Good morning ladies and gentlemen and welcome to the Teleflex Fourth Quarter 2022 Earnings Conference Call. At this time, all participants have been placed in a 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. And now I'll turn the call over to Mr. Lawrence Keusch, Vice President of Investor Relations and Strategy Development.

Good morning everyone and welcome to the Teleflex Inc. fourth quarter 2022 earnings conference call. The press release and slides to accompany this call are available on our website at teleflex.com. Please note that webcast viewers have the ability to advance the presentation slides on their own. Simply follow along with the presentation as we proceed through the call. As a reminder a replay will be available on our website. Those wishing to access the replay can refer to our press release from this morning for details. 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 the slides posted to the Investor Relations section of the Teleflex website. 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 included in 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 will now turn the call over to Liam for his remarks.

Thank you, Larry and good morning everyone. For the fourth quarter, Teleflex revenues were $758 million, a year-over-year decline of 0.5% on a reported basis and an increase of 3.7% on a constant currency basis. Compared to the prior year period, revenue under the manufacturing and supply transition agreement associated with our prior divestiture of our Respiratory assets negatively impacted growth by 0.6% in the quarter, implying underlying constant currency growth of 4.3%. Adjusted earnings per share declined by 2.2% year-over-year to $3.52. In reviewing the quarter, our fourth quarter constant currency revenue growth remained durable despite an unexpected subcomponent supply chain issue in our Surgical business that resulted in an approximately $3.5 million headwind during the quarter. The solid performance in the quarter continues to demonstrate the benefits of Teleflex's diversified portfolio that has been purposely built to target the care of critically-ill patients. Of note, our Interventional Surgical and OEM product categories generated double-digit constant currency year-over-year revenue growth during the fourth quarter. Encouragingly, we witnessed improving monthly growth on a sequential basis with December representing the strongest month of the quarter as health care utilization continues to normalize. From a geographic perspective, Asia generated strong results and continues to be an important growth driver for Teleflex. Raw material inflation and supply chain challenges remained headwinds for the business during the fourth quarter. Tyvek continues to be in short supply and has primarily impacted our Vascular and Interventional businesses. Turning to the full year of 2022. When adjusting for the divestiture of the Respiratory assets and one less shipping day, constant currency revenue growth was 4.3% for 2022 as healthcare utilization improved through the year and demand for Teleflex products accelerated. Our high-growth revenue portfolio maintained momentum across the majority of growth drivers. Although UroLift constant currency revenue…

Thanks, Liam and good morning. Given the previous discussion of the company's revenue performance, I'll begin with margins. For the quarter, adjusted gross margin totaled 60% a 120 basis point increase versus the prior year period. The year-over-year increase was driven by price, foreign exchange and mix partly offset by incremental inflation. Of note, our price strategy maintained its traction during the fourth quarter, enabling us to drive more than 50 basis points of year-over-year price improvement for 2022. During the quarter, we continued to see an improvement in sea freight costs in line with our expectations. Conversely, raw material and supply chain disruption remained elevated and have yet to normalize. Adjusted operating margin was 27.9% in the fourth quarter. The 30 basis point year-over-year increase was the result of higher gross margin and disciplined expense management of non-revenue-generating expense, partly offset by deleverage across our expense base from lower revenue year-over-year; inflation in our expense base such as wages; and planned investment in the business for our growth drivers. Net interest expense totaled $18.7 million in the fourth quarter, an increase from $11.8 million in the prior year period. The year-over-year increase in net interest expense reflects higher interest rates versus the prior year and increased borrowings on our revolver to fund the purchase of Standard Bariatrics, partially offset by a reduction in average debt outstanding. Our adjusted tax rate for the fourth quarter of 2022 was 13.6% compared to 13.8% in the prior year period. The year-over-year decrease in our adjusted tax rate is primarily due to further enhancements and tax efficiencies and of our global structure, partly offset by tax expense arising from the new provision of the US tax law requiring the capitalization of certain R&D expenses. At the bottom line, fourth quarter adjusted earnings per…

