Teleflex Incorporated (TFX) Q1 2025 Earnings Report, Transcript and Summary

Good morning, ladies and gentlemen, and welcome to the Teleflex First Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded, and we will be available on the company's website for replay shortly. Now, I will 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. First Quarter 2025 Earnings Conference Call. The press release and slides to accompany this call are available on our website at Teleflex.com. 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 John Deren, Executive Vice President and Chief Financial Officer. Liam and John 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, including our Form 10-K, which can be accessed on our website. Now I'll turn the call over to Liam for his remarks.

Thank you, Larry, and good morning, everyone. On this morning's call, we will discuss the first quarter results, review strategic and commercial highlights and provide an update on our financial guidance for 2025. For the first quarter, Teleflex revenues were $700.7 million, down 5% year-over-year on a GAAP basis and a decline of 3.8% on adjusted constant currency basis, which is within the range of the minus 3% to minus 4% guidance provided during our quarter 4 earnings call. Revenues were $2 million below the midpoint of the range due to some softness in orders in EMEA, which has since recovered in April. First quarter adjusted earnings per share was $2.91, a 9.3% decrease year-over-year. Now, let's turn to a deeper dive into our first quarter revenue results. I will begin with a review of our geographic segment revenues for the first quarter. All growth rates that I referred to are on an adjusted constant currency basis unless otherwise noted. Americas revenues were $475.7 million, a 3.2% decrease year-over-year. Revenue growth in the quarter was in-line with expectations and was impacted by OEM decline and continued challenges in the UroLift office sites of service. EMEA revenues of $151.2 million decreased 2.8% year-over-year. Strong performance in Surgical and Vascular Access were primarily offset by anesthesia. We experienced lower-than-expected orders during the latter portion of the first quarter, which have recovered in April. Turning to Asia. Revenues were $73.8 million, a 9.7% decrease year-over-year and in-line with our expectations. Revenue growth was impacted by the previously announced volume-based procurement in our China business. We expect sequential quarterly revenue improvement in our China business through the remainder of 2025. Let's now move to a discussion of our first quarter revenues by global product category. Commentary on global product category growth for the first quarter will also be on a year-over-year adjusted constant currency basis. Starting with Vascular Access. Revenue increased 1.9% year-over-year to $182.4 million. The quarter was led by year-over-year growth in PICCs, which increased at a double-digit rate and a solid performance in EZ-IO. We still expect our Vascular Access business to grow in the mid-single-digit range in 2025 driven by continued PICC growth and the return of the Endurance Catheter to the market. Moving to Interventional. Revenue was $137.5 million, an increase of 3.2% year-over-year. During the quarter, performance was led by growth drivers such as on control and complex catheters. In the quarter, we continued to see robust demand for intra-aortic balloon pumps which grew at a strong double-digit rate in the Americas, offset by a tough year-over-year comp in Asia Pacific. Turning to Anesthesia. Revenue decreased 8.6% year-over-year to $86.6 million. Among our largest product categories, Endotracheal Tubes and hemostatic products showed growth in the quarter and were primarily offset by a tough comp in military orders and pressure on airway products. In our Surgical business, revenue was $105.8 million, an increase of 2% year-over-year. Our underlying trends in our core surgical franchise continued to be solid, partially offset by the expected impact of volume-based procurement in China. For Interventional Urology, revenue was $71 million, representing a decrease of 10.7% year-over-year. While we saw strong double-digit growth for Barrigel, we continue to experience pressure on UroLift, particularly in the office sites of service. OEM revenue decreased 26.8% year-over-year to $63.9 million. Growth was in-line with our expectations. The performance in the quarter was driven by the impact of the last customer contract discussed on our third quarter 2024 calls with the remainder attributable to customer inventory management. As expected, the last customer contract impacted first quarter revenue by approximately $7 million with the balance from customer inventory management. In particular, as we progressed through the quarter, we began to see the expected improvement in order rates from our customers, validating our assumption of growth improvements quarter-over-quarter as we progress through the year and reached the anniversary of the loss of our customer contracts in the third quarter of 2025. First quarter other revenue increased 4.5% to $53.5 million year-over-year. That completes my comments on the first quarter revenue performance. Turning to some commercial and clinical updates. In our interventional portfolio, we are pleased to announce that the AC3 range Intra-Aortic Balloon Pump has received 510(k) clearance from the FDA. The AC3 range Intra-Aortic Balloon Pump is a compact pump, which combines the simple interface and proprietary algorithms of our flagship AC3 Optimus Intra-Aortic Balloon Pump to provide the same precisely timed support. The AC3 range is designed to provide reliable, ongoing intra-aortic balloon pump support across various patient transport modes, including commonly used ground and air ambulance vehicles. The AC3 range features a full-sized helium tank, dual-power options and other features to support maneuverability. With the FDA clearance, the AC3 range will enter full market release in the United States and begin shipping to customers in the second quarter of 2025. Also in our Interventional business, we announced preliminary results for the Ringer Perfusion