Good morning, ladies and gentlemen, and welcome to the Teleflex Third 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. And now I will turn the call over to Mr. Lawrence Keusch, Vice President of Investor Relations and Strategy Development. Lawrence?

Good morning, everyone, and welcome to the Teleflex Inc. Third 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 details. Participating on today's call are Liam Kelly, Chairman, President, and Chief Executive Officer; and Thomas Powell, Executive Vice President and Chief Financial Officer. Liam and Tom will provide prepared remarks, and then we will open the call to Q&A. Before we begin, I would 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 will 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 third quarter results, review some commercial highlights and provide an update on our financial guidance for 2024. For the third quarter, Teleflex revenues were $764.4 million, up 2.4% year-over-year on a GAAP basis and an increase of 2.2% on an adjusted constant currency basis. Third quarter revenues were slightly below our $765 million to $770 million guidance which reflects unanticipated softness in our OEM business. Third quarter adjusted earnings per share was $3.49, a 4.1% decrease year-over-year, but notably higher than expectations, driven by strong margin performance, which Tom will discuss later on the call. Now let's turn to a deeper dive into our third quarter revenue results. I will begin with a review of our geographic segment revenues for the third quarter. All growth rates that I referred to are on an adjusted constant currency basis unless otherwise noted. Americas revenues were $433.3 million, a 1.5% increase year-over-year. Investors familiar with Teleflex will be aware that prior year MSA revenues were booked in the Americas, which impacted growth by approximately 510 basis points in the third quarter. EMEA revenues of $150.2 million increased 3.9% year-over-year. The growth continues to be driven by our targeted strategy to increase the geographic availability of Teleflex products and improving utilization in Europe. Now turning to Asia, revenues were $98.3 million, a 5% increase year-over-year. The quarter was primarily impacted by the continued soft performance in South Korea due to the ongoing impact of the doctor strike. We estimate that the doctor strike impacted our APAC growth by approximately 2%. Looking forward, the doctor strike remains ongoing, implying that headwinds are likely to linger through the remainder of 2024. Now let's move to a discussion of our third quarter revenues by Global Product Category. Commentary on Global Product Category growth for the third quarter will be on a year-over-year adjusted constant currency basis. Starting with Vascular Access, revenue increased 6.3% year-over-year to $180.9 million. In the quarter, our broad Vascular Access portfolio drove growth, including our peripheral and central access products. Of note, and as anticipated, global PICC revenue increased by strong double digits as we continue to execute our strategy to expand usage of Teleflex products. Moving to Interventional, revenue was $149.9 million, an increase of 11.4% year-over-year. In the quarter, the broad portfolio performed well. We still expect an increase in contribution from intra-aortic balloon pump revenues in the fourth quarter. Turning to Anesthesia, revenue increased 3.4% year-over-year to $101.1 million. Growth was led by intraosseous products, hemostatic products, and single-use laryngeal masks. In our Surgical business, revenue was $111.7 million, a decrease of 1% year-over-year. Our underlying trends in our core surgical franchise continued to be solid with growth of our largest franchises, led by instrumentation and chest drainage, but offset by a tough year-over-year comparison in our ligation portfolio. In the quarter, we were encouraged by tightened stapler growth trends, which improved on a quarter-over-quarter basis and strong double-digit growth year-over-year as expected. Consistent with our strategy, we continue to proctor surgeons and roll out our buttress kit following the launch earlier in 2024. We are encouraged by the sequential growth and continue to see the product as a growth driver over the coming years. For Interventional Urology, revenue was $83.4 million, representing an increase of 13.3% year-over-year. As expected, growth was driven by Barrigel revenue following the October 2023 acquisition of Palette Life Sciences. And as anticipated, UroLift growth was impacted by continued challenges in the office site of service. OEM revenue increased by 0.1% year-over-year to $82.6 million and was softer than expected. We were recently notified by a large customer that they have decided to vertically integrate a component that we have been supplying, which has resulted in a loss of this revenue stream. In addition, we have now started to see some customers delay orders as they increasingly focus on managing inventories. Looking forward, we are not aware of any market share loss and have purposefully added manufacturing capacity for our thin wall microcatheters, one of the fastest-growing segments for OEM. Given the continued growth of the markets that we serve, we would anticipate that the softness seen in OEM revenue growth should be transitory but unlikely to be resolved in 2024. Third quarter other revenue declined 28.3% year-over-year to $54.8 million. 