Thank you, Tom. In closing, I will highlight our three key takeaways from the fourth quarter of 2022 and our 2023outlook. First, our fourth quarter results were solid and driven by an improving end market for the majority of our businesses. Second, we are confident in our outlook for 2023. Our outlook reflects the diversification of the Teleflex portfolio through the combination of our growth drivers and stability of durable core revenues. Importantly, we will continue to focus on investment in our future growth drivers to enhance long-term value creation. Third, we are focused on achieving our objectives in 2025. We have a balanced approach to top line growth as we invest in our growth drivers and optimize the performance of the durable core. We see opportunities to drive margin expansion through mix shift, restructuring and price. And finally, we will remain disciplined in our capital allocation strategy, with a focus on executing on our M&A strategy. That concludes my prepared remarks. Now, I would like to turn the call back to the operator for Q&A.

Thank you. [Operator Instructions] Our first question will come from Cecilia Furlong with Morgan Stanley. Please go ahead, Cecilia.

Great. Good morning, and thank you for taking the question. Liam, I wanted to start with '23 guidance and if you could walk through relative to the updated LRP and those CAGRs, how we should think about contributions both from the durable core high-growth assets in UroLift. And specifically on UroLift with the 8% to 9% CAGR, how you're thinking about cadence over the next three years?

Yes. Cecilia, thank you for the question, and good morning. So, I'll start with our overarching guidance for '23 on revenue, which is 4.75% to 6.25% with a midpoint at 5.5%. This represents an improvement over 2022, which had an underlying growth rate of 4.3%. And as regards cadence within the year, you obviously heard in Tom's prepared comments, where the quarter one will be 5.5% to 6.5% with a midpoint of 6%, so therefore, obviously, seeing an improvement right out of the gate in core revenue. As a company, we're continuing to focus our efforts on high growth and durable core, to the other part of your question. But the natural evolution for Teleflex is to guide these buckets as they contribute to the overall growth rate of the company. Our guidance assumption for 2023, Cecilia, assumes that high growth will grow 8% to 11%; durable core will grow 4.5% to 5.5%; and the other bucket will be flat to declining in 2023. As you know, we're an incredibly transparent company. And while we will not be guiding specifically to UroLift, we will report Interventional Urology revenues every quarter consistent with all our other product categories. The exception of this, this year will be Standard Bariatrics and the Titan Stapler, as we have guided the full year $30 million to $35 million. This is consistent with our past guidance principles of giving guidance to an acquisition within the first year. Obviously, for UroLift, we would expect an improving environment in 2023, and that would carry on into '24 and '25, Cecilia.

Great. Thank you, Liam. And then if I could follow up on gross margin as well, just the outlook that you put out for '23, if you could walk through both what you're expecting from continued inflation benefit of pricing. And then also just UroLift 2 conversion impact that's having on gross margin alongside Standard Bariatrics?

Okay. I'll just cover the conversion of UroLift 2 and Tom will cover the rest of the topics on margins, Cecilia. UroLift 2 we have the US market pretty converted at this stage to the UroLift 2, and Tom will go through your other questions on the gross margin line.

Okay. So for 2023, our guidance is 59 to 59.5 or about five basis points at the midpoint. And for 2023 we expect to realize meaningful margin accretion from the combination of mix price manufacturing cost improvement programs and our footprint restructuring programs. However as we've spoken about in 2022, we continue to expect inflation largely to offset these gains. And additionally we're expecting a modest gross margin headwind from foreign exchange. If we were to look at what are the drivers of the accretion, the largest being the cost improvement programs accounting for some 40% of the positives and then mix price and the footprint about 20% each of the increase. And then as we look at what is offsetting that, it's largely the inflation, which accounts for 80% of the offset. And then as mentioned it's a little bit from foreign exchange as well and some miscellaneous other items. So really it's a story of really good underlying margin expansion opportunities. As we've mentioned we still feel very good about the long-term prospects. However, inflation is having an impact and largely offsetting those nice gains in the underlying business.

Our next question comes from Matt Taylor with Jefferies. Matt, please go ahead.

Hey, thank you. This is Mike Sarcone on for Matt today. Good morning, everyone.

