Good morning, ladies and gentlemen, and welcome to the Teleflex First Quarter 2024 Earnings Conference Call. Please note that this conference call is being recorded and will be available on the company's website for replay shortly.

Good morning, everyone, and welcome to the Teleflex Inc. First Quarter 2024 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 detail. 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, 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 some commercial highlights and provide an update on our financial guidance for 2024. We had a solid start to 2024 as momentum seen through last year continued into the first quarter. For the quarter, Teleflex revenues were $737.8 million, up 3.8% year-over-year on both a GAAP and constant currency basis. First-quarter adjusted earnings per share was $3.21, a 3.9% increase year-over-year. During the quarter, utilization for our products trended positively and aligns with our expectations. While we do not expect a revenue benefit from pent-up demand due to the broad exposure of the Teleflex portfolio to critical care procedures, we are seeing utilization back to pre-pandemic levels. Turning to raw material inflation, we saw positive trends during the first quarter with year-over-year disinflation tracking towards our expectations for the year. Nonetheless, we continue to expect total inflation to be somewhat higher in 2024 compared to 2023 in part due to inventory capitalized in 2023 impacting the income statement this year. I would also like to provide an update on our logistics and distribution infrastructure. Our freight expenses continue to show positive trends. Despite the conflict in the Middle East, we continue to maintain customer service levels by successfully diverting shipments to alternative shipping lanes. In addition, I would note that we do not utilize the Port of Baltimore to ship Teleflex products to or from our North American distribution center. Now let's take a closer look at our first quarter revenue results, starting with a review of our geographic segment revenues. All growth rates mentioned are based on constant currency unless stated otherwise. Revenues in the Americas were $406.3 million, which represents a 1.5% decrease compared to the previous year. Investors familiar with Teleflex know that MSA revenues from the prior year were recorded in the Americas. EMEA revenues reached $159.6 million, rising 9.7% year-over-year. We experienced growth across most of our product lines, with significant double-digit contributions from Interventional and Interventional Urology. This region also benefitted from the ongoing recovery of ET tubes following last year's recall. Moving on to Asia, revenues totaled $84.2 million, marking an 11.2% increase year-over-year. The revenue growth was widespread across the region, with double-digit increases noted in China, India, and Southeast Asia. Now let’s discuss our first quarter revenues by global products category, which will also reflect year-over-year constant currency growth. Starting with Vascular Access, revenue increased by 2% year-over-year to $181.4 million. This quarter was driven by strong growth in PICCs, central access, and EZ-IO, partially offset by the impact of the previously announced Endurance catheter recall. We will see the anniversary of the Endurance recall in the second quarter, and we remain optimistic about opportunities for market share growth in peripheral access. For Interventional, revenue reached $134.7 million, an increase of 15.4% year-over-year, with growth observed across our geographic segments as our growth-driving portfolio performed well. This quarter’s growth was led by balloon pumps, MANTA, and complex catheters. In Anesthesia, revenue rose 3.2% year-over-year to $96.4 million, with balanced growth across the portfolio. Importantly, we continue to recover from the ET tube recall initiated in the second quarter of 2023 and will fully anniversary the revenue comparisons at the end of next quarter. In our Surgical business, revenue was $105.5 million, showing a 7.1% year-over-year increase despite a challenging comparison. Trends in our core surgical franchise remain solid, with the largest franchises recording growth driven by instrumentation and our ligation portfolio. For