Teleflex Q1 2022 Earnings Call Transcript

Quartr
Provided by Quartr
April 28, 2022

There are 7 speakers on the call.

Operator

Please standby. Good morning, ladies and gentlemen, and welcome to the Teleflex First Quarter 2022 Earnings Conference Call. At this time, all participants have been placed in listen only mode. At the end of the company's prepared remarks, we will conduct a question and answer session. Please note that this conference call is being recorded and will be available on the company's website for replay shortly.

Operator

And now, I will turn the call over to Mr. Laurence Kirsch, Vice President of Investor Relations and Strategy Development.

Speaker 1

Good morning, everyone, and welcome to the Teleflex Incorporated First Quarter 2022 Earnings Conference Call. The press release and slides to accompany this call are available on our website at teleflex.com.

Speaker 2

As

Speaker 1

Participating on today's call are Liam Kelly, Chairman, President and Chief Executive Officer and Thomas Powell, Executive Vice President and Chief Financial Officer. William and Tom will provide prepared remarks, and Then we will open the call to Q and A. Before we begin, I would like to remind you that some of the matters discussed in the conference call will contain forward statements regarding future events as outlined in our slides. 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 ks, which can be accessed on During this conference call, you will hear management make statements regarding intra quarter business performance.

Speaker 1

Management is providing this commentary To provide the investment community with additional insights concerning trends and these disclosures may not occur in subsequent quarters. With that With that, I'll now turn the call over to Liam for his remarks.

Speaker 2

Thank you, Larry, and good morning, everyone. It's a pleasure to speak with you today. Teleflex continues to execute well despite a challenging environment. For the Q1, Teleflex generated 3.2% constant currency revenue growth year over When adjusting for the estimated 1% impact of 1 less selling day in the quarter compared to the prior year period and the impact of our 2021 respiratory business divestiture. The underlying growth in the quarter was 5.8% year over year despite Some disruption from COVID in January early February.

Speaker 2

Adjusted earnings per share increased 0.3% year over year to $2.88 reflecting growth in the business, offset by the impact of incremental inflation and investment for our growth drivers. Once again, our steady performance in the quarter was driven by the company's balance of growth drivers, Broad portfolio of medically necessary products and category leadership, offset by the impact of COVID-nineteen and the divestiture of the Although the surge in COVID infections disrupted the business during the first half We had a better than expected performance in March. Specifically, we saw a notable impact in January early February, However, as COVID infections declined, we saw a notable uptick in our business as we exited February. In the quarter, our high growth portfolio, which accounted for approximately 25% of revenues in 2021 and includes UroLift, MANTA, Haemostatic Products, EasyIO, OnControl and PIX performed well. When excluding UroLift, Which was anticipated to build momentum through the year, the remainder of products in the high growth portfolio increased in the low double digits when adjusting for one less selling day in the quarter.

Speaker 2

We continue to expect our high growth portfolio to grow in the mid teens for 2022 Our durable core remains on track for 4% growth in 2022 as assumed in our guidance. Overall, we are pleased with our Q1 performance despite the COVID related disruptions and year over year inflationary pressures from freight, raw materials and labor. I am also pleased to report that our pricing Strategy has gained traction early in the year, and I feel very confident in delivering our plan of 50 basis points in positive pricing in 2022. We continue to assume a more normalized operating environment as we progress through 2022 due to a decrease in COVID disruptions and an increase in elective surgical procedures. Given that it is Still early in the year, we are maintaining our constant currency and adjusted earnings per share guidance for 2022.

Speaker 2

I would once again like to thank the entire Teleflex team. The resilience of the organization continues Although the disruptions from the pandemic have been longer than anticipated, I believe the Teleflex team is managing through this exceptionally well. The The hard work and dedication of our employees continues to be felt throughout the organization And with our customers, patients and in our communities. With that, let's turn to a deeper look at our first quarter Revenue results. I will begin with a review of our report segment revenues for the Q1.

Speaker 2

All growth rates that are referred to are on a constant currency basis unless otherwise noted. During the Q1, our Americas, EMEA, Asia and OEM segments demonstrated resilience with all regions showing constant Americas revenues were $378,000,000 which represents 0.8% growth year over year. In the quarter, surgical was the biggest contributor to growth, partially offset by the impact of COVID-nineteen And one less selling day. Excluding the impact of the selling day, the Americas region grew approximately 2.3% year over year. The headwind associated with the respiratory divestiture to the Americas growth was minimal in the quarter.

