. Finally, we see a pathway through value analysis committees with carve-out due to the differentiation of the stapler which gives us confidence in our ability to expand our user base over the coming years. Third, the acquisition of the Titan Stapler reflects Teleflex's strategy to invest in innovative products and technologies that can meaningfully enhance clinical efficacy, patient safety and comfort, reduce complications and lower the overall cost of care. From a financial perspective, the acquisition is immediately accretive to Teleflex's long-term revenue growth profile and will enhance our gross and operating margin over time. Moving over to Interventional; we relaunched the Langston Dual Lumen Catheter and expect sales to ramp up in the fourth quarter and into 2023. In addition, at the mid-September TCT conference, we highlighted the Karolinska 1000 consecutive MANTA device study. This study which was not sponsored by Teleflex, represents the largest real-world evaluation of the MANTA device in patients undergoing TAVI. The study demonstrated low complication rates and a short learning curve. Specifically, MANTA device-related major vascular complications occurred in 4.2% of patients which was consistent with the SAFE MANTA IDE study and the MARVEL prospective registry. With respect to our market development objectives for UroLift, we were again pleased with our progress during the quarter. Training of new physicians continued in the third quarter and we are on track to reach our target for the year. With access to surgeons improving, we recently hosted a live BPH Summit training session in the United States as we continue to tap into surgeons not yet trained on UroLift. We are also excited to host an upcoming BPH Summit in Japan during the fourth quarter. We continue to receive excellent feedback from surgeons regarding UroLift 2, while UroLift advanced tissue control for use in obstructive median lobes saw increased momentum in the third quarter. New data published in the peer-reviewed Journal of Endourology revealed that in a controlled clinical trial of the UroLift system for obstructive median lobes, men experienced better symptom improvement within the first three months of treatment compared to those treated with placebo and TURP in other controlled studies. Encouragingly, those patients did not endure high-grade serious adverse events. The data further reveals that symptoms and EuroFlow outcomes were largely consistent for obstructive median lobes patients treated in both, controlled and real-world settings. We believe that the launch of the UroLift two in advanced tissue control will enable us to further engage with surgeons and drive utilization deeper into our label's indications. Based on our progress at the end of the third quarter, we remain on track to convert the vast majority of our U.S. customers to UroLift two by the end of 2022. Now, turning to an update on our international expansion strategy for UroLift. We are in the early stages of a multiyear, multigeography international market expansion which is expected to be a meaningful driver of growth in the coming years. The launch of UroLift in Japan which began on April 1, continues to gain momentum and is tracking to our plan. Cases are continuing to ramp up and we are very encouraged with the results thus far. Looking forward, we are excited to implement our virtual reality capabilities to enhance our physician training and sales force interactivity. Given our results to date, we expect to be well positioned to increase traction in 2023 as we expand our reach into key regions within the country. Shifting to other international geographies. We remain on track with our expected UroLift commercial milestones. In China, we will commence our initial launch activities in the fourth quarter with a focus on key cities and engagement with the urological society to build acceptance. In addition, we still expect updated reimbursement in France and launches in select regions in Italy and Spain during the fourth quarter. Finally, investors familiar with Teleflex will recall that, in July of 2020, we informed the investment community that the Department of Justice had opened an investigation under the Civil False Claims Act with respect to one of our subsidiaries, NeoTract Inc. I am glad to share that, in August of 2022, the U.S. Department of Justice advised us that it had closed the investigation. We are pleased to have this investigation behind us and look forward to continuing our focus on the patients we serve across the world every day. That completes my prepared remarks. Now, I would like to turn the call over to Tom for a more detailed review of our third quarter financial results. Tom?

Liam Kelly:

Thanks, Tom. In closing, I will highlight our three key takeaways from the third quarter and our 2022 outlook. First, our third quarter results reflect the diversification of the Teleflex portfolio through the combination of our growth drivers and stability of durable core revenues. Importantly, we will continue to focus on investment in our future growth drivers while managing overall costs for the business. Second, in the quarter, we augmented our growth drivers with the acquisition of the Standard Bariatrics Titan SGS powered stapler. We expect revenue growth and margin accretion over time as we effectively integrate Standard Bariatrics into the Teleflex Surgical business and expand the reach of this innovative stapling technology. Accordingly, we expect the Standard Bariatrics acquisition to enhance our long-term constant currency growth. Third, we continue to execute against our long-term growth strategy. We will continue to incrementally invest in our high-growth portfolio and drive dependable expansion in our durable core portfolio. We have levers in place to drive further expansion in our margins. And our balance sheet is in a solid position with pro forma leverage of 1.9x, providing ample financial flexibility for our capital allocation priorities, including M&A. That concludes my prepared remarks. Now, I would like to turn the call back to the operator for Q&A.

Cecilia Furlong:

Good morning and thank you for taking the questions. Liam, I wanted to start on your commentary on UroLift and really just the site of care that you talked about in terms of where you're seeing patient flow offices versus inpatient. Can you just talk about how that's trended versus pre-COVID times? And then also just the role of DTC, you talked about surgeon training. How you're thinking about DTC going forward?

Cecilia Furlong:

Great, thank you. And if I could follow up, just your comments on Japan as well, the initial launch there. Can you talk through either your contribution, what you're seeing to date, outlook for 4Q? And then as you think beyond '22, just to your confidence, especially just given the current macro environment with the 15% growth that you laid out at the Analyst Day earlier this year? And thank you for taking the questions.

Operator:

Thank you. And our next question comes from Jayson Bedford of Raymond James. Your line is open.

Thomas Powell:

Well, I will say that as revenue slows, you do lose leverage in the P&L. And for us to continue to drive margin expansion, we want to see that top line moving. I think as Liam just touched on, the LRP doesn't start for another couple of months. And our expectation is to continue to grow the top line. We'll have to look and see how inflation impacts us but that certainly has been a drag as well. But if you think about the business, the key tenets of margin expansion remain with restructuring programs are still in place. We do have good growth in our high-growth portfolio which, as you know, has got higher than average margin. So as Liam mentioned, getting UroLift back and growing in North America at a solid pace will certainly help us assure that margin achievement over the longer-term horizon.

Jayson Bedford:

Okay. And just as a quick follow-up. Liam, you mentioned an elevated backlog during the quarter. Is there a dollar amount that you could attribute to this dynamic?

Operator:

Thank you. We now have Shagun Singh from RBC. Please go ahead when you’re ready.

Liam Kelly:

We can hear you, Shagun.

Liam Kelly:

Okay. Thanks, Shagun. There's a lot in that to unpack. So let me begin. As I said earlier, the LRP begins in 2-and-a-bit months, I think I feel confident in the 6% to 7% we outlined and the addition of Standard Bariatrics helps my confidence on the 6% to 7% CAGR over that period of time. I think that, again, reminding people that the 15% for UroLift is also a CAGR. And we probably have an easier comparable in the first year of that 3-year plan that should help us to improve that. Why do I feel confident that patients will return? Because there's a lot of them. There is 12 million patients out there that our target market is the 1.5 million men that have BPH, took the pill and no longer take it. And I'm also encouraged by what I see going on in the hospital environment where staffing levels are starting to improve. Some -- what we've learned from our patient study is some patients are having difficulty making appointments to actually get in to see the urologists. So if that staffing improvement in the hospital moves to the office and the ASC, that should also assist in getting that to come back. And you're correct in your math, it would imply for Q4 an $86 million number for UroLift. And what is considered in that is just the normal seasonality that one sees because of the deductible impact that happens every year going from Q3 to Q4. And obviously, the input from the international markets as we expand over there. So there isn't, in our $86 million, an implied continued recovery. If that happens, that will help but it's not implied in our guide as we've given it today.

Matt Taylor:

Hi, good morning, guys. Can you hear me, okay?

Matt Taylor:

Great. Hi, men. I’m okay. I have a couple of questions. I'll keep my questions to [indiscernible]. So, I wanted to ask you about -- you said you're going to be well in excess of the 50 basis points. So can you give us any sense for how much better you're tracking? And then also, can you keep this up next year? Is it something that you view as durable? Or is it more onetime?

Matt Taylor:

Okay. Got you. And then I want to check some math. I went back on the disclosures about the high-growth portfolio ex UroLift. And I think it looks like you did like low double digits in Q1, excess of 20% in Q2. And then it looks like low double digits in Q3 versus -- is that correct? And then the 14% year-to-date, what do you expect for the high-growth portfolio going forward? And are the fluctuations quarter-by-quarter just comps? Or is there something else going on there?

Operator:

We now have the next question on the line from Mike Polark of Wolfe Research. Please go ahead when you’re ready.

Liam Kelly:

Yes. So on that one, normally, what you see in seasonality within the U.S. is a pickup in that, call it, 7% to 10% just based on the deductible phenomenon that goes with that. Obviously, OUS, in particular, Japan has been ramping steadily. And as we advised investors, it's 1/3 of the size of the U.S. and we expected it to ramp at 1/3 of the size of the U.S. And in the first year, the U.S. business has done $5 million and then $15 million and then $50 million and so on and so forth. So if you take 1/3 of that, that would be a good metric for Japan. And we continue -- and the contribution in all transparency in China is very modest within the fourth quarter. So I wouldn't advise building much in for that. We will do cases. It's difficult to get people in and out of the country but we are encouraged to ramp within -- in 2023 and China would be more of a 2023 ramp than a 2022 impact.

Liam Kelly:

Yes, Mike, I think the way I'd frame that is that Teleflex pays out the full $130 million, no one will be happier than Liam Kelly because that will mean that the business will have done better than I would have anticipated. I think that when we look at this business, it's a unique technology. And I look at this and a lot of these technologies that gain share, they tend to be evolution rather than revolution. And this really fits into that category. It's right into the sleeve gastrectomy market that the surgeons conduct every day. It speeds up the procedure, you get less leaks, higher burst pressure when you complete it. And all in all, it's being adopted pretty rapidly out there. We have a number of the high-volume users that have already adopted the technology and a high-volume user for us will be someone that's doing 10 sleeves a month. And we're very encouraged by the way it's moving forward. But to your question, if we pay out the $130 million, Teleflex would be delighted.