Interventional Urology, revenue reached $79.7 million, reflecting a 6.1% increase year-over-year, primarily propelled by Barrigel revenue following the October 2023 acquisition of Palette Life Sciences. As expected, UroLift growth faced challenges due to ongoing issues with office services and sales force training activities for Barrigel during the quarter. Our full-year 2024 revenue guidance for Interventional Urology continues to reflect an anticipated growth of approximately 7.5%, incorporating Palette revenues estimated in the range of $66 million to $68 million for 2024. OEM had another solid quarter with revenues increasing 13.6% year-over-year to $87.7 million. Our three largest product categories recorded double-digit growth in the quarter, including continued strength in microcatheters. In addition, we saw some modest benefit from order timing shifting from the second quarter into the first quarter. First quarter other revenue declined 27.1% to $52.4 million year-over-year. The decline in revenue on a year-over-year basis is primarily due to the planned December 2023 exit of the MSA by Medline. That completes my comments on the first quarter revenue performance. Turning to some commercial and clinical updates. Starting with an update on Palette Life Sciences, our most recent acquisition. We have now owned Palette Life Sciences for just over 6 months, and I am pleased to report that the integration process is meeting our targeted milestones. Cross-functional product sales training continued to progress throughout the first quarter, and the first phase of training for our jewel bag reps will be completed at the end of the second quarter. During the quarter, we were active training and proctoring the legacy UroLift sales force on the use of Barrigel, and we remain on track to fully complete the integration of the sales force by the end of 2024. Moving to a couple of product updates. In our Interventional Access business, we initiated a limited market release of the Wattson temporary pacing guidewire. Wattson will complement our expanding structural heart portfolio, which already includes the MANTA, large bore closure device and the Langston Dual-Lumen for contrast delivery and pressure measurement. In our Surgical business, we are pleased to share that the Titan SGS stapler is now available with GORE SEAMGUARD Bioabsorbable staple line reinforcement material. This complementary pairing supports bariatric surgeons by addressing clinical preferences in the sleeve gastrectomy market. As we look further into 2024, we will continue to advance our new product introductions with a number of launches across our business units. In our Interventional Access business, there is no change to our expectation for an FDA marketing clearance and a limited market release of the Ringer catheter in the second half of 2024. Ringer incorporates a unique balloon design that allows blood to flow through a vessel while the balloon is inflated. We expect to initially launch with a PTCA indication but we'll evaluate opportunities for label expansion following the completion of our vessel perforation trial. Finally, I will provide a regulatory update. In February, we voluntarily initiated a recall of our QuickFlash radial artery and radial artery arterial line catheterization kits after receiving reports of increased resistance in the Guidewire handle and chamber during use. The financial impact from this recall was de minimis. In cooperation with the FDA Teleflex also recently initiated a voluntary field advisory notice for Arrow FiberOptix and UltraFLEX intra-aortic balloon catheter kits. Due to reports indicating an infrequent condition, which were not identified and corrected promptly, could result in serious health consequences, including a reduction or loss of the hemodynamic support normally provided by intra-aortic balloon pump therapy. The FDA has not yet designated a recall classification. But under the field advisory notice, customers may continue to use the products in scope per additional instructions, warnings and cautions. We expect the financial impact from the voluntary field action to be immaterial. That completes my prepared remarks. Now I'd like to turn the call over to Tom for a more detailed review of our first quarter financial results. Tom?

