Teleflex Incorporated

Lawrence Kirsch, Vice President of Investor Relations and Strategy Development.

Good morning, everyone, and welcome to the Teleflex Incorporated fourth 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 releases from this morning for details. Participating on today's call are Liam Kelly, Chairman, President, and Chief Executive Officer, Thomas Powell, Executive Vice President and Chief Financial Officer, and John Darin, Corporate Vice President and Chief Accounting Officer. Liam, Tom, and John will provide prepared remarks, and then we'll 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. First, I would like to discuss a transition into senior leadership at Teleplex. Tom Powell, Executive Vice President and Chief Financial Officer, has informed the Board of his intention to retire effective April 1, 2025. Tom has been a trusted partner and I want to thank him for his contributions to Teleflex. Over the past 13 years, Tom has played a major role in driving our adjusted operating margins, which have increased by 800 basis points from 2012 to 2024. As we've grown, Tom has also built an outstanding global finance team that will be instrumental in keeping us well positioned for the future. I also want to highlight Tom's focus on succession planning. ensuring a smooth transition in finance leadership. Finally, thank you for your agreement to stay on in a consulting capacity over the next 12 months. I am pleased to announce that John Dern, Corporate Vice President and Teleflex's Chief Accounting Officer, will succeed Tom as Executive Vice President and Chief Financial Officer effective April 2, 2025. I look forward to working closely with John. With an extensive knowledge of Teleflex, and over 30 years of financial management and reporting experience for public companies, John will be instrumental as we continue to execute on our growth strategy. Moving on now to financial results. For the fourth quarter, Teleplex revenues were $795.4 million, up 2.8% year-over-year on a GAAP basis and an increase of 3.2% on an adjusted constant currency basis. Our interventional and surgical businesses executed well in the fourth quarter with adjusted constant currency growth of 18.7% and 12.3% respectively. Palette Life Sciences revenues exceeded the high end of our $73 to $75 million guidance for 2024. Notwithstanding these strong performances, adjusted constant currency revenues for the fourth quarter were $10.2 million below the low end of our revenue expectations, of which approximately half was attributable to interventional urology. The remaining revenue shortfall was due to lower year-over-year hospitalizations due to flu and COVID-19 impacting our CDC business negatively in our vascular business unit. In the fourth quarter, adjusted earnings per share grew 15.1% to $3.89. I would now like to turn it over to Tom for his remarks.

Thanks, Liam. I have enjoyed a long and fulfilling career, including over 20 years as a public company CFO. I particularly enjoyed the past 13 years spent with Teleflex, and I'm extremely proud of what we have accomplished as a team during my tenure, having successfully grown into our position as a leading global provider of medical devices. After first consulting with my family, we felt that this was the right time for my retirement. My decision was significantly aided by the fact that over the past several years, I have worked through our internal planning process to develop a strong bench with internal succession candidates. Following a formal search, which included qualified internal and external candidates, and in which our board participated, it was determined that John Darin was the right choice for Teleplex. I have a high level of confidence in the Teleplex management team and look forward to Teleplex's continued success in the future. As disclosed in this morning's 8K, following my retirement, I have agreed to serve as a consultant to the company through March 31st, 2026 to support continuity and a smooth transition. I will now turn to a review of the fourth order. beginning with gross margin given the previous discussion of revenues. For the quarter, adjusted gross margin was 60.1%, which was flat versus the prior year period as the benefits of M&A, mix, and price were largely offset by inflation and foreign exchange. Adjusted operating margin was 27.6% in the fourth quarter, up 130 basis points year-over-year as tight spending controls contributed to lower operating expense as a percentage of sales. Turning to our 2024 results. For the full year 2024, adjusted constant currency revenues increased 3.1% year over year, while adjusted earnings per share was $14.01. Our interventional and EMEA businesses both had strong performances in 2024, with adjusted constant currency growth of 14.8% and 7.3% respectively. Surgical also continued to execute well with 6.1% adjusted constant currency growth with continued contributions from the Titan stapler. Interventional urology revenue increased 3.7% adjusted constant currency with growth in pellet largely offset by softness in the urolith business. 2024 margin expansion was solid, with adjusted gross margin expanding 120 basis points and adjusted operating margin increasing 60 basis points year-over-year. Drivers of adjusted gross margin expansion included the termination of the MSA and the acquisition of Palette and favorable pricing, while adjusted operating margin expansion was primarily driven by the flow-through of adjusted gross margin. Cash flow from operations was strong, increasing 24.7% year-over-year to $638.3 million in 2024 compared to $511.7 million in the prior year period. The year-over-year improvement in cash flow from operations benefited from improving operating performance and improvements in working capital stemming from a moderation of our inventory levels and a benefit of $37 million from the termination of our US pension plan. Net leverage at quarter end was approximately one and a half times. Lastly, in connection with the performance of the fourth quarter 2024 annual impairment test for goodwill, we determined that the carrying value of the interventional urology North America reporting unit included within our America's operating segment exceeded its fair value as a result of a prolonged period of subdued revenue growth due to persistent end market challenges and changes in competitive pressures in the short to mid-term. Consequently, we recognized a non-cash goodwill impairment charge of $240 million for the fourth quarter of 2024. Now, I'd like to turn the call over to John Darin.