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 third quarter revenue performance. Turning to some commercial and clinical updates. Starting with an update on Palette, our most recent acquisition. We have now owned Palette Life Sciences for about a year, and I am pleased to report that the acquisition continues to track ahead of expectations. Barrigel continues to gain traction in the U.S. with strong sequential revenue momentum. We are seeing success in our marketing strategy and continue to convert urologists and radiation oncologists to the use of Rectal Spacing due to the compelling clinical data and Barrigel's ease of use. Longer term, we see a number of potential opportunities to expand the indications for our NASHA product platform. For example, the first patient was recently enrolled in a study for Barrigel in men with cancer following the surgical removal of the prostate. The trial will study Rectal Spacing with Barrigel in patients undergoing hypofractionated post-prostatectomy radiation therapy across the United States and one site in Australia. The study endpoints are to demonstrate Barrigel Rectal Spacer as a safe and effective option that reduces prostate radiation side effects for this patient population. Based on the segmentation of risk groups between low, medium, and high prostate cancer reoccurrence, after radical prostatectomy ranges from 16% to 46%. Due to the strong performance in the third quarter, we are increasing our 2024 revenue guidance for Palette to $73 million to $75 million from $70 million to $72 million previously. The increase in guidance reflects the performance in the third quarter and updated assumptions for the fourth quarter. Although Palette continues to exceed our expectations, UroLift has not yet stabilized in the United States. Given the continued pressure on UroLift, our fourth quarter assumptions reflect the third quarter performance typical year-end seasonality and the impact from the recent hurricanes and saline shortages experienced in early Q4. In turn, our full-year 2024 Interventional Urology total revenue guidance now assumes approximately 5% growth versus 7.5% growth previously. Now moving to comments on the intra-aortic balloon pump market. In the United States, we continue to experience quote activity above our historic levels following a May 8 letter from the FDA to health care providers regarding pump safety and quality in relation to our primary competitor in the intra-aortic balloon pump market. There is no change to our view that the biggest incremental opportunity for Teleflex will be in the United States market following the agency's recommendation, the health care facilities transition away from the use of competitive devices and seek alternatives if possible. We also expect continued share gains in Asia based on solid execution from the team over the past couple of years. Regarding the European Union, the notified body for our primary competitor recently announced that the temporary suspension of the CE mark for its intra-aortic balloon pumps will remain in place until July 1, 2025. We continue to assume that there will not be any meaningful share shift in Europe. We will monitor the market closely and be in a position to respond to customer needs should they arise. Of note, we have successfully ramped our manufacturing capacity for pumps and catheters to help customers that are seeking an alternative vendor. We will continue to expand our manufacturing capacity through 2024 and will carefully modulate our capacity in accordance with demand signals. Taking the various global balloon pump market dynamics into account, there is no change to our outlook for the fourth quarter of 2024 as compared to the prior guidance. Finally, I will provide a clinical update. In our Surgical business, we continue to expand our foundation of clinical data that supports the use of the Titan SGS stapler as safe and effective for patients undergoing laparoscopic sleeve gastrectomy. In August, we announced the publication of a propensity matching review of retrospective data. This single-center study found that the Titan SGS Stapler enables consistent gastric pouch formation with fewer variations, providing potential enhanced clinical outcomes and significant procedural efficiency compared with traditional surgical staplers. The study showed that the use of the Titan SGS Stapler simplified and efficient stapling process was associated with fewer 30-day readmissions, especially those related to nausea and vomiting, which was statistically significant. The median operative time for the Titan SGS Stapler was 8 minutes less than MultiFire staplers, which was also statistically significant. This is an important efficiency data point as hospitals seek to optimize OR time. In addition, patients were more likely to be discharged within 24 hours after surgery in the Titan SGS Stapler cohort as compared to MultiFire staplers. The Titan SGS Stapler continues to be the first and only single-fire surgical stapler designed and indicated for sleeve gastrectomy pouch creation and the only surgical stapler cleared by the FDA for this specific indication. We will continue to focus on supporting the Titan SGS Stapler with expanded clinical data. That completes my prepared remarks. Now I would like to turn the call over to Tom for a more detailed review of our third 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 60.8%, a 140 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 and the acquisition of Palette and favorable pricing, partially offset by manufacturing inefficiencies and continued cost inflation, including labor and raw materials. Adjusted operating margin was 27.3% in the third quarter. The 10 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 Sciences operating expenses and investments to grow the business. Net interest expense totaled $18.8 million in the third quarter, an increase from $15.7 million in the prior year period. The year-over-year increase in net interest expense reflects the impact of the funding for Palette acquisition and share repurchases in the third quarter. Our adjusted tax rate for the third quarter of 2024 was 13.6% compared to 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, nonrecurring prior year discrete benefits, not repeating this period and nonrecurring discrete detriments that occurred in the third quarter. At the bottom line, third quarter adjusted earnings per share were $3.49, a decrease of 4.1% versus prior year. The year-over-year decrease in earnings per share includes dilution from the acquisition of Palette Life Sciences and the related incremental borrowings, the termination of the MSA and a higher tax rate. Turning now to select balance sheet and cash flow highlights. Cash flow on the year-to-date continues to be solid. Cash flow from operations for the 9 months was $435.6 million compared to $372.4 million in the prior year period. The $63.2 million increase was primarily attributable to favorable operating results a decrease in cash outflows from inventories as we continue to moderate our inventory levels and proceeds from the termination of a pension plan. The increase in net cash provided by operating activities was partially offset by