Speaker 2

EMEA revenues $136,900,000 increased 3.4% year over year with interventional, vascular access and anesthesia Products leading the growth. EMEA continues to face a headwind from COVID-nineteen in early January and subsequently saw procedure volumes improved as countries across the region continued to open up. Excluding the impact of the respiratory Divestiture revenues rose 7% year over year. Turning to Asia. Revenues were $69,200,000 increasing 12.5% year over year.

Speaker 2

China revenues This increased at a strong double digit rate led by growth in vascular and surgical, while Southeast Asia and Japan also contributed The performance in the quarter. Excluding the impact of the respiratory divestiture, Asia revenues rose 18.5% year over year. Let's now move to a discussion on our Q1 revenues by global product category. Consistent with my prior comments regarding our reportable segments, commentary on global product category growth For the Q1, we'll also be on a constant currency basis and ranked by size of our business units. Starting with vascular access.

Speaker 2

Revenue increased 3.2 percent to $166,100,000 Our category leadership in central venous catheters and midlines, along with our novel coated PIC portfolio continue to position us For dependable growth, PIK growth was in line with internal expectations for the quarter. We expect PIX to grow faster than the market with double digit growth for 2022 as we invest behind our differentiated portfolio. Moving to Interventional. Revenue was $96,900,000 up 2.3% year over year. We executed well during the quarter with growth across our broad portfolio.

Speaker 2

We continue to invest behind our interventional portfolio including complex catheters and MANTA, our large bore closure device. MANTA revenues were as expected in the quarter with usage continuing to expand both in the U. S. And in international markets. In turn, we remain on track for our 2022 revenue objectives.

Speaker 2

Now to anesthesia. Revenue was $86,900,000 up 5% year over year. LMA single use masks, haemostatic products, Atomization and Airway all contributed to growth in the Q1, partly offset by lower sales of tracheostomy products. Haemostatic Products revenues were in line with our expectation for the quarter. In our Surgical business, revenue was $89,700,000 Representing 14.4 percent growth year over year.

Speaker 2

Among our largest product categories, We continued to witness robust growth in sales of metal and polymer ligation clips offset by timing of orders in our instrument business. As expected, the performance in the quarter was negatively impacted by the meaningful acceleration in COVID cases in January February, which not only impacted patients but also resulted in staffing shortages. However, We saw improvements in the operating environment sequentially as COVID related disruptions began to ease. OEM revenues increased 9.2% year over year to $57,700,000 Once again, our order Book remains strong as customers recognize our broad competencies. We remain well positioned with competitive capabilities across our markets, including faster growth opportunities in thin mold, advanced interventional microcatheters used in neurovascular and other applications.

Speaker 2

And finally, our other category, which incorporates sales of respiratory products not included in Urology Care and Manufacturing and Supply Transition Agreement revenues related to our respiratory business divestiture declined by 11.7 percent to $69,500,000 year over year. The decline reflects the loss of revenue due to the divestiture of the respiratory Product, partially offset by manufacturing and supply transition agreement revenues. We continue to expect manufacturing and supply transition agreement revenues partially offset the impact on our revenue growth related to the divested respiratory assets over the first half of 2022 and that all MSA revenues will phase out at the end of 2023. That completes my comments on the Q1 revenue performance. Turning to some commercial updates and starting with UroLift.

Speaker 2

We continue to see UroLift positioned For accelerating growth in the second half of twenty twenty two, as pandemic headwinds abate through the year and as elective surgical procedures Accordingly, there is no change to our 15% year over year growth outlook for the year. UroLift remains differentiated from other outpatient BPH treatment with strong clinical results, studies showing rapid symptom relief and recovery, no new sustained sexual dysfunction and durable results. Investors familiar with Teleflex will be aware that UroLift is being positioned for patients that are suffering from BPH and have failed or are not Our DTC program remains an important element in our market building activities and is poised for another successful year with internal metrics tracking to or above plan in the Q1. As discussed previously, we are laser focused on improving UroLift utilization for existing users and driving increased productivity Of the roughly 900 surgeons that were trained in the midst of the pandemic, our sales force is fully engaged to advance the rollout of UroLift 2 with conversion of the vast majority of our U. S.