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 was 61.1%, a 170 basis point increase versus the prior year period. The year-over-year increase was primarily due to the favorable impact of gross margin from the termination of the MSA, the acquisition of Palette, favorable price benefits from cost improvement initiatives, partially offset by unfavorable fluctuations in foreign exchange rates and continued cost inflation. Adjusted operating margin was 26.6% in the first quarter. The 80 basis point year-over-year increase was primarily driven by the flow-through of the year-over-year increase in gross margin, partially offset by the inclusion of Palette Life Science, operating expenses, employee-related expenses, and investments to grow the business. Net interest expense totaled $21 million in the first quarter, an increase from $17.5 million in the prior year period. The year-over-year increase in net interest expense reflects higher interest rates versus the prior year and higher average debt outstanding utilized to fund the acquisition of Palette, partially offset by increased interest income. Our adjusted tax rate for the first quarter of 2024 was 13.2% compared to 11.8% 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 European Pillar 2 tax reform and realization of discrete items in the quarter. At the bottom line, first quarter adjusted earnings per share was $3.21, an increase of 3.9% versus prior year. The year-over-year increase in EPS reflects dilution from the acquisition of Palette Life Sciences and the related incremental borrowings. Turning now to select balance sheet and cash flow highlights. Cash flow from operations for the first quarter was $112.8 million compared to $84.3 million in the prior year period. The $28.5 million increase was primarily attributable to favorable operating results and a decrease in cash outflows from inventories as we moderate our inventory levels due to improving supply chain dynamics, partially offset by an increase in accounts receivable resulting from higher sales and lower levels of accounts payable and accrued expenses. Moving to the balance sheet. At the end of the first quarter, our cash balance was $237.4 million as compared to $222.8 million as of year-end 2023. The increase in cash on hand is primarily due to operating cash flows. Net leverage at quarter-end was approximately 1.7x. Inclusive of the debt associated with the acquisition of Palette Life Sciences, our financial position remains sound and continues to provide us flexibility to execute on our long-term capital allocation strategy. Turning to financial guidance. We are pleased with the solid start to the year and are making select updates to the outlook for 2024. We continue to expect 2024 constant currency revenue growth of 3.75% to 4.75%. The year-over-year growth includes the loss of the $75.7 million in MSA revenues, partly offset by the incremental revenues from Palette in the range of $66 million to $68 million, which Liam mentioned earlier. Turning to foreign exchange. We now assume a negative impact from foreign exchange of approximately $12 million, representing a 40 basis point headwind to GAAP growth in 2024. This compares to our prior guidance of approximately $5 million or a 15 basis point headwind for 2024. The updated guidance of a $12 million foreign exchange headwind assumes approximately a $1.07 average euro exchange rate for 2024 versus the prior guidance, which had assumed approximately $1.08. Considering the foreign exchange outlook, we expect reported revenue growth of 3.35% to 4.35% in 2024, implying a dollar range of $3.074 billion to $3.104 billion. For your modeling purposes, the 2024 outlook includes an assumption of $760 million to $765 million in revenues for the second quarter, representing growth in the range of 3.1% to 3.8% year-over-year, excluding an FX headwind of approximately $6 million. We reiterate our expectation for 2024 gross margin to be in the range of 60% to 60.75%. Our gross margin guidance reflects the year-over-year positive impacts from the termination of the MSA, manufacturing efficiencies, price and the Palette acquisition partially offset by inflation and the impact of changes in foreign currency exchange rates. We also continue to expect operating margin to be in the range of 26.25% to 26.75% for 2024. Our guidance reflects the flow-through of gross margin and the positive impact of restructuring, offset by the inclusion of operating expenses for Palette Life Sciences and investments to grow the business. Moving to items below the line. Net interest expense is expected to approximate $78 million for 2024. The majority of the year-over-year increase in our net interest expense outlook reflects the impact of borrowings associated with the Palette acquisition, higher interest rates, partially offset by planned debt repayments during 2024. Our tax rate is expected to be approximately 12% for 2024, which reflects favorable mix offset by discrete items in 2023 that will not repeat in 2024 and the impact of the Pillar 2 global minimum tax. Turning to earnings. We are raising the low end of guidance by $0.05, which reflects the strong results in the first quarter and the updated foreign exchange headwind. In turn, we now expect 2024 adjusted earnings per share to be in a range of $13.60 to $13.95. Finally, our 2024 adjusted EPS outlook reflects $0.87 in year-over-year headwinds from incremental dilution associated with the acquisition of Palette, the termination of the MSA, the year-over-year increase in our tax rate, primarily due to the Pillar 2 minimum tax and the updated foreign exchange headwind of $0.28. After adjusting for these headwinds, year-over-year underlying adjusted constant currency EPS growth is approximately 7% on the low end of guidance and 10% on the high end of guidance. That concludes my prepared remarks. I would now like to turn it back to Liam for closing commentary.