Good morning.

Good morning. So just two follow-ups on Cecilia's questions. Just first on the UroLift growth CAGR of 8% to 9% over the next three years. By any chance could you parse out how you're thinking about US growth versus OUS growth?

YeahSo I will tell you that when it comes to the guidance for UroLift during the LRP over the coming years, we are assuming that UroLift will grow 12% to 13%. So, two comments on that. We -- the high growth will go 12% 13%. And within that UroLift will grow 8% to 9%. So a couple of comments on that. First is that nothing has changed to our international assumptions. We still are confident in the rollout of the product in Japan. As we said in our prepared remarks, we've begun in China. There are other geographies coming on board such as Brazil, Taiwan, India, France, Italy, Spain and ultimately Germany as you go through the LRP cadence. I would also say that 2022 played out a little bit differently than we anticipated in the US with procedural recovery a lot slower than we had anticipated due to patient flow and staffing shortages. And I think overarching if you look at Teleflex as a company within that high-growth bucket in 2022, it's 25% of our company growing at 12% to 13% By 2025, it will be one-third of our company still growing at that 12%, 13%. And I think this along with our growth within UroLift will position Teleflex as for attractive long-term durable growth as a company.

Got it. That's very helpful. And then just one follow-up on the gross margins for 2023. Do you think you could help us think about the quarterly cadence through the year and just how we should flow gross margin through?

Yeah. So I'd say there's some pluses and minuses with how foreign exchange comes in and others. But what you should expect is a relatively stable gross margin for the first three quarters and then expect to see some margin expansion or further expansion in the fourth quarter as a result of a higher volume more attractive mix expectation.

Our next question comes from Shagun Singh with RBC. Please go ahead. Your line is open.

Great. Thank you so much for taking the question. So just on UroLift, the LRP guidance is about 8% to 9%. Is mid single-digit a reasonable ballpark for this year? And I just wanted to get your thoughts on what gives you the confidence that patients will return. Do you have a backlog to tap into? It is encouraging that physicians are continuing to train. And then with respect to my second question on EPS, it's a pretty wide range. So what gets you to the top versus the bottom end? And what are the biggest swing factors here? Thanks for taking the questions.

Okay. Shagun, thank you for the questions. I'll let Tom answer the EPS range in a moment, but let me begin with UroLift. So obviously, we feel confident on the 8% to 9% for UroLift within our LRP. We do believe it will be improving, as we go through the LRP. And as I said earlier, nothing has changed in our assumptions for the international markets and we continue to anticipate that the international markets will do well. And we do feel good about the global growth for the UroLift franchise based, on all of that and based on the improving environment that we anticipate, as we said in our prepared remarks. And this gives us the confidence in the LRP growth of 8% to 9% CAGR, between now and 2025. With regard to your question regarding patient returns, there's two elements I think is going to need to be taken into account is, patient returns and staffing shortages. And we have seen -- in the fourth quarter, we saw a 13% sequential improvement from Q3 to Q4. We did see across all of our businesses an improvement, as you went through the fourth quarter as we said in our stated -- in our prepared remarks. That was also true of UroLift, as you went through that fourth quarter. You saw improvements, as you went through the three months of the fourth quarter. I was actually -- and ultimately we beat the UroLift -- our expectations for UroLift, by in excess of $3 million in the fourth quarter, which is the first time we've done that in a couple of quarters now, which gives us some encouragement as we move forward. I was out on the road last week, I spent a few days with our urology sales force with UroLift and meeting with customers. And while we're seeing some improvement in staffing levels in hospitals, we're still not seeing it in the ASC and in the office environment. I do anticipate that that will improve as we go through this year 2023. And I also believe, that patient flow will begin to return to the office. We're going to help that by continuing to train urologists. And we trained close to around 400 urologists, last year. Everything that's within our control, we're managing I think really well. We're going to continue with our DTC campaign. And we have, a new ad that we just launched. And let's not forget BPH isn't going away. 12 million men with BPH, are still there. It's deferrable, but it's not gone. And we remain the premier product for the treatment of BPH. And we are in effect the market leader in the treatment of BPH, which gives us confidence for that CAGR for UroLift over the LRP.