Speaker 2

Users anticipated by the end of 2022. Importantly, we are getting very good feedback from surgeons that have now converted to the new device. In addition, UroLift 2 remains an important margin driver, and we remain positioned to generate approximately 400 basis points of UroLift gross margin expansion once the U. S. User base is fully converted.

Speaker 2

We believe that a tactical approach to moving our existing UroLift users back towards The Temic procedure level is the most effective way to improve growth in 2022. Even though it is early days, we are encouraged by the improvement we are seeing in the growth from existing UroLift users. Now turning to an update on our international expansion strategy for UroLift. We have initiated our launch of UroLift in Japan on time and With the April 1 implementation of reimbursement, we have now completed initial cases with key opinion leaders, And we are methodically ramping up volumes. The feedback from the first cases has been overwhelmingly positive, which reflects the clinical benefits of the UroLift system and our field clinical capabilities.

Speaker 2

Although we 2022 as a building year for Japan, the country remains an important long term opportunity for UroLift with a 2,000,000,000 TAM And we are excited to bring this clinical beneficial treatment to those suffering from BPH. We continue to expect our sales in the region to ramp In a similar fashion to the United States, in a market that is 1 third the size, as we look into the second half of twenty twenty two, we expect To revise reimbursement in France and we anticipate launch activities in select regions in Italy And Spain. We still expect to obtain clearance for UroLift in China in 2023. Turning to the vascular business. We recently received an award of a sole source group purchasing agreement with Vizient for the supply of central venous access products.

Speaker 2

The group purchasing agreement includes access to Teleflex's leading portfolio of CBCs with differentiated antimicrobial Technology as well as recently launched ErgoPac Complete System. The agreement goes into effect in And should generate incremental revenue for Teleflex over the next several years. That said, the impact of the agreement Already contemplated in our annual guidance for 2022. Regarding potential label expansion opportunities for the hemostatic Product portfolio, as we indicated previously, we have completed patient enrollment in a 231 patient IDE study Evaluating the performance of QuickClot Control Plus Hemostatic Devices for mild to moderate bleeding in cardiac procedures as compared We remain on track with our regulatory milestones and recently filed a 510 That completes my prepared remarks. Now I would like to turn the call over to Tom for a more detailed review of our Q1 financial results.

Speaker 2

Tom?

Speaker 1

Thanks, Liam, and good morning. Given the previous discussion of the company's revenue performance, I'll begin with margins. As anticipated, Gross and operating margins declined year over year in the Q1. For the Q1, adjusted gross margin totaled 58.4%, A 100 basis point decrease versus the prior year period. The year over year decrease was the result of incremental inflation in freight, Raw materials and labor, partially offset by favorable pricing.

Speaker 1

As expected, inflation was the largest contributor to the year over year decline Gross margin for the Q1. As previously mentioned, our 2022 guidance contemplates a 70 basis point impact to gross margin from incremental Inflation. Adjusted operating margin was 25.7 percent in the first quarter. The 180 Net interest expense totaled $10,200,000 in the Q1, a decrease from $16,100,000 in the prior year period. The year over year decrease in net interest expense reflects savings from the early redemption of the 20 26 senior notes and the impact of reductions to outstanding debt using the proceeds of the respiratory divestiture and operating cash flows.

Speaker 1

Our adjusted tax rate for the Q1 of 2022 was 11.9% compared to 13.9% in the prior year period. The year over year decrease in our adjusted tax rate is primarily due to Further enhancements in tax efficiencies of our global structure, partly offset by costs arising from the new provision of the U. S. Tax law Requiring the capitalization of certain R and D expenses. At the bottom line, 1st quarter adjusted earnings Per share was $2.88 which was relatively flat year over year.

Speaker 1

Turning to select balance sheet and cash flow highlights. Cash flow from operations in the Q1 was $62,100,000 compared to $110,800,000 in the prior year period. The decline was primarily attributable to unfavorable changes in the working capital, driven by higher bonus payments in the quarter due to improved performance in 2021 versus 2020. Also impacting cash flow The increase to our inventory levels, provide support for future growth and to minimize the potential impact from supply chain disruptions. Moving to the balance sheet.

