Good morning, ladies and gentlemen, and welcome to the Teleflex, Third Quarter of 2021 Earnings Conference Call. [Operator Instructions] And now I would like to turn the call over to Mr. Lawrence Keusch, Vice President of Investor Relations and Strategy Development.

Good morning, everyone. And welcome to the Teleflex Incorporated third quarter 2021 earnings conference call. The press release and slides to accompany this call are available on our website at www.teleflex.com. As a reminder, this call will be available on our website and a replay will be available by dialing (800) 585-8367 or for international calls (416) 621-4642 using the passcode 4079822. Participating on today’s call are Liam Kelly, Chairman, President and Chief Executive Officer; and Thomas Powell, Executive Vice President and Chief Financial Officer. Liam and Tom will provide prepared remarks and then we will open the call to Q&A. Before we begin, I’d like to remind you that some of the matters discussed in the conference call will contain forward-looking 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-K, which can be accessed on our website. During this conference call, you will hear management make statements regarding intra quarter business performance. 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 said, I’ll now turn the call over to Liam for his remarks.

Thank you, Larry. And good morning, everyone. It’s a pleasure to speak with you today. For the third quarter Teleflex generated double digit constant currency revenue and 27% adjusted earnings per share growth on a year-over-year basis, despite a greater than expected headwind from increased COVID-19 infections due to the delta variant. All of our global product families grew on a constant currency basis year-over-year, with the exception of our other category due to the divestiture of the respiratory assets to Medline. Although we encountered a change in macro-trend versus expectations at the time of the second quarter, the solid performance for Teleflex during the third quarter of 2021 reflects the diversified nature of our business and the benefits of the company’s broad portfolio of medically necessary products and category leadership. Our six primary product families on broad global footprint have offset pressure on product revenues associated with elective surgery that were subject to pauses during the third quarter. As many investors would be aware, there were restrictions on elective surgical procedures in as many as 28 states during the third quarter. However, as we have seen since the pandemic began, our broad-based portfolio provides a hedge in periods of increased COVID activity with more than 60% of our business, either benefiting from increased COVID-related treatments or remaining relatively insulators from disruptions due to the pandemic. Although we do not routinely provide intra-quarter commentary, given the larger than expected surge in COVID-19 infections from the desert variant, I will share some details for the third quarter. Relative to guidance provided at the time of our Q2 earnings report, we saw a greater than anticipated pause in elective surgical procedures across select geographies in the U.S., Europe and Asia. However, as COVID-19 infections trended down, we saw our average daily sales…

Thanks, Liam, and good morning, everyone. Given the previous discussion of the company’s revenue performance, I’ll begin with the gross profit line. For the third quarter, adjusted gross margin totaled 59.5%, a 230 basis point increase versus the prior year period. The year-over-year increase in gross margin was driven by product and regional mix, benefits from cost improvement initiatives, favorable impacts from pricing, M&A and foreign exchange partly offset by raw material and distribution inflation. Third quarter adjusted operating margin was 28.5% or a 340 basis point year-over-year increase, driven by the gross margin improvement as well as disciplined expense management and partially offset by planned investment in the business. For the quarter net interest expense totaled $11.8 million, a decrease from $16.4 million in the prior year period. The year-over-year decrease in net expense reflects savings from the redemption of the 2026 notes, and also includes the impact of debt pay down using the proceeds of the respiratory divestiture and operating cash flows. Our adjusted tax rate for the third quarter of 2021 was 11.3% compared to 7% in the prior year period. The year-over-year increase in our adjusted tax rate is primarily due to a lower benefit from stock based compensation compared to the prior year period. At the bottom line, third quarter earnings per share increased 26.7% to $3.51; included in this result it’s an estimated favorable impact from foreign exchange of approximately $0.13 per share versus prior year. Turning to select balance sheet and cash flow highlights. Year-to-date, cash flow from operations total of $450.5 million compared to $241.5 million in the prior year period, and represented a year-over-year increase of $209 million. The increase was primarily attributable to favorable operating results, lower contingent consideration payments, lower payroll and benefit related payments and proceeds received under…

Thanks Tom. In closing, I will highlight our three key takeaways from the quarter. First, our diversified product portfolio enables Teleflex to deliver double-digit constant currency growth in the third quarter, even with greater than expected disruption from COVID-19. Second, we continue to execute on our strategy to drive durable growth across our diversified portfolio with investment in organic growth opportunities, margin expansion, and deployment of capital for M&A. Third, we raised our earnings per share guidance for 2021, reflecting 23% to 25% earnings growth year-over-year. In closing, we feel good about our overall performance in the quarter, which was anchored by our diversified portfolio of medically necessary products. Our balance sheet is in a solid position which leverage at 2 times providing ample financial flexibility for our capital allocation priorities. We remain confident in our future and our ability to continue to meet commitments to patients, clinicians, communities, and shareholders. That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q&A.