Thanks, Tom. I appreciate the confidence and trust in me from Liam, Tom, and the board as I take on the role of Chief Financial Officer for Teleflex. It's an incredible honor to step into this role, and I'm excited for the opportunity. Tom's leadership over the years has set a solid foundation, and I'm committed to building on that as we move into this next chapter. With the strength of our talented management team, I'm confident we can continue driving success at Teleflex. Before I get started with guidance, I would like to comment on the accelerated share repurchase we announced this morning. The $300 million accelerated share repurchase will be effective tomorrow, February 28th. We expect the accelerated share repurchase to be completed in the second quarter of 2025. This stock repurchase would complete the existing $500 million share repurchase program authorized by our Board of Directors in July of 2024. As part of our ongoing capital allocation strategy, we will continue to be opportunistic regarding share repurchases in the future. With that, I would like to turn now toward 2025 financial guidance. We are expecting 2025 adjusted constant currency growth of 1 to 2%. Note, this range excludes 13.8 million negative impact from the Italian measure incurred in the second quarter of 2024. We are assuming approximately 55 million or a 180 basis point headwind to revenue from foreign exchange translation in 2025 based on a Euro to dollar exchange rate of 103. For 2025, our outlook assumes continued pressure on our interventional urology business due to softness in UroLift. In our OEM business, we have now started to increasingly see what is expected to be a temporary delay in customer orders due to a focus on inventory management as well as the contract loss discussed at the time of third quarter 2024 earnings. resulting in negative growth for the year. Additionally, we expect an impact from volume-based procurement on our surgical business in China during the year. We expect 2025 adjusted earnings per share to be in the range of 1395 to 1435. We have established our fiscal year revenue and adjusted EPS expectations to reflect what we believe are realistic and achievable low ends of each range both of which we have a high level of confidence in the team's ability to deliver in 2025. For your modeling considerations, our 2025 guidance range assumes the following. Adjusted gross margins in the range of 60.25% to 61%. Adjusted operating margin of 26.6% to 27%. Net interest expense of approximately $75 million, which includes the impact from the accelerated share repurchase. In addition, I would note that we will update the interest expense expectation for 2025 following the close of the vascular intervention acquisition. An adjusted tax rate of approximately 13.5% and approximately 45.5 million average weighted shares inclusive of the $300 million accelerated share repurchase. Our 2025 guidance includes tariffs currently enacted but does not contemplate newly proposed tariffs. Our most significant exposure to tariffs on U.S. imports is associated with our manufacturing facilities in Mexico. Any implementation of tariffs on medical device products in this geography would have a negative impact on the financial results and may impact our 2025 guidance as set forth today. Finally, our full-year revenue guidance assumes first quarter revenue declines of 3% to 4% on a constant currency basis, excluding an estimated $14 million negative impact from changes in foreign currency exchange rates compared to the prior year. The first quarter of 2025 year-over-year decline reflects continued challenges related to the headwinds previously discussed. I will now turn back to Liam to discuss the updates to our strategic framework and focus on shareholder value creation.