Speaker 1

Our financial position remains healthy. At the end of the Q1, our cash balance was 460 $6,700,000 as compared to $445,100,000 at year end 2021. Net leverage at quarter end was approximately 1.7x, which remains well below our 4.5x covenant. Now moving on to our 2022 guidance. We are reaffirming our expectation for constant currency revenue growth of 4% to 5.5 percent in 2022.

Speaker 1

In addition, we still expect reported revenue growth of 2.3% 3.8 percent in 2022, implying a dollar range of $2,870,000,000 to 2,917,000,000 Excluding the year over year headwind in the respiratory divestiture, our underlying constant currency revenue growth is still expected to be 5.5% to 7%. Moving to earnings. We are reaffirming our adjusted earnings per share guidance of $13.70 to 14.30 22, a 2.8 percent to 7.3 percent year over year increase. Our guidance continues to include headwinds from the respiratory divestiture and inflation That together represent roughly $0.50 in 2022. Earnings per share growth, excluding the respiratory divestiture and the incremental inflation, It's expected to be approximately 7% to 11%.

Speaker 1

And that concludes my prepared remarks. I would now like to turn it back to Liam

Speaker 2

Thanks, Tom. In closing, I will highlight our 3 key takeaways from the Q1 and our 2022 outlook. First, our diversified product portfolio enabled Teleflex to deliver constant currency growth of 3.2% in the Q1 Despite another wave of COVID, when adjusting for one less selling day and the headwind from the respiratory divestiture, the underlying business growth Approached 6%. 2nd, we will continue to effectively manage the business and look for ways to minimize incremental headwinds from inflation and supply chain challenges. Although foreign exchange remains out of our control, we remain confident and our ability to deliver against our 2022 financial guidance.

Speaker 2

3rd, we continue And drive dependable expansion in our durable core portfolio. We have levers in place to drive further expansion in our margins And our balance sheet is in a solid position with leverage at 1.7x, providing ample financial flexibility for our Capital allocation priorities, including M and A. We remain confident in our future and our ability to continue to meet our commitments

Operator

Thank you. We invite you to add yourself to the queue again by pressing star 1. Our first question today comes from Jayson Bedford from Raymond James. Your line is open.

Speaker 3

Hi, good morning and thanks for taking the questions guys. Maybe just to start Hi. You reiterated the IRRRLIP guide of 15% for the year. I'm just wondering, has the cadence changed at all with respect to the gating in the second quarter versus second half? And then just more broadly, I'm Curious, in your view, what's the gating factor right now to broader use?

Speaker 3

Is COVID truly in the rearview mirror? Are you still Facing some staffing concerns that are that flow and grow.

Speaker 2

So Jason, thanks for the question. So first of all, I would say that we feel really confident in our full year UroLift guidance. I think the year is playing out pretty much as we expected year to date. January was impacted by COVID, so over the 1st 2 months or 2 weeks of February. But we still ended up with Positive growth, slightly ahead of our expectations due to the strength that we saw as we went into March.

Speaker 2

Nothing has changed in our outlook, Jason. We still expect the first half of the year to below single digits, and we expect to see an improvement in the second half, culminating in the full year growth of 15%. The acceleration in the second half is really due to the second part of your question. We'll be out the other side of COVID patient confidence we see recovering and we definitely see procedural volume start to come back into During quarter 1, I was out on the road and I met with 32 urologists, Jason. And it's hard not to feel enthusiastic For the recovery in the back half of the year, given what I heard from those urologists, they realize that urology procedures are beginning to come back, Patient confidence is beginning to come back.

Speaker 2

And so I think I'll finish by saying on your question by saying, yes, feel really good about 15% in the back half of the year. And if you go into Q3, Jason, it's simply a question of math. If you remember, Q2 last year, we did $94,000,000 $92,000,000 and Q3 last year was 83 So the majority of the growth just comes from run rate as you go from Q2 into Q3. And then you will see in the back half and into Q4, you normally get an uptick in Q4. And as people use their deductibles, that fuels that.

Speaker 2

And if you would also Existing dock utilization to pick up as we see DTC start to flush through as well. So all of the metrics tell us the 15

Speaker 3

And just as a quick follow-up, It's obviously been a volatile market, both private and public. You're less than 2 times levered on the stated intention to deploy So my question is, has the environment impacted your capital allocation decisions at all?