Thank you. [Operator Instructions] And now our first question comes from Matt Taylor from UBS. You’ll answer open.

Hey, good morning. Thanks for taking the question. The first thing I wanted to ask you about was what you’re assuming for Q4 and recent trends? In – from the commentary that you made about the environment it seems like you’re assuming stability with some of this subdued trends that you saw in late Q3. And so I just want to make sure that was correct and get any color on what you’ve actually seen happen in the early part of Q4?

Matt, thank you very much for the question. I think that as we look into the fourth quarter, we have to start with what we saw in the third quarter, and we’re really pleased with our revenue results which were better than our expectations and clearly demonstrate the advantage of a global diversified portfolio. In the quarter, even though certain elective aspects of our business, such as UroLift Intervention Access and Surgical were impacted by COVID. We still met expectations for revenue in that tough environment and exceeded our expectations on margins and EPS. I mean, EPS actually grew 27% within the quarter. And Q3 would deliver growth of 10.3% over 2020, and nearly 6% over 2019. We saw strength in OEM, the Americas, EMEA and APAC. And in fact, Matt, EMEA and APAC would have grown 6.8% and 12.2% respectively when you normalize for the impact of the respiratory divestiture. We also saw a strength within many of our segments, surgical interventional, vascular and anesthesia. And our key growth drivers ex-UroLift continued to deliver really solid results. MANTA grew 82%, and [indiscernible] grew 12%, [indiscernible] grew 10% and to your question, as we’ve progressed through the quarters, procedure volume did not recover in-line with our original expectation and we’re not as far along on the recovery slope, as we had hoped. UroLift is clearly a deferrable procedure and I would look at it as revenue deferred rather than revenue postponed. Procedures began to be impacted in the second half of July, but we did see improvements Matt in September within all of our procedure volumes that were impacted. And if you look at our assumptions for UroLift in particular and our updated assumptions for UroLift, the lower end of the range would be attributable to a flat lining of what we saw in September through the end of the year in that regard. I don’t really want to get into the specifics of Q4 Matt because there’s only one quarter left and clearly our guidance outlined what we’re expecting in Q4 from all aspects of our business.

Okay. All right. Thanks. Make me elect all that color. Maybe I could just ask you one question about the UroLift reimbursement and obviously we’ll see what happens here over the next week or so would the final outcome of the orthopedics reimbursement? How are you preparing for some of the different scenarios? If the cut stays or if there’s a phase-in or hopefully there’s something better, but maybe you could talk about what you think the company would be to do under some of those different things that could – could happen to help physicians maintain their business in the office or move it to the AFB if they have to?

Yes. So you’re correct Matt, there is no update as we sit here today and we would expect the proposed ruling to come through in early next month. That’s the normal timeline for us. We’ve really put a strong case to support the CMS, rethink of the proposed ruling. We believe it will limit Medicare and Medicaid patient access to over 600 procedures and we still believe the appropriate action is to cancel the proposed ruling and engage with key stakeholders on the new proposal. As I’m not sure the investment community is aware, but there were over 30,000 comments during the comment period and we believe that CMS is duty bound to take all the comments into consideration. We, when their final ruling comes out, we anticipate issuing a press release Matt on the publication. We have certain advantages over other minimally invasive procedures in, so far as we have flexibility with size of service. The UroLift procedure is profitable, not only in the office, but also in the ASC and the hospital and the vast majority of urologists that do the procedure in an office have parent ownership or access to an ASC and have that level of flexibility. So we’ll wait for the final ruling, Matt, and then we will make a decision on how we will proceed. But rest assured, plans are, of course, within Teleflex to move quickly once we get the final ruling.

Our next question comes from to Cecilia Furlong from Morgan Stanley. You line is open.

Hey, good morning. And thank you for taking the questions. Liam, I wanted to continue with UroLift and ask if you could talk about just procedure deferrals either the impact that DTC may have had during the quarter or just COVID pressure? But as you think about 4Q what you contemplated from potentially being able to recapture those procedures? And also, how you are looking at the environment today from a deferral, recapture perspective versus what played out in the March, April timeframe?