Craig Bijou:

Good morning, guys. Thanks for taking my questions. Just a couple on UroLift. And I appreciate all the comments that you made, Liam but I wanted to ask specifically on -- so I believe you said doc visits were down 12% year-over-year in Q2. Now they're down high single digits in Q3. But sales for you guys were, let's call it, just flat sequentially. So I wanted to reconcile that dynamic. And I know you mentioned that staffing was getting better in the hospitals. But did staffing improve in the office setting from Q3 to Q2? Or did it get worse? And then, is there a timing factor from visit to procedure that may be kind of embedded in those numbers as we look at them sequentially from Q2 to Q3?

Craig Bijou:

Okay. Thanks for that color, Liam. And then apologize for getting granular here. But you guys mentioned the overall business in September was stronger than July and August. So wanted to ask maybe specifically on UroLift. I know June was a tough month for UroLift but any color on the monthly trends within the quarter for UroLift sales?

Craig Bijou:

Okay, thanks for taking my questions, guys.

Operator:

We now have Matthew O'Brien of Piper Sandler. Please go ahead when you’re ready, Matthew.

Liam Kelly:

We can hear you, Phil. Thank you.

Liam Kelly:

So with regard to the training, the training was -- in Q3 was right in line with our expectations. So we're ramping to the traditional 400-ish docs that we would train in any given year. So we're on track for that. And that for us is encouraging because it lets us know that docs are still interested in the procedure. They want to take the procedure. We're moving from the early adopter to the fast follower and that is quite encouraging. With regards to visits, the first milestone for me, Phil, is to get to a flat visit year-over-year. We've gone through this year with minus 15, minus 12, minus high single digits. So we have to get the flat first before we get the normal cadence of increase. And even when we're flat year-over-year, that is still below 2019 pre-COVID. So there is a ways to go in the patient visits. And you are correct. Once patient flow starts to come back, there should be a lag thereafter. And then you should see momentum begin to build once the patients are back, visiting their urologists.

Liam Kelly:

Yes. So Standard Bariatrics first, obviously, it's a great acquisition for us. We already have a significant call point in the -- with the bariatric surgeon. We sell our mini lap, our percutaneous surgical system. We sell the Weck EFx closure and we sell our cold ligation products. So we already have that call point around it. And this is an opportunity for us to double our sales force in that call point as the Standard Bariatrics and double the number of salespeople that are selling the Titan SGS as well. Regarding M&A, pro forma, we're at 1.9x levered. So we're in pretty good shape. We are active out there in the marketplace looking for assets. The team internally ran some analysis on the Standard Bariatrics acquisition because I'm taking from your question, should you do a share buyback given where your stock is at? And actually, if you're a short-term holder of Teleflex, the staff buyback in the first year might be preferable. But if you're a long-term holder for sure, over the 2, 3, 4, 5, 6-year horizon, it's a significantly better return on Teleflex using their balance sheet to do M&A, rather than do a stock buyback, even with our stock price where it is today. So we've run that analysis. We feel confident we can give shareholders a better return by continuing to bring in attractive M&A into the company, continue to expand Teleflex's reach into new and aligned procedures and that would be our mantra going forward and that's what we're going to execute towards.

Unidentified Analyst:

Hi, good morning. This is Vick in for Larry. Just a couple from us. Can you provide us with a framework for 2023, not asking for a specific guidance but any sort of items you're aware of now like FX or inflation running through the P&L that you can share your preliminary thoughts on? And any reason why you don't think you'll be at 6% to 7%? And then I have a follow-up. Thanks.

Unidentified Analyst:

Great. And just a follow-up. Can you talk about MANTA penetration in the quarter? And how are you thinking about the rest of this year and potentially, next year? Thanks so much.

Operator:

Thank you. We now have Anthony Petrone of Mizuho. Your line is now open.

Liam Kelly:

Yes, Anthony, welcome back. Good to have you back on the story. So just to be clear, we'll do around 400 a year in the United States rather than the quarter. In Japan, we're very early in the cycle. So we're really in a few major metropolitan areas. Obviously, Tokyo being one of them. We have added some additional sales reps in this quarter as we continue to prepare for 2023. And again, I feel really confident on the ramp at 1/3 of the size of the U.S. market. So next year, it should be something in the region of 1/3 of about $15 million, what we should expect from Japan. China, we'll do our first case this quarter. Obviously, we're starting in the private hospital sector. And again, we'll start in the major metropolitan centers. We will start in Shanghai, Beijing and Guangzhou and then we'll expand out beyond that. I would like to get the initial trainings done in China before we give too much more color on how many docs we can bring on. But we have identified a number of the key opinion leaders in China and that training will -- as I said, will take place during Q4. Excited about both. I think those are the markets that can really move the needle for UroLift. They're large enough. They've got -- Japan has good reimbursement. We will get reimbursement and put it on to the regional tenders in China, once we build some traction in the private markets and that will take us a few years to do that.

Thomas Powell:

Sure. Well, as we mentioned in our prepared remarks, inflation continues to exist for us. As we think about the components of it, we're actually seeing some improvement in sea freight and we had expected that all along this year. And so we're seeing the costs of freight going down quarter-over-quarter. Materials, however, continue to be at elevated rates. We haven't seen that stabilize quite yet or return to a normalized level. So we will continue to expect to have inflation in our numbers. And historically, we've always had a level of inflation. I would say that this year, it was higher than typical. We will have some rolling into next year as a result of just how we capitalize our inventory and how that rolls off the balance sheet. But right now, we're not in a position to give specific guidance for inflationary pressures for next year. Now with that being said, there are a number of offsets. We talked about pricing which we were very successful this year in getting pricing out there to help offset some of the inflation pressures. Restructuring programs are -- that are currently announced will also provide a benefit in next year. And as we look out to the next couple of years, we expect to realize about 0.5 point in margin expansion from restructuring just next year with a full point over the next couple of years. So there is a nice benefit from restructuring, from pricing. Underlying in our business, we still have a nice mix benefit that we're seeing come through from our high-growth portfolio, as mentioned. They grow at a faster rate and carry a higher margin. So that's an underlying mix benefit that we continue to see and expect to see for the number of years over the LRP. And as UroLift continues to recover, we'll expect to see more and more contribution from that business unit as well on the margin line. So again, we'll give specific numbers on inflation as we get to the guidance for 2023.

Richard Newitter:

Hi, thanks for taking the questions. Maybe just -- actually two on our UroLift here, sorry to harp on your left. I know it's a lot of focus there already but I think it's so important for investors. You've mentioned the CAGR, granted it's off of a potentially lower starting point. I'm just curious, to get to that 15%, even if it is off the lower starting point, can you give us a sense of what the minimum level of the U.S. portion of that needs to grow? In other words, do you need to be back to double-digit U.S. growth over the CAGR in order to get there? Or is there enough room that you don't need to rely on that in the international contention there? And then I have one follow-up.

Richard Newitter:

Okay. Yes. I was more just asking because I have to get back to double digits, if you can answer that. But the second question, too, for me on UroLift was, I just want to make sure I understand the staffing issues in the office setting. My understanding was, doctors tend to schedule their UroLift procedures on one or two operating days. So I'm just trying to get a sense for how that might be the mix of where the UroLift's volumes coming back? Is it more -- you're talking about the higher volume accounts that are maybe doing many more UroLift’s, so they just can't get back to their -- meet the demand levels because they're doing multiple days per week of operations? Or what exactly am I missing if the office setting should be easier from a scheduling and patient management standpoint? Thanks.

Operator:

Thank you. Your next question comes from Michael Matson of Needham & Company. Your line is open.

Liam Kelly:

Well, I think that we already have a series of products within that call point. Obviously, it's a fast-growing market. It's a market that's going to continue to grow as we as a society continue to eat more of the wrong stuff. So we do see this as an opportunity for us to continue penetration within the bariatric market that there are some aligned technologies that may be of interest to us as we go deeper into this. It is an area of interest for Teleflex and always has been, as I said earlier, we've got our cold ligation clips in there. We got our facial closure in there and we got our mini lab that we -- our sales force is in there. Regarding turnover, like all medical device companies, we experienced heightened turnover in 2021 right across the border in Teleflex and in UroLift. Right now, we have a very stable sales force in the UroLift area. We have, I think, right now as I sit here today, I think we have about four or five open territories within the business units. And we feel really confident that we're well poised to be ready for the -- for when the market recovers.

Liam Kelly:

I'm sorry, Mike, I missed the question.

Liam Kelly:

We already sell staples in our general surgical portfolio but they're skin staplers. And obviously, our Hemo-lok, our Horizon are both, cold and metal ligation clips. So don't see ourselves really going up against the big guys to try and take them on, in more broad stapling, Mike. It's -- the reason we went into this one is because it's so differentiated. It speeds up the procedure. It gives a better outcome for the patient and gives a better outcome for the docs. So this is probably the reason we went into this area of stapling.

Lawrence Keusch:

Thank you, Abrika and thank you to everyone that joined us on the call today. This concludes the Teleflex Inc. third quarter 2022 earnings conference call.

Operator:

Good morning, ladies and gentlemen. Welcome to the Teleflex Second Quarter 2022 Earnings Conference Call. [Operator Instructions]. Please note that this conference call is being recorded and will be available on the company's website for replay shortly. And now I'll turn over to Mr. Lawrence Keusch, Vice President of Investor Relations and Strategic Development. Please go ahead.