Balloon Catheter PBC Catheter IDE Study. Ringer PBC is a rapid exchange percutaneous transluminal coronary angioplasty catheter with a unique helical balloon. When it places the balloon approximates a hollow cylinder with a large central perfusion lumen allowing for continuous coronary blood flow during prolonged inflation. The Ringer PBC Study is a limited prospective, multi-center, single-arm IDE study undertaken at 4 sites in the United States, the Ringer PBC for the management of emergent coronary perforations that developed during percutaneous coronary intervention procedures. The study enrolled 30 participants and analysis was performed based upon intention to treat. The preliminary results were favorable with the primary efficacy endpoint observed in 73% of participants, which required successful Ringer delivery and inflation at the perforation site, control of blood leakage into surrounding tissue and preservation of antegrade coronary flow. The results also showed successful delivery of Ringer in approximately 87% of participants. And of those participants, control of blood leakage into surrounding tissue with perfusion was achieved in nearly 85% of cases. These results are intended to support a premarket application for a coronary perforation indication, which was recently submitted to the FDA. Ringer PBC, which was granted FDA breakthrough device designation is currently indicated for balloon dilation of coronary artery or coronary bypass graft stenosis where the physician desire to distill blood perfusion during balloon inflation for the purpose of improving myocardial perfusion. Finally, in our emergency medicine business, QuikClot Control+ has received FDA clearance for an expanded indication to include all grades of internal and external bleeding. Combined with its existing indications, for severe and life-threatening bleeding, this expanded indication allows us to target more procedures for fast, effective control of bleeding could benefit patients, clinicians and health systems. Additionally, while our primary focus for this portfolio remains on trauma, the expanded indication will also support procedures in general surgery, gynecological surgery, orthopedic surgery and other areas. We estimate that these additional clinical spaces add more than $150 million to our serviceable, addressable market in the United States. Moving to strategic updates. On February 27, we announced the intention to separate Teleflex into 2 independent publicly traded companies. The separation is intended to enhance value for all Teleflex shareholders. By separating, each business will benefit from a more tailored strategic direction, a simplified operating model, a streamlined manufacturing footprint and a capital allocation strategy aligned with the growth philosophy and objectives for each of the companies. We believe the proposed separation will offer investors more targeted and uniquely compelling long-term investment opportunities. We are confident that this separation will enable both companies to pursue their strategic objectives more effectively and create meaningful long-term value for our shareholders. As expected, following the announcement of the separation, we have received significant inbound third-party interest in acquiring NewCo. We will continue to be guided by the objective of maximizing shareholder value creation. Consistent with this objective, and with full support and oversight of the Board, management is continuing to actively explore all options, including the potential sale of NewCo in parallel with the potential spin. We will provide updates to the investment community on our progress as appropriate as we explore these parallel paths. We will remain focused on execution and continue to operate the RemainCo and NewCo businesses consistent with the long-term strategy, including investments in commercial growth and innovation. Moving to the acquisition of substantially all of BIOTRONIK Vascular Intervention business, which was also announced on February 27, we remain on track to close the acquisition by the end of the third quarter of 2025, subject to customary closing conditions, including receipt of certain regulatory approvals. We continue to see a strong fit for the Vascular Interventions business with the legacy Teleflex Interventional business. The acquisition will add a broad portfolio of therapeutic products to Teleflex's portfolio of interventional access products, driving an enhanced global presence in the cath lab. The BIOTRONIK Vascular Intervention product portfolio complements the current Teleflex offering in the cath lab. Our existing complex PCI portfolio has products that are utilized in difficult coronary interventions. And by adding the innovative products that we expect to acquire, we will be able to advance our technology offering with relevant coronary and peripheral interventions. We see significant opportunity to carve out niche markets in the coronary intervention space. For example, the combination of the recently launched Teleflex Ringer catheter and the PK Papyrus in the vascular interventional portfolio of BIOTRONIK will provide a complete and unique solution for the acute and long-term treatment of vessel perforations during coronary procedures. The total addressable global market for treating coronary vessel perforation is estimated to be in excess of $80 million. We are also excited about the emerging potential for resorbable scaffold technologies and the ability to expand our current available procedure base. The Vascular Intervention business will also establish our global footprint in the fast-growing peripheral intervention market and provide a channel for Teleflex products that currently have a peripheral indication. The acquired business is [indiscernible] in robust research and development, clinical expertise and global manufacturing capabilities, which we believe will further bolster Teleflex's inhibition pipeline and positions the company to participate in the emerging potential for resorbable scaffold technologies. That completes my prepared remarks. Now, I'd like to turn the call over to John for a more detailed review of our first quarter financial results. John?