And then with regard to EPS the $0.60 range, which is a little bit less than 5% top versus bottom. So the drivers that could push us to the top end of the range, would be favorable mix in our sales for the year, as well as inflation staying at a certain level. So if I were to characterize, what would be the swing factor in there, probably the largest swing factors can be foreign exchange rates, which have been proven to be pretty volatile over the past year as well as just where does inflation go. So that's -- those are probably, the two biggest swing factors in the guide.

The next question comes from Mike Polark with Wolfe Research. Please go ahead, Mike.

Good morning. Thank you for taking the questions. I have two on the updated comments around the LRP revenue first and then margin. On revenue, I heard low end the prior CAGR was described as 6% to 7% at the company-wide level. So let's call it 6%. My question is, are there any additional kind of unannounced acquisitions considered in that update. Or is it the base plus Standard Bariatrics now, and no unannounced M&A contribution?

So, Mike, thanks for the question. You are absolutely, correct. It is the base with the revised UroLift CAGR and the inclusion of Standard Bariatrics. That is the only change, we've made. That's accurate.

Cool. The follow-up on margin as it relates to the updated LRP commentary, just to level set low end for the prior goals on gross and operating margin expansion, jumping off from 2022. So 2022 on gross margin 59.2. If I add 250 basis points I'm just south of 62% in 2025 and then on operating margin 27% plus 200 bps and 29% in 2025. Have I done the math correct?

You have.

Okay. Thank you.

Thanks, Mike.

Next question comes from Jayson Bedford with Raymond James. Jason, please go ahead.

Good morning. So I wanted to ask about operating margin the fourth quarter was strong but the 2023 op margin guidance was a bit softer. And the heaviness seems all to be in the operating line OpEx. It implies a pretty sharp step-up in OpEx and I assume some of the restructuring helps this line. But I guess my question is where is the reinvestment occurring. And how much of this is kind of structural inflation-driven or discretionary?

Well to your point I think as we look at the op margin for 2023, the first point is that just given the inflationary pressures and foreign exchange we're getting a lesser gross margin benefit than we would typically get. So we're starting off with the last benefit from the gross margin. But then, as you look at the OpEx, there's a couple of things that are I guess I would characterize them as structural in that, there are head count-related expenses that we're adding back in – in 2023 that were not there in 2022. Variable compensation was lower than target and there were a number of open positions quite a few that took a while to fill given the tight labor market environment and we're we've filled those positions and we're resetting the variable comp back to 100%. So there's a pretty big structural kind of move as a result of that. Now investments to grow we've got some continued investments behind our high-growth drivers. Expansion into international markets would be one as well as continuing to build out the capabilities of our systems and otherwise in 2023. Now, restructuring does provide a benefit. Part of that is in gross margin, part of it is in OpEx, and some is in 2023 and the balance in 2024 and about two-thirds of that restructuring will benefit 2023. So I would say, overall the biggest impact is just a structural putting the cost back into the OpEx that were not there in 2022. And that's part of the reason why we benefited in 2022 at a higher margin as these costs were not in the cost structure.

What's the expected dilutive impact from Standard Bariatrics in 2023?

So that's – as we stated before Jayson it's $0.10. So it was –

$0.10 to $0.15.

It is $0.10 to $0.15 for this year and it was $0.10 in the fourth in last year.

Our next question comes from Lawrence Biegelsen with Wells Fargo. Lawrence, please go ahead.

Yeah. Good morning. Thanks for taking the question. One on 2023, one on the LRP. Just on 2023, Tom maybe help me with the math here. The midpoint of the Q1 guidance day adjusted 6%, I think constant currency. It's slightly below the rest of the year. Just why would – why would the growth for Q2 through Q4 be lower than Q1, if I'm doing the math correctly?