Liam Kelly:

Thank you, Larry, and good morning, everyone. It's a pleasure to speak with you today. For the second quarter, Teleflex revenues were $704.5 million, a year-over-year decline of 1.3% on a reported basis and an increase of 2.3% on a constant-currency basis. Adjusted earnings per share increased 1.2% year-over-year to $3.39. In reviewing the quarter, we posted solid execution across the vast majority of Teleflex, with nearly 90% of the collective business driving constant-currency revenue ahead of plan. Volumes have continued to recover in the U.S., EMEA and Latin America as COVID hospital admittance have declined from peak levels earlier this year. However, the revenue results were below our expectations as UroLift sales did not rebound to the level we had anticipated. Excluding UroLift, constant-currency growth in the quarter was 4% year-over-year as the remainder of the business collectively outperformed our forecast for the quarter, albeit with some pluses and minuses across the portfolio as we navigated a dynamic environment. Moreover, when adjusting for the impact of the Respiratory divestiture and UroLift, the rest of the business grew 5.2% constant currency. This solid performance continues to reflect the benefits of a diversified portfolio that has been purposely built and is primarily targeted to the care of the critically ill patients. In the quarter, our high-growth portfolio, which includes UroLift, MANTA, hemostatic products, EZ-IO, OnControl and PICCs, maintained momentum across the majority of growth drivers. Although UroLift declined 13% year-over-year in the second quarter, the remainder of products in the high-growth portfolio increased in excess of 20%. Although the second quarter presented some additional challenges, we remain confident that the environment will continue to improve over time, including for the most elective surgical procedures like UroLift. Moreover, we will continue to execute against our strategy that we articulated at the May Analyst and Investor Day. We remain focused on strong execution and funding our existing growth drivers. We will drive geographic expansion with a particular emphasis on the Asia Pacific region. Margin expansion remains an opportunity as we improve the mix of our high-growth portfolio and generate cost savings. We remain good stewards of our capital with a prioritization on internal investments to ramp our innovation engine and M&A. Our business development team is active with opportunities in scale acquisitions, late-stage technology and tuck-ins. We believe that the external environment for deals is improving, and we are prepared with a strong balance sheet to take the cues on opportunities that meet our acquisition criteria. In fact, during the second quarter, we completed a product tuck-in acquisition in our interventional business and closed on a distributor-to-direct conversion early in the third quarter. Although both transactions are immaterial to Teleflex in 2022, we remain committed to continued execution of our M&A strategy. And finally, we will continue to advance our TSR and DE&I initiatives. I would call your attention to our soon-to-be-public 2021 Global Impact Report, which highlights our progress as an organization to advance our corporate social responsibility agenda. Now let's turn to a deeper dive into our second quarter revenue results. I will begin with a review of our reportable segment revenues for the second quarter. All growth rates that are referred to are on a constant-currency basis unless otherwise noted. Americas revenues were $412.7 million, which represents a 0.3% decline year-over-year against nearly 32% growth in the year-ago period, but reflecting improving growth trends on both a 2-year and 3-year basis in the quarter. Surgical was the biggest contributor to growth, offset by decline in Interventional Urology. The headwind associated with the Respiratory divestiture to the Americas group was minimal in the quarter. EMEA revenues of $145.2 million increased 3.4% year-over-year. The growth was broad-based during the quarter with Anesthesia, Surgical and Interventional Products making notable contributions. Once again, procedure volume strengthened year-over-year as countries across the region moved past COVID-related restrictions. Excluding the impact of the Respiratory divestiture, revenues rose 6.7% year-over-year. Turning to Asia. Revenues were $76.6 million, increasing 1.8% year-over-year. Southeast Asia and Korea were strong contributors to the performance in the quarter. Growth in China was negative year-over-year due to the impact of the COVID lockdown during May and June. Excluding the impact of the Respiratory divestiture, Asia revenue for the second quarter rose 7.3% year-over-year. Let's now move to a discussion of our second quarter revenues by global product category. Consistent with the prior comments regarding our reporting segment, commentary on global product category growth for the second quarter will also be on a constant-currency basis and ranked by the size of our business units. Starting with Vascular Access. Revenue increased 1% to $163.9 million. The performance in the quarter in part reflects the year-over-year reduction in COVID intensive care unit patients and a decline in overall intensive care unit visits. Looking forward, our category leadership in central venous catheters and midline, along with our novel coated PICC portfolio, continue to position us for durable growth. Based on our second quarter performance, there is no change to our double-digit growth outlook for PICC in 2022 as we invest behind our differentiated portfolio. Moving to Interventional. Revenue was $114.4 million, up 5.3% year-over-year against a tough comparison of 31% growth in the second quarter a year ago. We are pleased with the performance in light of the industry challenges given the contrast shortage. For Teleflex, the contrast staff shortage impact was immaterial, and we see the situation continuing to improve. We remain on track to achieve high single-digit to low double-digit constant-currency growth in our Interventional business for 2022. For MANTA, our large bore closure device, we see approximately 50% growth on a full year basis. Now turning to Anesthesia. Revenue was $104.7 million, up 14.4% year-over-year, despite a challenging year-over-year comparison. Of our larger franchises, hemostatic product, atomization and LMA reusable mask all contributed to growth in the second quarter, partly offset by lower sales of tracheostomy products. Hemostatic product revenue increased sequentially and exceeded expectations for the quarter. In our Surgical business, revenue was $99.6 million, representing 5.9% growth year-over-year after a 39% constant-currency comp last year. Among our largest product categories, instruments led the growth for the quarter. Metal and polymer ligation kits maintained growth despite the tough year-over-year comps and the COVID-related lockdown in China during the quarter. For Interventional Urology, revenue was $79.8 million, representing a quarter-over-quarter increase of 6.9% but a decrease of 13.2% year-over-year and below our internal expectations. We did not see the recovery in the operating environment in our Interventional Urology business that we were expecting during the second quarter. April was somewhat faster than our plan. We saw some stabilization in May offset by the COVID-19 impact. But finishing out the quarter, June was unexpectedly weaker and well below our expectations. Looking at the revenue composition of UroLift, we saw year-over-year revenue declines in all sites of service during the quarter, including hospital, ASC and physician's office. We have identified a number of factors that contributed to the revenue performance in the quarter. First and foremost, the broad-based recovery in overall urology procedures that we assumed in our guidance did not materialize. Most investors familiar with Teleflex will be aware that urology procedures in 2021 remained below 2019 level. We had anticipated patient visits to urology practices to improve year-over-year as we moved through 2022. However, we actually witnessed a drop in patient flow to urologists in the second quarter, which impacted UroLift procedures. In addition, while BPH remains in the top 4 disease states treated by urologists, higher-acuity conditions that require immediate attention such as kidney stones, blood in the urine and prostate cancer continue to be prioritized. Second, UroLift procedures continue to be hindered by COVID disruptions, including procedure cancellations in late May and the continuation of staffing shortages. We conducted an internal survey with just over 100 urologists responding in the second quarter. Of the respondents, over 50% indicated that they were understaffed. Third, we initiated a voluntary recall in June of certain identified lot of our UL400 UroLift System, which is a first generation UL1 device. Although immaterial to Teleflex, this created some disruption for the UroLift sales force during the second quarter as they managed the recall activities. The UroLift issue was brought to our attention through our internal quality monitoring process, which identifies the potential where, upon implant deployment, the affected devices may not properly deliver an implant. The issue is immediately obvious to the surgeons and impact implant delivery at the time of the procedure. It has no impact on a UroLift implant once it has been properly delivered and tensioned. As a result of our root-cause investigation of the issue, we have isolated an out-of-specification product tool on 1 production line at 1 facility. We otherwise remain in production for the UL400 device. We have adequate levels of inventory of unaffected products available so we do not foresee any supply constraints associated with providing replacement products for our customers affected by the recalls or in satisfying future customer orders. To confirm, the recall has not had and is not expected to have a material impact on our consolidated financial results or operations. Importantly, the UroLift 2 system is not subject to recalls due to a different manufacturing process. OEM revenues increased 17.6% year-over-year to $70 million due to strong double-digit growth across all product categories. Our order book remains well positioned as customers recognize our broad competencies with competitive capabilities across our market. I would like to emphasize that the acquisition of HPC has been an excellent addition to the business. The integration has been completed, and we are participating in fast-growth markets for thin-wall interventional microcatheters to access small vessels and fine wire for sensing and ablating technology. And finally, our other category, which incorporates sales of respiratory products not included in the divestiture to Medline, urology care and manufacturing and supply transition agreement revenues related to the Respiratory business divestiture. Second quarter other revenues declined 10.9% to $72.1 million year-over-year. The decline reflects the loss of revenue due to the divestiture of respiratory products, partly offset by manufacturing and supply transition agreement revenues. We continue to expect all MSA revenues will phase out at the end of 2023. That completes my comments on the second quarter revenue performance. Turning to some commercial and clinical update, and starting with UroLift. With respect to our market development objective for UroLift, we were pleased with our progress during the quarter. We continue to get excellent feedback from surgeons regarding UroLift 2 as well as the UroLift Advanced Tissue Control for use in obstructive median lobe. We believe that the launch of the UroLift 2 and the Advanced Tissue Control will enable us to further engage with surgeons and drive utilization deeper into our labeled indication. In fact, during the second quarter, we have seen procedure growth in accounts that have converted over to UroLift 2 that is greater than for accounts that have not yet made the switch. Based on our progress at the end of the second quarter, we are confident in our ability to convert the vast majority of our U.S. customers to UroLift 2 by the end of 2022. In turn, we expect a 400 basis point margin expansion for Interventional Urology associated with the UroLift 2 conversion when our U.S. base is fully switched over. In addition, we have seen that our patient response to our direct-to-consumer programs are running ahead of our plan for the first half of 2022. We were also pleased with our new surgeon training in the first half of the year. Of note, during the second quarter, we hosted our first BPH summit since the pandemic began, with over 80 physicians attending the live events. And given that recent success, we will be hosting another BPH summit in the second half of 2022. From a clinical perspective, UroLift remains differentiated from other outpatient BPH treatments with strong clinical results, studies showing rapid symptom relief and recovery, no new sustained sexual dysfunction and durable results. Our review of the clinical data from recent urology meetings indicate that real-world results continue to approximate the LIFT pivotal trial with regard to retreatment rate. We recently highlighted a number of studies at the European Association of Urology Annual Meeting. Of note, our real-world retrospective study included patients with varying prostate sizes and morphologies across 22 international sites. Our retrospective review of UroLift cases was performed after subdividing patients according to prostate size, ranging from less than 30 ccs to more than 80 ccs, and obstructive median lobe and lateral lobe obstructions. IPSS improved significantly for all volume groups at 24 months. Now turning to an update on our international expansion strategy for UroLift. We are in the early stages of a multiyear multi-geography international market expansion, which is expected to be a meaningful driver of growth in the coming years. The launch of UroLift in Japan, which began in April 1, is tracking to our plan, and we are very encouraged with the results thus far. We continue to engage with key opinion leaders, and cases are continuing to ramp up. The feedback from these initial cases has been overwhelmingly positive, and we are again getting strong responses to the performance of the UroLift 2. Indeed, I recently met personally with 19 urologists during a recent visit to Japan and was very encouraged by the commentary following their initial UroLift cases. Although we consider 2022 as a building year for Japan, we remain excited about our prospects for 2023 and beyond. Japan remains an important long-term opportunity for UroLift with a $2 billion TAM, and we are excited to bring this clinically beneficial treatment to those suffering with BPH. Shifting to other international geographies. We remain on track for our expected UroLift commercial milestones, including the launch of UroLift in China and updated reimbursement in France during the fourth quarter. Moving on to some reimbursement update. On July 7, CMS issued its 2023 physician fee schedule proposed rule, which was in line with our expectations. CMS proposed a reduction in the conversion factor by 4.4% in 2023 as it continues the four-year cave-in associated with the 2022 final rule. We will continue our efforts to engage CMS alongside a broad number of stakeholders to provide our position that the cut reimbursement for over 600 common office space procedures will result in migrating to higher-cost sites of service and limit options for senior citizens in the United States. CMS also issued its 2023 outpatient prospective payment system proposed rules, which was published on July 15. In this case, the facility fee was increased by an average of 2% in the ASC and 3% in the hospital outpatient setting. These rules are open to public comments through September 2022 and do not come into effect until 2023. Considering the proposed changes to the 2023 physician fee schedule and OPPS, UroLift continues to be the most profitable minimally invasive treatment adoption for BPH that does not require an overnight stay in the hospital. Turning to our Interventional business. We've announced the MANTA Ultra Study in June. This study, which is expected to enroll up to 150 patients in 15 investigational sites, is intended to demonstrate the safety of MANTA ultrasound-guided closure, without dependence on pre-procedural depth locator measurements. As noted in our press release announcing the study, the occurrence of access site complications is known to be associated with higher rates of morbidity and mortality and increased costs associated with prolonged length of stay. In addition, we received Health Canada approval for MANTA in May, which will help us continue to build momentum for our large bore closure device globally. That completes my prepared remarks. Now I would like to turn the call over to Tom for a more detailed review of our second quarter financial results. Tom?