Thanks, John. Turning now to our value creation framework. We have four pillars that support our corporate strategy. These include a focus on driving sustainable revenue growth and achieving earnings and margin expansion. Today, we are excited to announce that Teleflex has entered into a definitive agreement to acquire substantially all of the vascular intervention business of privately held Biotronic SE and Company KG for an estimated cash payment at closing of approximately 760 million euros that certain adjustments as provided in the purchase agreement, including certain working capital, not transferring and other customary adjustments. The Teleflex interventional portfolio has long been a cornerstone of growth and innovation within our diversified product portfolio. With the opportunity to drive sustainable revenue growth and improve margins, the vascular intervention acquisition is a key part of the value creation strategy that will allow us to further build upon this strong foundation. With the acquisition of Biotronic products, we believe Teleflex will gain meaningful scale, expand its presence in the cath lab, and be positioned for continued healthy growth. The product portfolio expected to be acquired includes a broad suite of vascular intervention devices such as drug-coated balloons, drug-eluting stents, covered stents, balloon and self-expanding bare metal stents, and balloon catheters. Turning to the strategic rationale for the acquisition of the vascular intervention business. Similar to the vascular solutions acquisition in 2017, the acquisition of the vascular intervention business will once again allow Teleflex to increase its scale in the cath lab. In this case, we are acquiring a broad portfolio of interventional therapeutic devices that will complement the company's well-established complex percutaneous coronary intervention access products, while building upon and enhancing the legacy interventional sales force. The vascular intervention acquisition significantly expands Teleflex's market presence with a combined coronary and peripheral interventional business. Investment in internal R&D will remain a priority, with opportunities for expansion given the increased scale of the combined businesses. The peripheral intervention market is growing rapidly, with global growth estimated to be in the high single-digit range. We believe the addition of the vascular intervention business will allow Teleflex to establish a footprint in the adjacent peripheral market and complement our growing position in coronary intervention. Our existing complex PCI portfolio has products that are utilized in difficult coronary interventions. And by adding the portfolio of innovative products that we expect to acquire, we will be able to advance our technology offering with relevant coronary and peripheral interventions. The ability to participate in combined coronary strategies with drug-coated balloons, drug-eluting stents, and the emerging potential of resorbable scaffold technologies will expand our current available procedure base. We have a range of products in our current portfolio which have peripheral indications. This acquisition will provide a sales channel to sell these products. In addition, the expansion of our product portfolio will enable our sales force to leverage their clinical knowledge and increase clinician interaction. We see opportunities to expand the presence of the products anticipated to be acquired in the U.S. through our commercial initiatives and investment in new product registrations. Likewise, we see the ability to expand our complex PCI franchise in Europe, given the strong market presence of the vascular intervention business in this geography. Robust research and development Clinical expertise and global manufacturing capabilities are key elements of the vascular intervention business that we expect to acquire, all of which are expected to further strengthen Teleflex's innovation pipeline and enable the company to bring new products to market and improve the care of patients. We will continue to invest in developing highly competitive interventional products, including differentiated new technologies, including the Resorbable Metallic Scaffold. Coupled with our extensive global reach, we aim to deliver innovative technologies to interventionalists, advancing clinical benefits and safety for both physicians and patients. The acquisition of the vascular intervention business will also allow Teleflex the opportunity to invest in and expand the clinical trial program for Biotronix Freesol, a serolimus-eluting resorbable metallic scaffold technology, including optimal pursuit of the US market. Freesol has the potential to advance the trend in interventional coronary and endovascular procedures to leave less permanent hardware behind. We believe Freesol shows early potential to address the limitations of previous polymeric resorbable scaffolds, achieving more rapid absorption, thinner struts, and metallic mechanical performance. Freesalve has already demonstrated compelling clinical data in the Biomag-1 study, a first in human study at 14 European centers. Freesalve received CE mark for treatment of de novo coronary stenosis in February 2024. based substantially on the safety and efficacy of its predecessor, Magmaris. The European Pivotal BioMag2 study is now enrolling with initial results expected in 2027. Turning to the financial profile for the business expected to be acquired. We expect to close the acquisition by the end of the third quarter of 2025, subject to customary closing conditions including receipt of certain regulatory approvals. Assuming this timeline, we intend to update our guidance on the third quarter 2025 earnings conference call. The biotronic products that we expect to acquire delivered a constant currency revenue tagger of 5.4% since 2022. Based on the expected timeline for closing, The Biotronic products are expected to generate approximately 91 million euros in revenues in the fourth quarter of 2025. Beginning in 2026, the Biotronic acquisition is expected to deliver constant currency revenue growth of 6% or better. Adjusted gross margin for the products expected to be acquired is comparable to the Teleplex corporate average. The acquisition is expected to be delusive to Teleflex adjusted operating margins, driven by continued robust investment to advance the pipeline and free solve. As revenues associated with the Biotronic acquisition grow, we expect operating margin leverage over time. On the bottom line, we expect the transaction to be approximately 10 cents accretive to our adjusted earnings per share in the first year of ownership from the date of close and to be increasingly accretive thereafter. The acquisition of the vascular intervention business is expected to drive double-digit ROIC early in year four following the close of the transaction. We plan to initially finance the acquisition through a new term loan and revolving borrowings under our existing senior credit facility and cash on hand. Additionally, we entered into foreign exchange derivative contracts to economically hedge against the foreign currency exposure associated with the cash consideration needed to complete the acquisition. In parallel with the process to acquire the Biotronic Bachelor Intervention business, we have conducted a comprehensive business portfolio evaluation. Following our review, we are announcing today that the Teleflex Board of Directors has authorized management to pursue a plan to separate the company into two independent publicly traded companies, Remainco and Newco. The separation of the company is consistent with our stated corporate strategy to optimize our product portfolio and drive adjusted margins and adjusted earnings per share expansion. The separation is designed to deliver greater value for all Teleflex shareholders. Creating two independent publicly traded companies will position each to accelerate growth with a simplified operating model and enable increased management focus. The separation will allow for improved allocation of resources to the unique strengths and opportunities of each business, which will offer investors a more targeted investment opportunity. This structure will also facilitate distinct capital allocation strategies that better align with the specific growth philosophies and objectives of each independent company. I will now provide an overview of the transaction. Teleflex will create a new independent publicly traded company with urology, acute care, and OEM businesses. The transaction is intended to be a distribution of newly issued shares of NewCo to shareholders that is tax-free for U.S. tax purposes. As mentioned, the separation will position each company to accelerate growth with a simplified operating model and increased management focus. Each of RemainCo and NewCo are expected to be appropriately capitalized with distinct and disciplined capital allocation priorities. At the time of separation, RemainCo is expected to deliver 6% plus revenue growth on a constant currency basis and be accretive to Teleflex's adjusted gross margin, initially neutral to Teleflex's adjusted operating margin, partially as a result of higher anticipated investment in R&D. In the first full year post-separation, we expect to drive double-digit adjusted earnings per share growth. I will continue to lead Remainco as its Chairman, President and CEO. New co-leadership will be announced in the coming months and we expect to complete the transaction in mid-2026, subject to market, regulatory and certain other conditions. Moving to a deeper dive into the benefits of establishing two leading, focused, independent companies. For Remainco, the separation will create a streamlined portfolio