higher tax payments. Moving to the balance sheet. At the end of the third quarter, our cash, cash equivalents, and restricted cash equivalents balance was $277.8 million, which includes restricted cash equivalents of $34 million associated with the 2024 pension termination as compared to $222.8 million as of year-end 2023. Net leverage at quarter end was approximately 1.7x. I will now provide an update on our $500 million share repurchase authorization, which includes a $200 million accelerated share repurchase program. Under the terms of the ASR, which began on August 2, 678,000 shares were repurchased during the third quarter and represent 80% of the $200 million aggregate under the program. We anticipate completing the ASR in the near term. In addition, we currently have $300 million left on our share repurchase authorization, and we'll continue to be opportunistic with future purchases. Anchored by our strong cash generation, return of capital to shareholders remains an important element of our disciplined capital allocation strategy. Turning to our updated financial guidance for 2024. Our updated 2024 guidance assumes adjusted constant currency revenue growth of 3.5% to 4%, compared to 4.25% to 5.25% previously. Note, this range excludes the $13.8 million negative impact of the Italian measure discussed on our second quarter earnings call and a $4 million headwind from changes in foreign exchange. Our guidance now reflects the year-to-date performance and fourth quarter dynamics, including lower-than-anticipated revenue in both our OEM and our Interventional Urology businesses. As Liam mentioned previously, we have not yet seen a stabilization in UroLift. In addition, we have also encountered procedure cancellations early in the fourth quarter due to disruption from recent hurricanes in the southern portion of the United States and the impact of saline shortages on elective procedures. On a GAAP basis, we expect reported revenue growth of 2.9% to 3.4% in 2024, implying a dollar range of $3.061 billion to $3.076 billion. Excluding the impact of the Italian measure, we expect reported revenue growth of 3.4% to 3.9% in 2024 and for a dollar range of $3.075 billion to $3.090 billion. This revenue range, specifically GAAP revenue, excluding the $13.8 million impact from the true-up of the Italian measure anchors our 2024 guidance. For your modeling purposes, the 2024 outlook includes an assumption of $809 million to $824 million in revenues for the fourth quarter, representing growth in the range of 4.6% to 6.5% year-over-year on an adjusted constant currency basis excluding an expected FX headwind of approximately $1 million. We are raising the low end of our 2024 gross margin guidance by 25 basis points to a range of 60.5% to 61%. Our gross margin guidance reflects the operating performance for the first 9 months of 2024 and our expectation of an increased headwind from foreign exchange in the fourth quarter and accelerated capital equipment sales in the fourth quarter from intra-aortic balloon pumps. The capital component of pumps is slightly dilutive to our corporate gross margin. However, we expect the margin profile to improve in the future with the sale of disposables or catheters that carry a more favorable margin profile. We are also raising the low end of our operating margin guidance by 25 basis points to a range of 26.75% to 27.0% 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, we now expect net interest expense to approximately $78 million for 2024 versus $81 million previously. The reduction in our net interest outlook primarily reflects debt pay down as well as lower interest rate expectations. Our tax rate for 2024 is now expected to be in the range of 12% to 12.5% versus the prior guidance of approximately 12%. The tax rate for 2024 reflects year-to-date actual results and our expectations for the fourth quarter. Turning to earnings, we are raising the low end of guidance by $0.10, which captures the performance in the third quarter. In turn, we now expect 2024 adjusted earnings per share to be in a range of $13.90 to $14.20. Finally, we are assuming 47.1 million average weighted shares for 2024, which reflects the $200 million ASR commenced during the third quarter. 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 third quarter of 2024. First, although we encountered some revenue headwinds in the third quarter, our diversified portfolio and global footprint proved beneficial. In the quarter, we drove year-over-year gross margin expansion and increased our operating income. We continue to focus on execution, our margins remain healthy, and we raised the low end of our adjusted 2024 EPS guidance range. Of note, our 2024 adjusted earnings per share outlook reflects approximately $0.85 in year-over-year headwind, including dilution from the termination of the MSA and the acquisition of Palette Life Sciences, increased taxes primarily due to the Pillar 2 minimum tax, and foreign exchange. After adjusting for these headwinds, year-over-year underlying adjusted constant currency earnings per share growth is approximately 9% at the low end of guidance and 11% on the high end of guidance. Second, cash flow performance remained strong in 2024 with cash flow from operations of $436 million at the 9 months and up $63 million over the prior year period. We remain on track to drive over $500 million in cash flow from operations for the full year 2024. And net of capital expenditures to invest in growth, it leaves approximately $400 million in free cash flow. The healthy cash flow generation provides a strong foundation for executing on our disciplined capital allocation strategy, including investment back into the business, inorganic growth opportunities, return of capital to shareholders and debt repayment. Third, we will continue to focus on our strategy to drive durable growth. Palette is performing above our expectations. We are executing on the intra-aortic balloon pump and catheter opportunity, and Titan is generating solid growth. We are continuing on our journey to transform our portfolio to drive growth and will execute on expanding our internal innovation engine and pursuing inorganic opportunities including M&A. That concludes my prepared remarks. Now, I would like to turn the call back to the operator for questions and answers.

