Teleflex(TFX) - 2023 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported revenues of $710.9 million for Q1 2023, a year-over-year increase of 10.8% on a reported basis and 13.2% on a constant currency basis [48] - Adjusted earnings per share (EPS) for Q1 was $3.09, reflecting a 7.3% increase year-over-year [44] - Adjusted gross margin was 59.4%, a 100 basis point increase compared to the prior year, driven by pricing, lower logistics costs, and favorable foreign currency fluctuations [40][41] - Cash flow from operations for Q1 was $84.3 million, up from $62.1 million in the prior year [43] Business Line Data and Key Metrics Changes - OEM revenues increased by 34.5% year-over-year to $77 million, with strong performance across all product categories [1][99] - Interventional Access revenue was $116.9 million, up 23.3% year-over-year, benefiting from a diversified portfolio [56] - Surgical business revenue reached $99 million, a 14.3% increase year-over-year, with strong contributions from metal ligation clips and instruments [57] - Vascular Access revenue increased by 9.2% to $177.7 million, with solid performance across the portfolio [71] Market Data and Key Metrics Changes - Revenues from Asia were $78.7 million, increasing 22.8% year-over-year, with China showing high single-digit growth [54] - Americas revenues were $411.9 million, representing 9.2% growth year-over-year, driven by double-digit increases in interventional and surgical revenues [69] - EMEA revenues of $143.3 million increased 10.5% year-over-year, reflecting improved procedure volumes [70] Company Strategy and Development Direction - The company plans to focus on driving durable growth through organic opportunities, innovation, and disciplined capital allocation [31] - The company is actively engaged in expanding its product portfolio, including the launch of new devices and clinical studies [5][6] - Management emphasized the importance of maintaining pricing discipline and expects at least 50 basis points of positive price year-over-year in 2023 [41] Management's Comments on Operating Environment and Future Outlook - Management noted a recovery in surgical procedures, particularly in hospitals, with staffing shortages improving [20] - The company raised its 2023 revenue guidance to a growth expectation of 5% to 6.25% [20] - Management expressed confidence in the full-year EPS guidance outlook, despite not narrowing the EPS range [15][24] Other Important Information - The company anticipates that all MSA revenues will cease at the end of 2023, implying no MSA revenue in 2024 [1] - The company expects a foreign exchange translation headwind of approximately 35 basis points in 2023, down from a prior estimate of 50 basis points [25][26] Q&A Session Summary Question: Can you discuss the recovery standpoint in hospital versus ASC and office-based settings? - Management noted that overall procedure volume within hospitals has continued to progress, with growth in the Americas and EMEA, while the office side showed modest improvement due to staffing issues [9][11] Question: What are the growth expectations for the OEM business? - Management expects the OEM business to grow in the high single to low double digits, leaning more towards low double digits due to strong performance in Q1 [80] Question: What is driving the outlook for revenue guidance? - Management clarified that the plan is front-end loaded, with tougher comparables expected in the latter half of the year [24] Question: Can you provide insights on the sustainability of procedure volumes? - Management indicated that procedural volumes are strong and improving, particularly in hospitals, and expect this trend to continue [85] Question: What is the impact of the MSA headwind? - Management quantified the MSA headwind as approximately $70 million, which is expected to improve gross margins as low-margin revenue goes away [97] Question: How is the company positioned for M&A? - Management stated that the company has significant firepower for M&A, with a leverage ratio of 1.7 times, and is actively looking for strategic fits [108]