Teleflex Incorporated
CEO : Mr. Liam J. Kelly
Quarterly earnings growth(YoY,%)
| Period | Revenue | Operating Income | EPS | Release Date |
|---|---|---|---|---|
| 2023 Q2 | 5.5% YoY | 6.2% | 5.3% | 2023-08-03 |
Liam Kelly says,
Second Quarter 2023 Results
- Teleflex revenues were $743.3 million, a year-over-year increase of 5.5% on a reported basis and an increase of 5.9% on a constant currency basis.
- Second quarter adjusted earnings per share was $3.41, a 0.6% increase year-over-year.
- Stable utilization in the acute care setting in global markets.
Geographic Segment Revenues
- Americas revenues were $424.7 million, representing 3% growth year-over-year.
- EMEA revenues of $147.8 million increased 0.7% year-over-year.
- Asia revenues were $86.7 million, increasing 19.1% year-over-year, with stable demand across the region, including growth in excess of 20% in China.
Second Quarter Revenues by Global Product Categories
- Vascular Access revenue increased 6.6% to $173.8 million, with category leadership in Central Venous Catheters and midlines.
- Interventional Access revenue was $124.8 million, up 9.6% year-over-year, with double-digit growth in balloon pumps, right heart catheters, and access and closure.
- Anesthesia revenue was $100.8 million, down 3.6% year-over-year due to a tough year-over-year comp.
- Surgical business revenue was $106 million, up 7.7% year-over-year, with progress in the integration of Standard Bariatrics and training of new surgeons on the use of the Titan SGS Stapler.
- Interventional Urology revenue was $77.8 million, representing a decrease of 2.3% year-over-year, with growth in UroLift in the hospital setting but challenges in the office side of service.
- OEM revenues increased 19.8% year-over-year to $84.1 million, with double-digit growth in all product categories.
- Other revenue increased 4.8% to $76 million year-over-year.
Acquisition of Palette Life Sciences
- Teleflex announced a definitive agreement to acquire Palette Life Sciences for an upfront cash payment of $600 million at closing and up to an additional $50 million on the achievement of certain commercial milestones.
- Palette Life Sciences has a portfolio of fast-growing Non-Animal Stabilized Hyaluronic Acid (NASHA) spacer and tissue bulking products.
- Palette is estimated to generate net sales of approximately $56 million on a stand-alone basis in fiscal year 2023 and is expected to contribute to Teleflex’s growth in the coming years.
Titan SGS Stapler
- Teleflex continues to execute on its commercial strategy for the Titan SGS power stapling device for use in sleeve gastrorectomy procedures to treat obesity.
- Feedback for the Titan stapler remains positive, but revenue expectations for 2023 have been adjusted to be in the high-teens due to longer-than-anticipated clearance processes.
- The company is focused on gaining Value Analysis Committee approval and training surgeons, with improvements expected throughout the year.
Thomas Powell says,
Adjusted Gross Margin
- Adjusted gross margin for Q2 2023 was 59%, a 60 basis point decrease compared to the prior year period.
- The decrease was primarily due to cost inflation, product recalls, and unfavorable impact on productivity due to raw material supply.
- Favorable price, lower logistics and distribution-related costs, and cost improvement initiatives partially offset the decrease.
Price Expectation
- No change to the expectation for at least 50 basis points of positive price year-over-year in 2023.
Adjusted Operating Margin
- Adjusted operating margin for Q2 2023 was 26.6%, a 90 basis point decrease compared to the prior year period.
- The decrease was the result of flow-through of gross margin, increased headcount and employee-related expenses, investments to grow the business, and the inclusion of Standard Bariatrics.
Net Interest Expense
- Net interest expense for Q2 2023 was $16.6 million, an increase from $11.2 million in the prior year period.
- The increase reflects higher interest rates versus the prior year, partially offset by a reduction in average debt outstanding.
Adjusted Tax Rate and Earnings per Share
- Adjusted tax rate for Q2 2023 was 10.8%, compared to 12% in the prior year period.
- The decrease in adjusted tax rate is primarily due to a reduction in tax costs resulting from U.S. tax law requiring capitalization of R&D.
- Adjusted earnings per share for Q2 2023 was $3.41, a 0.6% increase compared to the prior year.
Cash Flow and Balance Sheet
- Cash flow from operations for the 6 months was $170.6 million, compared to $101.9 million in the prior year period.
- Cash balance at the end of Q2 2023 was $250.8 million, a reduction from $292 million as of year-end 2022.
- Net leverage at quarter end was approximately 1.6x, well below the 4.5x covenant.
Financial Guidance and Acquisition
- Palette Life Sciences is expected to generate net sales of approximately $56 million in 2023, with minimal impact on Teleflex’s 2023 revenue.
- The acquisition is expected to dilute the company’s adjusted earnings per share by approximately $0.15 in 2023 and $0.35 in 2024, but become increasingly accretive from fiscal year 2025 onwards.
- Teleflex plans to finance the acquisition through borrowings under its revolving credit facilities and cash on hand.
Revised 2023 Financial Guidance
- Revised constant currency revenue growth guidance for 2023 to 5.5% to 6.25%.
- Assuming current foreign exchange rates, there is now an expected positive impact from foreign exchange translation of approximately $8 million or 30 basis points to GAAP growth in 2023.
- Reported revenue growth is expected to be 5.8% to 6.55% in 2023, with an increase to the low end of the dollar range of $32 million and the high end of $80 million.
- No changes to the outlook for gross and operating margin in 2023.
- Net interest expense is expected to approximate $77 million in 2023, reflecting net incremental borrowings for the acquisition of Palette.
- Maintaining adjusted earnings per share guidance of $13 to $13.60 for 2023, including dilution from the acquisition, recall expenses, foreign exchange benefit, and favorable operating performance.
Q & A sessions,
Diversified Portfolio and Global Footprint
- The company’s diversified portfolio and global footprint drove durable growth in Q2 2023.
- The company’s execution remains strong.
- New product launches and healthy margins are contributing to the growth.
Financial Guidance for 2023
- The solid performance in Q2 keeps the company well positioned to deliver on its financial guidance for 2023.
- The company anticipates stable to improving macro conditions in the second half of 2023.
Palette Life Sciences Acquisition
- The acquisition of Palette Life Sciences is expected to be a meaningful contributor to the company’s growth in the coming years.
- The acquisition is expected to be immediately accretive to gross margins and enhance adjusted operating margins in the near term.
- The company has confidence in its ability to deliver on its 2023 to 2025 LRP (Long-Range Plan) revenue objectives.
Challenges in the UroLift Market
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No bad stock 