Teleflex Incorporated

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 Kirsch, Vice President of Investor Relations and Strategy Development.

Good morning, everyone, and welcome to the Teleflex Incorporated 4th Quarter 2021 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 by dialing 800-585-7000. or for international calls, 416-621-4642 using passcode 1028958. Participating on today's call are Liam Kelly, Chairman, President, and Chief Executive Officer, and Thomas Powell, Executive Vice President and Chief Financial Officer. Liam and Tom will provide prepared remarks, and then we will open the call to Q&A. Before we begin, I would 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. 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. With that said, I will now turn the call over to Liam for his remarks.

Thank you, Larry, and good morning, everyone. It's a real pleasure to speak with you today. For the fourth quarter, TataFlex 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 category 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 shortages 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 Eurolift, 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 remained 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 years. 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 continued to optimize our portfolio with the integration of HPC and ZMedica acquisitions, and we divested certain low-growth and low-margin respiratory assets. And we did not take our eyes off 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. America's 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 four-quarter revenues by global product categories. 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, four-quarter revenue increased 6.4% to $193 million. Our category leadership in central venous catheters and midlines, along with our novel coded pig portfolio, continue to position us for dependable growth. The pig 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 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 remained 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 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, haemostat revenues were approximately $66.5 million and fell squarely into the $60 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 continued 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 to $91 million implied guidance for the quarter. We saw a clear improvement in Eurolift 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 EURLIF 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 30.9% 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 micro catheters 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, Eurolift procedures are negatively impacted, and then recover when COVID case counts drop. In addition, staffing shortages, 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 to competing device-based treatments 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 Eurolift 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 Eurolift 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 Eurolift 2 with conversion of the vast majority of the U.S. users anticipated by the end of 2022. Eurolift 2 remains an important margin driver, and we remain positioned to generate 400 basis points of Eurolift gross margin expansion once the U.S. user base is fully converted. We believe that a tactical approach to moving our existing Eurolift 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 multi-year catalyst for Eurolift 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, Eurolift 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 Eurolift 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 Eurlyft. We secured reimbursement for Eurlyft last December and have a team in place to initiate our rollout launch once the reimbursement is implemented on April 1st of this year. Japan remains an important long-term opportunity for Eurlyft, 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 US in a market that is one third 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 Eurolift 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 Eurolift, 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 the convergent factor in the Medicare physician fee schedule by 3% for 2022 versus the final rule issued in November. For EURLIF 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 Salesforce expansion which is intended to provide additional resources for Manta training and increase our market penetration. On the clinical front, we recently received 510K clearance to extend the indication for our specialty support catheters, guide extension catheters, and specialty guide wires to include cross-chronic total occlusions. 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 depth locator during the quarter. The depth locator expands the use of the 14 French Manta closure for Impella in emergent cardiogenic shock procedures. Regarding EasyPlaz, 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 its effect on the healthcare 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 healthcare 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 acids. As we look forward, when excluding Eurolift and our other business, the remaining three-quarters 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, Hemistats, Interosseous, and PICS. On top of these revenues, EuroLift remains a significant opportunity as pandemic-related disruptions recede in the United States, and we execute on our multi-year, 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 would like to turn the call over to Tom for a more detailed review of our fourth quarter financial results. Tom.