Teleflex Incorporated Q3 FY2025 earnings call

Management Statement and Operational Highlights

• Corporate Strategy: Teleflex is being separated into RemainCo and NewCo. Focus on selling NewCo to maximize shareholder value. Italian payback measure led to a $23.7 million decrease in reserve and increase in EMEA revenue.
• Third Quarter Results: Third quarter revenues $913 million GAAP, +19.4% YOY. Adjusted revenues $892.9 million, +16.8% reported, +15.3% adjusted constant currency. Adjusted EPS $3.67, +5.2% YOY.
• Clinical and Commercial Updates: BIOMAG-II trial for Freesolve resorbable magnesium scaffold at midpoint with over 1,000 patients enrolled. Integration of acquired Vascular Intervention business on track; planned restructuring to reduce costs. Launch of Barrigel in Japan.

Segment Performance

• Geographic Segments:
  • Americas: Revenues $555.9 million, +7.5% YOY. Acquired Vascular Intervention business was a key growth driver. Excluding this, growth from Surgical, Interventional, and Vascular offset by OEM declines and UroLift challenges.
  • EMEA: Revenues $214.1 million, +34.4% YOY. Driven by Vascular Intervention acquisition. Excluding acquisition, strength in Surgical, Vascular, and Interventional offset by anesthesia issues.
  • Asia: Revenues $122.9 million, +25.3% YOY, primarily due to Vascular Intervention acquisition. A $9 million stocking order in China, with expectation to sell through inventory by end of 2025.
• Product Categories:
  • Vascular Access: $191 million, +4.3% YOY.
  • Interventional: $266.4 million, +76.4% YOY (excluding acquisition, +9% YOY). Acquired Vascular Intervention revenue exceeded expectations, but balloon pump revenue lowered by $30 million midpoint due to lower US orders.
  • Anesthesia: $101.4 million, -1.4% YOY. Impacted by decreased military orders and tracheostomy tubes, offset by ET tubes, LMA masks, and hemostatic products.
  • Surgical: $122.9 million, +8.8% YOY. Solid core growth with chest drainage and instrumentation, partially offset by China volume-based procurement.
  • Interventional Urology: $71.8 million, -14.1% YOY. Strong Barrigel growth but pressure on UroLift.
  • OEM: $80.4 million, -3.9% YOY due to customer inventory, but sequential increase.
  • Other: $59 million, +3.1% YOY broad-based growth.

Guidance

• 2025 Adjusted Constant Currency Growth: Expected 6.9%-7.4%, driven by Vascular Intervention but revised down due to lower intra-aortic balloon pump orders in US.
• Revenue: Adjusted revenue range $3.305B-$3.320B (8%-8.5% growth), GAAP 9.1%-9.6% including Italian payback.
• Margins: Adjusted gross margin ~59%, operating margin ~24.5%, net interest expense $93M, tax rate ~12.5%. EPS range $14-$14.20.
• Fourth Quarter: Adjusted constant currency growth 14%-15.8%, excluding $21M FX benefit.

Risks

• Tariffs: Impact on margins, but progress in mitigation strategies.
• Intra-Aortic Balloon Pumps: Lower-than-expected order rates in US leading to revised revenue expectations.
• Market Competition: Potential loss of share to drug-coated balloons.
• Integration Risks: Challenges in integrating acquired businesses, including potential write-downs in intangibles.

Question and Answer

• Q: Mike Matson on China balloon pumps A: Liam Kelly explains a $9 million stocking order in China, driven by growth strategy and timing related to tariffs, expecting inventory to sell through by end of 2025.
• Q: Matt Taylor on spin/sale of NewCo A: Liam Kelly discusses progress in the sale of NewCo, highlighting healthy buyer interest and focus on maximizing shareholder value through the sale.
• Q: Jayson Bedford on Q4 revenue guidance A: John Deren states Q4 adjusted constant currency growth expected 14%-15.8% excluding $21M FX benefit, with implied Q4 revenue range $930 million to $945.6 million.
• Q: Ravi Misra on vascular business and bariatrics A: Liam Kelly and John Deren discuss strong performance of BIOTRONIK Vascular and write-downs in bariatrics due to GLP-1 pressure but continued growth.
• Q: Samantha Munoz on sale of NewCo and intra-aortic balloons A: Liam Kelly provides details on advanced due diligence in the sale of NewCo and discusses longer-term outlook for intra-aortic balloon pumps and catheters.
• Q: Patrick Wood on BIOTRONIK integration and procedural volumes A: Liam Kelly talks about solid integration of BIOTRONIK Vascular with strong retention and healthy procedural volumes in the cath lab.
• Q: Indiscernible Analyst on BIOTRONIK EMEA and sales force realignment A: Liam Kelly provides insights on early integration synergies and broad-based restructuring efforts.