Yes. So, I’ll started with the last bit of it. I think that hospitals are much better able to adapt to the COVID environment. And I think they’re managing the subsequent waves much better. And from that, we do anticipate 150% the number of impressions and we’re well on track [indiscernible] three quarters to get to those number of impressions. The number of patients responding through the campaign continues to have a similar uplift and we’re really encouraged by that. What we see as we go into the future, as I said earlier, is that the low end of the range implies the flat-lining of our September run rate for the remainder of the year. Now, Cecilia to your point on the deferral procedures and other aspects, we do expect to see some seasonal improvement due to the deferral, and also due to patients using up their deductible during the year, as we have seen in previous years. And we would also expect to enter into normal trading environment in 2022. And the market opportunity hasn’t changed. I mean, I think, that’s the most important thing. There’s still 12 million men that suffer with BPH. Urolift is still the go-to product for the treatment of BPH. And we still only done party just over 300,000 procedures, all of those 12 million men. And we still only trained 3,000 out of the 12,000 urologists. So, we’re still have a significant, a massive opportunity to continue to convert that customer base. And our own observation is that the procedures just deferrable more so than we would’ve thought quite frankly, when we bought the company. And also no one would have anticipated COVID in that environment. And we do think that there are three aspects that are impacting the product, restrictions and fear of COVID. I think number two, scheduled procedures that are subsequently canceled. And number three, and the lesser impact is really [indiscernible].

Okay, understood. I didn’t want to ask just on staffing shortages as well, and of the impact that you’ve seen there either throughout 3Q, but then more recently, if that is a growing issue? And then also how you’ve seen site of care shift this quarter versus what you saw earlier in the year with some cases being pushed into the office, that I’m just curious if you’ve seen similar trends or is that stayed more in line with your traditional breakout? Thank you.

Thank you. It’s pretty aligned with what we saw traditionally Cecilia regarding that we do see daycare procedures in hospitals rebounding and that’s one of the trends that we’ve seen. Regarding your question in staffing shortages, we would anticipate that the staffing charges would improve as we go through Q4 and into 2022. And that’s simply because it’s not doctors that the issue that a lot of the ancillary workers that are within the office, the AAC and the hospitals, and a lot of those people, unfortunately were furloughed in the midst of COVID. They have been receiving government checks. The government checks began to dry up in September. So, we would anticipate a bolus of those individuals coming back into the workforce in Q4 and into 2022. And we would anticipate seeing that environment improve also.

Our next question comes from Anthony Petrone from Jefferies. Your line is open.

Great, thanks. And good morning, everyone.

Good morning.

Maybe Liam, just a high level on the nursing shortages where we’re hearing it on several calls. It seems to be more pronounced in certain areas of the ICU critical care. But there are other specialty areas that are seeing shortages as well. So just from a high level, how substantial of an overall impact do you think nursing and hospital staffing shortages was in 3Q? And if you use your crystal ball looking into 2022, how long of a headwind do you think this is? Is it transient, or does it bleed deep into next year? And I’ll have a follow-up on Urolift.

Yes Anthony, I think, there is a difference inside of service, quite frankly. In the hospital environment, my observation is that the staffing shortages is fatigue. A lot of these people are just exhausted from fighting COVID. And we’ve seen a lot of retirements as well in the nursing environment. I think that’s going to take a little bit longer to work through. I think we may have to consider the importation or the acceleration of nursing through the education process or the importation of nursing through the issuance of visas to up to other jurisdictions. I think then if you look at the AAC and the office, and in particular, the office, the dynamic here, Anthony, is that these people were furloughs in the midst of COVID, because office – a doc working in an office is like a small business. So, they have to try and protect their cash flow, they furlough the people. Those people went down to government assistance. Now the government assistance dried up in around September that timeframe. So, I would anticipate that would probably rebound a little bit faster simply because those individuals would want to come back to the workforce in order to generate an income. So that’s how I would see it. And if you recall Anthony, we did call out staffing shortages in Q2. I think we’re one of the fewer companies to start identifying it a little bit earlier on the trend.