Thanks, Tom. In closing, I will highlight our three key takeaways from the first quarter of 2024. First, we started 2024 with a solid performance as momentum continued from the end of last year. Overall, our diversified portfolio and global business units performed well. We managed operating expenses and continued to focus on new product introductions in 2024. Netting the loss of MSA revenues, the incremental Palette sales and the revised foreign exchange headwind, we anticipate an approximately 100 basis points year-over-year headwind to growth in 2024. Second, we are well positioned to deliver on our financial guidance for 2024. We remain highly focused on executing on our plan for the year, just as we did in 2023. Third, we will continue to focus on our strategy to drive durable growth. We will invest in organic growth opportunities and drive innovation over time, expand our margins and execute on our disciplined capital allocation strategy to enhance long-term value creation. The integration of Palette Life Sciences is progressing well, and we expect the acquisition to be a meaningful contributor to our growth in the coming years. That concludes my prepared remarks. Now I would like to turn the call back to the operator for Q&A.

Your first question will come from the line of Patrick Wood from Morgan Stanley.

I guess for the first one, I'm curious about OEM, another very strong quarter. There's kind of a lot of different pieces moving in there. The volume environment is very good. But equally, there's a little bit of competitive noise backwards and forwards. I'm just curious how you see that evolving through the year. You've mentioned a little bit of phasing as some stuff was pulled into Q1, but should we expect more of a normalization in the second half or similar kinds of growth patterns we've seen so far?

Thank you for the question, Patrick. OEM certainly stood out once again this quarter, but there were several impressive highlights for Teleflex. It was a really strong quarter and a great beginning to the year, with revenues growing by 3.8% and earnings increasing faster than revenues at 3.9%. We've also raised the lower end of our earnings guidance while accounting for some foreign exchange impacts. Regarding OEM, I expect there will be some phasing as we progress through the year. I believe OEM can achieve double-digit growth for the entire year, although it might take a slight dip in Q2 due to order phasing. Nonetheless, the underlying growth is robust. Our order backlog is strong, especially for microcatheters following the HPC acquisition a few years ago. Catheter extrusions remain solid, and demand is high, with a favorable environment for the OEM business. While OEM does put some pressure on our gross margins, I want to emphasize that it positively impacts our operating margins and is therefore a valuable contributor to Teleflex as it grows.

And then just quickly on the second one. Within the Urology side of things, obviously, you pulled a bit of the sales force back to get some of the training going. A, sort of how is that going? How has the response been internally? And b, how disruptive is that? How long does that kind of training process take? I know it's kind of an open-ended question, but just curious.

No, that's a fair question, Patrick. I think that the training is going well. So we are proctoring our sales reps. We have about, as we ended the first quarter, we have roughly around 40% of them trained that need to be trained in this phase. So this will be completed at the end of Q2. And then over the remainder of the year, we'll take a systematic approach to onboarding additional reps and full bagging them. We would anticipate that the organization will be fully integrated and all the training will be pretty much done by the end of this year and Palette will be integrated. The good news is that it has had zero impact. While it did have some impact on UroLift, it had zero impact on Palette. And Palette again, six months into our ownership is performing very well.

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

Maybe just to start for Tom. The first quarter gross margin was above your full year guidance. Revenue will increase from first quarter levels. So what pressures gross margin over the next three quarters?

Well, I wouldn't say there's anything that necessarily is pressuring over the next number of quarters other than what we already saw in the first quarter, which we've got inflationary pressures. We've got some FX, although we expect FX to improve as the quarters go on. So obviously, we had a really solid start to the year. We provided full-year guidance and are working towards that. I would say that as a result of the strong start, we feel really good about achieving that guidance, and we'll continue to monitor the situation and provide any updates in the future as the situation warrants.

Okay. Fair enough. And then just maybe as a quick unrelated follow-up. Interventional, very strong of a tough comp, Liam, you alluded to a few drivers, but just a little bit more granularity. Is this excess share gain? Is there a new product in there that's driving this growth?

So I wouldn't exactly call it a new product. But obviously, MANTA continues to penetrate the large bore market, really solid double-digit growth coming from that product specifically complex catheters, which is the bread and butter of this franchise, which is the guideline or trap line or Turnpike. They continue to grow within the market. And obviously, then you have our intra-aortic balloon pumps and catheters, really strong performance from them, in particular, overseas. So across the board, I think it's a procedure of volumes globally in the cath lab are back to pre-pandemic levels. We're getting some benefit from that, but also further penetrating in our accounts having a suite of products to surround MANTA and now having the Wattson coming to the market in a limited market launch only helps to compound that growth within the cath lab space.