focused on highly complementary business units, vascular access, interventional, and surgical. Of note, the acquisition of substantially all of the biotronic vascular intervention business is an important element of the strategy to build a business with meaningful global presence in the catheterization lab with enhanced investment to drive the new technology pipeline. This focused portfolio will better position RemainCo to capitalize on high growth, high acuity, hospital-focused end markets. We believe this more nimble operating model and simplified manufacturing footprint will unlock margin expansion opportunities over time and create capacity for increased and highly focused R&D investments. Finally, RemainCo will be able to fully align its capital allocation philosophy with its growth strategy, increasing its ability to pursue business development opportunities to more effectively compete in high innovation end markets. Moving to NUCO. The operational structure will allow management to have an undivided focus on unlocking NUCO's potential through a simplified operating model. NUCO will participate in attractive end markets in urology, acute care, and OEM, and will be positioned to leverage its established market positions in its respective markets. The company will be able to identify, invest in, and capitalize on opportunities that are unique to the urology, acute care, and OEM end markets through its tailored capital allocation and investment strategy to drive innovation and growth. There remain significant growth opportunities in the urology markets, while OEM will have flexibility to further expand its customer base and enhance its capabilities that were not available while part of Teleflex. The separation will position both RemainCo and NuCo for greater corporate clarity and enhanced strategic focus. RemainCo, with approximately $2.1 billion in 2024 revenue pro forma for the acquisition of the vascular intervention products from Biotronix will be better positioned to capitalize on attractive high-growth end markets addressing emergent procedures performed primarily in the hospital setting across the intensive care unit, emergency department, cath lab, and operating room. The RemainCo product portfolio will be highly complementary with significant breadth across the hospital with leading market positions and opportunities for growth across three distinct business units, vascular, interventional, and surgical. Vascular access will include products primarily consisting of our arrow-branded catheters, catheter navigation, and tip positioning systems, and our intraosseous access system. Post-separation vascular access will also include our emergency medicine portfolio, including our hemostatic products branded under our QuickClot trade name. Interventional will primarily consist of a variety of coronary catheters, structural heart support devices used by interventional cardiologists, interventional radiologists, and vascular surgeons. The interventional product category will also include the biotronic vascular intervention business, the agreed upon acquisition of which we announced today and expect to close by the end of the third quarter of 2025, significantly expanding our portfolio in both coronary and peripheral cath lab procedures. Surgical will include single-use and reusable devices designed for use in a variety of surgical procedures, primarily consisting of metal and polymer ligation clips, facial closure surgical system used in laparoscopic surgical procedures, percutaneous surgical systems, a power bariatric stapler, and other surgical instruments used in ear, nose, and throat, and cardiovascular and thoracic procedures. NUCO, with approximately $1.4 billion in 2024 revenue, will have enhanced ability to identify, invest in, and capitalize on opportunities unique to the company's business units and end markets. NUCO will be a diversified acute and extended care company with a focus on urology, acute care, and OEM markets. Urology will include the company's interventional urology and bladder management portfolios. Key products and brands will include the Urolift system for the treatment of BPH. pharygel rectal spacer for use in radiation therapy for prostate cancer, and the Root brand of catheters and bladder management products. Acute care will include the majority of Teleflex's anesthesia product category, as well as our respiratory product category, portfolio of intra-arthric balloon pumps, and select other products. OEM will remain focused on the design, manufacture, and supply of devices and instruments for other medical device manufacturers. The OEM business specializes in custom extrusions, micro catheters, and specialized sutures. Remainco and UCO will benefit from more nimble operating models and simplified manufacturing footprints. The operating model will be simplified from seven product categories today to three product categories in each company post-separation. From a manufacturing footprint perspective, the separation results in significantly streamlined operations for both companies. RemainCo will have a simplified and nimble operating model with a streamlined manufacturing footprint. Transitioning from 19 anticipated manufacturing facilities at Teleflex, inclusive of the biotronic vascular intervention business as of year end 2025, to seven facilities at RemainCo post-separation with the remaining 12 to transfer to NewCo. Importantly, the structure and locations of the NewCo businesses and manufacturing footprint will help to ease the separation process. Moving now to additional information on RemainCo. RemainCo will be focused on highly complementary business product categories within hospital-focused end markets. The markets served, including vascular access, interventional, and surgical, approximate $32 billion in size and are growing in the mid-single digit plus range. Following the separation, RemainCo is expected to generate constant currency revenue growth of 6% plus, be immediately accretive to Teleflex adjusted gross margin with a mid-60% profile, and is initially expected to be neutral to Teleflex adjusted operating margin, partially as a result of higher anticipated investment in R&D. The simplified operating model will provide opportunities for margin improvement over time and will create capacity for additional focused R&D investments. The transaction is also expected to deliver double-digit adjusted earnings per share growth in the first full year post-separation. turning to RemainCo's capital allocation strategy. With an enhanced financial profile following the separation, RemainCo will have an increased flexibility to better align its capital allocation philosophy and growth strategy. The company will remain disciplined, planning to prioritize allocating capital to internal investment into high ROI growth drivers, growth accretive acquisitions to help the company more effectively compete in highly innovative end markets, repaying debt as appropriate to optimize the leverage profile, and continuing to return capital to shareholders via quarterly dividends and opportunistic share repurchase. As part of this capital allocation strategy, Teleflex is targeting a net leverage ratio below three times through 2026. Moving to NUCO. NewCo will have a strong portfolio in established end markets that are expected to grow in the low to mid single-digit range and total over $40 billion. The company will have strong call points in the hospital, AFC, and office sites of service. Additionally, through NewCo's OEM business, the company is anticipated to have strong relationships with other medical device manufacturers that use its strong design and manufacturing competencies. Following the separation, NUCO is expected to generate low single-digit constant currency revenue growth with a mid-50% gross margin profile. Over the medium term, NUCO will have the potential to accelerate growth to low to mid-single digits as the Eurolift business recovers, Barragel momentum remains strong with the opportunities to expand the addressable market through new FDA-cleared indications, and the OEM business seeks to return to historical growth empowered by greater flexibility to further expand the customer base and enhanced capabilities. The company will benefit from a simplified operating model that will enable targeted investment for growth drivers and capital allocation for its investors. As mentioned, Muco has the potential to improve growth to low single digit to mid single digit from the low single digit at the time of separation, with urology and OEM as key drivers. In urology, the focus will be on stabilizing UroLift beyond 2025. This year marks the final year of the phased reimbursement reduction in the United States off the site of service. The team is focused on driving usage through site of service specific strategies. and continued development of EurLift 3, which we believe will drive improved economics and maintaining the base of strong scientific evidence that supports the use of the technology. Palette revenue modestly exceeded the high end of the 2024 guidance of $73 to $75 million, implying growth over 30%. Looking forward, we continue to expect healthy double-digit growth. In OEM, we expect the dynamics impacting revenue growth in 2025 to be transitory, following a long period of revenue increases with a 9.5% CAGR from 2014 to 2023. The impact from the customer vertical integration will anniversary in the middle of 2025, and customer inventory management should largely run its course during the year. Post-separation, OEM will have the flexibility to further expand the customer base and enhance capabilities. That concludes my preparatory remarks. Now I would like to turn the call back to the operator for Q&A.

Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you are using a speakerphone, make sure your mute function is turned off to allow your signal to reach our equipment. We ask that you please limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star one. And our first question will come from Patrick Wood with Morgan Stanley. Your line is open.

Beautiful. Thank you so much. Busy morning for you guys. I guess maybe I'd love to start with kind of a why now and a genesis of getting to the point where we're at now. I'm just curious, you know, what prompted the review, you know, how you landed at now being the right strategic timing for all this? Because there's a lot of changes, of course, and I'd love a little bit of a timeout there, and then I had a quick follow-up.

Yeah, yeah, Patrick. As we've discussed many times, Teleflex continuously does portfolio reviews as a discipline management team. One of the key pillars of our value creation framework is optimizing our product portfolio so we're constantly evaluating options to maximize the potential of each of the businesses and maximize value for shareholders. If you look back at the history of Teleflex, we've undergone a significant evolution in terms of company focus. From a fairly diversified industrial company, if you go back to the 1900s, then we focused on becoming a true play medical device company and performed a lot of acquisitions and divestitures in the 2000s. We believe that this is the appropriate time, particularly with the addition of biotronic vascular intervention business that we are also announcing today. It's clear to us that we would truly have two businesses with different growth strategies, different goals, capital allocations, priorities, both of which would benefit from being independent companies. If you look at RemainCo and NewCo, they have fundamentally different growth and profitability profiles with the value not fully realized within either of them when they're combined within Teleflex. Once we came to that realization, we started to look at this from a logistical standpoint. And it was actually a pretty clean separation. Our manufacturing footprint and operations today are already largely aligned to this separation. Urology business and OEM business are easily separable entities within Teleflex today. So the strategic rationale was there. And then when we actually looked at how feasible it would be logistically and operationally, the pieces all really fell into place. So after looking at multiple ways to drive value with these businesses, we felt that a separation at this time is the most significant way we can drive value for our shareholders, our businesses, and our team members.

Super helpful. And then just as a quick follow-up, we obviously together chatted about BAFTA a few times and that side of things. How are you thinking about the relative sales force and the access? Because obviously Biotronics is very, very strong in EMEA. And I'm just trying to think, obviously you've got a bigger bag for the reps um is there any ability to consolidate the reps or is this a situation where because of the geographic split being a little bit different between the two of you you keep them all on you just increase the size of the bag so i think you've hit the nail on the head synergistically the acquisition of biotronic uh teleflex's interventional business is much stronger within the americas the biotronic business is much stronger

within EMEA. So we have the opportunity now in combining the vascular interventions business with the Teleflex business to take advantage of both of those areas. Also within Teleflex, as I said in my prepared remarks, we have products that are already approved for peripheral access, but we have never had a channel in order to sell those products through within the United States and in Europe. So that gives us the opportunity to do that. And where the biotronic vascular interventions business are sold within the United States, obviously it's a smaller company, so getting access to the cath lab is difficult for their individuals, whereas Teleflex has no issue getting access to that cath lab. And, of course, the two businesses are very complementary. I'll give you one small example. Their Orsiro drug-eluting stent, is really suitable for those tortuous coronary arteries because of its flexibility and my ability to place it. That is where a broad part of our portfolio is used every single day, gaining access to place these products.