And our first question comes from the line of Patrick Wood with Morgan Stanley.

I have one question and a follow-up. First, regarding the sales reduction at the top line, congratulations on the improvements in gross margin. However, concerning the OEM sales cut, it seems to me that it accounts for about half of the total. Did you indicate in your prepared remarks that the remaining half is mainly due to the impact of weather and the IV solutions segment? Is that correct, or are there other factors at play?

No, you have two categories that you've misallocated. Reflecting on the quarter, I must say we are disappointed with OEM's performance. However, apart from OEM, the rest of the business performed very well. Despite the impact from OEM, we were slightly below our guidance range of $765 million to $770 million. We are particularly pleased with the margin expansion, earnings per share performance, and strong free cash flow, which positions us well to implement our capital allocation strategy. Regarding your question about the full year categories, there are indeed two: OEM and Interventional Urology. The total change at the low end of the guidance is around $22 million, with OEM having the larger impact due to two main factors. One factor is the vertical integration customer order and the order pushout due to inventory management, which accounts for approximately $14 million for the full year, largely due to an unanticipated vertical integration. The second component relates to Interventional Urology. While Palette is performing well and we are pleased with it, our prior guidance expected better UroLift trends in the fourth quarter, which we have not observed. Our updated guidance reflects normal seasonality without assuming improved trends and considers the Q4 effects of hurricanes and the IV saline shortage on procedures. The total impact from that category is about $8 million for the full year, with improvements from Palette offset by about $11 million from the UroLift impact. Those outline the buckets for the full year. In the quarter, OEM's impact was around $7 million, and excluding OEM, we would have comfortably stayed within our provided ranges.

That's a lot of detail. Regarding the balance sheet, you've discussed the potential for some small acquisitions before. How do you view the relationship between the $300 million share buyback and these small acquisitions? What are your thoughts on these two opportunities?

Our balance sheet is in excellent shape, with a net leverage of 1.7x. As noted in our prepared remarks, our free cash flow from operations stands at $435 million, an increase of $63 million, reflecting strong performance that boosts our confidence in pursuing both share repurchases and acquisitions. We still have $300 million remaining in our share repurchase plan, which we intend to utilize strategically. The M&A environment is favorable, and we are actively pursuing several private assets. While we are not certain when we will acquire an asset, I want the investment community to know we are diligently working on this. To clarify, the free cash flow figure I provided was specifically from operations. We are focusing on assets within the cath lab space, particularly in intensive care, emergency medicine, and strategic tuck-ins related to our existing business. We will maintain discipline in our approach and prioritize non-dilutive earnings per share assets that align with the Teleflex family. We plan to remain active in this area while continuing our capital allocation efforts concerning share repurchases for returning capital to shareholders.

