Q3 2024 Earnings Summary
Metric | YoY Change | Reason |
---|---|---|
Total Revenue | +2% | Increased from a prior +5.5% YoY in Q2 2023 to +2% YoY, reflecting solid growth in Interventional and Interventional Urology but offset by the Italian payback measure and the termination of the MSA. These headwinds tempered overall revenue growth compared to last year. |
EMEA | +5% | Rose from about +0.7% in Q2 2023 to +5% YoY, driven by higher sales volumes and price increases, despite Italian payback reserves impacting reported figures. The region benefited from stronger geographic availability and utilization but faced currency fluctuations and ongoing macro uncertainties. |
Asia | +6% | Down from the prior +19.1% growth in Q2 2023 due to external factors (e.g., the doctors’ strike in South Korea) and unfavorable currency effects. Despite these pressures, stable sales in China and new product contributions supported continued yet lower growth. |
Vascular Access | +6% | In line with the +6.6% growth in Q2 2023 , underpinned by recent product launches (e.g., Arrow VPS Rhythm DLX) and expanded PICC portfolio. Despite inflation and supply chain challenges, the business maintained category leadership in vascular products. |
Interventional | +12% | Higher than the +9.6% increase in Q2 2023 , propelled by strong balloon pumps, right heart catheters, and closure products. The continued success of MANTA and favorable market dynamics (e.g., FDA guidance on competing devices) supported robust gains. |
Interventional Urology | +13% | Rebounded from a -2.3% dip in Q2 2023 , thanks to Barrigel contributions (acquired with Palette Life Sciences) and international UroLift growth. Challenges in the U.S. office setting remain, but sales force cross-training and further penetration in Japan helped drive YoY improvements. |
Other | -28% | Down from +4.8% in Q2 2023 , largely reflecting the one-time headwinds associated with Italian payback reserves (allocated to past periods) and the ending of MSA revenues. This year-over-year decline is expected to persist once all MSA revenues fully cease. |
Operating Income (EBIT) | -10% | Fell versus the +6.2% rise in Q2 2023 , driven by higher SG&A expenses, restructuring charges, and reserve adjustments for the Italian payback. Even with a slight gross margin improvement, these costs outweighed benefits, reducing overall operating income. |
Net Income | -19% | Declined compared to the +5.5% gain in Q2 2023 , impacted by increased interest expense, SG&A costs, and the Italian payback. The pension settlement in the first half of the year also dampened net profitability. |
Diluted EPS | -19% | Lower than the +5.4% increase seen in Q2 2023 , reflecting weakness in net income, elevated interest expenses, and tax rate pressures. While adjusted EPS saw only a marginal difference YoY, GAAP EPS was impacted more severely by one-time items like the Italian payback reserve. |
Metric | Period | Previous Guidance | Current Guidance | Change |
---|---|---|---|---|
Revenue Growth (GAAP) | FY 2024 | 3.4% to 4.4% | 2.9% to 3.4% | lowered |
Revenue Growth (Excluding Italian) | FY 2024 | 3.85% to 4.85% | 3.4% to 3.9% | lowered |
Gross Margin | FY 2024 | 60.25% to 61% | 60.5% to 61% | raised |
Operating Margin | FY 2024 | 26.5% to 27% | 26.75% to 27% | raised |
Net Interest Expense | FY 2024 | $81 million | $78 million | lowered |
Tax Rate | FY 2024 | 12% | 12% to 12.5% | raised |
EPS | FY 2024 | $13.80 to $14.20 | $13.90 to $14.20 | raised |
Average Weighted Shares | FY 2024 | no prior guidance | 47.1 million | no prior guidance |
Revenue | Q4 2024 | no prior guidance | $809 million to $824 million | no prior guidance |
Metric | Period | Guidance | Actual | Performance |
---|---|---|---|---|
Revenue | Q3 2024 | $765 million to $770 million | $764.375 million | Missed |
Topic | Previous Mentions | Current Period | Trend |
---|---|---|---|
Intra-aortic balloon pump (IABP) opportunity | Featured consistently from Q4 2023 onward with emphasis on revenue contribution, market share gains, and FDA-driven opportunity. | Contributing over $10M to Q4 2024 revenue and expected to continue into at least H1 2025, with strong U.S. quote activity following competitor’s FDA letter. Biggest incremental opportunity in the U.S. | Continued bullish driver with ongoing demand, especially in the U.S. |
Interventional Access growth | Previously showed strong year-over-year growth, fueled by new product launches (MANTA, Ringer), with Q2 2024 at +13.8%. | Anticipates an uptick in Q4 2024, mainly tied to balloon pump volumes in the Americas. No significant Q3 impact reported. | Positive near-term momentum |
Palette Life Sciences integration | Discussed each quarter since acquisition, with consistent updates on sales force training, synergy, and revenue outperformance (Q2 guidance raised to $70M-$72M). | Nearly complete, exceeding initial plans. Guidance raised to $73M-$75M from $66M-$68M, driven by product performance (Barrigel). | Ongoing success; delivering synergy and increased revenue outlook |
