Teleflex (TFX) 1 Aug 24 2024 Q2 Earnings call transcript

In the second quarter of 2024, Teleflex Incorporated reported a 0.9% year-over-year increase in revenues on a GAAP basis, reaching $749.7 million. However, when excluding the impact of the Italian payback measure, adjusted revenues for the second quarter were $763.5 million, marking a 2.7% year-over-year increase on a reported basis and a 3.4% increase on a constant currency basis. The company's second quarter adjusted earnings per share were $3.42, representing a 0.3% year-over-year increase.

Impact of the Italian Payback Measure

The Italian government's legislation, which requires medical device companies to contribute to funding any deficit created by government budget overspend for medical devices each year, had a significant impact on Teleflex's revenues. The company had to book $15.8 million in reserves and reduce revenue within its EMEA segment by $15.8 million related to the Italian payback measure. This impacted the company's adjusted revenue growth rate, although it did not significantly affect the underlying operational performance.

Geographic Segment Revenues

Americas revenues were $426.8 million, representing a 0.6% year-over-year increase. However, the impact from the termination of the MSA in the second quarter led to a challenging comparison. EMEA revenues, on the other hand, increased by 9.8% year-over-year, driven by a targeted strategy to increase the geographic availability of Teleflex products and improving utilization in Europe. Asia revenues were $87 million, marking a 4% increase year-over-year, primarily due to a softer performance in South Korea caused by a doctors strike.

Product Category Revenues

Teleflex's vascular access and interventional categories performed well, with revenue increases of 4.8% and 13.8% year-over-year, respectively. The anesthesia and surgical categories also showed growth, with revenue increases of 2.3% and 6.4% year-over-year, respectively. Interventional urology revenue was $83.1 million, representing a 7.1% year-over-year increase, driven by Barrigel revenue following the October 2023 acquisition of Palette Life Sciences.

Financial Guidance for 2024

Teleflex raised its 2024 adjusted constant currency revenue growth guidance to 4.25% to 5.25%, excluding the impact of the Italian measure from prior years. The company also expects incremental intra-aortic balloon pump revenue in the fourth quarter, contributing to a total revenue range of $3.76 billion to $3.105 billion on a GAAP basis.

Intra-aortic Balloon Pumps and Catheters

The recent FDA letter to health care providers regarding pump safety and quality in relation to Teleflex's primary competitors in the intra-aortic balloon pump market has created an opportunity for the company to gain share, particularly in the U.S. market. The company is also investing in increasing its manufacturing capacity for pumps and catheters to meet the demand from customers seeking alternatives.

Palette Acquisition

The acquisition of Palette Life Sciences has been tracking ahead of expectations, with strong revenue momentum and the integration process progressing well. The company is now fully on track to complete the integration of the sales force by the end of 2024.

Share Repurchase Program

Teleflex announced a new share repurchase program, with the intention of repurchasing up to $500 million of its common stock. This move is seen as a complementary strategy to the company's ongoing M&A efforts and reflects its strong free cash flow profile and confidence in its business prospects.

Looking Ahead

Teleflex's second quarter results demonstrate a solid operational performance, with growth in key product categories and geographic segments. The company's financial guidance for 2024 reflects optimism about its future prospects, particularly in the context of the intra-aortic balloon pump market opportunity and the ongoing integration of Palette Life Sciences. With a focus on innovation, margin expansion, and disciplined capital allocation, Teleflex is well-positioned to drive durable growth and create value for its shareholders.