Appreciate that. And just a follow-up on Urolift, when you sort of think about the potential that perhaps maybe the market froze here a bit ahead of the reimbursement announcement, do you think any of that was at play in 3Q, or was the bulk of the headwind here really just a deferral of procedures through the Delta? And so as you mentioned earlier, the high – there’s a high probability that these are recaptured over the next couple of quarters. Thanks, again.

I would say, we have very high degree of confidence, Anthony, it has nothing to do with CMS. The CMS ruling won’t come in until next year, if and it hasn’t even been announced. So it is all about COVID.

Our next question comes from Jayson Bedford from Raymond James. Your line is open.

Hi, good morning. Just a couple of UroLift questions, not to get too granular, but is there something different about the geographic makeup for your UroLift business that made it more exposed to Delta meaning, are you over indexed to Florida and Texas?

Yes. So I think that we have very strong presence in Florida and Texas are two of our key markets for UroLift for sure. And you also have to look at in particular in Florida, the population it’s a big retirement community there. So the age profile of men in that area would obviously make it a significant market for us. I think that the main impact of Jayson of the – in UroLift in the quarter is simply the Delta variant. It’s simply 28 states have imposed restrictions. Now we would have thought that as we went through September, we would have anticipate some of those states reducing the restrictions, and we would have expected them this month October that, that they would have also been removing restrictions. And as I said earlier, it is a very deferrable procedure. I personally know two people that need the UroLift and neither of them are willing to have it done in this COVID environment. They’re waiting until the environment improves. So I think that’s the simple impact. And I think the word deferred is the important word, because it is simply deferred. Those two people that I know personally are going to get the procedure done. It will happen if it doesn’t happen in Q4, it will happen in Q1.

Okay. Okay. That’s helpful. Just as a bit of a related follow-up durable growth is obviously a focus for the team here. I think the debate will turn to the level of durable growth with this business – market has changed, but you did mention normalized growth if you…

Deal with the your reference that durable growth and let’s refer next two minutes, we grew 10.3% earnings per share growth in the third quarter. And as you move into the fourth quarter, I’m going to compare ourselves back to 2019, because that’s a better base year for me. We’re – we grew 6% – in the midst of COVID, the advantage of a diversified portfolio is allowing us to pose real positive growth with real half the earnings are as a result of that. Regarding your question on the durable, what is durable growth for UroLift, obviously, we’re going to give guidance when we get through the fourth quarter. I want to see how the fourth quarter plays out. I am keeping an eye on this new variance that has raised a test in the UK and in Israel. I would want to make sure that that doesn’t become an issue and become Delta part two, as we go through the fourth quarter. But I agree with you, the end markets haven’t changed. Our strength of our position in those end markets haven’t changed and the clinical outcomes of the…

Our next question comes from Matt O’Brien from Piper Sandler. Your line is open.

Yes. Hi guys, this is Drew on for Matt, and thank you for taking the questions. I do just want to ask about UroLift and DTC a little bit here. I mean in your deck, you expect or you mentioned that you expected double your impressions in 2020, here in 2021. But your revenues are obviously like that pays significantly and obviously, I think it’s obvious that COVID plays a big part in that. But you just have a sense for where those patients are currently going today. Are they getting into the doctor’s office and being seen, but the procedure they’re being deferred due to COVID or are they facing logistical issue even getting to that point.

Thank you. So we know for a fact that they’re going to the doctor’s office, we know that because we actually direct them to the doctors. So they’re under the care of that doctor now. Again, the impact is simply COVID. You’ve got restrictions in 28 states. You’ve got people that are not comfortable quite frankly going in to have a procedure. And that, that is the impact. One data point that I think is important for investors to realize is the vast number of our champions are in the office and the ASC. And the vast, vast majority of those only offer one minimally invasive modality for the treatment of BPH and that’s UroLift. So by investing behind DTC and by transferring patients to those doctors with the best clinical output, those doctors in the vast majority only offer UroLift. So that’s why we have a heightened degree of confidence in continuing with our DTC. And I would just like to point out that our expectation for impressions with the investment we’re making is 150%. And through three quarters of the year, we are well on track to achieve that level of impression. So we’re very encouraged by the DTC, we’re in burning calories by an engagement, and it was also nice to get the bronze award for the advertisement itself.

Helpful, thank you. And then just to kind of follow-up on that point a little bit just on the competitive landscape, Boston talking about good progress with resume Olympus rolling out good productive space. I know you said that share has been stable, but just wondering if your reps are bumping up against any of these other products in this space and any sense for if your customers are taking a look at some of the newer products. Thank you.