Speaker 2

No, the market has not. If anything, I feel good. I feel a lot better than I did last year about the market. And you're right, our leverage is now low, now to 1.7x. So in order to do M and A, Bridge is now low, now to 1.7x.

Speaker 2

So in order to do M and A, the most important thing you need is firepower. We are chasing Assets, I can't tell you when we get efficient to vote, but we've got a lot of lines out there with very attractive hooks on them. We will maintain our financial discipline, Jason. And I think that the heady nature of the IPO market That we saw in 2021 has moderated. So therefore, we think it's a good environment for Teleflex with the firepower we have to continue to do M and A.

Speaker 2

Obviously, we'll continue to fund R and D. We'll continue to fund our restructuring programs as well. But Our main focus right now is out there looking for a nice good M and A opportunity. Scale, tuck in, dealer to direct and also late stage technologies.

Operator

Our next question comes from Cecilia Furlong from Morgan Stanley. Please go ahead.

Speaker 4

Good morning and thank you for taking the questions. Liam, I wanted to continue a bit just your near term outlook as you think, one, about Trying to impact staffing shortages, if you could just talk about the puts and takes specifically for 2Q as you think about it and also for Euralift, Just the potential for staffing shortages to impact that bucket near term and then looking beyond 2Q as well.

Speaker 2

Yes. I mean, I think the first thing, Cecilia, is that we reiterated our full year guidance. So that will tell you the confidence level we have in the numbers we have out there. With regard to China, I'll start there and then I'll come to UroLift. But with regard to China, as we said in our prepared remarks, China produced really strong double digit growth in Q1 with APAC growing 18.5% ex the respiratory divestiture.

Speaker 2

Obviously, lockdowns are in place in Shanghai and with some port closures. We normally have a couple of months of inventory in the channel. So as long as the lockdowns Do not become prolonged and widespread. I believe the situation is very manageable for Teleflex. And just to level set everybody, China is approximately 4% of our global revenues and we do not manufacture any products within China.

Speaker 2

Regarding the UroLift Question and staffing shortages. Again, when I met with those 32 urologists, two things really resonated with me from those conversations. Number 1, they've all seen patients come in as a result of our DTC. So that's a real positive for us. It's having an impact out there.

Speaker 2

And the other thing that I heard from them is, yes, they were impacted and are currently being impacted by staffing shortages, but it is getting better. They are seeing an improving environment as and then this was in February, I was out on the road. So they were beginning to see an improving environment As they came out the backside of COVID and they felt confident that they would be able to address their staffing charges, Much more acute in the office than in the ASC in the office was my observation from those conversations as well. So I still think there's going to be a little bit of a staffing issue as you get into Q2. I think it will get better as you go back to the back end of the year, which It's actually quite good because I also anticipate patient confidence improving as you go through Q2 into Q3 and Q4.

Speaker 4

Great. Thank you. And if I could follow-up as well on MANTA, just off of the investment in the back half of last year, How are you thinking about growth to that profile of that business unit for 2022? And thank you.

Speaker 2

Thanks, Julian. As we've said since the beginning of the year, we anticipate that MANTA will grow in excess of 8% for the year, pretty much due to that investment and acute focus on a greater adoption. We now believe we'll be able to train more docs. And we also think that the international growth, in particular, in EMEA is going to be quite robust. So we still feel confident.

Speaker 2

And as I said in my prepared remarks, Manta had a good solid Q1 even with the impact of COVID in January early February.

Operator

Our next question comes from Shugan Singh from RBC Capital Markets. Please go ahead.

Speaker 5

Thank you so much for taking the question. Liam and Tom, your guidance still reflects a wide range for EPS and is unchanged despite the Q1 beat. So can you just walk us through what the offsets are given the Q1 beat? What are you now assuming at the top versus the bottom end? And given the incremental Headwinds from FX and inflation, are you more comfortable at the top or the bottom end?

Speaker 5

And then just as a follow-up, can you just talk about I think the Euro spot rate included in your initial guidance was for 1.12 and it seems to be tracking now at 1.0 Fine. So by my math, that could be a meaningful headwind. So what are the offsets there? Thank you.