Liam Kelly:

Thank you, Tom. In closing, I will highlight our 3 key takeaways for the second quarter and our 2022 outlook. First, our diversified product portfolio enables Teleflex to deliver constant-currency growth of 2.3% in the second quarter despite meaningful macroeconomic headwinds. Moreover, when adjusting for the headwind from the Respiratory divestiture, the underlying business growth was 3.5%. Second, we will continue to effectively manage the business and look for ways to minimize incremental headwinds from inflation and supply chain challenges. While the near-term UroLift revenue results are disappointing, our guidance implies an improving growth trajectory in the second half of the year. Moreover, we are well positioned when the macro headwinds for the urology market abate. Third, we continue to execute against our long-term growth strategy. We will continue to incrementally invest in our high-growth portfolio and drive dependable expansion in our durable core portfolio. We have levers in place to drive further expansion in our margins, and our balance sheet is in a solid position with leverage at 1.8x, providing ample financial flexibility for our capital allocation priorities, including mergers and acquisitions. That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q&A.

Cecilia Furlong:

Liam, I did want to start with UroLift. And really looking to just get a bit more color in terms of how you're thinking about the back half, the revised guidance, but either contributions from backlog coming back in, either ramping volumes under your prior high-volume utilizers, DTC, just kind of a balance of how you're thinking about the environment and then really also just your longer-term view on that 15% growth for the overall business, how you're thinking about potential backlog recapture in '22 and beyond.

Operator:

Our next question comes from Jayson Bedford from Raymond James.

Liam Kelly:

Yes, we can hear you, Jayson. Thank you.

Liam Kelly:

So Jayson, we're very pleased with the rate of conversion that we're seeing right now. We are actually slightly ahead of our plan -- our internal plan that we laid out at the beginning of the year. What we're seeing is that when surgeons move over to the UL2, it's also an opportunity for us to introduce the Advanced Tissue Control. And the combination of those 2 new products is actually driving greater throughput in those practices. It's a combination of the sales force reengaging with the surgeon. And it's also a combination of expanding the size and complexity of prostates that surgeon is willing to treat because the outcomes on the UL2 are actually better than the UL1, and obviously, they feel much more comfortable doing median lobes with the Advanced Tissue Control. So we're ahead of our plan, and we do envision having the bulk of the North American -- the U.S. market converted by the end of this year. And that will also result obviously in that 400 basis points in margin expansion for the UroLift products.

Liam Kelly:

So the strategy is as it was because it is working insofar as we did see sequential improvement from Q1 to Q2. UroLift actually grew 7% quarter-over-quarter. And we have to bear in mind they had a really tough comp in the prior year, it grew 120 -- over 120% in the prior year, was below our expectations. But what we're seeing with physicians is that they are actually -- the new docs that are trained -- we're actually seeing an improvement in the cases per physician from the new docs trained. And we've also brought on a larger number of high-volume docs within quarter 2. So therefore, that's what gives us the encouragement for the improvement -- the sequential improvement in Q3 and the further sequential improvement in Q4, Jayson.

Matthew O'Brien:

Just to continue along the UroLift questioning. I'll ask my questions upfront. Liam, going down $60 million for the year roughly for UroLift, how much of that is just the volume impact that you're seeing on the folks going into urologists versus maybe losing a few people because of the recall or competitive launches versus reimbursement headwinds? And then just to be -- the second question, just to put a finer point on it, can you still grow UroLift 15% in '23, '24 and '25 like you mentioned at the Analyst Day?

Operator:

Our next question comes from Shagun Singh from RBC Capital Markets.

Liam Kelly:

Okay. I'll ask Tom to answer the FX and inflation. I'll take the couple of macro questions. So in relation to if we enter into a recession, I think that Teleflex is well positioned. Normally, medical devices -- no industry is immune to a recession and the impact, but I think medical devices in general have been cushioned from the impact of a recession. I think Teleflex in particular will be even more cushioned than other types of medical device company. And the reason I say that is that Teleflex, our whole portfolio is skewed towards the elderly population. And normally, when you go into -- if you look at the last recession and if you look at unemployment rates -- and the reason I'm citing unemployment rate is because it impacts insurance for those individuals. So if you look at the last recession, unemployment went up to about 11%. But if you look at the demographics, those over the age of 55, unemployment was about 7%. And it was double that for those under the age 55. And because our portfolio is skewed towards that population, I think we would be somewhat -- not completely insulated but somewhat protected from a recession. Regarding that question specific to UroLift, with 12 million men in the United States suffering from BPH and 100 million globally, there's enough of a patient population there to continue to grow UroLift even in that type of an environment. Regarding your question on M&A in the current environment, obviously, interest rates have gone up so the cost of funding has increased. I do think though that the environment is more receptive to more appropriate valuations right now than it has been at any time in the past. And as I said in my prepared remarks, we are active out there right now. We feel good about the environment. Our leverage is 1.8x so we have firepower. We are chasing assets at the moment. We are looking at scale transactions, tuck-in transactions. And as you heard in my prepared remarks, we announced a late-stage technology and a dealer to direct, not that material for Teleflex but nonetheless an indication that we're active out there in the market looking at M&A in this current environment. And I'll ask Tom to answer the FX and inflation question. If you don't mind, Tom.

Operator:

Our next question comes from Matthew Mishan from KeyBanc.

Liam Kelly:

Okay. So on Interventional, you are correct, it's an accelerating back half of the year. Obviously, one of the contributors to that is MANTA. As we said, we expect MANTA to grow in and around that 50% mark and will drive a significant proportion of the growth. We also have some supply chain disruption for some of our products in the second quarter that will flush out in the back half of the year. And the Langston product is returning to the market also in the back half of the year, which drives that acceleration. And there's a little bit of comp year-over-year that helps as well, Matt, but we're confident that Interventional access will get to high single digits, low double digits in the back half of the year from a revenue perspective.

Thomas Powell:

Well, for the full year, right now, cash flow from operations is in the $400 million to $450 million range, with CapEx in the $75 million to $80 million range. Some of the things that impacted the first quarter and first half will also play out in the full year as to why it isn't as strong as last year

Michael Polark:

Two quick follow-ups on UroLift and then one bigger-picture question, if I may. Just the recall, was it fully sorted exiting June? Or is there a tail to complete July, August? And then July, any -- will you hazard a comment on UroLift volume thus far in July? And then the broader question is just -- you made a comment or 2 about favorable benefit so far from certain pricing actions. Can you just remind us broadly across the portfolio what you're doing there, order of magnitude? What kind of benefit are you driving towards? And what's kind of the -- over what time horizon might those benefits start to manifest in the numbers?

Operator:

Our next question comes from Craig Bijou from BofA Securities.

Liam Kelly:

No, absolutely. And just to level set, so we were off the quarter by around $14 million. And when we gave our guidance at the beginning of the year -- and you're right, we reaffirmed it at the Analyst Day in quarter 2. We did anticipate an improving environment from April to June. So April was slightly below our plan. May did improve despite cold cancellations within the month of May, but we did not see the expected improvement in June. June was not a good month for UroLift, to be fair. In actual fact, June was worse than either of the 2 months and decelerated. We did get a little bit of an impact from the recall, just sales time from the recall. But I think the more significant factors were the ones that I pointed to

Liam Kelly:

So I might ask Tom to cover that. If you don't mind, Tom.

Operator:

Our next question comes from Richard Newitter from Truist.

Liam Kelly:

Yes. So I'll start with retreatment rates. The Kaplan study, which was a 35,000-patient retrospective study clearly demonstrated that retreatment rates for UroLift were very similar to TURP and were well below the retreatment rates for other technologies that are out there in the marketplace. With regard to share shift, no, Rich, plain and honest answer, we haven't seen any share shift in the marketplace. We've analyzed our -- all of the accounts within -- that do business with UroLift and Teleflex, and we have not seen share shift within our existing accounts. We firmly believe that it is end market dynamics that are having the impact on UroLift and the postponable nature of the procedure. So yes, I think that would be the case.

Michael Matson:

So I have two questions. I'll just ask them both. So first on UroLift. I mean the DTC, I mean you're talking about these metrics and that you're running ahead of expectations and so forth. But I mean, I guess, I'm just wondering -- we're almost a year into this now. I mean what's happening with these patients? I mean shouldn't the ultimate measure or metric here be the procedure growth, I mean, which is negative? So are these patients just not scheduling with their urologists yet? Or are the urologists turning them down because they're too busy doing other procedures or something? And then my second question is not on UroLift but just on Vascular Access. You saw slower growth, and you called out some factors there that caused that. Just wondering if that would potentially continue beyond the second quarter.