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

Maybe just a little bit more clarification from the last question. But just Liam, the OEM pressure, are you going to still feel that same $14 million-ish in the first half of next year? And then for UroLift, is it really still contained to just the physician's office? Or are you starting to see it spread into other areas of weakness, either hospital or ASC because the physician's office business is pretty small at this point? And then I do have a follow-up.

Yes, Matt. So with regard to the OEM, as I said, of the $14 million, the majority of it is from vertical integration that candidly was a surprise. We've been making this particular business for a number of years, and we were not expecting it to be brought in-house by this customer who is a large customer of ours. That will continue through Q3 of next year. So that, unfortunately, will continue. The destocking, we'll monitor that closely with the inventory management of our customers, and we'll make a determination on that as we go through the year. With regard to your question, it's still the office side of service, Matt. The office side of service is incredibly challenged. Obviously, we're going into the final year of reimbursement in this year, and we'll be happy to see the end of those reimbursement changes. That will have another approximately 6% impact on the reimbursement rate for UroLift in 2025, and that will be the end of the downward trends in reimbursement in the office side of service. So hopefully, at the end of that, it will begin to show some signs of stabilization.

Got it. And then I don't want '25 guidance here. I guess I was hoping for some error bars about how to think about next year just because you've got this, it sounds like a $10 million OEM headwind, but then Barrigel's doing better and PICCs are doing great and other things are doing well. So I'm just curious if we can think about how all of those factors plus the MSA going away might influence what to think about for the underlying business next year with the top line growth going to be mid-single digits. And can you get operating margins back to where you saw those in 2021?

So Matt, obviously, this is the third quarter call. So we'll address the 2025 guidance when we get to our Q4 call, which is our next earnings call, obviously. So if you don't mind, I'll address that when we get to that earnings call.

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

Maybe just a couple here. There's been a few numbers thrown around on the OEM dynamic. Just, I guess what's the annual revenue level of the lost OEM customer? And I apologize if it's been mentioned.

No, that's okay, Jayson. The impact on our full year guidance is essentially $14 million, with most of it resulting from the vertical integration. Specifically, we recorded $7 million of this in Q3, and we expect another $7 million in Q4, leading to a total of $14 million for the full year from OEM.

Okay. And just on the balloon pump dynamic, did you see any contribution in 3Q? And have your underlying assumptions that you kind of laid out on the second quarter call changed at all?

So our underlying assumptions have not changed. As investors will be aware, we have a competitor who has got a notice from the FDA, advising customers to move away from their pump and seek an alternative. Our quote volume continues to be strong in the U.S., and it is focused on the U.S. The only change since then has been that the CE mark suspension, further competitor has been extended to July of 2025. We do not anticipate a significant change in EMEA. We still believe that the majority of the upside will come in the Americas. So you should see an uptick in the Interventional Access growth rate in Q4 specifically associated with the volume of pumps that we anticipate in Q4, and nothing has changed to our expectations. We did not see an impact in Q3, also in line with our previous expectations on the balloon pumps, it is anticipated that it will hit in Q4.

Our next question comes from the line of Shagun Singh with RBC.

I guess a couple of follow-ups. On IABP, can you provide your updated thoughts on that opportunity in Q4? And then also maybe any puts and takes for 2025 and why you don't think Europe will provide any upside to that outlook even into next year?

So our outlook has not changed from the Q2 call to Q4. In the Q2 call, we projected an increase in revenue of about $15 million, a significant portion of which, over $10 million, is related to the intra-aortic balloon pumps expected to contribute in the fourth quarter. Looking ahead to 2025, we believe this opportunity will persist into the first half of the year, and our assumptions remain unchanged. As I mentioned earlier, we will provide guidance during the Q4 earnings call and discuss the expected impact of the balloon pumps then. We do not anticipate much impact in Europe, and we are continuing to gain market share in Asia Pacific.

Our next question comes from the line of Matt Taylor with Jefferies.

I did want to follow up on the balloon pump forecast. And just trying to understand how you're thinking about the different guideposts in terms of the order flow that you've seen already and just predicting how much upside you could get if things get extended, and your competitor, they continue to see challenges. So just a little more color on the orders that you've seen come through to date? And how you're thinking about predicting the upside next year depending on what happens there?