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

uh morning thanks for taking the questions and tom best of luck to you uh in the future i guess liam you know as i think about the um asset that you're acquiring here you know free solve seems interesting although it's been difficult with these bio-resorbable products historically um just talk about the the asset that you're bringing in the confidence of being able to deliver the kind of growth you're talking about from it i don't know if it's more ous expansion of it going forward. But then also just the ability to kind of layer on from, you know, from when you get this in-house, when you have RemainCo in the future and what that could look like, you know, going forward. Because I think some people will be a little bit skeptical just given the fact that you're rolling in some, you know, some technologies that are a little bit older, I guess, in nature for lack of a better term.

So if you look at the portfolio, there are some key products within there. You've got the PK Papyrus, which is a covered stent, which is actually one of the only covered stents and unique in its applicability. You've got the Pantera Pro drug-coated balloon with a really solid CAGR over the last couple of years. And you've got the Peripheral Pacero drug-coated balloon with really solid rates. Regarding your comments on on the free cells. I would like to point out that the older products were polymer, whereas this one is metallic. And I think this gives us nice optionality on revenue growth in the future as we go through the clinical trial. If we look at the tagger of the portfolio that we're acquiring, and to be clear, Matt, we're not acquiring all of the portfolio of the vascular interventions business But if you look at the CAGR of that portfolio over the last couple of years, it's been 5.4%. And even within that, there's volume-based procurement impacts in late 2024 in China. And if you normalize for that, the CAGR of this portfolio will be in excess of 6%. So it's got a solid growth profile already. It's got some innovative products, and it's very complementary to to Teleflex, both geographically and synergistically, with the portfolio that we have. And it gives us a much bigger presence in the cath lab in both Europe and the United States, and it will unlock the opportunity for some potential go-directs very similar to what happened when we acquired Vascular Solutions back in 2017.

Got it. And then just to follow up on the acquisition as well, can you just talk a little bit more about the actual sales numbers? I don't know if you or Tom wants to talk about this, but the sales numbers, margin profile, and then just why you guys think you can really grow this business at a better rate than what Biotronic was doing. Thanks.

Yeah, with regard to the sales number, so I gave you the growth rate for the acquisition that we brought in. As we outlined, we intend to close late Q3, and as I said in my prepared remarks, that would be approximately €91 million in the fourth quarter. There isn't that much seasonality with this business, a little bit in the summer, so therefore you just take that €91 million which is approximately $94 million, that would equate to around 375 million in a full year basis. And our expectation, because of the synergies of bringing this product family into Teleflex, that it will grow 6% or better from 2026 on. And then, as I said, you have the optionality of pre-solve into the future.

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

Good morning, and Tom, congrats on the retirement. Maybe I'll ask two questions, both up front. Liam, I'd love to hear from you why you're staying with RemainCo versus NuCo. And then secondly, as part of the comprehensive business review, did you actively explore divesting pieces of the business versus spin? Thanks.

Yeah, so I plan to stay with Remainco. That's what the board has asked me to do, to remain and to see through the separation of the two companies. And it is my intention to see through and drive this company. to a plus 6% growth at a mid-60s gross margin, operating margin the equivalent of the Teleflex company. And like I said earlier, in regard to sell or spin, it is our intention to continue to invest in R&D within this business. And look, as we evaluated our portfolio and as we looked at Biotronics' business coming in, we determined that the most efficient way to unlock shareholder value was to separate these two businesses. We are very focused on creating that shareholder value, and our base case for the separation, as we are announcing today, is intended to be a tax-free distribution via spinoff. But, Jason, as you are aware, recently a number of transactions of this nature that have been announced, they started off as a spend and they ended up being sold. And candidly, if that opportunity presents itself and creates more value for shareholders, we're going to be open to pursuing it.

The next question comes from Shagan Singh with RBC. Your line is open.

Great. Thank you so much for taking the question. I guess I was hoping you could comment a little bit on your 2025 guidance of 1% to 2% constant currency, which surprised me a little bit. you know, what has driven such a drastic revision in your business? You know, can you maybe talk to Q4 trends and, you know, some of the outlook for 25? And then just on Remainco, really what gives you the confidence that you can deliver on that 6% XFX growth, you know, on a durable basis post the separation in mid-2026 and beyond? Thank you for taking the question.