So I'll take that one instead of Tom, if you don't mind Larry. So really you have a year-over-year, comp is one of the reasons for it. If you recall, there was Omicron last year which had a slight impact on some of the procedures that we're getting done. We also expect in Q1 to see a good solid performance as – in the overseas markets and in OEMs so – just because of that, impact in the prior year period. So, that's why it's a little bit front-end loaded in that regard Larry. And I think most investors would prefer to see a front-end loaded revenue plans and a back-end loaded revenue plan in my experience at least. So I think coming out of the blocks pretty well at a 6% growth with the guidance that – with the midpoint of our full year guidance at 5.5% I think should be seen as a positive for the investment community.

Okay. Yeah. So I agree with that on the front-end loaded comment. Liam thanks. And then on the LRP, I guess, maybe two-parts. One, if I'm just thinking about the math right the 5% -- I think the midpoint for revenue, it's about 5% organic this year in 2023, if I'm thinking about that right but 6% now for the LRP. So it implies an acceleration in 2024 and 2025 if I'm thinking about that, right. And on the margins, to follow-up on the earlier question, people are going to now look at this operating margin for example, at 26.3 at the midpoint for 2023 and approximately 29% goal in 2025. That's a pretty big step-up of about 300 basis points. So, basically what gives you the confidence in both of those if I'm thinking about the revenue acceleration in 2024 and 2025 correctly here? And then, on the margins basically 150 basis points a year, in 2024 and 2025. What gives you that confidence? Thanks for taking my questions.

Okay. So I'll cover the LRP, and Tom will cover the margin question. But I know, what Tom's answer is it's going to be really focused on inflation Larry, which should be no surprise to anybody given the environment that we're in. But let me cover the revenue. It's all constant currency. So what I'm going to talk about is constant currency. So the first year of the LRP will be 5.5%. We're at the -- we're guiding to the low end of our LRP which is 6%. So you are correct. There is a modest up-tick in revenue as you go from this year 2023 and to 2024 and 2025. And why is that? One of the main reasons for that is the improving macro environment that we expect to see beginning as we go through 2023 and continuing into 2024 and 2025. The second factor that will help that is the international expansion of some of our high-growth portfolio not just UroLift but also the international expansion of PICCs the international expansion of the intraosseous portfolio the international expansion of the hemostatic products that will bring accelerated growth in the latter half of the LRP. And we feel pretty confident in that. It's not a managed step-up. We're going from 5.5% to a 6% CAGR over the horizon of the LRP. And I think the other comment that I will make, that nobody has picked up on so far in their questioning is, durable core was 4% to 5%. While we've been micro-focused on one element of Teleflex the durable core has been improving all this time. And now the durable core for the LRP is now 5% at the upper end of the original guide of 4% to 5%, through excellent execution by the businesses globally. And the margins on a high-portion of that durable core are fairly substantive and helpful to Teleflex. And it's a $14 billion global TAM, for the high-growth and we're only 5% penetrated. So the opportunities for us to continue to grow into that are significant. But I'll let Tom address the margin question that you had Larry. And thanks for the questions.

Sure, Larry. So the driver of the op margin expansion is really going to come from -- largely from the gross margin. And as you break that down, we're expecting continued margin accretion due to mix and price. Additionally, we have the MSA with Medline which ends at the end of 2023 and that adds close to a full point of margin as a result of that. And then, the third area is that, typically, we have enough productivity in our operations to more than offset inflation. That wasn't the case in 2022. That's not the case in 2023. We do expect to see that -- some improvement as we go into 2024 and 2025 on inflation. And as a result operations productivity once again becomes accretive to gross margin versus dilutive in 2022 and 2023. So those are kind of the key drivers of the gross margin. We also expect to see some leverage in the operating margin as a result of increasing revenues allowing us to leverage that cost structure. So if I think about the key components that would be the four points I'd reference.

The next question comes from Michael Matson with Needham & Company. Michael, please go ahead.

Yeah, thanks. So I want to ask one on pricing. I think you said you had over 50 basis points and I think that was for the full year 2022. What have you kind of assumed in the guidance for 2023? Is it kind of remaining at that level? Could it even be higher maybe?