Your next question comes from the line of Shagun Singh from RBC Capital Markets.

Liam, your guidance calls for about 4.25% growth in 2024 at the midpoint versus 6.5% last year and your LRP target of the low end of 6% to 7%. I know you called out some year-over-year factors to consider. But I'm just wondering what accelerates the growth profile for the company from here? How are you thinking about M&A boosting your weighted average market growth? And if you could put all this in the context of your utilization commentary, it seems like there isn't a backlog, but there is still healthy demand. That would be really helpful.

Thank you for the question. You're right about the midpoint of our guidance. I want to remind everyone that with our guidance, there is roughly a 1% headwind from the inorganic aspect related to the MSA in Palette. Our guidance of 3.75% to 4.75% indicates that the organic growth underneath that is actually between 4.75% to 5.75%. As we move into next year, growth will start at a higher rate since the MSA will be hitting its anniversary in the fourth quarter. Overall, I believe our growth outlook for Teleflex is strong, and we have a clear path to achieving our long-range plan of 6%. The market conditions are favorable, and several segments in our business are performing exceptionally well. We highlighted OEM and Interventional Access, while Surgical had a strong beginning to the year, and Interventional Urology is at 6.1%. Regionally, EMEA is at 9.7% with double-digit growth in APAC. The underlying growth strategy for Teleflex remains solid. We’re now one quarter into the second year of our long-range plan, and we're quite optimistic about our company's prospects.

Your next question comes from the line of Larry Biegelsen from Wells Fargo.

This is Nathan Treybeck on for Larry. Can you talk about, given the constant currency beat in Q1, what were some of the considerations for not raising the full-year guide?

Yes. So obviously, the first consideration is it is Q1, and I think if you take that into account. The other consideration is we give our guide in February, we had a really, really nice March. So that was helpful. And we came in above where we thought based on the performance of March and some of the performances that we spoke about earlier on. And we did have some OEM orders that pulled in from Q2 into Q1, and we updated for FX. So we'll continue to monitor the situation as we go into Q2, Q3, and Q4. But again, I feel fairly bullish on our performance. This is our fifth quarter in a row where we've actually been in a position to beat our internal revenue forecast and to be able to provide upside. And it's a nice upside of $11 million. Again, a few million was pulled in from orders from OEM that shipped in Q1 rather than Q2. But other than that, the underlying growth of the business is really solid.

Okay. And can you talk about the drivers of growth for Palette? Is it share gains? Is it market expansion? If you could just give some color there.

Yes. The bulk of the growth for Palette is really market expansion. We have continued to bring this product to our existing customer base, and it's being adopted there. I mean, there is some share shift, but I would say that we are more focused on the white space than trying to take share from others within the marketplace. The product is performing exceptionally well. The sales force is very, very bullish. Once we have our additional 50 reps trained, they will now be active in the marketplace in Q3 jewel bag selling that product. So that should also help. And also in order to expand the market even further, we have initiated and agreed and funded an additional study for expanded indications for the Barrigel product for Palette. We have identified the sites that will conduct the study and we envision beginning enrollment in the very near future. So not alone, we're not satisfied with the market of $330 million. We want to expand that market even further so that we can create more white space for us to grow into.

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

Tom or Liam, I know you're going to say it's Q1 and everything, but you just beat Q1 by about $0.15 or $0.14 on the bottom line, only taking the low end up by about a nickel. So the midpoint is only going up by about $0.025. Why the conservatism there, especially with inflationary pressures easing? And could we just start looking at kind of the higher end of that range just based on the trends so far?

Well, I would just say, first of all, we raised by $0.09 in the lower end, but $0.05 or I should say, $0.04 of that was offset by an increase in the foreign exchange rates. So again, we feel really good about the results in the first quarter. We've provided full-year guidance. Gives us improved confidence in our ability to achieve that full-year guidance, and we'll continue to monitor the situation and update. But again, we are just getting out of the first quarter and give us a chance to see a little bit more how the year is playing out.