Thanks, Liam, and good morning, everyone. Given the previous discussion of the company's revenue performance, I'll begin with margins. For the quarter, adjusted gross margin was 60.4%, a 70 basis point decrease versus the prior year period. The year-over-year decrease was primarily due to continued cost completion from macroeconomic factors, specifically with respect to labor and raw materials and unfavorable product mix, partially offset by cost improvement programs. Adjusted operating margin was 24.7% in the first quarter. The 190 basis point year-over-year decline was primarily driven by the flow-through of the year-over-year decrease in gross margin, employee-related expenses and investments to grow the business. Net interest expense totaled $16.6 million in the first quarter, a decrease from $21 million in the prior year period. The year-over-year decrease in net interest expense reflects lower interest rates and lower debt outstanding. Our adjusted tax rate for the first quarter of 2025 was 14.5% compared to 13.2% in the prior year period. The year-over-year increase in our adjusted tax rate is primarily due to additional costs arising from the enactment of the European Board through tax reforms. At the bottom line, the first quarter adjusted earnings per share was $2.91, a decrease of 9.3% versus the prior year. The year-over-year decrease in EPS reflects lower revenue, lower operating margins as previously outlined, foreign exchange and a higher tax rate year-over-year, partially offset by a lower interest expense and share count. Turning now to select balance sheet and cash flow highlights. Cash flow from operations for the first quarter was $73.3 million compared to $112.8 million in the prior year period. The $39.5 million decrease was primarily attributable to operating results and unfavorable changes in working capital, which were largely driven by inventory purchases and outflows related to cloud computing arrangements expenditures as part of our ongoing ERP system upgrade. Moving to the balance sheet. At the end of the first quarter, our cash and cash equivalents and restricted cash equivalents balance was $317.5 million as compared to $327.7 million as of year-end 2024. Net leverage at quarter end was approximately 1.8x. Finishing up on the quarter, I will provide an update on the $300 million accelerated share repurchase program, which we entered into on February 28, 2025. The program was completed on April 9, 2025, and we received just over 2.2 million shares of common stock at an average price per share of $135.23. Now turning to financial guidance. We continue to expect 2025 adjusted constant currency revenue growth of 1% to 2%. We now assume a negative impact from foreign exchange of $5 million representing an approximately 17 basis point headwind to GAAP revenue growth in 2025. This compares to our prior guidance of approximately $55 million or a 180 basis point headwind for 2025. The updated foreign exchange guidance assumes approximately $1.10 average Euro exchange rate for 2025. As a result of the foreign exchange outlook, we have increased the guidance range for 2025 reported revenue growth from a range of negative 0.35%, to positive 0.65%, to positive 1.3%, to positive 2.3% implying a dollar range of $3.086 billion to $3.117 billion. On the topic of tariffs, the situation remains highly dynamic and is likely to change over the coming months. There remains significant uncertainty on the positioning, timing and magnitude of the administration's tariff policy as well as retaliatory impacts from other countries. Of note, were not for the impact of tariffs enacted since the issuance of our previous guidance, we project full year results for 2025 to fall within our previously stated guidance ranges. Our current outlook includes tariffs as currently enacted, including the country-specific reciprocal tariff rates that were delayed for 90 days, but does not contemplate potential future tariffs that are not yet proposed. Conversely, the 2025 outlook does not assume that tariffs may be paused further or reduced. Any future changes could change the anticipated impact on our adjusted EPS in 2025. We expect an impact from tariffs of approximately $55 million in 2025, which will be recorded in cost of goods sold before any future initiatives to mitigate the exposure on the business. Approximately 50% of the total tariff impact is associated with China. Of the 50%, approximately 80% is associated with products sold in China and the remaining 20% on imports into the U.S. In addition, approximately 35% of the total tariff impact is associated with Mexico on products that are currently not USMCA-compliant at a rate of 25%. We now expect 2025 adjusted earnings per share to be in the range of $13.20 to $13.60 from $13.95 to $14.35 previously. Specifically, the changes in our 2025 adjusted earnings per share range were driven by an estimated $1.05 headwinds from tariffs enacted since the issuance of our previous guidance, partially offset by a $0.30 benefit of which $0.20 is due to lower share count, including the result of the recently completed accelerated share repurchase program with the balance from expense control and a small benefit from foreign exchange. We are actively exploring strategies to mitigate our exposure to tariffs in 2025, but these efforts will take some time to implement. Specifically, we are focused on optimizing our supply chain, including chain of custody changes increasing our mix of USMCA compliant products, which provides tariff waivers for products assembled in Mexico and Canada using U.S. components and continued and diligent control of our spending. We will also begin to implement increased customer pricing as contracts come up for renewal. Additionally, for modeling purposes, you should consider the following. We now expect 2025 gross margin be in the range of 58.25% to 59%, approximately 180 basis points of the total 200 basis point reduction in gross margin guidance is related to tariffs with the balance coming from impacts related to foreign exchange. We now expect operating margins to be in the range of 24.6% to 25% in 2025. Our revised guidance reflects the flow-through of our updated gross margin expectations. Moving to items below the line. Net interest expense is expected to be approximately $75 million for 2025. Our tax rate guidance remains unchanged at approximately 13.5% for 2025. For the full year, we expect shares outstanding to approximately $44.9 million. For the second quarter, adjusted constant currency growth is expected to be in the range of 0.5% to 1.5% excluding a foreign exchange benefit of approximately $2 million. That concludes my prepared remarks. I would now like to turn the call back to Liam for closing commentary.