So, we began the year in 2022, expecting 50 basis points of positive pricing and we exceeded that goal in 2022, Mike. So we came in comfortably above the 50 basis points. We would expect again to be above 50 basis points and to deliver a minimum of 50 basis points of pricing this year. And we have a pathway to that. We have some carryover from the prior year and we have some additional pricing opportunities that -- some of which we've already executed.

Okay. Got it. Thanks. And then, I think, Tom did call out some restructuring in his comments on the margin. So is that existing programs, or are you planning anything new there?

That is existing programs. We have a number of footprint programs that are still finalizing and will be largely done by 2025. And then we introduced a new program in the fourth quarter of 2022 that will be complete by 2024. So everything I spoke about are known and existing programs that frankly we're managing to expectations.

The next question comes from Matthew O'Brien with Piper Sandler. Matthew, please go ahead.

Good morning. Thanks for taking the question. So, Liam, as I think about UroLift and this new 8% to 9% CAGR through the LRP, I think that's about $90 million to $100 million of incremental revenue through that time frame by 2025. So if I remember correctly, Japan and China were supposed to be pretty sizable contributors, I think, in the out years, maybe half of that $90 million to $100 million, maybe a little bit more than. So it would imply some fairly modest improvement here domestically. First of all, am I right about that? And then, secondly, how conservative is that? Does it make sense to be doing these DTC, or making this DTC spend, if you don't think the domestic business can really accelerate over the next several years?

So, Matt, your overall math is fairly good, with regard to the growth in UroLift over the three-year horizon. I think that we still are reliant on the US to drive the bulk of the growth, just because the overseas markets aren't big enough. Clearly, overseas and international, we're encouraged by what we're doing. And by the time we get to the end of 2025, it will be a bigger portion of the revenue. And of course, on a smaller base, the percentage growth is going to be much better. We've done a really good job in Japan. We're going to do a really good job in China, Taiwan, India, France, Spain, Italy, Germany, Brazil and so on and so forth, but they're just not big enough to carry the growth to get us to that CAGR of 8% to 11%. I think that the DTC does make sense, to answer the other part of your question. If you go back to 2022, based on our expectations, the number of impressions were up by 27%. The number of responses were up double -- very strong double digits. So we feel that that is an encouraging factor. And every time I talk to urologists. And the same was true last week, when I was out on the road, patients are coming into them asking them for UroLift based on the ad campaigns that they see. So I think we will continue with the DTC campaign. And we believe that 8% to 11% is very achievable for us as a company.

Okay. Appreciate that, Liam. And then, as far as the high-growth portfolio goes as well, coming down a little bit from -- I think, it was 14% to 15% before and now its 12% to 13%, still implies the rest of the portfolio outside of UL is strong. Can you talk about some of those components, what you're seeing from MANTA, EZ-IO, PICCs, et cetera, that are giving you the confidence to reiterate the strength in that segment of the business over the next several years? Thank you.

Yes. So the high growth is doing really well. In the fourth quarter, it grew approximately 14%. The full year it grew approximately 14%, ex the contributions of UroLift. So, obviously, there are elements within the high growth that are above the average that we expect and there are elements of the high growth that will be slightly below it. Obviously, now the Titan, which comes from Standard Bariatrics, will be the fastest-growing. Then you have MANTA which will grow above the average. So we feel really good about the high-growth portfolio. We feel really good about being able to deliver the high growth of 12% to 13% over the LRP and we feel really good about being able to deliver 8% to 11% from the high growth in 2023. And the performance of all other aspects of the high growth, except for one, have been right in line, if not, ahead of our expectations for the entirety of 2022. And there's nothing better than momentum, as you know Matt as you head into 2023, 2024 and 2025 as you continue to build that out. And I know we talk a lot about international expansion with UroLift, but it is also the same for the rest of the high growth. There is international expansion as well as domestic sales growth as we tap into that market. And the encouraging thing is as I said earlier all of this high growth is growing into a massive market TAM where we're very underpenetrated, but significant opportunities for growth.

Our next question comes from Anthony Petrone with Mizuho. Please go ahead, Anthony.