Okay. Fair enough. And I wanted to ask about UroLift, but I think the more pertinent questions back on Interventional, like Jason was talking about. That performance has been very strong for several quarters in a row here. You've got this focus on structural heart. It's one of the fastest growth areas in med tech. You've got Wattson coming. Is this an area that can deliver not necessarily this level of growth but just well above Teleflex levels of growth for the next several years? And is this an area of focus maybe from an M&A perspective as well, just given the strong underlying performance of the market in general?

So I'll start with the last part of your question. It's definitely a focus for M&A, Matt. I've said many times that I like the cath lab as a call point. We now have a global franchise with that call point. And it is one of the key areas of focus for us when we're doing M&A. It's not the only area of focus, but it's a key area of focus. With regard to the sustainability of the growth, I think that the Interventional portfolio that we have with MANTA in there with Wattson coming in there, we got Ringer coming down the road. We got Triumph that's going to be launched sometime in 2025. So we have a whole suite of products coming into this call point. And we have invested heavily in the R&D organization there to ensure that we have the suite of products coming through. So I think it's well capable of maintaining well above Teleflex average growth and be a growth driver for Teleflex over a multiyear period just based on that background, but it has come at the back of investment. This is one of our areas where we have invested behind the acquisition of MANTA a number of years ago is playing out really well as we penetrate that large bore closure market.

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

And I hope everyone is doing well. Congrats on a strong 1Q here. Maybe a couple of questions. One, just actually focused in on the Americas. Surprised to see just regionally, Americas actually being down a touch here. And then when you sort of bridge that to some of the divisions Vascular was pretty good, OEM obviously outperformed even Interventional Urology is a touch ahead of our numbers. So where specifically in the U.S., was there slippage? Was it tough comps? Or were there other stocking dynamics in the U.S.? And I'll have one follow-up.

Yes, Anthony, thank you. I hope you are doing well. I appreciate your question. In the Americas, the most significant factor affecting performance was the MSA. If you recall, all of the MSA revenue was recorded in the Americas. If you exclude the MSA, growth for the Americas would have been around 3.5%. There are a few underlying factors to consider in the Americas throughout the year, particularly the Endurance recall, which mostly affected the vascular segment. As we progress through Q2 and into Q3, we will have anniversary effects from that. By Q4, we will also anniversary the MSA, leading to an improved environment for the Americas as the year progresses. However, please keep in mind that the MSA is fully accounted for in the Americas, and its year-over-year impact is what primarily holds us back. You had a follow-up, Anthony.

Yes. One quick follow-up would just be a high-level revisit on the M&A strategy here at Teleflex and the company has been active over the years, and it's done a number of different transactions. I remember the years of the distributor tuck-ins. There have been some R&D plays but not as prevalent as the sort of here and now revenue-generating growth accretive deals. And of course, the EBITDA level is now higher. So maybe just to revisit on the strategy what is most prioritized and what are the size of transactions that you're contemplating these days?

So I think that for Teleflex, we're really focused on tuck-ins and scale transactions. We have done some late-stage technologies, and we've done some investments, early-stage investments into companies, and we'll continue to do that. We have the most important thing you need, Anthony, for M&A, which is firepower. So as Tom said in his prepared remarks, we're 1.7x levered. So we have lots of firepower. We are, at the moment, chasing lots of assets. I will tell you, and they do fit in the range from a tuck-in of revenue of, call it, in the tens of millions to scale transactions in the hundreds of millions. We are cognizant of dilution, especially in this year where the MSA going away is dilutive, you have Palette coming in as dilutive, the underlying earnings growth is in that 8% to 10%, as Tom outlined in his remarks, but I think investors want to see that. So we are keeping that in mind. We are disciplined, Anthony, and we will remain disciplined. I think that finally, the multiples seem to have tempered somewhat at least some of the high-growth assets on the public markets are not carrying the value that they were 12 months ago. And obviously, that plays into the psyche of the seller as well. And it's obviously, as a buyer, you can point to really great companies on the public markets, super companies, but not carrying the value that they held 12 or 18 months ago, and that should be reflective in private companies as well. So a healthy environment, lots of assets and a very, very disciplined Teleflex.