Thank you, John. In closing, I will highlight our key takeaways from the first quarter of 2025. Aside from currency impacts, the quarter evolved largely as expected. We entered the quarter expecting the following: pressure on the OEM business due to loss of customer contracts and customer inventory management, a decline in the UroLift business due to the final year of reimbursement phasing, and China volume-based procurement headwind. We continue to expect these headwinds to be transitory, although as we have previously indicated, they will represent an approximate $100 million headwind to revenues in 2025. While the business is working through the impact of these idiosyncratic factors, we did see Barrigel continue to deliver strong growth with revenue increasing strong double digits in the quarter. Our EZ-IO and franchise executed well with strong growth. Our complex catheter business grew high single digits and our PICC business achieved double-digit growth. If it were not for the impact of tariffs enacted since the issuance of our previous guidance, we project full year results for 2025 would fall within our previously stated guidance ranges. We delivered on our commitment to return capital to shareholders through our accelerated share repurchase program and continue to pursue long-term value creation through a proposed separation of our business into 2 publicly traded companies, while pursuing a potential sale of NewCo in parallel. Consistent with the performance of Teleflex in the first quarter and the outlook for 2025, RemainCo constant currency revenue growth was in-line with our expectations. It is our expectation that a number of the specific headwinds facing the business this quarter will result in the coming quarters, and we remain hyper-focused on returning the business to growth and creating shareholder value. That concludes my prepared remarks. Now, I would like to turn the call back to the operator for Q&A.

[Operator Instructions] Our first question comes from the line of Patrick Wood from Morgan Stanley.

Maybe I'll just quickly ask them both upfront, if that works. One, a bit random, but given all the supply chain noise and things like that, have you seen any, I guess, incremental demand on the OEM side of the business, even just some initial discussions for people think about onshoring and moving supply chains. It seems like you guys could be a solution provider on that side. And then just very quickly, secondarily, think of BIOTRONIK and closing that, the Vascular side, is this something that you feel like you'd like to keep building on longer term, potentially with some other assets? I mean I feel like Vascular is an area that gets ignored quite a bit by some of the other larger strategics. And so it feels like an opportunity potentially to kind of keep growing on that side. How much of this is beyond just BIOTRONIK as sort of sustainable area of focus for you guys?

Thank you, Patrick, and good morning to you as well. Let me start with your first part of your question, the supply chain. We have seen demand in OEM pickup. We have seen the order rate continue to improve as we went through the quarter. And I'm not sure if that is attributable to what's going on in the supply chain because that would -- it would be too early for that to happen. I think this is base demand. We did see -- as we expected, the impact of approximately $7 million to the vertical integration in OEM. We did also see the destocking in the first couple of months of the quarter. But as we went through the quarter, we saw a pickup in demand within the OEM business. So that was very encouraging and it gives us confidence in OEM's ability to deliver to plan for the full year. Regarding -- your question regarding BIOTRONIKs and investing, in particular, in that cath lab call point, that is, for sure, going to be an area for focus, our focus for Teleflex in RemainCo. I will say in this interim period of time, we will be focused on bringing in BIOTRONIK into Teleflex, and we will be focused on the parallel path that we just announced of spinning NewCo and also, at the same time, doing a sale process based on the inbound interest. The bigger footprint and presence in the cath lab, we're going to have approximately $1 billion of revenue in the cath lab, and that is going to be a strategic call point for Teleflex. And just a broader comment on the quarter, Patrick, I will say we were pleased with how the quarter played out. It played out very much in-line with our expectations, we executed pretty well. Revenue came in where we thought it was going to come in. And obviously, we were tracking really well to our margin profile, our earnings profile, the ASR outperformed. So we feel that it was a solid start to the year for Teleflex. Thank you.

Your next question comes from the line of Michael Sarcone with Jefferies.

This is Mike, on for Matt this morning. I guess just to start, on the tariffs, you mentioned $55 million, and that's prior to any mitigation strategies. Can you just give us a little bit more color? I know you mentioned a few on how quickly you could actually implement near-term mitigation strategies and what type of EPS headwind that could offset if you were able to execute on it efficiently.