Okay, Shugun, let me take the second part of that first, and what gives us the confidence that Remainco will be able to grow 6% plus growth. Well, if you look at our guidance for 2025 and our plan for 2025, X the impact of the volume-based procurement in China, that business is growing in the high fives. Obviously, also within our plan, the Remainco is challenged, and I'll get into that now as I go through the guidance. So our guidance of 1% to 2%, it honestly reflects the trading environment we see for the 12 months. Our guidance is expecting the Americas and APAC will grow low single digits, while EMEA will grow in the mid single digits. Eurolift is continued. We anticipate to be challenged as we go through the year. And we also expect Palette to grow in line with our previous expectations. But we've communicated many times to the investment community in 2025, we're not expecting Palette and improvement in the environment for Eurolift. This is the last year of reimbursement, so that could be something that would change going forward. For OEM, we are now expecting tighter inventory management by our customers in 2025. We have reached out to all of our customers to get order levels for 2025, and it now appears that inventory management we experienced in the second half of 2024 will accelerate as we go into 2025. We already had, as we communicated, an impact in the first half of 2025 in OEM from the vertical integration, but now we see that being compounded by more robust inventory management in that period. The third headwind is in APAC, where we anticipate being impacted by volume-based procurement in our surgical business in 2025. This, again, like the OEM impact, we believe would be transitory and be largely flushed through in 2025. And therefore, that's what's reducing our expectation for APAC growth to the lower single digits. And the impact is within China. If you take those three buckets of headwinds, Shagun, that's approximately $100 million, with Eurolift being the largest OEM being next and volume-based procurement being the third.

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

Good morning. Congratulations, Tom. A couple of questions for me. I guess one on Biotronic and one on the separation. So Liam, maybe just specifically on the Biotronic product, can you resurrect or syro? What's the plan for Pantera Lux in the U.S.? ? And free-solve in the U.S., when can you start the pivotal trial? And I had one follow-up on the separation.

Okay, so with regards to the question on the Orsero product, it has got excellent clinical data. Our observation is that presenting that clinical data could be improved, and I think Teleflex bringing our clinical expertise to that to present it. It is particularly suitable for the more tortuous stent placements because of the flexibility and the thin wires of that particular stent. The Pantera would require some effort on the coating technology to bring it broadly into the US. For now, we've announced that we're going to sign the We've signed the agreement today. We're not going to have the product closed until the end of Q3. Our expectation for FreeSolve is that we will continue with the clinical study in Europe, get that through, and we'll update the investment community in our plans for FreeSolve for the United States as we go through 2026. But it is a nice revenue optionality for us within the future, Zari.

Okay, that's helpful. And then second, for the separation, the margins of each business today, I didn't see the operating margin for SpinCo. You talked about RemainCo being kind of neutral with increased investments. Can you kind of give us the pieces today so obviously we can create separate options? models and just any color on stranded and stand-up costs for each. Should we just look at recent precedents? Thank you.

Yeah, I think for stranded and stand-up costs, Larry, you're pretty accurate. You should look at precedents. We believe this will be, while every spin is unique, we think this is going to be similar to many of those. We've tried to give the investment community as much color as possible with RemainCo growing at plus 6% at mid-60s gross margin, investing in R&D with operating margins similar to Teleflex. Same for NewCo. We think it's going to be growing low single digits with the potential to improve as the urology business and the OEM business improves over time. It'll have mid-50s gross margin. Obviously, a lot of the other information will be disclosed in the Form 10, but I think you should consider it to be similar to similar carabouts, Larry. It's a good benchmark to use.

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

Thanks, and Tom, congratulations. Good luck on the transition. Maybe sticking on the structure of the spin, Liam, will the parent retain any ownership in the spin? How will that work out? Any comments on the capital structures of the two businesses? The consolidated business is holding around $1.65 billion in debt. So any early views on how debt for each of the standalone businesses will play out? And then I'll have one quick follow-up on Biotronix.

Yeah, just regarding the capital structures, all of that will be determined as we go through, Anthony. And also the determination as to what holding that RemainCo would hold within UCO. And obviously all that would be disclosed in the Form 10 report. It is our intent to set up two very successful companies, and all of this will be defined over the next several quarters. We do want to have a RemainCo and a NewCo with a strong, viable future, both making independent decisions for their companies to extract shareholder value from both RemainCo and NewCo.

And then just on Biotronic, maybe a little bit on top-line synergy. potentials as well as cost synergy. You know, at the top line, certainly that there are channel overlaps with vascular access, maybe to some extent interventional, surgical, maybe separate, and then geographic. It seems like there could be synergies there. And then just on cost synergy. So just a little bit on the sales synergy of parent co with Biotronic as well as cost synergy. Thanks.

Yeah, thanks, Anthony. As I said a little earlier, we have a range of our current products that have an indication for peripheral, but we haven't had a channel to sell those products together. I think there's a significant opportunity for us in combining the sales forces in both the US and in Europe to have a larger bag and be more relevant within that Cat Lab call point. We've said many times that the Cat Lab is a call point that we really want to continue to explore And we want to continue to invest behind the new product innovation. That's the lifeblood of these products. So we'll have a whole suite of products now available with a full bagged sales organization in the cath lab for both coronary and peripheral indications. And we will be able to sell our products that have a peripheral indication through that sales channel, gaining synergies in that regard. So your analysis and perception is absolutely correct. There will be opportunities as we combine the bags of both companies and the sales forces of both companies to help drive that growth of 6% or better as we move forward.

The next question comes from Richard Newiter with Truist Securities. Your line is open.

Hi, thanks for taking the questions. Tom, I echo my congrats into your retirement. I just have a couple up front here. Forgive me with all the news flow. These might feel like kind of old topics, but any update on the entry rate or balloon pump forecast horizon and views on the competitive dynamics in that market and your opportunity to gain share there? I'd also like to just ask how, if at all, tariff exposure is contemplated in the outlook for 25? And if you could just remind us how that runs through your business and what your exposure is there. And then just lastly, any insight on who's going to run new co, are you going to go internal or external, or is it too early? Thanks.