Speaker 1

Well, I would, 1st of all, say that with respect to the EPS, we're really pleased with the Q1 results Despite the challenging environment from COVID, constant currency revenue growth was at 5.8% after adjusting for The sales of the respiratory assets in one less shipping day. Also say expenses were fairly well aligned with expectations. Now with that being said, Foreign exchange and interest rates have been fairly volatile of late, to your point. And as a result, we'd like to give ourselves another quarter to see how things Playing out before we would make any adjustment to earnings. As we think about foreign exchange, We had given guidance at the beginning of the year and that was set when the euro was at 112.

Speaker 1

We had mentioned that at that point, it would be 170 basis point headwind to revenue and 20 basis point headwind to EPS. The rule of thumb that we've given in the past is as the euro moves and this obviously can be offset We're somewhat offset or further impacted by other currencies as well. But the rule of thumb on the euro is that for every penny move, It's about a $0.05 impact full year to earnings. Now given that we've already passed through 1 quarter, I'd say it's probably 0.035 to 0.04 dollars Per penny of euro. And again, this amount may be partially offset by some other currency moves I'd say that as we think about the guidance that we just gave and reaffirmed, we're Reflecting what we're seeing from an inflationary environment and that assumption is that the inflationary environment that we experienced In the Q1 of the year, we'll largely remain throughout the balance of the year, and that's factored into our guidance.

Operator

Our next question comes from Larry Biegelsen from Wells Fargo. Your line is open.

Speaker 3

Good morning. Thanks for taking the question. Just one for me, Liam, you've got an analyst meeting coming up here next month. Just at a high level, any thoughts on how you're feeling about

Speaker 2

kind of

Speaker 3

the 6% to 7% LRP growth algorithm and street models right now are assuming about 100 basis points leverage per year After 2022, any thoughts you can provide as we head into that meeting would be appreciated. Thanks so much.

Speaker 2

Yes, Larry, thank you very much for the question. Look, we're really looking forward to engaging with the investment community in late May. I think what we'll be communicating is durable, sustainable top line growth. I don't want to really put a number on it right now, but if you wait another few weeks, Larry, we'll be unveiling on that. We want to show margin expansion Within Teleflex, we still have restructuring programs in place.

Speaker 2

We still have mix that's going to work in our favor. We will obviously have conversations on cash flow generation, capital deployment. Our main focus is of capital deployment, as I said, Capital deployment, our main focus is of capital deployment, as I said earlier, is M and A, R and D and further restructuring programs. And obviously, you'll see us continue to focus on ESG. So I think those would be the broad themes that we're discussing with the investment community.

Speaker 2

And obviously, we will invest Behind our high growth portfolio and communicate on the expectations for that aspect of our business as well, I think That 25% of our portfolio is very exciting to us. UroLift is clearly included there, but there's a lot more to Teleflex than UroLift and we want the investment community to see that. MANTA is very exciting. Our hemostat portfolio is very exciting. Our intraosseous portfolio and our PIC portfolio, all really solid growth drivers.

Speaker 2

And actually, UroLift is in the middle of the pack from a margin perspective. So there's broad appeal to Teleflex, and that's what we want to communicate also.

Speaker 3

All right. Thanks so much for taking the question.

Speaker 2

Thanks, Tariq.

Operator

We now turn to Matt O'Brien from Piper Sandler. Your line is open.

Speaker 6

Hi, guys. Good morning. This is Drew on for Matt and thanks for taking the questions. Maybe if you could just speak To the very near term for UroLift, what are you actually seeing on the ground from a volume perspective? I think the It's Molly.

Speaker 6

And mid single digit growth here in Q2, is that consistent with what you're seeing right now? And then just Are you seeing any meaningful transitions in Cytokare so far this year?

Speaker 2

Can you just repeat the last part of your question, meaningful transitions Thank you very much. So really, what we saw with as I said Earlier in my commentary, we still expect UroLift in the first half of the year to grow low single digit growth and then to accelerate in the back half. And we're very confident on the 15% For the full year, and it's really playing out as we anticipated as a company. Obviously, Q1 was impacted by COVID In January and early February, we were encouraged by what we saw in March. March did show the green shoots of recovery.