I think I'll take that question. So obviously, the current tariff environment is obviously disappointing. The $55 million is based on what's enacted today again, and does not include any mitigation strategies as noted. But I will tell you what we have done a number of things ahead of the tariff. So we did move inventory ahead of the tariffs. We moved supply into China ahead of the step-up in tariffs. We are currently making sure that inventories are in the regions by shipping into bonded warehouse where we don't incur tariffs so that hopefully, when things get alleviated, we can quickly move it into country. But in terms of the other mitigation strategies, and there are a number of them and some of them will take longer than others. But I think the #1 thing we're doing right now is we're looking very carefully at the USMCA exemptions in Mexico. So about 50% of our inventory is exempted under USMCA today, and there are some real opportunities to bring in much more of that inventory under that exemption. Now it will be different -- it takes some different timing per product. So you basically have to have 90% of your components coming from the U.S. So it will vary, but we believe we can substantially increase that. I don't think we're in a position to give you a target yet that would help you get to a new EPS number. But that's the first thing that we're doing. We're also looking at opportunities in the supply chain to improve where we source product to avoid the tariffs. And so that is currently underway, and that may take a little longer. So there are a number of strategies to mitigate. And last but not least, we are looking at opportunities to increase price should the tariffs stay in place opportunistically as contracts renew and where we're not contracted more immediately. So we set up a tariff council, we're looking at the supply chain opportunities very closely. And we also have a commercial meeting that's regular on pricing. So a lot of things, a lot of strategies to mitigate the tariffs. Again, the $55 million does not include that. That is fully the calculation of what is in today. I view it as worst case. Hopefully, there won't be more negative changes on the policy side. And again, there will be opportunities for us to mitigate these further.

And Mike, I would just add one comment to John's. And this we've already implemented and it's in our guidance, but we have taken some thoughtful spending controls, and that is a part of the $0.30 offset that John mentioned in his prepared remarks, that is offsetting the impact of tariffs. So multiple mitigation, some already in place and others that we will enact as we go through the remainder of the year.

Got it. That's really helpful. And then just a follow-up. Since you mentioned pricing, I was just wondering how you feel Teleflex is positioned today to maybe take more aggressive pricing? And then just on that re-contracting, can you give us any sense for if there's a particular business areas or segments where that's more impactful? Just trying to get a sense for maybe how many of these contracts are able to be renegotiated in the near term?

Yes. Well, in the U.S., if you take into account our GPOs and our big IDNs, more than half of our business is contracted in that area. So what we will be doing over the next couple of quarters, and we've already begun to do some work on this is we're beginning at the non-contracted business, and we're identifying products within the non-contracted business that are impacted by tariffs. And we will -- if the tariffs stay in place, we will be implementing pricing changes on that -- on those products. This year, in the first quarter, or in the full year of 2025, we have plans to increase pricing between 30 and 50 basis points. And it will be our plan to accelerate that if these tariffs stay in place, and we will give more updates as we go from quarter-to-quarter.

Your next question comes from the line of Jayson Bedford with Raymond James.

Thanks for all the detail here. Just on the comment around significant interest from other parties on NewCo, is there a consideration or maybe a willingness to sell pieces of NewCo? Or is the intention here to spin/sell the entire NewCo portfolio as you've laid it out?

Yes. So first of all, I would say we are very encouraged by the number and quality of inbound interest that we have believed in NewCo. Our guiding principle is going to be shareholder value creation. And based on the level of interest we believe that the process will be competitive, and therefore, we feel pretty bullish on our ability to drive shareholder value through this parallel process of spin and sale. And it is a parallel process, Jayson. We are continuing with the activities around the spin, but we are engaging with companies in relation to the sale as well. In relation to the part of your question is will we sell parts, we will do whatever creates the most value for our shareholders. We are clearly open to exploring all options with the goal of unlocking that shareholder value.

That's helpful. And maybe for John, the $55 million in tariffs, is that 2 quarters worth of impact?

Yes. So obviously, this is subject to capitalized variances and will be first go into inventory. So we will not have an impact in Q2 to the P&L. The impact will start in Q3 and Q4. I won't get into the individual canes of the quarters right now, but you shouldn't expect it to be a little heavier in Q4 where most of the impact will hit.

And your next question comes from the line of Larry Biegelsen with Wells Fargo.

This is Vik, in for Larry. Thanks so much for taking the questions, so 2 for me. Liam, your comments around the potential sale and significant interest in NewCo. We'd just love to get your thoughts on a preference of a sale versus a spin. And if it were to be a sale, any potential update on timing? And I have a follow-up, please.

