Q2 2024 Earnings Summary
- Strong Growth in EMEA Region: EMEA revenues increased 9.8% year-over-year in Q2 2024, driven by strong performance in Germany, France, Spain, and Italy. Key growth areas included emergency medicine, interventional urology, and interventional access. Management expects continued strong performance, potentially moving into the higher mid-single-digit growth range.
- Gaining Market Share in Intra-Aortic Balloon Pumps (IABP): Teleflex is confident in converting strong quote activity into actual conversions in the IABP market, especially in the United States, where customers have been advised by the FDA to seek alternative suppliers. Despite the pump sales being slightly dilutive to margins, the core business is performing exceptionally well, leading to an uplift in gross margin guidance by 25 basis points. ,
- Successful Launch of Innovative Products and M&A Performance: The new Ringer catheter targets a $40 million market with potential for expansion into peripheral indications, with no cannibalization of existing products. Additionally, the acquisition of Palette is exceeding expectations, with updated revenue guidance increasing from $66-68 million to $70-72 million, driven by the strong performance of Barrigel. ,
- Teleflex's interventional urology business, specifically the UroLift product in doctor's offices, continues to face challenges with stagnant growth, similar to the first quarter, with no improvement expected in the near term.
- Revenue from intra-aortic balloon pumps may have lower margins upfront due to capital equipment sales being slightly below the company's gross margins, which could impact overall profitability.
- The company reduced its GAAP earnings per share guidance due to increased restructuring expenses, which management considers 'business as usual,' potentially signaling ongoing operational challenges.
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Intra-Aortic Balloon Pump Opportunity
Q: What's the outlook for intra-aortic balloon pump (IABP) opportunity?
A: The company is excited about the IABP opportunity, expecting significant contributions starting in Q4. They've had a strong market position over the past 2.5 years and continue to take share. Recent robust quote activity, especially in the U.S., boosts confidence in impacting revenues into the first half of 2025. Catheters, which are accretive to margins, will follow the pumps and are expected to drive long-term growth. -
Capital Allocation: Share Buyback vs M&A
Q: Is the share buyback signaling a shift away from M&A?
A: Management emphasizes that the $200 million accelerated share repurchase (ASR) is in addition to ongoing M&A initiatives. With strong free cash flow and leverage moving from 1.6x to 1.9x, they remain active in seeking M&A opportunities and reassure that the buyback won't hinder their M&A strategy. -
Margin Outlook and Guidance
Q: How will IABP affect margins and what's the margin guidance?
A: The initial pump sales are slightly dilutive to gross margins, but the following catheter sales are accretive, making the overall business margin-neutral. Despite this, they have updated gross margin guidance with an uplift of 25 basis points driven by the core business. They expect stable gross margins in Q3 and Q4, with further operating margin leverage in Q4 due to stronger revenues. -
Interventional Urology Update
Q: What's the status of the interventional urology business?
A: The doctor's office segment remains challenged with no change from Q1. However, the Palette Life Sciences acquisition, particularly Barrigel, is outperforming, leading to an updated revenue guidance from $66–68 million to $70–72 million. They anticipate improvement in the second half as cross-training of sales reps is now complete and they focus on both UroLift and Barrigel. -
M&A Outlook
Q: What's the current focus and outlook on M&A activity?
A: The company remains active in the M&A market, focusing on areas like the cath lab, emergency medicine, and intensive care units. They assert that the ASR does not replace M&A efforts and they have the cash flow to support both. They are seeking assets that add value to both the top line and earnings, with awareness of the impact on EPS. -
ASR Timing and EPS Impact
Q: When will the ASR be completed and its impact on EPS growth?
A: The ASR is expected to be completed in 2 to 3 months. The benefit to earnings per share from the share repurchase will be more significant in 2025, due to the timing of weighted average shares calculation. -
EMEA Performance
Q: How sustainable is the strong growth in EMEA?
A: EMEA had a solid quarter, growing 9.8%. Strong performances were seen in Germany, France, Spain, and Italy, particularly in emergency medicine, interventional urology, and interventional access. While such high growth rates may not persist, they expect EMEA to maintain mid-single-digit growth over the longer term. -
Ringer Balloon Catheter Introduction
Q: How does the Ringer balloon catheter fit into the portfolio?
A: The Ringer catheter, indicated for PTCA, complements the existing portfolio without cannibalization. It's entering an approximately $40 million market. The product aids interventional cardiologists during accidental vessel punctures, allowing procedures to continue. They are exploring additional indications, potentially expanding into the peripheral market. -
GAAP EPS Guidance Reduction
Q: Why is there a reduction in GAAP EPS guidance?
A: The reduction is largely due to an increase in restructuring charges. Management states there's nothing of substance to call out and considers it business as usual. -
Consumable Attachment and Pricing in IABP Market
Q: Are consumables captive to pumps, and will pricing change with market shifts?
A: Attachment rates of catheters to pump brands are incredibly high, with customers typically using the catheter from the same brand as the pump. They don't anticipate significant price changes as they convert market share because pricing agreements are already in place with many customers.
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