Barrigel product expansion | Consistently highlighted for market expansion and trials. Previous quarters focused on sales force training and strong early adoption. | Strong sequential revenue, targeting a $100M post-prostatectomy market. Unique NASHA compound with an estimated 1.5-year timeline for expanded indication. | High-growth potential, expanding indications |
Intraosseous product | Noted each quarter as a contributor to revenue growth in Anesthesia and Vascular Access categories. | Continues to be a strong growth driver with a new disposable tray format, retaining strong customer loyalty. Competitor’s new device announced. | Sustained positive momentum, with new format |
Loss of significant OEM customer | Mentioned in Q2 2024 regarding OEM headwinds, but not noted in earlier quarters. | $14M impact on 2024 revenue, split between Q3 and Q4, after the customer chose to vertically integrate a specific component. Extends through Q3 2025. | Negative short-term, OEM business expected to normalize after 2025 |
UroLift challenges | Discussed each quarter, citing slow office procedural recovery, sales force training impacts, and reliance on hospital site growth. | Office site remains challenged, facing reimbursement cuts (another 6% in 2025), plus saline shortages and hurricane disruptions. $11M impact to full year. | Ongoing headwinds, especially in office reimbursements |
OEM segment growth | Historically grew 5–13% each quarter, driven by microcatheters and catheter extrusions. | Up 0.1% year-over-year, softer than expected due to vertical integration by a major customer and some inventory management delays by others. | Short-term dip, but mid- to high-single-digit potential remains |
MANTA product performance | Consistently cited as a growth driver in Interventional. Achieved solid double-digit growth earlier in the year. | Continues to perform well in TAVR and EVAR, with EVAR offering less price sensitivity. | Steady positive growth |
EMEA region growth | Historically ranging from -2.7% to +9.8% growth, driven by Interventional Urology and product rollouts. | 3.9% year-over-year to $150.2M, attributed to increased product availability and improving utilization. | Moderate consistent growth |
Restructuring charges and GAAP EPS guidance | Only noted in Q2 2024 as “business as usual,” affecting GAAP EPS. | No specific mention in Q3. | No updates in the current period |
Inflationary pressures | Mentioned each quarter; remains a headwind but easing. Offsetting with pricing and production efficiencies. | Still above pre-COVID but moderating, partially offset by cost improvement initiatives. | Gradual improvement yet still elevated |
Vascular Access Endurance catheter recall | Last cited in Q2 2024 as it anniversaried, normalizing comparisons. Also noted in Q1 and Q4 2023 as a negative factor. | No mention in Q3. | Not discussed this period |
Ringer catheter pipeline | Previously highlighted as launching with a PTCA indication in Q2 2024, and a vessel perforation trial in progress. | Not mentioned in Q3. | No update in current call |
Procedure volumes returning to pre-pandemic | Generally referenced as returning to normal in Q1 and Q4 2023 across certain segments (e.g., cath lab). | Not mentioned in Q3. | No mention this period |
Operating margin targets | Consistently discussed as mid- to high-20s range, with improvements driven by scale, cost savings, and mix shifts. | Raised low end of 2024 guidance to 26.75%-27.0%. Reflected gross margin flow-through and ongoing investments. | Positive update, continuing upward trend |
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OEM Headwinds
Q: Will OEM pressures continue next year?
A: Liam Kelly stated that the $14 million impact from OEM, due to a surprise vertical integration by a major customer, will continue through Q3 of next year. This unexpected event will persistently affect revenues, and they will monitor destocking closely. -
Balloon Pump Opportunity
Q: What is the outlook for balloon pumps?
A: Orders exceeding $10 million are expected in Q4, with the competitor likely out of the market until at least the first half of 2025. This presents a significant opportunity primarily in the Americas, which may extend if the competitor remains sidelined. -
UroLift Weakness
Q: Is UroLift weakness limited to physician offices?
A: The challenges remain in the office site of service, which faces another ~6% reimbursement cut in 2025, marking the final year of such reductions. They anticipate potential stabilization after this period. -
Capital Allocation
Q: How will you balance buybacks and M&A?
A: With net leverage at 1.7x and free cash flow from operations at $435 million, up $63 million, they are confident they can do both. They have $300 million left in the share repurchase plan and are actively pursuing non-EPS dilutive M&A opportunities. -
Guidance Unchanged
Q: Have underlying assumptions changed?
A: No changes in underlying assumptions; they will address 2025 guidance in the next earnings call. The expected impact from balloon pumps in Q4 remains as previously anticipated. -
OEM Revenue Impact
Q: What's the revenue loss from OEM customer?
A: The full-year impact is $14 million, with $7 million in Q3 and another $7 million in Q4, mainly due to vertical integration.
Research analysts covering TELEFLEX.