Okay. So Vik, thanks for the question. Good morning to you as well. I will tell you, I'm agnostic as to whether it's a sale or a spin. Our guiding principle, as I said earlier will be on creating and unlocking shareholder value. Honestly, in many ways, we see this as a validation of the quality and the value of the SpinCo assets given the amount of inbound interest for us, it is what we expected when we announced the spin, we did expect to get inbound interest. I will tell you that in all transparency, the level and the quality of the inbound interest is actually better than we were expecting, and that's very encouraging. So we are definitively on a parallel path of both spin and sale and our guiding principle will be maximizing shareholder value as we go through that parallel pathway. It's a little bit premature, Vik, in all honesty, to speak about timing. We will engage with both parallel paths, and we'll update the investment community as we have updates.

Got it. That's helpful. My follow-up question, Liam, is the market did not react favorably to the BIOTRONIK deal as well as the separation looking back from your Q4 earnings call. Maybe just talk about what the Street is missing?

Yes. So I think on the BIOTRONIK deal, we see this as a very attractive asset and we are planning to complete the acquisition at the end of the third quarter. We still anticipate that it will deliver approximately EUR 91 million in the fourth quarter. I think that -- I don't think the Street is missing anything about BIOTRONIK, but I don't truly believe that they understand what assets are within the BIOTRONIK portfolio. And if you -- in our prepared remarks today, let me just give one little example of the combination of PK Papyrus and the Ringer catheter will actually carve out a niche within the cath lab for perforations that these combination products will actually dominate that space. It's a great fit for Teleflex. This company has 50% of the revenues in EMEA. So the combination of the Teleflex channel in the Americas and the BIOTRONIK channel in EMEA will actually drive better access to the cath lab. They have excellent R&D capabilities and that presence in the cath lab, as I said. And of course, we have the optionality of Freesolve, the resorbable scaffold opportunity, which is very aligned to the current trend in interventional cardiology procedures to leave nothing behind. And it allows the cardiologist flexibility for further procedures with that patient with a fully by resorbable scaffold that can address the patient issues. So I think there's a lot of attractive elements within the BIOTRONIK assets. And as it comes into the Teleflex family, we'll be able to speak more about the components of the product categories that are within the BIOTRONIK portfolio. But there are some really significant ones such as drug-coated balloons, the peripheral Passeo drug-coated balloon, some of these growing at a CAGR of double digits over the last number of years. And I think that the margin profile and growth profile of this fits incredibly well into Teleflex and establishes our footprint more solidly within that cath lab.

Our next question comes from the line of Matthew O'Brien with Piper Sandler.

Liam, I got a couple on the update this morning about significant interest in the spin or NewCo. The first one, and then I'll ask the second one in a minute. But on the first one, I know you don't want to give away too much, but just in the current environment, I can't imagine a lot of strategics are willing to go out to do deals right now. So is it fair to think that a majority of the inbound interest so far has been from the financial sponsor side of things? Or is it a better mix of strategic than you would have thought? And then I do have that follow-up.

Yes, Matt, thank you. Good question. Actually, it is a healthy mix of both strategics and private equity inbound interest that we received. Like I said a moment earlier, it was greater interest than we had anticipated, and I think a solid validation of the quality of the assets that are in NewCo, but both is the simple answer to your question.

Got it. Okay. Appreciate that. And then when I look at what's being spun-off, you paid just over $1 billion for NeoTract and then about $600 million for Palette. So you put those together with OEM plus acute care, I'm thinking the valuation is somewhere -- all those assets together would be something like $2 billion. I mean how do we think about the valuation from here? Are those -- how much you paid for those 2 assets are good jumping off point? Or not?

So Matt, again, thanks for the question. I'm not going to go into valuations on the call. I think that this is something that we will go through as we assess the inbound interest. I think what we will be doing from a valuation perspective is doing a comparable as to what these NewCo would be valued on the stock market will take into account tax leakage, and we will do whatever is in the best interest of our shareholders. Our whole goal when we started this in maximizing shareholder value and shareholder returns. That guiding principle will be what will determine whether -- which leg of the parallel path we go down, and that will be our North Star.

The next question comes from the line of Anthony Petrone with Mizuho Financial Group.

Maybe going back to tariffs, just wondering how the $55 million splits between RemainCo and SpinCo or the sale here and how you're going to just sort of navigate mitigation between the 2 entities as we move into the second half of the year? And I'll have a quick follow-up.

So Anthony, I'll let John answer that, but I will tell you, we're running Teleflex as one Teleflex today and separation doesn't occur until mid-2026, but John?

I think you've said, Liam. We're not getting into anything beyond 2025 for tariffs. It is far too speculative with the policy changes that happen so quickly. And as we work through the mitigation strategies, they'll impact both companies to be sure. So I think we'll talk a little more about what the 2 companies look like as we get closer to a spin in totality and what the impacts of tariffs are at that time.