Operator:

That is all the time that we have for questions this morning. I will hand it back to Lawrence Keusch for any final remarks.

Operator:

Our conference call for today is now concluded. Thank you all for your participation. You may now disconnect.

Disclaimer*:

This transcript is designed to be used alongside the freely available audio recording on this page. Timestamps within the transcript are designed to help you navigate the audio should the corresponding text be unclear. The machine-assisted output provided is partly edited and is designed as a guide.:

Lawrence Keusch:

00:32 Good morning, everyone and welcome to the Teleflex Incorporated first quarter 2022 earnings conference call. The press release and slides to accompany this call are available on our website at teleflex.com. As a reminder, this call will be available on our website, and a replay will be available. Please refer to our press release from this morning for details on how to access the replay. 00:59 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'll open the call to Q&A. 01:16 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 our slides. 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. 01:40 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. During this conference call, you will hear management make statements regarding intra-quarter business performance. Management is providing this commentary to provide the investment community with additional insights concerning trends and these disclosures may not occur in subsequent quarters. 02:17 With that said, I'll now turn the call over to Liam for his remarks.

Thomas Powell:

17:55 Thanks, Liam, and good morning. Given the previous discussion of the company's revenue performance, I'll begin with margins. As anticipated, gross and operating margins declined year-over-year in the first quarter. For the first quarter, adjusted gross margin totaled 58.4%, 100 basis point decrease versus the prior year period. The year-over-year decrease was the result of incremental inflation in freight, raw materials and labor, partially offset by favorable pricing. 18:27 As expected, inflation was the largest contributor to the year-over-year decline in gross margin for the first quarter. As previously mentioned, our 2022 guidance contemplates a 70 basis point impact to gross margin from incremental inflation. 18:44 Adjusted operating margin was 25.7% in the first quarter, 180 basis point year-over-year decline as a result of the lower gross margin and planned investment in the business for our growth drivers, partially offset by disciplined expense management. 19:01 Net interest expense totaled $10.2 million in the first quarter, a decrease from $16.1 million in the prior year period. The year-over-year decrease in net interest expense reflects savings from the early redemption of the 2026 senior notes and the impact of reductions to outstanding debt using the proceeds of the respiratory divestiture and operating cash flows. 19:24 Our adjusted tax rate for the first quarter of 2022 was 11.9%, compared to 13.9% in the prior year period. The year-over-year decrease in our adjusted tax rate is primarily due to further enhancements in tax efficiencies of our global structure, partly offset by costs arising from the new provision of the U.S. tax law requiring the capitalization of certain R&D expenses. At the bottom line, first quarter adjusted earnings per share was $2.88, which was relatively flat year-over-year. 19:59 Turning to select balance sheet and cash flow highlights. Cash flow from operations in the first quarter was $62.1 million, compared to $110.8 million in the prior year period. The decline was primarily attributable to unfavorable changes in the working capital driven by higher bonus payments in the first quarter, due to improved performance in 2021 versus 2020. Also impacting cash flow was increase to our inventory levels provide support for future growth and to minimize potential impact from supply chain disruptions. 20:35 Moving to the balance sheet. Our financial position remains healthy. At the end of the first quarter, our cash balance was $466.7 million, as compared to $445.1 million at year-end 2021. Net leverage at quarter end was approximately 1.7 times, which remains well below our 4.5 times covenant. 20:57 Now moving on to our 2022 guidance. We are reaffirming our expectation for constant currency revenue growth of 4% to 5.5% in 2022. In addition, we still expect reported revenue growth of 2.3% to 3.8% in 2022, implying a dollar range of $2.874 billion to $2.917 billion. Excluding the year-over-year headwind in the respiratory divestiture, our underlying constant currency revenue growth is still expected to be 5.5% to 7%. 21:33 Moving to earnings, we are reaffirming our adjusted earnings per share guidance of $13.70 to $14.30 for 2022, a 2.8% to 7.3% year-over-year increase. Our guidance continues to include headwinds from the respiratory divestiture inflation that together represent roughly $0.50 in 2022. Earnings per share growth excluding the respiratory divestiture and the incremental inflation is expected to be approximately 7% to 11%. 22:06 And that concludes my prepared remarks. I would now like to turn it back to Liam for closing commentary.

Operator:

23:48 Thank you. [Operator Instructions] Our first question today comes from Jayson Bedford from Raymond James. Your line is open.

Liam Kelly:

24:55 So, Jayson, thanks for the question. So first of all, I would say that we feel really confident in our full year UroLift guidance. I think the year is playing out pretty much as we expected year-to-date. January was impacted by COVID over the first two months -- or two weeks of February. But we still ended up with a positive growth slightly ahead of our expectations, due to the strength that we saw as we went into March. Nothing has changed in our outlook, Jayson. We still expect the first half of the year to be low-single digits and we expect to see an improvement in the second half culminating in the full-year growth of 15%. The acceleration in the second half is really due to the second part of your question. We will be out the other side of COVID, patient confidence we see recovering and we definitely see procedure volume start to come back into the fold. 25:53 During quarter one, I was out on the road and I met with 32 urologists, Jayson. And it's hard not to feel enthusiastic for the recovery in the back half of the year given what I heard from those urologists. They realized that urology procedures are beginning to come back. Patient confidence is beginning to come back. And so I think I'll finish by saying on your question by saying, yes, feel really good about 15% in the back half of the year. 26:22 And you know that if you go into Q3, Jayson, it's simply a question of math. If you remember Q2 last year, we did $94 million -- $92 million and Q3 last year was $83 million. So the majority of the growth just comes from run rate as you go from Q2 into Q3. And then you will see in the back half, I think Q4, you normally get an uptick in Q4. And as people use their deductibles that fuels that and you would also expect existing dock utilization to pick up as we see DTC start to flush through as well. So all of the metrics tell us the 15% is good, Jayson, and we feel really confident on it.

Liam Kelly:

27:24 No the market has not. If anything I feel good, I feel a lot better than I did last year about the markets. You're right, our leverage is now low now to 1.7 times. So in order to do M&A, the most important thing you need is firepower. We are chasing assets, I can't tell you when we get efficient to both, but we've got a lot of -- got lines out there, with very attractive hooks on them. We will maintain our financial discipline, Jayson. And I think that the heady nature of the IPO market that we saw in 2021 has moderated. So therefore we think it's a good environment for Teleflex with the firepower we have to continue to do M&A. Obviously, we'll continue to fund R&D, we will continue to fund our restructuring programs as well, but our main focus right now is out there looking for a nice -- a good M&A opportunity, scale tuck-in, dealer to direct and also late-stage technologies.

Cecilia Furlong:

28:33 Hey, good morning and thank you for taking the questions. Liam, I wanted to continue a bit just your near-term outlook as you think one about trying to impact on staffing shortages. If you could just talk about the puts and takes specifically for 2Q as we think about it, and also for UroLift, just the potential for staffing shortages to impact that market near-term and then looking beyond 2Q as well?

Cecilia Furlong:

31:00 Thank you. And if I could follow-up as well on MANTA just off of the investment in the back half of last year. How are you thinking about growth to that profile of that business unit for 2022? And thank you.

Operator:

31:52 Our next question comes from Shagun Singh from RBC Capital Markets. Please go ahead.

Thomas Powell:

32:42 Well, I would first of all say that with respect to the EPS, we're really pleased with the first quarter results despite the challenging environment from COVID, constant currency revenue growth was at 5.8% after adjusting for the sales of the respiratory assets in one less shipping day. Also say expenses were fairly well aligned with expectations. Now with that being said, foreign exchange and interest rates have been fairly volatile of late to your point. And as a result, we'd like to give ourselves another quarter to see how things are playing out before we would make any adjustment to earnings. 33:19 As we think about foreign exchange, we had given guidance at the beginning of the year and that was set when the euro was at $1.12. We had mentioned that at that point, it would be 170 basis point headwind to revenue and 20 basis point headwind to EPS. The rule of thumb that we've given in the past is as the euro moves and this obviously can be offset or somewhat offset or further impacted by other currencies as well, but the rule of thumb on the euro is that for every penny move, it's about $0.05 impact full-year to earnings. 34:00 Now given that we've already passed through one quarter, I'd say it's probably $0.035 to $0.04 per penny of euro. And again, this amount may be partially offset by some other currency moves throughout the world. But I'd say that as we think about the guidance that we just gave and reaffirmed, we're reflecting what we're seeing from an inflationary environment and that assumption is that the inflationary environment that we experienced in the first quarter of the year will largely remain throughout the balance of the year. And that's factored into our guidance.

Larry Biegelsen:

34:46 Good morning, thanks for taking the question. Just one for me, Liam, you've got an Analyst Meeting coming up here next month. Just at a high level, any thoughts on how you're feeling about kind of the 6% to 7% LLP growth algorithm and street models right now are assuming about 100 basis points leverage per year after 2022. Any thoughts you can provide as we head into that meeting would be appreciated. Thanks so much.

Larry Biegelsen:

36:47 All right. Thanks so much for taking the question.

Operator:

36:52 We now turn to Matt O'Brien from Piper Sandler. Your line is open.

Liam Kelly:

37:26 Can you just repeat the last part of your question? Meaningful transitions --

Liam Kelly:

37:33 Yes, thank you very much. So really what we saw with, as I said earlier, in my commentary, we still expect UroLift in the first half of the year to grow low single-digit growth and then to accelerate in the back half and we're very confident on the 15% for the full-year. And it's really playing out as we anticipate as a company. Obviously, Q1 was impacted by COVID in January and early February. We were encouraged by what we saw in March. March did show the green shoots of recovery. Also our strategy that we've implemented on focusing on existing users and training those 900 docs that were brought on during the pandemic is also showing some early green shoots and we're encouraged by what we're seeing there. 38:25 We're driving doc utilization on UL 2 and ATZ. And obviously our DTC campaign is adding to our confidence in the growth for UroLift. I'm really pleased to report that we have seen no shift in site of care and we do not anticipate seeing any shift in site of care. The vast majority of our office based urologists have signed up to our new pricing strategy and that is now implemented and being rolled out to its full. So no shift in site of care, don't expect any shift in site of care for the remainder of the year. And again I'll reiterate feel good about 15%.