So I would read those comments closely, because they combined two products in the comment. And as we analyze the data, we know that we’re not losing share. It’s not a question of, if we know that we’re not losing share. If you look at the claims data, it shows the market share to steady, and UroLift is holding its dominant position with the minimally invasive treatment of BPH. So this is a COVID question, not a competitive question in my mind.

Our next question comes from Matthew Mishan from KeyBanc. Your line is open.

Hey, great. Good morning, guys. I wondering source the conversation over to the margin side, gross and operating margins. I think, Tom, you laid out, I mean, mostly a miracle locked in freight contracts, like the last December regulations on doing that. But they’re actually running – they’re – those are kind of – those are done at this point. How should we think about the headwind into the fourth quarter and really into 2022 of that excess freight and logistics, as well as sort of lagging costs of materials that end up getting into your numbers as you kind of move forward?

Well, I would say that, as a result of locking in the contracts, we were able to save considerable expense during 2021. As mentioned a number of those contracts did expire at the end of September and others at the end of December. So we do have some heightened inflation in the fourth quarter I cited $3 million overall. The majority of that is really due to the increase in freight both from the expiration of the sea freight contracts, as well as just heightened inflation overall logistics. And that will play into 2022, in terms of inflation as we’re looking at things right now, assuming expenses stay or rates stay where they are, we’re going to see some heightened inflation throughout 2022 on the freight line. Obviously, we’ll get into more detail on that as we provide guidance for the year. And we have greater clarity as to how the rates seem to be trending and whether we expect some recovery or not next year.

Okay, excellent. And then on the Japan reimbursement for UroLift, with you now scheduled to the meeting in November, were you scheduled previously for it in September, and then it didn’t take it up or they took it off a bit. We’ll move it to November. What’s the logistics of why it was delayed by next couple of months?

No, it’s not a live a couple of months. It’s a – they write out to companies and give them their, their time they’re going to review it. We got ours then it was November in all transparency. We tell it, it was going to be October, but it was November. And we’re really happy that they’re going to review it. Then, it’s a $2 billion mark. It’s a great opportunity for us. We’ve already done the pre-market work and in the marketplace and we expect to ramp as we go through 2022. And we didn’t anticipate any revenue in the fourth quarter in our original guidance to saw. We feel really encouraged and also we feel encouraged by Brazil. We’re early into Brazil, much earlier than we thought. And we think that’s going to be a nice market for us to, we’ve already done a limited market launch. We’ve been down there, we’ve actually trained some surgeons. We’ve got proctors already trained within the region. And we feel really good about both Japan and UroLift. And we feel very good about the international expansion of UroLift under the global marketplace, which is as big an opportunity as the U.S. market once we started to ramp oversee.

Thanks, Tom.

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

Yes, thanks. Just want to follow up on the prior question on inflation. You’re one of the few MedTech companies that’s really able to get positive pricing, historically. Do you think you could maybe offset some of the inflation with additional price increases or shipping surcharges or anything like that if you needed to?

Mike, thanks for the question. In a word, yes. We’ve seen positive pricing through the first three quarters of the year. We – I agree with you. We’re one of the few companies that he’s able to take positive pricing. We’ve taken some this year in order offset some of the inflation that we’ve seen. And if you look at our margin progress today, it’s reflected in that. You can see, how well we’re doing from a margin in an inflationary environment. As we get to next year, we’ll get to next year, but it wouldn’t be our thinking that we would offset some of the inflation with price increases. Shipping charges are harder to implement, people don’t like them, you’re better off in my view, just looking at it as a straightforward price increase.

Okay. Got it. And then just wanted to ask about EZPlaz, I think, the last time you talked about, you said you thought you could have an approval by the end of this year. Is that rain and is that still your thinking on it.

Unfortunately, it’s out of my control right now, because it’s with the FDA. We’ve got our submission in to continue to engage with them. It’s unchartered waters by the FDA. This is a – they’ve never approved a biologic like this before, but they’re -- they continue to engage with as they continued to be helpful. And obviously, we’ll update the investment community, Mike, as soon as we’ve used on it.

Thank you. There is no further question at this time. I would now like to turn the call over back to Larry.

Thank you, operator, and thank you to everyone that joined us on the call today. This concludes the Teleflex incorporated third quarter of 2021 earnings conference call.

This is currently all the time we have for questions this morning. And this concludes our conference call. Thank you for participation.