And then maybe just a follow-up on BIOTRONIK. Can you push a little bit on the details of, if you can, on early views on cost synergy but also revenue synergy either by product category or geography.

Yes. Thanks, Anthony. Well, as I said earlier, Anthony, this is all about the channel. And I think that if you look at the opportunity there is to leverage the BIOTRONIK channel in Europe to have more Teleflex products flow through that and then leverage the Teleflex channel in the Americas to -- in order to leverage the BIOTRONIK portfolio. I think that is the key metric. We'll obviously be looking in the OUS areas at opportunities for GoDirects, and this is a very nice asset that we will bring into the company. 70% of the revenues in the coronary space, which is we know and love incredibly well. And as I said earlier, they have some really, really excellent products, and we will fund the R&D at BIOTRONIK to continue to advance these innovative products. And we will continue with the clinical study on free trials to bring that to the market. That is a nice option that comes with the BIOTRONIK to drive revenue growth in the future. So that's a good stuff about BIOTRONIK in our view.

Your next question comes from Shagun Singh with RBC.

Just on interest in NewCo. Can you maybe share is it for select business or the entire business? And then with respect to the separation, it sounds like mid-2026 is still a target. Maybe can you give us an update on the progress you're making around that? When would you potentially share more details with us there? And then I have a follow-up.

Okay, Shagun. So the majority of the interest is for the entirety of NewCo. It is early days. We only announced the Spin 2 months ago. And as I said a couple of times, I'm really encouraged not alone by the quantity, but the quality of inbounds that we have. Regarding the spin, we have started the executive management search and will be our intent to file our Form 10 in 2026 and nothing from the timing has changed in our view, and we continue to work towards these dates.

Got it. And Liam, I'm wondering if you can share your updated view on growth for NewCo versus RemainCo. As I look at the quarter, it does seem a little mixed to me, and especially the NewCo assets, they are delivering negative growth. You've called out some of the headwinds on the call, that's helpful. But how do you think about that low single-digit ex-FX growth for NewCo? And then do you expect RemainCo could get to that 6-plus percent growth?

Thanks, Shagun. So in the same way as things came in-line for total Teleflex, things came in-line for both RemainCo and NewCo and everything was in line with our expectations. Obviously, the first quarter would be the largest negative growth for OEM, which is a significant part of NewCo. That will improve as you get to the back half of the year. Obviously, you have the impact of the last customer, $7 million a quarter for Q1 and Q2. That is anniversaried as you go into Q3. As I said in the prepared remarks and in an earlier answer, the order rate for OEM has picked up nicely as we went through the quarter. So that's very encouraging. But everything is as we expected, Shagun for NewCo, for RemainCo, for TeleflexCo, and we're executing against that plan for the year. And again, just bear in mind, everybody, the separation is in mid-2026. We are now on a parallel path, and we will continue to update you. And our guiding principle, I've got to restate this, again, probably for the fifth time. Our guiding principle is releasing the maximum shareholder value as we go through this parallel process.

Your next question comes from the line of Richard Newitter with Truist Securities.

Just a couple of follow-ups on the tariff. So I think you had mentioned that you expect China to get better moving through the year. And my question here is a little bit more just on the underlying kind of growth trend in the fallout of the trade war here. What gives you that confidence. If I heard that correctly, that China is going to get better moving through the year? And then on the $100 million for the underlying China headwind, are there any products on the potential exempted devices list that have been speculated on that you would be able to be included in? And I also wanted to know if BIOTRONIK, any EU manufacturing and the 10% baseline. Is that included in the $55 million that you called out for tariffs as well?

All right. I've got it, Rich. There's a lot there. So let me start with China. So the reason that we anticipate an improving revenue environment for China is volume-based procurement. We would anticipate that the largest impact that you would see for any volume-based procurement is when you see the destocking. We also had some tough comps on the balloon pump business in Q1 in China. So we would see this as the low point for APAC from a growth perspective, and we would see APAC picking up from here on in and China also as a result of that. Regarding the exempt devices, we are hopeful that medical devices will be excluded. Even if -- and we don't manufacture in China and import into the United States. But I don't need a new iPhone, but if you're lying in a hospital bed, you need medical devices. So I think we need to be thoughtful here on exemptions for particular products and medical devices for me would seem like a category that's needed to keep people alive in both China and in the United States. So we're hopeful that common sense will prevail as we go through this. Regarding BIOTRONIK, to your BIOTRONIK question, the impact of tariffs on BIOTRONIK just because of their revenue profile is de minimis. So that's -- I think that's all aspects of the areas of your question, Rich.

The next question comes from the line of Craig Bijou with Bank of America.