Liam Kelly:

39:38 So my father used to say that a good start is half the battle. And we've had a good start to our pricing and the rollout of our pricing and I feel really encouraged by that. In regard to your question about how it impacts inflation, so we're expecting 50 basis points of positive pricing and we're expecting 70 basis points of inflation and it's already baked in to our forecast. I think that there is -- Teleflex has always been a company that's been able to deliver positive pricing. And I think if inflation gets worse, I do believe that there is some flexibility for us to increase our pricing in the future.

Matthew Mishan:

40:28 Good morning and thanks for your questions. Liam, could you talk to us some of the dynamics of the Interventional segment and how we should be thinking about growth in that segment for 2022?

Matthew Mishan:

41:39 Okay. Excellent. And then on Anesthesia, can you talk about Z-Medica versus the broader Anesthesia portfolio and how that did in the quarter?

Operator:

42:37 Our next question comes from Richard Newitter from Truist. Please go ahead.

Liam Kelly:

42:46 Welcome back, Rich.

Liam Kelly:

43:41 So the way I look at it Rich is, we're very confident on growing at 15% this year. And this year it's all about the U.S. You will get a small contribution for overseas with Japan will ramp a little bit this year. You'll see France in the back half of the year a little bit from Brazil, Italy and Spain. And then you'll see China get the registration next year and we'll go into that market. And the way I look at it is we'll finish this year. We believe we'll get 15% growth, hopefully we'll be inside of COVID and it will be in the rearview mirror. You head into the following year, you'll have an easier comp in the U.S. in the first year and then you should see some contributions begin to ramp up in the international markets. 44:27 And Rich, it's great to have you back, but if you would just be a little patient for another couple of weeks and I'll tell you what UroLift is going to do over the next three years at the Analyst Day when we all get together in New York.

Liam Kelly:

45:16 Yes, we began the year, Rich, by expecting our Surgical business to be low-single digit growth. The first quarter came out little bit ahead of our expectations and it was really driven by strong growth in APAC and the U.S. as procedures continue to recover. And also we saw some pricing benefit. This is one of the areas we always start to take pricing. We still expect lower single digits in the full-year, but maybe a good execution and again back to my earlier comment on pricing, if we can sustain it little bit better for the remainder of the year, we may get to the mid single-digits with good execution in our Surgical business which would be a really good performance for that business overall. 45:56 So, again a good start as half the battle, as my father says, and Surgical definitely had a good start, but we still expect low singles maybe get to mid with good execution as we go through the year. And on the full-year basis, again as I said earlier, we feel really good about our -- the broad-based recovery and we feel really good about our full-year guidance and Surgical is no different than the total of Teleflex.

Mike Matson:

46:30 Yes, thanks for taking my questions. I guess I'll ask another one on UroLift. So you've ramped up the DTC advertising. It seems like there is a little bit of a conundrum here, because that the timing of when -- I think of when you kind of ramp that up was coincided with a lot of these COVID impacts and a slowdown in the growth. And I understand what's happening there and the sensitivity to the infection rates and whatnot. But I guess what gives you confidence that the DTC ads are actually proving effective and you're getting adequate return on the investment?

Mike Matson:

48:41 Okay, got it. And then just wanted to ask about consensus for the second quarter, I didn't really hear any kind of commentary around where we should be modeling. I think -- I know you don't give any kind of quarterly guidance, but you do have a bit of a tougher comp for the second quarter. Are you okay with top and bottom line consensus estimates for that -- for the second quarter?

Operator:

49:19 That's all the time we have for questions this morning. I'll now hand back to Mr. Lawrence Keusch for closing remarks.

Operator:

49:39 Our conference call for today is now concluded. Thank you all for your participation.

Operator:

Good morning, ladies and gentlemen and welcome to the Teleflex Fourth Quarter of 2021 Earnings Conference Call. At this time, all participants have been placed in a listen-only mode. 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 would like to turn the call over to Mr. Lawrence Keusch, Vice President of Investor Relations and Strategy Development.

Liam Kelly:

Thank you, Larry and good morning, everyone. It's a real pleasure to speak with you today. For the fourth quarter, Teleflex generated 7.9% constant currency revenue growth year-over-year and increased 10.4% over the comparable period in 2019. In the quarter, there was one extra shipping day which added approximately 1% to the year-over-year growth rate. Adjusted earnings per share rose 10.8% year-over-year. Our fourth quarter performance was driven by the company's balance of growth drivers, broad portfolio of medically necessary products and categories leadership, offset by the impact of COVID-19 and the divestiture of the respiratory assets. As we had anticipated at the time of our third quarter earnings report, COVID-19 remained a headwind during the fourth quarter and elective surgical procedures did not return to comparable 2019 levels. Specifically, COVID cases increased significantly during December in geographies with large populations, including the Northeast, Florida, Texas and California, as COVID spread quickly through these regions. We also saw increased staffing charges as COVID infections accelerated quickly in the latter portion of the quarter. Teleflex executed well in the quarter with dependable service levels to our customers while managing supply chain challenges, freight logistic delays and responding when COVID infection rates began to accelerate. Of note, when excluding UroLift which is the product that was most impacted by the pandemic, revenues from the remaining business grew over 9% on a constant currency basis in the fourth quarter year-over-year. Turning to our performance in 2021. Although the year presented challenges, I am proud to say that Teleflex executed very well. We confronted the unprecedented market disruption head-on as the pandemic continued to ebb and flow. We remain diligent and flexible in order to support our customer needs and keep our workforce safe. We responded effectively as freight and raw material supply challenges escalated through the year. Throughout the year, we stayed true to our objectives by advancing our strategy of driving durable growth, expanding margins and remaining good stewards of our balance sheet. During the year, we invested in our growth drivers, executed on our overseas strategy and rolled out new products. Our customers remained our focus and Teleflex team members enabled us to supply customers with products necessary to care for their patients. We continue to optimize our portfolio with the integration of HPC and Z-Medica acquisitions and we divested certain low growth and low margin respiratory assets. And we did not take our eyes of our people as we fortified our culture and advanced our ESG initiatives. From a financial perspective, we delivered on our full year 2021 financial commitments with constant currency sales growth of 8.8%, adjusted operating margin expansion of 310 basis points and adjusted earnings per share of $13.33, a 24.9% increase year-over-year. None of this would be possible if it were not for the tireless efforts of the global Teleflex team. I would like to thank our employees for their hard work and dedication during 2021 and throughout the pandemic. Turning now to a deeper look at our fourth quarter revenue results. I will begin with a review of our reportable segment revenues. All growth rates that I refer to are on a constant currency basis unless otherwise noted. During the fourth quarter, our Americas, EMEA, Asia and OEM segments demonstrated resilience with all regions showing constant currency revenue growth over 2020 when excluding the impact of the extra shipping day despite the continued headwinds from COVID. As I mentioned earlier, this underscores the benefits of our diversified product portfolio. Americas revenue was $451.7 million in the fourth quarter which represents 7.6% year-over-year growth. Contributors to the year-over-year growth were Surgical, Vascular and Interventional, partially offset by the impact of COVID-19. EMEA revenues of $164.5 million increased 4.8% year-over-year with Interventional, Surgical and Vascular Access products leading the growth. EMEA continues to face a headwind from COVID-19. Although procedure volumes improved year-over-year as countries across the region continued to open up. Excluding the impact of the respiratory divestiture, revenues rose 8.7%. Turning to Asia; revenues were $78.5 million, increasing 0.5% year-over-year. Excluding the impact of the respiratory divestiture, revenues rose 6.7%. Let's now move to a discussion of our fourth quarter revenues by global product category. Consistent with my prior comments regarding our reportable segments, commentary on global product category growth will also be on a constant currency basis and ranked by size of our business units. Starting with Vascular Access; fourth quarter revenue increased 6.4% to $193 million. Our category leadership in central venous catheters and midlines, along with our novel coated PICC portfolio continued to position us for dependable growth. The PICC portfolio continues to perform well with 11% growth year-over-year as we continue to invest behind our differentiated portfolio and are gaining market share. Intraosseous continues to be a dependable growth driver, with fourth quarter revenues rising approximately 17% year-over-year. Moving to Interventional; fourth quarter revenue was $114.9 million, up 8.2% year-over-year. We executed well during the quarter and saw a strong demand for our complex catheters and balloon pumps. We continue to invest behind our interventional portfolio, including complex catheters and MANTA, our large foreclosure device. MANTA momentum remains strong, both in the U.S. and in international markets, with growth of approximately 45% year-over-year. Of note, we exceeded our objective for 8% share in 2021 of the $200 million to $300 million global market opportunity. Turning to Anesthesia and Emergency Medicine; fourth quarter revenue was $102.8 million, up 20.5% year-over-year. Hemostat products drove the growth in the quarter, offset by tough comparisons in the airway business and lower sales of tracheostomy products. For the full year, Hemostat revenues were approximately $66.5 million and fell squarely into the $60 million to $70 million range that we had established coming into 2021. In our Surgical business, revenue was $106.4 million in the fourth quarter, representing 16.1% growth year-over-year. Among our largest product categories, we continue to witness robust growth in sales of our instruments and ligation clips as the elective surgical procedure environment was stronger than in the prior year period and hospital capital spending increased. For Interventional Urology; fourth quarter revenue was $92.9 million, representing a decrease of 1% year-over-year and a 12% increase sequentially. This result was above the $85 million to $91 million implied guidance for the quarter. We saw a clear improvement in UroLift procedure trends during October and November when compared to the third quarter. However, December was negatively impacted year-over-year by the surge in COVID-19 with continued staffing shortages and an increase in procedure cancellations. Of note, we did not see any pull forward of UroLift procedures into the fourth quarter of 2021 from 2022, resulting from the announcement of the Medicare physician fee schedule final rule in November. OEM revenues increased 3.9% year-over-year to $67.2 million in the fourth quarter as customer demand remains strong across our portfolio. We remain well positioned with broad capabilities in our markets, including faster growth opportunities in thin walls, advanced interventional microcatheters used in neurovascular and other applications. And finally, our other category which incorporates sales of respiratory products not included in the divestiture to Medline, Urology Care and manufacturing and supply transition agreement revenues declined by 12.2% to $84.7 million year-over-year. The decline reflects the loss of revenues due to the divestiture of the respiratory products, partially offset by manufacturing and supply transition agreement revenues and growth in Urology Care. We continue to expect manufacturing and supply transition agreement revenues to phase out at the end of 2023. That completes my comments on fourth quarter revenue performance. Turning now to some commercial updates and starting with UroLift. As we reflect on 2021, we continue to see COVID-19 as being the most disruptive force on the Interventional Urology business. Given the deferrable nature of BPH treatments, patient willingness can modulate depending on the severity of the pandemic. Our experience has shown that when COVID infections pick up, UroLift procedures are negatively impacted. And then recover when COVID case counts drop. In addition, staffing charges which we identified in the second quarter created business disruptions, particularly in our office site of service. Importantly, our analysis continues to confirm that we have not lost share completing device-based treatment for BPH. For 2021, UroLift revenues increased 18% year-over-year despite the broader category for urology procedures remaining below pre-pandemic levels. We continue to see UroLift positioned for accelerating growth as pandemic headwinds abate. COVID has remained a headwind early in the first quarter but we anticipate improvement in sales trends throughout the year as elective surgical procedures become less disrupted. UroLift remains differentiated from other outpatient BPH treatments with strong clinical results, studies showing rapid symptom relief and recovery, no new sustained sexual dysfunction and durable results. Investors familiar with Teleflex will be aware that UroLift is being positioned for patients that are suffering with BPH and have failed or are not satisfied with drug therapy. In 2022, we will be intentionally laser-focused on improving utilization of existing UroLift users and driving increased productivity of surgeons that were trained in the midst of the pandemic. We will also fully engage our sales organization to advance the rollout of UroLift 2 with conversion of the vast majority of the U.S. users anticipated by the end of 2022. UroLift 2 remains an important margin driver and we remain positioned to generate 400 basis points of UroLift gross margin expansion once the U.S. user base is fully converted. We believe that a tactical approach to moving our existing UroLift users back towards pre-pandemic procedure levels is the most efficient way to improve growth in 2022. As for our consumer marketing efforts, we continue to view direct-to-consumer as a multiyear catalyst for UroLift in the U.S. For 2021, we exceeded all of our internal targets for the DTC campaign and I would like to share a couple of highlights. Impressions increased nearly 200% year-over-year and exceeded our 150% objective. Likewise, UroLift brand awareness increased 60% year-over-year to 16% and has surpassed 14% per TARP which declined 600 basis points in 2021. Importantly, our DTC programs are extremely focused on driving revenue for Teleflex. Since the vast majority of our customers only offer UroLift for minimally invasive treatment of BPH. We will continue to fund our DTC campaign in 2022 and retain our flexibility to flex up and down depending on the macro environment. Additionally, our international market expansion remains active with several milestones expected for 2022. In Japan, we continue to make progress towards an upcoming commercial launch for UroLift. We secured reimbursement for UroLift last December and have a team in place to initiate our rollout launch once the reimbursement is implemented on April 1 of this year. Japan remains an important long-term opportunity for UroLift with a $2 billion TAM and we are excited for the upcoming launch. We continue to expect our sales in the region to ramp in a similar fashion to the U.S. in a market that is 1/3 the size. Now, turning to Brazil. We are encouraged by our initial commercial activity with a focus on training surgeons and securing reimbursement in the coming years. Additional UroLift launches could come in the second half of 2022, including France and initial activities in Italy and Spain. Finally, we remain on track for a regulatory clearance in China in 2023. To round out the update on UroLift, President Biden signed into law, the protecting Medicare and American farmers from Sequester Cuts Act on December 10, 2021. Among a number of important items, the law increased conversion factor in the Medicare physician fee schedule by 3% for 2022 versus the final rule issued in November. For UroLift specifically, the change will translate into an incremental $100 to $150 in profitability in the office setting in 2022 as compared to the MPFS final rule. We are encouraged by the improvement in reimbursement and will continue to work with stakeholders to address the unintended consequence of the changes to physician fee schedule that will limit choice for Medicare recipients and move procedures to higher-cost sites of service. Moving to some updates in our Interventional business unit. We have completed the sales force expansion which is intended to provide additional resources for MANTA training and increase our market penetration. On the clinical front, we recently received 510(k) clearance to extend the indication for our specialty support catheters, guide extension catheters and specialty guidewires to include cross chronic total occlusion. Our FDA filing was based on successful results from a peer-reviewed perspective single-arm IDE study that enrolled 150 patients across 13 investigational centers in the United States. The study met the protocol's primary endpoint of procedural success. And achieved technical success which is defined as successful guidewire recanalization in more than 93% of these very complicated CTO cases. We view complex PCI and especially CTO-PCI, as high-growth spaces within interventional cardiology. And our new labeled indication keeps us competitively positioned. Lastly, we continue to innovate around the core MANTA platform and initiated a limited market release of the 14 French branch depth locator during the quarter. The depth locator expands the use of the 14 French manteclosure for Impella in emergent cardiogenic shock procedures. Regarding EZPlas, we have not yet received U.S. regulatory clearance following the receipt of a completed response letter. Importantly, we do not have to collect additional clinical data and we have clear line of sight on the additional information that FDA is requesting. We remain committed to gaining FDA clearance for this novel and innovative product and will work collaboratively with the agency. We will update the investment community when we have additional information to share. Now, turning to our 2022 outlook. Teleflex remains well positioned to drive growth in these challenging times. Although the pandemic and it's effect on the health care providers are still with us, we expect the impact to be lower in 2022 versus 2021. We believe that elective surgical procedures should improve in 2022 over 2021. We are seeing excellent progress in the ability of the global health care systems to adapt to the pandemic environment. With each subsequent surge in COVID infections, hospitals continue to improve their ability to treat COVID-19 patients and perform elective surgical procedures. We also expect more people to become fully vaccinated and increasing availability of therapies to treat the virus after infection. Our range of guidance contemplates varying scenarios for the impact of COVID which depending on the level of disruption, inform our view on the top and bottom end of our outlook. In addition, our 2022 guidance assumes a normalization in our operating expense as the impact of the pandemic wanes. We will fund our commercial organization to remain in front of our customers and maintain investment for our growth drivers. It is important that we manage Teleflex for long-term durable growth and we will continue to fund our investments to keep us well positioned. That said, to the extent that COVID is more disruptive to revenues than we have assumed, we will be in a position to modulate our spending while still funding projects for long-term growth. Taking these elements together, we would expect to deliver underlying constant currency growth in 2022 that captures our prior 2019 to 2021 LRP growth algorithm of 6% to 7% when adjusting for the 1.6% headwind from the divestiture of the respiratory assets. We have made substantial progress over the past several years in reshaping the Teleflex portfolio by investing behind growth drivers and divesting slower growth respiratory assets. As we look forward, when excluding UroLift and our other business, the remaining 3/4 of our business is positioned to grow 4% to 5%. The growth is propelled by a base of medically necessary products and our high-growth portfolio of products, including MANTA, Hemostats, Intraosseous and PICC. On top of these revenues, UroLift remains a significant opportunity as pandemic-related disruptions recede in the United States and we execute on our multiyear multi-geography overseas expansion. We will also continue to execute on our M&A strategy to layer in additional growth drivers. That completes my prepared remarks. Now, I'd like to turn the call over to Tom for a more detailed review of our fourth quarter financial results. Tom?

Liam Kelly:

Thanks, Tom. In closing, I will highlight our three key takeaways from the quarter and our 2022 outlook. First, our diversified product portfolio enables Teleflex to deliver constant currency growth of 7.9% in the fourth quarter and 8.8% for 2021 despite the significant disruption from COVID during the year. Second, we continue to execute on our strategy to drive durable growth across our diversified portfolio with investment in organic growth opportunities, margin expansion and deployment of capital for M&A. Third, we remain confident in our growth strategy. We see our core growth platforms driving 4% to 5% growth with the additional growth coming from UroLift as pandemic headwinds subside. We have levers in place to drive further expansion in our margins. And our balance sheet is in a solid position with leverage of 1.7x, providing ample financial flexibility for our capital allocation priorities. We remain confident in our future and our ability to continue to meet our commitments to patients, clinicians, communities and shareholders. That concludes my prepared remarks. Now, I would like to turn the call back to the operator for Q&A.

Jayson Bedford:

Good morning and thanks for taking the questions and the comprehensive review here. So I guess just to start and I hate to be too granular here. But maybe can you comment on what you're seeing in the environment today versus, let's call it, a month ago? And I just want to feel a little comforted that you are seeing a little bit of a pickup as COVID wanes.

Jayson Bedford:

Okay. And just as a quick big picture follow-up. Liam, you made the comment in the release around optimizing the portfolio for growth which is consistent with past commentary. But I guess the question is, the current environment more or less conducive for your strategy? Meaning -- I'll ask another way, can you be more active in this environment?

Operator:

Your next question is from Lawrence Biegelsen with Wells Fargo.

Liam Kelly:

Yes, Larry. So with UroLift, first of all, we're really pleased with the strong finish to the year, $93 million in the fourth quarter. And indeed, our overall performance in the year and thank you for acknowledging it. I think we're really proud of what we did. We delivered revenue growth of 8.8% versus our original guidance of 8% to 9.5%. And don't forget, the original guide of $28 million to $32 million of respiratory revenue that we divested, delivered gross margins 59.4%, 270 basis points of expansion, up margin 310 basis points of expansion. And earnings per share, 25% growth in earnings per share, while also losing $0.10 to $0.15 in the respiratory divestiture. Looking forward, we've obviously communicated that we expect UroLift to grow 15% this year. We feel that, that's very achievable in the current environment. We expect it's going to be impacted by COVID in the first quarter as one would anticipate. And then we would anticipate lower single digits in the first half of the year and then picking up strongly in the back half of the year, obviously, an easier comp in Q3. And then going into Q4, as people work through their deductibles, you'd expect it to continue along that vein. We're really confident on our core business being well capable of 4% to 5%, Larry. And with good execution, I think we should be at the upper end of that range. So our growth algorithm of 6% to 7% is very, very much intact, as demonstrated in our guide today. So our constant currency guide is 4% to 5.5%. But there's 1.6% of a headwind from the respiratory divestiture, that's 30 basis points from the loss of a day which is in Q1 which actually gets you to 5.9% to 7.4%. So if anything, the algorithm has improved because of the base, our core business doing even better through good execution and really solid investment behind some of our good growth assets such as Intraosseous, such as our PICC portfolio, such as MANTA and such as our hemostasis portfolio.