Speaker 2

Also our strategy that we've implemented on focusing on existing users and training those 900 docks that were brought on during the pandemic is also showing some early green shoots and we're encouraged by what we're seeing there. We're driving dock utilization on UL2 and ATC. And obviously, our DTC campaign is adding to Confidence in the growth for UroLift. I'm really pleased to report that we have seen no shift in sight of care And we do not anticipate seeing any shift in sight of care. The vast majority of our office based urologists have signed up to our new pricing strategy, and that is now implemented and being rolled out to its full.

Speaker 2

So no shift inside of care. Don't expect any shift inside of care for the remainder of the year. And again, I'll reiterate, feel good about 15

Speaker 6

Okay, very helpful. And then I just a quick follow-up here on your commentary on the positive pricing. How do we think about those 50 bps of price positive price in comparison to the inflationary pressures you're seeing. And when based on when you think Those inflationary pressures may subside. Is there room to push that price even higher If those pressures are more persistent.

Speaker 6

Thank you.

Speaker 2

So my father used to say that a good Start is half the battle. And we've had a good start to our pricing and the rollout of our pricing, and I feel really encouraged by that. In regard to your question about how it impacts inflation, so we're expecting 50 basis points of positive pricing, and we're Taking 70 basis points of inflation, and it's already baked into our forecast. I think that there is Teleflex has always been a company that's been able to deliver positive pricing. And I think if Inflation gets worse.

Speaker 2

I do believe that there is some flexibility for us to increase our pricing in the future.

Operator

We move on to Matthew Mishan from KeyBanc. Please go ahead.

Speaker 3

Good morning and thanks for taking the questions. Liam, could you talk to me some of the dynamics of the Interventional segment and how we should be thinking about Growth in that segment for 2022?

Speaker 2

Absolutely, Matt. Thanks for the question. So as we look and nothing has changed from our guidance at the beginning of the year. We still expect our interventional Portfolio to grow high single digits, low double digits with good execution. I think that the quarter, the Q1 came in right as we We had some impact as one would expect from COVID in January and early February, But the recovery looks quite encouraging for interventional access.

Speaker 2

Just on a broader comment, I think hospitals are probably managing I'll be out the other side of COVID, probably better than ASCs and offices, and that's what we're seeing across the board. So feel really good about the Trajectory of that business and feel really good about the trajectory of Manta and the rest of the portfolio. So high single, low double digits with good execution, Matt, is what I would expect for the year.

Speaker 3

Okay, excellent. And then on anesthesia, can you talk about Zmedica versus the Broader anesthesia portfolio and how that did in the quarter? Yes.

Speaker 2

As we said in our prepared remarks, Zmedica was right in line with our expectation. We still expect the Zmedica portfolio, the hemostatic portfolio to grow high single, low double digit with good execution. So very encouraged again by how that hemostatic portfolio is generating. And you could see it in the numbers, Matt. It's been a while Since the anesthesia portfolio has put up a 5% growth number as an organic growth number, so I

Operator

Our next question comes from Richard Newitter from Trist. Please go ahead.

Speaker 1

Excuse me. Hi, thanks for taking the questions.

Speaker 2

Welcome back, Rich.

Speaker 1

Yes. I know. Thank you. Thank you. It's great to be back.

Speaker 1

Thank you very much, Tim. Maybe just to start on UroLift, This is such a strange year from a growth rate standpoint. Obviously, growth is being understated in the first half due to comps In COVID and in the back half, as you pointed out from a math standpoint, it's the same thing. To get to your guidance for 50%, usually you're going to have to do well over 20%. So I appreciate the 50% is the growth rate outlook for this year.

Speaker 1

So, Liam, can you just maybe help us think through what the right normalized growth rate is once we've kind of come out on the other side of Recovery and anniversary hopefully all of these different variables. Is 15% the right way to think about the U. S. UroLift business For now.

Operator

So the way I look

Speaker 2

at it, Rich, is we're very confident on growing at 15% this year. This year, it's all about the U. S. You'll get a small contribution for overseas with Japan will ramp a little bit this year. You'll see France in the back half of the year, a little bit from Brazil, Italy and Spain, and then you'll see China get the registration Next year and we'll go into that market.