As I mentioned earlier, the orders we are observing in the fourth quarter exceed $10 million. Additionally, we expect that our competitor will remain out of the market during the first half of next year. The variable factor, Matt, is whether they stay out longer, which would create a more extended opportunity for us. That’s our primary benchmark, and we will evaluate it over time. We anticipate their absence from the market will last at least until the first half of 2025, and we will capitalize on that opportunity. The quotation rates have remained strong throughout the third quarter, having peaked at the end of the second quarter, and they continue to be robust into the fourth quarter. Therefore, we expect this to be an opportunity for Teleflex at least through the first half of next year.

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

It's Ravi, in for Rich. So I have two questions, one on IABP, one on M&A. So I guess the first one, with the IABP, you have this $10 million line of sight in fourth quarter. Could you just help us think about what portion of that is capital versus consumable? And of that cohort, what kind of long tail do you see out of that on the consumable stream?

Yes, Ravi. I can tell you that the majority of that is capital in the United States. The consumable aspect will develop over time. When looking at the overall markets, the global market for intra-aortic balloon pumps and catheters is roughly split evenly between the two. In response to your other question, as we look ahead, the benefit of using the manufacturer’s catheter with the manufacturer’s pump is strong. Currently, most customers in the United States prefer fiber optic options. If you pair a Teleflex catheter with a Teleflex pump, you gain access to that fiber optic capability. However, if a competitor's catheter is used with our pump, that fiber optic advantage is lost. Therefore, we believe it's compelling that customers will choose our catheter with our pump.

Great. And presumably, given the way the FDA is kind of managing this, it seems like the tail on the consumables would be a little bit more pushed out? And then secondly, on the M&A. You talked about, I guess, non-EPS dilutive assets. Does that mean your tolerance for EPS dilution and M&A is a little bit lower now? It sounds like the market might be opening off and valuations might be picking up a little bit. It sounds a little bit different than what you said in the past. Do we look at the repo here as a boost earnings to absorb that kind of dilution or make it M&A a little bit more neutral?

So Ravi, I would like to clarify my perspective on the current environment regarding valuations. I believe that valuations are finally adjusting and have been for more than six months. There's typically a lag in how developments in the public markets affect private markets. Additionally, with the shift in valuations and the improvement in interest rates, it makes it more attractive to acquire assets that are not dilutive to earnings per share. Our criteria remain unchanged; we seek assets that contribute positively to our top-line growth, are at least neutral or accretive to our gross margins, and can further enhance our operating margin over time. In summary, there are assets available that fulfill all these requirements and do not dilute earnings per share.

Our next question comes from the line of Dave Turkaly with Citizens JMP.

I just want to confirm, is the OEM business primarily in the Americas geographically?

Dave, yes, the vast majority of the revenues is within the Americas. That is correct.

And I wanted to ask one on MANTA. I was wondering if you could give us sort of an update on how that's doing, either like the growth rate and maybe what you're seeing in sort of the underlying procedures that's used for?

Yes, so on the procedures, so first of all, MANTA continues to penetrate the market. It's the only large foreclosure device out there in the marketplace that's a single-shot product. The procedures that it's used on is TAVR and EVAR. Over the past year, as we continue to penetrate TAVR, we actually have now focused on doing that same penetration within EVAR. And what we've noticed is that the EVAR side of the house isn't as price-sensitive as the TAVR side of the equation. And therefore, our pricing in the EVAR market has been a lot more favorable. So we continue to penetrate, Dave, and the product is continuing to perform.

Our next question comes from the line of Craig Bijou with BofA.

I had a question regarding IABP and then a follow-up about OEM. Liam, regarding the orders you're anticipating for Q4, I'm curious if you have any insight into whether those orders represent a typical replacement cycle for the pumps. Have they reached their useful life, or are you actually seeing hospitals move away from competitor pumps?

We have the typical recycled pumps included in the numbers, but we are also observing that the uplift is primarily driven by our standard business operations, Craig, the conversion. Additionally, we are witnessing accounts completely replacing pumps that, in some cases, are less than two years old.

Got it. That's helpful. As a follow-up on OEM, if you exclude the $7 million you mentioned, I believe the growth for this quarter would be 9%. How should we consider the growth of that business? Is it in the high single digits, or is it slow or in the mid-single digits? I just want to better understand the typical growth of that underlying OEM business.