Liam Kelly:

Absolutely, Larry. So we look at assets that are in that $600 million to -- $60 million to $300 million in revenue. Our strategic criteria is that it fits within one of our pillars or in an adjacent space. It's got a really strong IP. Has a great value proposition within the hospital. Also has -- is clinically better than anything within the marketplace available. And we like products that are sticky. They get used over and over again. We obviously look for assets that are accretive to our gross margin. And we look for assets that are -- will become accretive to our op margin in time. We'll accept some shorter-term op margin dilution like we did, for example, with NeoTract as long as we can see leverage into the future. So those are really our financial and strategic criteria, Larry, and thanks for the questions.

Matthew Taylor:

Hey, thank you for taking the questions. Good morning.

Thomas Powell:

Good morning.

Liam Kelly:

Yes. Good question, Matt. So as I answered Larry, the first half will grow in the lower single digits due to the impact of COVID-19 through the first quarter and obviously, staffing shortages, while the second half of the year will grow really strong double digits. The contributions will be small from the international markets. You've got Japan, Brazil and France. They'll ramp in the second half of the year but they won't really become meaningful math until 2023 and beyond. So for this year, 2022, the main growth driver for UroLift will continue to be the United States. And I'll just add to that, Matt and I mentioned this in my prepared remarks that we trained through the pandemic. That is the most best tactical way to drive growth in UroLift in 2022 and then bring on the international markets in ‘23 and beyond. And obviously, you'll see places like China come into being in '23 and so we got a real great algorithm for growth for all of Teleflex and also from UroLift. And as Tom outlined in his prepared remarks, we've got 25% of our total revenue that is in that mid-teens growth which includes UroLift but as well as that, you've got MANTA and Hemostat and intraosseous and PICC, all driving that real solid top line growth for Teleflex.

Liam Kelly:

Yes. I did in the prepared remarks, Matt. So as I said in the prepared remarks, we've received the CRL and we are working on the information requested. The good news is the request from the FDA is not focused on clinical data and with clear line of sight on the additional information that the FDA is requesting. We will continue to interface with the FDA and it is very collaborative. But it's clear to us, Matt, this is also the first time the FDA has approved a biologic products such as this. So we're breaking new ground together. And as you're aware, Matt and as most investors will be aware, the RFP from the military within that $3 million to $4 million, it's a nice market in the future, it's $100 million that we'll grow into. But that $3 million to $4 million is not in our guidance for this year.

Liam Kelly:

You too.

Shagun Chadha:

Great. Thank you for taking the questions. I was just wondering if you could just let us know what the impact is of inflation and FX on margins and EPS in Q4. And then what have you assumed in 2022? And then just with respect to margins, can you bridge us from '21 to '22? I'm just trying to understand the puts and takes. So as it relates to, I guess, UroLift 2.0 conversion, we have slightly less than 40 basis points inflation. I think you called out 70 basis points on the call, annual pretax savings. I think you have about $40 million in '22 and '23. And then just higher level of investments. If you can just bridge that, that would be helpful.

Thomas Powell:

Okay. So I think the first question was just on the impact of inflation or FX in inflation in the fourth quarter. So as we look at the fourth quarter, I'll start with FX first. What we saw was a bit of a move in the exchange rates. And some of the tailwind that we had been experiencing through the earlier part of the year lessened quite a bit. So it was an adverse impact on our margins relative to the prior year but still slightly positive on a year-over-year basis. As far as inflation, we had talked about inflation ticking up in the fourth quarter relative to what we were seeing in the third quarter and we had estimated the amount to be approximately $3 million. It actually turned out to be higher, close to $4.5 million in the fourth quarter. And we've obviously assumed that, that's going to continue to be some of the case going into next year. As we think about just margins as we go into next year, there are a number of puts and takes. First of all, I'd say that the gross margin, I'd like to remind everyone that it had increased 270 basis points in 2021 versus 2020. So really strong expansion in 2021 despite a higher inflationary environment. As we look to 2022, our guidance is 59.75% to 60.25%, representing an increase of 60 basis points at the midpoint. The gross margin increase, as mentioned, attributable to mix, mostly UroLift as well as restructuring and operational efficiency programs being partly offset by inflation. And for 2022, our guidance assumes that supply chain inflation is approximately $20 million higher than the 2021 inflation level and that equates to an incremental inflation impact of about 70 basis points. So if you were to look at our guide on gross margin, excluding the impact of that incremental inflation, we're up about 130 basis points at the midpoint. And as we think about the cadence of gross margin, we do expect to see a strengthening gross margin as we go throughout 2022. Right now, our guidance assumes -- or included in our guidance is an assumption that we will see some improvement in raw material and logistics inflation in the second half of the year versus the levels we're currently expecting. And we also expect to get a mix benefit as we go throughout the year as UroLift becomes a greater percentage of the mix and actually the manufacturing supply agreement becomes a lesser part of the mix. So I would say big picture, gross margin is impacted by inflation and the cadence of quarterly margin expansion impacted by both inflation levels as well as mix. Now as we look at the operating margin, we are guiding to 27.75% to 30.25% which is flat to 2021 at the midpoint. A couple of things, again, to highlight, first of all, is that increase in the supply chain inflation has an adverse impact to gross margin and that drops down to the operating margin. And then secondly, I do want to highlight that in 2020, we had significantly reduced OpEx spending as a result of the COVID pandemic, in part because the pandemic caused limitations on our commercial activities. But also in part because we wanted to reduce cost to offset the COVID revenue impacts. Now in 2021, we partially restored activities in spending but we weren't back to pre-pandemic levels of activity or spend. In 2022, our guidance assumes that we will largely resume normal commercial activities, including hiring, sales, training, meetings, et cetera. And as a result, we'll incur an incremental about $20 million or 70 basis points of OpEx in the year. So if you look at the op margin, excluding the impacts of the supply chain inflation and normalization of expenses, we'd see about a 140 basis point improvement at the midpoint. Now in addition, in 2022, we plan to continue to invest behind key growth franchises, including UroLift, MANTA and EZ-IO. I'd say that given the successes we've seen in the UroLift DTC as well as sales force additions, we'll continue to invest there as well as behind MANTA. And then again, we will see some op margin improvement as the year progresses for a lot of the same reasons that we're talking about in the gross margin improvement.

Thomas Powell:

Hopefully, I answered all your questions.

Thomas Powell:

Thanks, Shagun.

Cecilia Furlong:

Hi, good morning and thank you for taking the questions. Liam, I wanted to start back on UroLift. Just -- you talked about initiatives to drive UroLift utilization in your existing position base. As well as drive adoption in newly trained positions. Can you walk through some of the kind of key points that you're focused on this year? And then kind of a bigger longer-term picture. But as you get out of COVID, as you think about all of the international markets coming online, Japan, China, Brazil, Europe as well, how do you think about just the durable long-term growth profile of UroLift?

Lawrence Keusch:

And Cecilia, it's Larry. I would just mention that we will obviously provide a longer-term view of our outlook for UroLift at our May Analyst Meeting.

Michael Matson:

Hi, thanks for taking my questions. I wanted to ask about the UroLift reimbursement changes that happened. I think that went into effect at the beginning of the year. So can you maybe talk about what you're seeing there? Have you seen maybe the physicians changing site of care or anything else? And with the 15% guidance, how much have you factored in, if anything, for that issue?

Michael Matson:

Okay, thanks. And if I could just slip one in for Tom quickly. Is there any kind of EPS impact from currency? I did hear that called out and you kind of walked through the headwinds. But just given that it is meaningful to the top line, I wanted to see if it was getting kind of offset on the bottom line. Thanks.

Operator:

Your next question is from Matthew Mishan with KeyBanc.

Matthew Mishan:

Can you hear me?

Matthew Mishan:

Okay, excellent. Just the first question on Vascular Access. That continues to exceed our expectations and it's about $100 million above where you were at in 2019. It seems like you're pretty confident around PICC and Vidacare as you're kind of moving those into the high-growth category. I'm just curious, how should we think about the durability of the improvement in Vascular Access versus maybe some of the other areas that may have been COVID-related beneficiaries?

Matthew Mishan:

Okay, excellent. And then, just an update -- and I'm sorry if I missed it, on where Z-Medica ended for 2021. And thoughts on growth drivers for that product into next year.

Operator:

And your last question comes from David Turkaly with JMP Securities.

Liam Kelly:

So for us, it's all about the coatings. And what changed, Dave, was in the past, hospitals didn't have to report infections on PICCs. And the assumption was when they weren't measuring it, the assumption was that the PICC infections were lower. PICC infections on CBC is used to be at 4% before we launched our coated technology on the CBCs. And with -- many studies have shown we've been able to bring it down to practically 0. And of course, once they started measuring PICC infections, they were around 4%. So now hospitals don't get reimbursed for those infections. And that's why we're being so successful with our PICC technologies. It's really around our coatings that are both antithrombogenic and anti-infectious.

Liam Kelly:

Yes. Also within -- this is also a global play for our Surgical business. So we have a really strong Surgical business in the Americas and in APAC. And as procedures bounced so did our Surgical portfolio. But we're also working on expanded indications for our coal ligation clips that should help us continue to augment the growth. Now it's not going to grow at that clip for next year and I don't want to mislead anybody that is going to do that. It will be in the low single digits as we go through next year. But we are -- we have some new products coming down the -- this year -- sorry, I said next year, this year, 2022, it will grow in the low single digits. But we have some nice pipeline of products coming through there and we've expanded our vascular closure. We've really like working on our instruments. And of course, it holds like as we continue to perform exceptionally well globally. And quite frankly, the team in Surgical has done an outstanding job in executing as procedures have returned. And also an area that we take price, I should mention that. It's a nice opportunity for us. And on pricing I think it's important that we did mention, we anticipate having positive pricing this year on that 50 basis points consistent what we drove last year in order to offset some of the inflationary pressures. And it's for a company by Teleflex, I believe that will be successful because we're used to taking prices out of our DNA and we'll continue to execute on that price, in particular, with Surgical within our Vascular business unit and also overseas in Asia and Europe. So, I just want to make a point as well before we close. Thank you.

Lawrence Keusch:

Thank you, April and thank you to everyone that joined us on the call today. This concludes the Teleflex Incorporated Fourth Quarter 2021 Earnings Conference Call.