Thanks. Hope everyone is doing well. Maybe just in the LRP Standard Bariatrics just to kind of clean that up a bit in terms of the top-line contribution, it rolls into organic I would assume sometime later this year or early next year. So maybe the contribution from Standard Bariatrics within the LRP and can that actually be margin accretive by the end of the LRP? And I'll have a couple of follow-ups.

Yes. And well done Anthony. Thanks for asking. So I'll answer the last part of your question first. Yes it will be margin-accretive by the end of the LRP. We expect it to become margin-accretive as we exit 2024. What you should expect from Standard Bariatrics is that it will deliver between $30 million and $35 million this year as we stated in our prepared remarks. And then as we said previously it should add approximately 50 basis points of growth to Teleflex year-over-year thereafter from an organic perspective. So that's what you should expect from Standard Bariatrics. Rough math should be around $60 million by the end of 2025.

And then a quick follow-up two I'll throw in there and I'll get back in queue. One just on UroLift when we think about it through 2025. Obviously, we saw some shifts in patient behavior. At what point do you think things sort of normalize here? Is there a path to normalization let's say at the end of this year early next year. I'm talking about US patient behavior. And then maybe just your updated views on the M&A landscape sort of what level of discussions is Teleflex having and just maybe your high-level views on M&A? Thanks.

Yes. Sure, Anthony. So I expect the overall environment for urology patients and staffing to continue to improve as we go through 2023. When it's going to be 100% normal Anthony, it's difficult for me to actually pinpoint that right now in all fairness. But I do anticipate to continue to improve. And why do I say that? The staffing levels in hospitals began to improve in Q4. I expect that to continue into Q1 this year. And once staffing levels start to improve in hospitals it will ultimately then begin to improve in ASCs and ultimately in offices thereafter. And I think the patient flow as I said earlier there's still 12 million men suffering from BPH. If you walk into a urologist office and there's 100 men in the urology waiting room, 40 of them are there because they got BPH roughly. So it's still the number one reason why a man goes to the urologist. So the size of the market is a significant driver to my belief that it will return to normal as we go through the LRP at some stage. With regard to M&A, clearly, we have the most important thing that you need. We have a very strong balance sheet. For M&A, we're about 1.75 times levered at the end of the fourth quarter. We are active out there looking at opportunities. We have a lot of lines in the water. We're fishing hard Anthony. Very difficult for me to say and we're going to get a fish on the hook and into the boat. But there are targets out there that we are interested in. There are targets out there that we are actively pursuing. And we do believe that we are an attractive acquirer and there are assets that we feel would fit very well in the Teleflex family.

Our next question comes from Craig Bijou with Bank of America Merrill Lynch. Craig, please go ahead.

Good morning, guys. Thanks for taking questions. One let me just start with UroLift. And I did want to ask I know Japan was better than expected. Was Japan in the quarter -- was the 89 versus the 86 that was implied by your guidance was that Japan, or I guess if you could just kind comment on what drove the few million beat. Was that US or on the international side?

So we saw improvement in both sides of the Atlantic. I keep getting back to the point that the international markets at this stage are not substantive enough to carry the can for the overall UroLift growth. And we would not have been able to beat by $3.3 million Craig the US delivering a good proportion of that. I am encouraged though as I said earlier on what we're doing in regards to the expansion overseas. Japan has gone exceptionally well. We did our first cases in China. We're starting to roll out in India and other geographies. I won't go through them all again, but we are encouraged by what we see with regards to that rollout.

Got it. Thanks, Liam. And then on your comments on the durable core and appreciate that -- how that's kind of moved up in terms of the LRP growth. Maybe, I mean what are some of the products the categories that are really driving that and that you see driving that LRP growth for the next several years?

