Teleflex Incorporated

Good morning, ladies and gentlemen, and welcome to the Teleflex second quarter 2024 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 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 Kirscher, Vice President of Investor Relations and Strategy Development.

Good morning, everyone, and welcome to the Teleflex Incorporated second quarter 2024 earnings conference call. The press release and slides to accompany this call are available on our website at teleflex.com. As a reminder, a replay will be available on our website Those wishing to access the replay can refer to our press release from this morning for details. Participating on today's call are Liam Kelly, Chairman, President, and Chief Executive Officer, and Thomas Powell, Executive Vice President and Chief Financial Officer. Liam and Tom will provide prepared remarks, and then we will open the call to Q&A. Before we begin, I'd like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events as outlined in the slides posted to the investor relations section of the Teleflex website. We wish to caution you that such statements are in fact forward-looking in nature and are subject to risks and uncertainties, and actual events or results may differ materially. The factors that could cause actual results or events to differ materially include, but are not limited to, factors referenced in our press release today, as well as our filings with the SEC, including our Form 10-K, which can be accessed on our website. Now, I'll turn the call over to Liam for his remarks.

Thank you, Larry, and good morning, everyone. On this morning's call, we will discuss the second quarter results, review some commercial highlights, and provide an update on our financial guidance for 2024. Before beginning our normal business review, I wanted to highlight a subsequent event following the end of the second quarter. As we have previously disclosed in our SEC filings, the Italian government introduced legislation back in 2015 requiring medical device companies that supply goods and services to the Italian national healthcare system pay back a portion of their proportional revenues to contribute to funding any deficit created by government budget overspend for medical devices each year. The payment amounts are calculated based on the amount by which the regional ceilings for that given year were exceeded. We and numerous other medical device companies challenge the enforceability of the law. primarily on the basis that the legislation was unconstitutional. To date, companies have not been required to pay these amounts while the measure was under consideration by the courts. On July 22nd, the Italian Constitutional Court issued an adverse ruling that supported the legislation related to the payback measure on medical device companies. Although Teleflex has accrued amounts, each year since 2015 we are now truing up our reserves to reflect the full amount expected to be invoiced by the italian government for the three and six months ended june 30th 2024 we recognized a 15.8 million dollar increase in our reserves and a corresponding reduction to revenue within our emea segment related to the italian payback measure Of the total increase in our reserves, $13.8 million related to prior years. The amount related to the prior years does not represent normal adjustments to revenue and is not recurring in nature, making it difficult to contribute to a meaningful evaluation of our operating performance. Accordingly, we have excluded $13.8 million for the prior years in our adjusted second quarter revenues to facilitate an evaluation of our current operating performance and a comparison to our past operating performance. For the second quarter, Teleflex revenues were $749.7 million, up 0.9% year over year on a GAAP basis. When excluding the prior year impact of the Italian payback measure, adjusted revenues for the second quarter were $763.5 million, up 2.7% year-over-year on a reported basis, and up 3.4% on a constant currency basis. In addition to the $13.8 million booked in the quarter for prior years, the quarter includes $2 million in increased reserves for this measure to true up the first and second quarter revenues. Backing out the $2 million in unplanned reserves for the Italian measure implies second quarter revenues came in slightly above the high end of our $760 to $765 million revenue guidance provided previously. Second quarter adjusted earnings per share was $3.42. a 0.3% increase year over year. 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 I refer to are on an adjusted revenue and adjusted constant currency basis, unless otherwise noted. America's revenues were $426.8 million, a 0.6% increase year-over-year. Investors familiar with Teleflex will be aware that prior year MSA revenues were booked in the Americas, which results in a difficult year-over-year comparison. The impact from the MSA termination in the second quarter was similar to the first quarter. EMEA revenues of $160.9 million increased 9.8% year over year. The growth was driven by a targeted strategy to increase the geographic availability of Teleflex products and improving utilization in Europe. Turning to Asia. Revenues were $87 million, a 4% increase year over year. the quarter was primarily impacted by a softer performance in South Korea due to the ongoing impact of the doctor's strike. We estimate that the doctor's strike impacted our APAC growth by approximately 5%. Although we anticipate the doctor's strike headwinds to linger through the remainder of this year, we expect the impact to diminish. We continue to see Asia as a growth driver for Teleflex and expect growth in the region of approximately 10% for 2024. Now let's move to a discussion on our second quarter revenues by global product category. Commentary on global product category growth for the second quarter will be on a year-over-year adjusted revenue and adjusted constant currency basis, starting with vascular access. Revenue increased 4.8% year-over-year to $181.1 million. In the quarter, our broad portfolio of vascular access drove growth, including our PIC portfolio and central access. Of note, the endurance recall anniversaried towards the end of the quarter, implying