The integration will definitely affect us in 2025, but the outlook for the OEM business looks very promising beyond the third quarter of next year. Typically, the underlying growth for this business is in the mid- to high single digits. There have been instances where the team has performed exceptionally well, achieving double-digit growth. During times of supply chain disruptions, we've successfully converted several accounts. Our efforts in the microcatheter space are going strong, and we have the capacity to meet demand. Even with the vertical integration, we've expanded our two plants, enabling our team to pursue new orders and fulfill existing ones while also engaging in R&D projects for key customers to enhance our order pipeline as we approach 2025. After 2025, you can expect to see normalized growth for the OEM business in 2026 and beyond, maintaining mid- to high single digit growth, with the potential to reach low double digits in favorable years.

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

I'm looking to gain a clearer understanding of the customer's decision to move towards in-sourcing. Do you collaborate with this customer on other products? What is the scale of this customer following their exit? Additionally, is this product that they are in-sourcing one that you manufacture for other clients? What motivated the customer to shift to handling this process themselves? Does this pose a risk for the product category for your other clients? I apologize for the complex question, but I want to better grasp the reasons and implications behind this unexpected development.

Yes, it's a fair question, Mike. This is a product, it's a significant component of a product that this customer sells as a branded product, and we've been making this for many, many years and it is the decision to in-source. And we only make it for this specific customer, to answer that part of your question. Second part of your question is why did they move it internally. Our assumption from the team is that they have an absorption issue in one of their plants and they're addressing it by moving this inside, and they have the capability within their plant for this particular product. Most of our products that we make are pretty complex microcatheters, pretty complex extrusions. This product was a little bit unique. It's not that complex, and therefore, the company felt that they could do it themselves in-house.

Our next question comes from the line of Mike Matson with Needham.

I have one question about Titan and bariatric surgery. It's great to hear that the product is performing better, but what are you observing in terms of procedure volumes for bariatric surgery? Are there any indications of stabilization? I know there has been a decline for some time. Do you believe that as we start to compare against those declines, the market might begin to stabilize?

Looking ahead, I believe the market will stabilize. Currently, the decline has slowed down somewhat, but it continues. However, for us, it doesn't have a significant impact. We are entering a $250 million market with a product that our recent clinical study shows is superior. We are able to discharge patients from the hospital faster, with about a 25% advantage for our patients compared to other technologies, and our single line of staplers provides greater efficiency, resulting in reduced operating room time. This is a crucial factor for hospitals when choosing technology. While I expect some stabilization, it’s not a primary concern for us; Titan showed strong double-digit growth this quarter, improving sequentially as well. This trend is promising and will drive our growth in the coming years.

Our next question comes from the line of Kristen Stewart with CL King.

I just wanted to focus in a little bit on the gross margin performance. I think your guidance for the full year implies gross margins up 100 to 150 basis points for the full year. I think the exit of MSAs was about 100 basis points. Just wanted to check the math on that. And then as we think ahead, are there any kind of puts and takes that we should think about in terms of gross margin performance for next year?

Well, sure. Well, to your point, we have raised our gross margin guidance to a range of 60.5% to 61%. The MSA going away did have an impact, and that impact will come to a close in the fourth quarter of this year as it will be in our run rate. So as we think about next year, what we're really looking to do is to continue to drive margin expansion through a combination of positive price through cost improvement programs. We still have savings from restructuring initiatives and using all of that to offset inflation. And we've been seeing inflation moderate from what it had been. It's still higher than what it was pre-COVID, but we're seeing that start to moderate. So we're going to get past some of the headwinds that we saw from this year on gross margin with the loss of Palette.

And then just thinking about the opportunity with the intra-aortic balloons. How should we think about that?

I'm sorry, just the loss of the MSA, I misspoke.

As we consider the situation, we anticipate the opportunity will be available at least through the first half of 2025. Depending on the FDA's decision, it may extend beyond that, but we'll evaluate as we progress. We aim for a significant portion to contribute to earnings while also wanting to reinvest some for future growth. This represents a balanced strategy we intend to adopt regarding this opportunity.

That concludes our Q&A session. I will now turn the call back over to Lawrence for closing remarks. Lawrence?

Thank you, Mark. Thank you to everyone that joined us on the call today. This concludes the Teleflex Inc. Third Quarter 2024 Earnings Conference Call.

That concludes today's call. Thank you all for joining. You may now disconnect.