Your next question comes from Mike Polark from Wolfe Research.

I'm curious on this CLEAR trial that's reading out at AUA over the weekend, UroLift versus Rezum. What's reasonable to expect there? Is there an impact in the field you anticipate as the data is disclosed?

Mike, look, we have a lot of data coming out at the AUA. We have five different papers that are being read out and there are a number of other studies. One in particular that coming from the European group about early intervention on minimally invasive therapies and that's much better than having individuals on pharma. With regard to the specific one that you're talking about, it's really focused on more rapid symptom relief and quality of life improvement post-treatment comparing UroLift to Rezum and outcomes that can aid healthcare providers and patients in getting a clearer understanding of the postoperative experience that the patient experiences with the product. I think there's a study on retreatment rates, which I'm really looking forward to hearing. I'm actually attending the conference myself. And also, there is a real-world study on complications of all BPH treatments, and I think that's going to be enlightening as well. So I think we've got a full suite of podium presence at the AUA. And I think that for sure, any of these head-to-head either comparing UroLift to Rezum, comparing it to other technologies, comparing it to drugs will be helpful for the sales force.

Appreciate that, Liam. If I may follow up on Urology as well on the numbers. I just want to make sure I'm understanding the performance in the quarter, the expectation for the year. So if I'm doing the math correct, I have net of pull at UroLift, maybe down high teens year-on-year. And I think if I do the guidance for the full year, perhaps UroLift down 10%. And so I just want to understand: One, for the first quarter, have I done the math correct? And you said that aligned with your internal plan, and I just want to make sure that that's all fair; and then two, kind of the path for UroLift to be better over the course of the year. It sounds like the sales force no longer being retrained and out in the field, double bag probably is a piece of that. But anything else you might be able to offer as to kind of why we get that product line trending back up the rest of the year would be helpful.

Yes, absolutely, Mike. We've talked about this in previous calls. We're going to report on total Interventional Urology consistent with all of our global product categories and businesses, and we won't provide product level revenue details for individual business lines within those. We have four reportable segments and six product segments. So there are multiple ways to analyze Teleflex. Let me provide some context. Starting with the full year, we remain confident in our expectation for Interventional Urology. I am very confident we will achieve 7.5% growth in 2024, which is at the midpoint of our guidance. This includes revenue from Palette Life Sciences of $66 million to $68 million, which will offset the year-over-year declines in UroLift. In the quarter, Interventional Urology grew by 6.1%. Palette met our expectations and continues to perform well. UroLift also performed as we expected. As we anticipated, UroLift was affected by declines in the office side of the service as well as from cross-training. Your insights are accurate, Mike. By Q3 and beyond, the cross-training for those 50 will be largely completed. Therefore, I feel good about the 7.5% growth for the Interventional Urology business unit on a full-year basis.

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

Liam, I know you're not going to get into the specifics on '25, but street expectations for margin expansion have come down looking at '25. So maybe if you could just talk about some of the opportunities to expand margins in '25 and how those might be lining up maybe without actually given specifics, but just kind of talking about where you could see some improvement.

Well, I think, Craig, it all starts with the gross margin line. And if you look at this year, at the midpoint, we're going to expand our gross margins by about 100 basis points. We've had a really good start to the year. Gross margins expanded 170 basis points in the first quarter of the year. So God rest my mother. She used to say, good start is half the battle, and we've had a really good start on the gross margin line. As you look forward, we have a number of catalysts for the gross margin line to come into being. We continue to have continuous improvement programs within our global supply chain team. We'll have Palette, the MSA will be behind us when we get into 2025. Palette will be continuing to ramp when we get into 2025. So those two factors will obviously help our gross margins. And I believe we'll continue to have positive pricing in '25. So that mix and positive pricing, continuous improvement programs. And then for Palette specifically, you'll begin to get leverage to the op margin line where it becomes accretive to the op margin and we're a very disciplined company on our OpEx. So I do believe that it all begins and ends with the gross margin line, and it will drop through to operating margin into the future. And I feel good about our prospects to continue to drive both growth and operating margin leverage on a solid 6% top-line growth for Teleflex and underlying 10% EPS growth, which is pretty much what we're delivering this year.