Okay. So I'll take two and I'll ask John to cover the tariffs. So with regard to the management team for NUCO, we're beginning a search immediately for the management team. There will obviously be some internal individuals that will transfer to run that business, but it's our intent to begin an external search for a new NUCO CEO and CFO. Regarding the inter-Arctic balloon pumps, Rich, nothing has changed in our outlook and expectation. We came in a little bit ahead of our expectation in Q4 for inter-Arctic balloon pumps. The quotation rates, as we've gone through Q4 and into early Q1, have remained robust. And we see that the opportunity through Q1 and Q2 is as we had communicated before. And I'll ask John to give you some more color on the tariffs.

Sure.

Tariffs that have been currently enacted, we have in our plan and in place. Tariffs that have been proposed several times by the Trump administration but have not been put in place are not in our plan. Our biggest exposure remains if the tariff is put in place for Mexico as we have significant operations in Mexico and that would have the largest impact.

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

Good morning, guys. Tom, congrats on the retirement. A couple quick ones for me. Maybe just a follow-up on Rich's question on tariffs. I mean, would it be possible to size the exposure to, you know, if the Mexican tariffs went into place? And then on the OEM business and your comments there, Liam, I guess I just wanted to understand, do you think it's a broad, a broader inventory work down? Or are there specific products within your portfolio that are maybe maybe being targeted by by your customers as you know, to work down that inventory? Thanks.

Yeah, Craig. So on the inventory, it's pretty broad-based with the inventory. We saw customers over the past couple of years stock up particularly on some of the extrusions, complex extrusions, and we're seeing a slightly outsized normalization in that area. With regard to the tariffs, there's a lot of variability there. In relation to those, it's not really clear. Will there be exceptions for medical devices? Is it value add only impact? How's the Makila door arrangement being managed? And it's difficult to run your business forecasting all of these based on the tweet of the day. Obviously we saw last night, they're now an intent on Europe. And again, there's a complete lack of clarity as to how that. So to give you a more wholesome answer, We really need more information. Obviously, we're taking actions. We've moved inventory north of the border. And as you probably are aware, Craig, if tariffs did hit, a lot of it would be capitalized into your inventory and then would flush out a little bit later in the cycle. So difficult to give you a specifics on the various different tariffs. But as John said earlier, all tariffs that are in place as of right now are contemplated within the guide that we provided.

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

Thank you. The balloon pumps are going to NUCO. Why not keep them and remain CO?

So I think that that was a topic conversation, candidly, Mike. But the reality was that it really does fit into that acute care. It has its own separate sales force, and it will be a value add for NUCO. The margin profile made it more applicable to NUCO than RemainCo. And obviously, it does have a separate manufacturing footprint. So it was... It was a discussion topic, and ultimately, as the team went through it over the last many months, this was the decision where we finally came down.

Similar question for the follow-up, but on anesthesia. I always viewed this as fairly complementary to vascular access, similar call point, critical care settings, ICU, emergency med. You know, what have I missed there? Is it a sales issue? Is it a separate sales effort? Is it a materially lower margin profile, price risk? Why separate those two? Thank you.

So the anesthesia business is broadly regional anesthesia and ICU slash operating room general anesthesia. Not that much synergies with the vascular business, candidly, Mike. The one piece of the business that does have synergy with the vascular business is the emergency medicine part of that. And obviously, that is staying with RemainCo. And obviously, the margin profile and growth profile of anesthesia without the emergency medicine side of it would probably fit better in UCO than in RemainCo.

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

Yeah, thanks for putting me in. Just want to ask one on the Biotronic deal. So I think you said that the gross margin of that business is similar to the current corporate gross margin. Is that right? And it's a bit lower than I would have thought. Is that maybe because they're more exposed to OUS and Europe in terms of their sales mix? And is there an opportunity there then if you start selling more of those products in the U.S. at higher prices to get some gross margin accretion there?

Yeah, so it is equal to the Teleflex. You heard that correctly, and that is correct. There is a fair amount of investment into the business right now in regards to the pipeline, in particular with the optionalities I pointed out to FreeSolve. And I think your observation is correct, as we can accelerate growth in the United States. And as we accelerate some of the new product pipeline, there is the potential to improve that gross margin over time. And obviously, definitely an opportunity to improve operating margin over time.

Okay. Got it. Thanks. And then just on free-solve, I apologize if you already answered this. Would you need to run a U.S. pivotal trial if you decide to try to commercialize that in the U.S., or are those trials running adequately?

So the current trial that's running is for Europe, so yes, that is accurate. We would have to run a trial for the U.S., and as I said earlier, we'll update the investment community as we go through 2026 as to our optionality on that. We'll have... gotten a lot more patients enrolled in the trial in Europe at that stage, and we'll have much better visibility as to what the path forward is in the U.S. at that stage.

This concludes the question and answer session. I'll turn the call to Lawrence Kirch for closing remarks.

Thank you, Sarah, and thank you to everyone that joined us on the call today. This concludes the Teleflex Incorporated fourth quarter 2024 earnings conference call.

Thank you, you may now disconnect.