Speaker 2

And the way I look at it is, we'll finish this year. We believe we'll get 15% growth. Hopefully, we'll be out there inside of COVID and it will be in the rearview mirror. You'll head into the following year, you'll have an easier comp in the U. S.

Speaker 2

In the 1st year And then you should see some contributions begin to ramp up from the international markets. And Rich, it's great to have you But if you would just be a little patient for another couple of weeks and I'll tell you what Euralis is going to do over the next 3 years at the Analyst Day when we all get together in New

Speaker 1

Excellent. Looking forward to that, Liam. And maybe just one more follow-up. I might have missed it earlier, but your surgical Performance this quarter came in well above our rating. Just what was driving that again and 14% constant currency Okay.

Speaker 1

Constant currency rate, is that sustainable or was there something in there that we should be thinking about? And if you could also just comment On 2Q, any guidance or color you can give the Street for modeling in the quarter ahead on revenue and earnings? Thanks, Liam.

Speaker 2

Yes. We began the year, Rich, by expecting our Surgical business to be low single digit growth. The Q1 Came out a little bit ahead of our expectations, and it was really driven by strong growth in APAC and the U. S. As procedures continue to recover.

Speaker 2

And also, we saw some pricing benefit. This is one of the areas we always take pricing. We still expect lower single digits in the full year, but maybe a good execution. And Again, back to my earlier comment on pricing, if we can sustain it a little bit better for the remainder of the year, we may get to the mid single digits with good execution in our Surgical business, which would be a really good performance for that business overall. So again, a good start is half the battle, as my father says, And Surgical definitely had a good start, but we still expect low singles, maybe get to mids with good execution as we go through the year.

Speaker 2

On the full year basis, again, as I said earlier, we feel really good about our the broad based recovery and we feel really good about our full year guidance and Surgical is no different Than the total Teleflex.

Operator

Our next question comes from Michael Matson from Needham and Company. Your line is open.

Speaker 3

Yes. Thanks for taking my questions. I guess I'll ask another one on UroLift. You've ramped up the DTC advertising. It seems like there's a little bit of a conundrum here because the The timing of when you I think of when you kind of ramped it up was coincided with a lot of these COVID impacts and a slowdown in the growth.

Speaker 3

And I understand what's happening there and the sensitivity to the infection rates and whatnot. But I guess what gives you confidence that the DTC ads are Actually proving effective and you're getting an adequate return on that investment.

Speaker 2

Well, obviously, we measure the effectiveness of our DTC campaign. At the end of last year, we know that Our expectation at the beginning of the year was to get 150% the number of impressions. We actually ended up at almost 200% Right across all the metrics. We look at the number of impressions. We look at the response from the patients.

Speaker 2

We measure The total estimated appointments and procedures, and we know based on all of that, Mike, that this is a good return on our investment. Anecdotally, when I was out with those 32 urologists in the Q1, every one of them had mentioned that patients had come in and asked them about UroLift as a direct result of the DTC campaign. So anecdotally and measurably, We know that it is working. And we are seeing and we do see the value of priming the pump In order to put patients in the care of urologists, in all transparency, Mike, we don't care when the procedure gets done. As long as we are pushing these patients To our urologists and the vast majority of the urologists that are our champions only For UroLift, so therefore, it's very focused.

Speaker 2

That's the one thing I will say about our DTC. It is very focused on Docs put patients arriving with doctors that use urolithomas exclusively.

Speaker 3

Okay, got it. And then, just want to ask about consensus for the Q2. I didn't really hear any kind of commentary around Where we should be, Molly, I know you don't give any kind of quarterly guidance, but you do have a bit of a tougher comp for the 2nd quarter. Are you okay with Your top and bottom line consent assessments for that sort of Q2?

Speaker 2

Yes, you're right, Mike. We don't give quarterly guidance, Well, we have reaffirmed our yearly guidance, and I guess I'll leave it at that. That's We feel really confident in our yearly guidance on all lines.

Operator

That is all the time we have for questions this morning. I will now hand back to Mr. Lawrence Kirsch for closing remarks.

Speaker 1

Thank you, Elliot, And thank you to everyone that joined us on the call this morning. This concludes the Teleflex Incorporated Q1 2022 earnings conference call.

Operator

Our conference call for today is now concluded. Thank you all for your participation.

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Earnings Conference Call
Teleflex Q1 2022
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