Yes. I think as I look at where we see an improvement in an improving environment, first of all, what you have to understand is in 2022 we had a lot of supply chain issues. We had shortages of Tyvek shortages of simple components and so on and so forth. So that's going to drive some of the early improvements that you're going to see. So you should see an improvement in our Vascular business. As you go through 2023 and beyond Vascular grew in the entire year about 1% constant currency. The normal growth for that business is in the mid single digits. I also believe that Interventional Access, we've got a lovely suite of new products coming through in Interventional Access and that's the late blood of that business. And Interventional Access, we would anticipate will continue to accelerate. One of our -- I guess, more than the durable core one of our underappreciated assets is our OEM business. We bought this company called HPC a couple of years ago. It does thin-walled catheters. That on top of the rest of the OEM business has continued to grow in the high single low double digits from a business that historically used to grow around 3% or 4%. So I anticipate that OEM will continue to flourish will continue to accelerate its growth over the LRP and be a real contributor. And never forget it's accretive to our operating margin and will drive that. And obviously, APAC is a key growth franchise for us. We have a lot of products that we are launching into the APAC region that we believe will be very successful there. So those are some of the key areas that I believe will continue to grow. And as I said earlier as we go through the LRP, we would anticipate that Interventional Urology would also improve as we go through the LRP.

Our next question comes from George Sellers with Stephens. George, please go ahead.

Hi. Thanks for squeezing me in here. I'll just ask one quick one. Could you give us a little color on what you're seeing in terms of private market valuations and how those have trended here recently? And maybe how confident are you that you could potentially deploy some capital here in the near term? Thank you.

So George, as you know it takes two to get married. So we're a willing groom or bride whichever way you want to put us. And it's a question of finding the other party. I will tell you the valuations from the heady days of 2021 have moderated somewhat. And high-quality assets are still not – inexpensive, but that's why they're high-quality assets and those are the assets that we're going after. But you can -- we will remain disciplined George and investors can expect us to remain disciplined. We will look for assets that are accretive to our top line growth. We look for assets that are accretive to our gross margins. We look for assets that will become accretive to our op margins and earnings pretty quickly after we acquire them. We will -- we're very disciplined on our return on capital and getting above our internal cost of capital by at least year five. We've always been able to do that in year four. But the hurdles will remain the same for Teleflex in finding good assets, bringing them into the family and integrating them into Teleflex and obviously, assets that are unique in the marketplace in segments that are growing faster than that core segments within Teleflex.

Our next question comes from Matt Mishan with KeyBanc. Please go ahead. Your line is open.

Great. Thanks for taking the questions. Just a quick clarification for Liam, and then I'll have a follow-up for Tom. On the low end of the 6% to 7% from '22 to '25, does that include the inorganic contribution of Standard Bariatrics in 2023?

Yes. As we said in our prepared remarks, and as I said a couple of times already, the changes that we're making is we're revising the high-growth bucket and the UroLift component of that high-growth bucket, and we're adding Standard Bariatrics. So that's it. That's correct.

Okay. And then just for Tom, on the tax rate, 10.25% to 10.75% for 2023 is pretty low, especially compared to historical standards. What's driving that for 2023? And how should people think about the sustainability of that tax rate moving forward into the next couple of years?

Well, I would say that, as you look at 2023, there's two drivers of the tax rate. One is the change in the tax law related to the capitalization of R&D expenses. We'll start to provide some ability to amortize in 2023. So we have a less of an expense impact as a result of that. And the other driver would be the IT consolidation projects or consolidation projects that we've undertaken will begin to show a higher benefit in 2023. And those benefits will continue throughout the LRP time frame. So you should think about the rate as being sustainable. I would say that there is one caveat in that the EU is currently assessing a minimum tax, if that were to become legislation, that could have an adverse impact on our tax rate.

And Matt, I just want...

And I should say that's contemplated for 2024, no 2023 impact.

Sorry, Tom. Yes. And Matt, I just want to circle back on the Standard Bariatrics question. The difference between pro forma and Standard Bariatrics as is isn't that significant, given that the product is only recently on the market and the growth has been driven by Teleflex, following the training of our sales force. So we've doubled the sales force. So, it isn't that significant, the difference one way or the other, Matt, is what I would tell you.

Those are all the questions we have time for today. So I'll now turn the call back to Lawrence for any concluding remarks.

Thank you, Emily, and thank you to everyone that joined us on the call today. This concludes the Teleflex Incorporated Fourth Quarter 2022 Earnings Conference Call.

Thank you, everyone, for joining us today. Our conference call for today is now concluded. Thank you for your participation. You may now disconnect your lines.