normalized comparisons in the second half of 2024. Moving to interventional. Revenue was $141.2 million, an increase of 13.8% year-over-year. In the quarter, our geographic regions had high single-digit or better growth as the broad portfolio continues to perform well, including contributions from growth drivers such as Manta, complex catheters, right heart catheters, and intra-arctic balloon pumps. Turning to anesthesia. revenue increased 2.3% year-over-year to $102.5 million. Growth was led by endotracheal tubes and intraosseous. Of note, we anniversary the ET tube recall towards the end of the quarter. In our surgical business, revenue was $111.3 million, an increase of 6.4% year-over-year. Our underlying trends in our core surgical franchise continue to be solid, with growth of our largest franchises led by instrumentation and chest drainage. Although GLP-1s continue to negatively impact sleeve gastrectomy procedures, Titan Stapler revenue growth in the second quarter was a creative to the growth profile of our surgical business, as well as the corporate average. Consistent with our strategy, we continue to proctor surgeons and roll out our buttress kit following the launch earlier in 2024. For interventional urology, revenue was $83.1 million, representing an increase of 7.1% year over year. Growth was driven by Barragell revenue following the October 2023 acquisition of Palette Life Sciences. And as anticipated, your lip growth was impacted by continued challenges in the office side of service and Salesforce training activities for Barragel during the quarter. OEM revenues increased 5.8% year over year to $88.8 million. The quarter reflects the order timing that we previously communicated with revenue that we had anticipated in the second quarter moving into the first quarter. Second quarter other revenue declined 26.4% to $55.5 million year-over-year. The decline in revenue on a year-over-year basis is primarily due to the planned December 2023 exit of the MSA by Medline. That completes my comments on the second quarter revenue performance. Turning now to some commercial and clinical updates. Starting with the inter-Ortic balloon pump and catheter market. We are currently experiencing increased quote activity following a May 8th letter from the FDA to healthcare providers regarding pump safety and quality in relation to our primary competitor in the intraortic balloon pump market. Intraortic balloon pump therapy is used to treat severely ill patients in cardiogenic shock, which is an acute condition where the heart can't pump enough blood to meet the needs of the body. The global inter-ortic balloon pump and catheter market is approximately $250 million a year with growth in the low single-digit range and consists of balloon pumps, which are primarily replacement sales, and single-use balloon catheters used to treat patients. The market is a duopoly, with Teleflex having approximately a one-third market share. Based on 2023 market data, Asia is just over one-third of the market, North America is about one-third, and EMEA is slightly less than 30%. We are in the process of increasing our manufacturing capacity for pumps and catheters to help customers that are seeking an alternative vendor. Looking forward, we will carefully modulate our manufacturing capacity in accordance with demand signals. We anticipate that the biggest incremental opportunity for Teleflex will be in the U.S. market due to the language in the FDA letter to healthcare providers. Specifically, the agency recommended that healthcare facilities transition away from the use of competitive devices and seek alternatives if possible. We also expect continued share gains in Asia based on solid execution from the team over the past couple of years. Finally, we are not currently assuming any meaningful share shift in Europe, given a temporary suspension of their CE mark. Looking into the second half of 2024, we expect incremental pump revenue in the fourth quarter, given the capital equipment sales cycle and customer training. Based on what we are currently seeing in cold activity, we anticipate a continuation of incremental inter-arctic balloon pump and capital revenue through the first half of 2025 at a minimum. Tom will cover the financial implications of this opportunity when we discuss updated guidance for 2024. Now I will move to an update on Palette, our most recent acquisition. We have now owned Palette Life Sciences for just over nine months, and I am pleased to report that the acquisition is tracking ahead of expectations. First, the integration process continues to progress well, including employee onboarding, training, and IT integration. Cross-functional product sales training and proctoring of the legacy Eurolift sales force on the use of Barragel continue to progress with the first tranche of our jewel bag reps completed at the end of the second quarter. We remain on track to fully complete the integration of the Salesforce by the end of 2024. Second, Barragel continues to gain traction in the U.S. with strong sequential revenue momentum. We are seeing continued penetration of Barragel into the rectal spacing market, and we anticipate an increasing number of urologists and radiation oncologists will utilize the technology over time. Due to better than expected performance in the first half and no change to our second half expectations, we are increasing our 2024 revenue guidance for Palette to $70 to $72 million from $66 to $68 million previously. Our full year 2024 interventional urology total revenue guidance continues to assume approximately 7.5% growth. Finally, I will provide a new product update. In our interventional access business, we recently received FDA clearance for the Ringer perfusion balloon catheter. A limited market release will occur in August, which is on track with our previously communicated second half 2024 timing. As a reminder, Ringer incorporates a unique balloon design that allows blood to flow through a vessel while the balloon is inflated. We expect to initially launch with a PTCA indication, but will evaluate opportunity for label expansion following the completion of our vessel perforation trial. 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?