• Revenue: $737.8 million, up 3.8% year-over-year.

• Adjusted Earnings Per Share (EPS): $3.21, increased by 3.9% year-over-year.

• Adjusted Gross Margin: 61.1%, a 170 basis point increase from the previous year.

• Adjusted Operating Margin: 26.6%, up by 80 basis points year-over-year.

• Net Interest Expense: $21 million, increased from $17.5 million year-over-year.

• Adjusted Tax Rate: 13.2%, up from 11.8% year-over-year.

• Cash Flow from Operations: $112.8 million, up $28.5 million from the previous year.

• 2024 Revenue Growth Guidance: Constant currency growth expected between 3.75% to 4.75%.

• 2024 Adjusted EPS Guidance: Raised to a range of $13.60 to $13.95.

• Warning! GuruFocus has detected 6 Warning Signs with W.

Release Date: May 02, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Teleflex Inc (NYSE:TFX) reported a solid start to 2024 with revenues of $737.8 million, up 3.8% year-over-year on a constant currency basis.

• Adjusted earnings per share for the first quarter was $3.21, marking a 3.9% increase year-over-year.

• Positive trends in raw material inflation and freight expenses were observed, aligning with the company's expectations for the year.

• EMEA and Asia regions showed strong revenue growth, with increases of 9.7% and 11.2% respectively, driven by solid performance across most product families.

• The integration of Palette Life Sciences is progressing well, meeting targeted milestones and contributing positively to the company's growth.

Negative Points

• Americas revenues decreased by 1.5% year-over-year, primarily due to the impact of prior year MSA revenues booked in this region.

• The company continues to face challenges in the office side of service for UroLift, impacting growth in the Interventional Urology segment.

• Teleflex Inc (NYSE:TFX) anticipates a total inflation rate somewhat higher in 2024 compared to 2023, partly due to inventory capitalized in 2023 affecting the income statement this year.

• First quarter other revenue declined by 27.1% year-over-year, mainly due to the planned exit of the MSA by Medline in December 2023.

• The company issued a voluntary recall of QuickFlash radial artery and radial artery arterial line catheterization kits, and a field advisory notice for Arrow FiberOptix and UltraFLEX intra-aortic balloon catheter kits, although the financial impact is expected to be immaterial.

Q & A Highlights

Q: Can you discuss the performance of the OEM segment and expectations through the year? A: Liam J. Kelly, Chairman, President & CEO of Teleflex, highlighted the strong performance of the OEM segment, noting its standout growth. He anticipates continued double-digit growth for the year, although there might be a slight dip in Q2 due to phasing of orders. The demand remains robust, particularly for microcatheters and catheter extrusions.

Q: How is the sales force training for Urology progressing, and what impact does it have? A: Liam J. Kelly explained that the training is progressing well, with about 40% of necessary sales reps trained by the end of Q1. The full integration and training are expected to be completed by the end of the year. While there was some impact on UroLift sales, Palette Life Sciences is performing well and unaffected by the training activities.

Q: What factors are pressuring the gross margin over the next three quarters? A: Thomas E. Powell, EVP & CFO, mentioned that the main pressures are similar to those in Q1, including inflationary pressures and FX impacts, although FX is expected to improve. The strong start to the year underpins confidence in achieving the full-year gross margin guidance.

Q: What are the drivers behind the strong growth in the Interventional segment? A: Liam J. Kelly attributed the growth to several factors, including the penetration of the MANTA large bore market, strong performance of complex catheters, and intra-aortic balloon pumps, particularly overseas. He emphasized that global procedure volumes in cath labs are back to pre-pandemic levels, aiding growth.

Q: What are the expectations for growth acceleration from current levels? A: Liam J. Kelly explained that the midpoint of their guidance accounts for about a 1% headwind from inorganic factors like the MSA and Palette. The underlying organic growth is stronger, and he expressed confidence in reaching the long-range plan growth targets, supported by strong performance across various business segments and geographies.

Q: Given the constant currency beat in Q1, why wasn't the full-year guidance raised? A: Liam J. Kelly noted that while Q1 performed well, particularly in March, some OEM orders expected in Q2 were pulled into Q1. They updated the guidance for FX impacts and will continue to monitor performance through the year before making further adjustments.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.