Could you provide an update on the contributions from Titan and standard bariatrics for 2024 and beyond as you expand your product offerings? Also, what can the new commercial updates or product expansions contribute to growth?

Thank you, Craig. First, regarding product expansion, introducing buttress is an important addition to the Titan product. Sixty percent of surgeons performing gastric sleeves utilize buttress. While the Titan product doesn't technically require it due to its seal pressure and high burst pressure, it's what surgeons prefer. We've provided them with what they want, and it has been very well received by the bariatric community. In the first quarter, Titan performed in line with our expectations, which was a positive way to start the year. I still believe it will drive growth this year and in the years ahead. To give some insight into the gastric sleeve market, which might interest investors, we saw a decline of 10% to 15% in gastric sleeve procedures during the second half of the year. This suggests that the market we are entering may be slightly smaller than the previously estimated $250 million plus. However, there is still significant potential for us to penetrate the Titan product into this gastric sleeve market. Additionally, I want to mention that in this quarter we had a strong focus on proctoring and training surgeons. My apologies for interrupting, operator.

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

It's actually Sam on for Rich here. Just first one from us on 2Q, I think $760 million to $765 million a touch below Street there. Some of that's from FX, some of that's from the OEM pull forward. But just anything else that you would call out in 2Q sort of explaining the delta between Street and the guidance?

No. They are the two big buckets, Sam. There's about $6 million of FX in Q2 and also there's a few million of OEM products that were originally planned to be shipped in Q2. Just bear in mind that the MSA was slightly higher in Q2, that's something just to bear in mind. And as we go through the year, you've got that dynamic of the MSA, and you also have the dynamic of Palette ramping as you go through the year. So you've hit on the two main impacts on Q2. $760 million, $765 million, 3.7%, and we feel good in our ability to deliver that.

Great. And then just on Palette. I know try to avoid, given the product specific that you given us the $66 million to $68 million. Just curious what you'd be looking for in the market or in results to take that range up and what could give you confidence there.

Yes, Sam. It started off very well. There is a lot of enthusiasm for the product. Expanding the indications is a key strategy for us, not just this year but in the coming years to continue growing. This will offer a unique indication that no other spacing technology can address. The product is highly visible, and its moldability and ease of use are resonating well with both the radiation oncology and urology communities. Once we have another quarter or two under our belt, we will return to the investment community with our thoughts on the $66 million to $68 million range. As I sit here today, I feel quite optimistic about achieving that range.

And your next question comes from the line of Kristen Stewart from CL King.

I just wanted to touch on the Vascular Access business that came in a little bit lighter than what I was expecting. Can you maybe just comment on the performance there in the quarter and what we should expect for the balance of the year?

Yes, Kristen, that's a good observation and a good question. The Endurance recall impacted the vascular business in Q1, and we'll anniversary that as we go through Q2. So when you get into Q3, you'll have a clean look at Vascular. So you should see vascular improve as you go through the year. The other thing I would say on the Vascular business, the underlying PICC growth was really solid, but that will improve too as we go through the year. I would anticipate seeing PICC volumes pick up as we go through the year. The underlying CVC growth is really solid, and we're really happy with how that's performing. So all in all, it's really the Endurance anniversarying that and an improved environment for PICCs continuing to grow as you go through the year.

And that concludes our Q&A session for today. I would like to hand back over to Lawrence Keusch for closing remarks.

Thank you, Polly, and thank you to everyone that joined us on the call today. This concludes the Teleflex Incorporated First Quarter 2024 Earnings Conference Call.

Thank you for joining us. You may now disconnect your lines.