I wanted to start with the urology business, Interventional Urology. And it came in a little bit ahead of expectations. And I know you called out still some headwinds for UroLift, specifically in the in-office site. But I wanted to see if you, Liam, if maybe you could talk about how Palette is doing? And is it tracking to that 20%-ish growth that you guys had expected? And then just is there any improvement in UroLift in office, recognizing there's still likely a headwind, but is there an improvement there?

Yes. Thanks, Craig. So for us, Interventional Urology came in, in-line with our expectations. It was -- they were on plan. To the other part of your question, Palette continues to perform exceptionally well, growing strong double digits and maintaining the growth momentum that we saw last year. For UroLift, we saw solid double-digit growth in APAC. So we continue to penetrate that market. The office in the United States, Craig, is still very challenged and we did see a little bit of pressure in the hospital side of service. So again, this is the last year, the reimbursement change. So we're hopeful that once we get through this final year of reimbursement that we will then begin to see some improvements in UroLift in the various sites of service. The AUA meeting was on. Just last weekend, I was actually at it. And there was a lot of enthusiasm for both the Palette business and for UroLift. And I thought the team did a nice job at that conference.

Great. And just a follow-up on the balloon pump environment and if there's any update as to what you're seeing or hearing from hospitals given the competitor quality issues?

Yes, it's as it was. And as it was expected, Craig, as we said in our prepared remarks, we saw strong double-digit growth in North America. APAC had a tougher comp. The quotations in Q1 were solid again. So that's encouraging. The people are still coming out looking for getting more and more quotations for the product. And nothing has changed in our expectation for our balloon pump business.

Your next question comes from the line of Michael Polark with Wolfe Research.

I have a question. Second quarter, I heard the guidance for 50 to 150 bps of CFX revenue growth. I didn't hear anything on earnings and just with all the moving parts, I'm interested if you might be willing to frame kind of a 2Q EPS expectation or puts and takes to consider there?

So Mike, we don't guide to EPS in the quarter as we do guide to revenue. And just for -- to help you with your modeling, the guide would indicate a range in revenue of $769 million to $777 million and that would represent the percentages that you outlined.

For the follow-up on OEM, I heard all the commentary. I guess even excluding the contract loss of $17 million down year-on-year, just felt like a big number for inventory management. And so I also heard that orders are improving throughout the quarter, but anything else you can spike out there? I mean, I guess I don't greatly appreciate customer concentration in this business, type of product concentration, inventory management headwinds, I think of something that would phase in over a longer period of time for them to all flare in 1Q, just surprised me. So what else can you help me with there to digest?

Yes, Mike. So I will tell you, it's in-line with expectations. This is exactly what we expected for the OEM business, and this will be the low point for the OEM business. You'll see sequential improvement as we go through the year. You're right, order rates did begin to pick up as we went through the latter part of the quarter, so that's encouraging. And I think that you're correct also, there's a $7 million impact with that vertical integration that was in Q1. That will be again in Q2. We still expect a little bit of inventory management in Q2. And thereafter, that is the worst of the inventory management behind us. And I know it looks probably heavier in Q1 from an external point of view, but from an internal point of view, this is exactly what we were expecting and OEM hit their plan. And as you get orders, just remember, you take an order, but that order then starts to get rolled through the income statement in the second half of the year and into 2026. So I think the team is executing well in OEM. I think they have a nice robust platform of new business that they're working on. And I think we're in good shape with OEM and it will be evident to the investment community as we go through the year and we begin to see that sequential improvement.

And the final question comes from the line of Mike Matson with Needham.

Yes. Just want to ask one on a couple of the products that I don't think you mentioned so far. So MANTA Standard bariatric. Maybe you can just give us some quick updates there. And is it safe to assume those are still accretive to your growth?

Yes. So MANTA continues to penetrate the large core market. On standard bariatrics, standard bariatrics because of the deductible impact, it normally has a very heavy Q4 and a little lighter Q1 and then ramps as you go through the year. But both are in-line with what we would have expected and both executing well. Of note, on the high-growth portfolio, Mike, what I'd call out is interosseous. Interosseous had a really good solid quarter one. The hemostatic portfolio performed well as well within that group. So yes, we didn't go into a lot of details on them because they're doing as one would expect. But thanks for the question.

Okay. And then just the tariff impact, I mean, the $55 million, just to get to an annualized number, I sound like it's probably a little more than double that. Is that fair just because it's hitting harder kind of in the latter part of the year?

Again, I think we're -- we'd be getting ahead of ourselves to try to give you an annualized number, and I would caution against trying to figure that out, given the changing environment and our ability, we believe, to continue to mitigate this.

That does conclude the question-and-answer session. I'd like to turn it back over to Mr. Keusch.

Thank you, Amy, and thank you to everyone that joined us on the call today. This concludes the Teleflex Incorporated First Quarter 2025 Earnings Conference Call.

Your may now disconnect your lines.