TFX earnings call transcript, November 5, 2026

growth strategy, and then turn to our priorities and expectations for the future. As previously discussed, Teleflex is in the midst of a massive transformation, and I want to thank our employees for the tremendous effort, dedication, and extra work they have put in to continue driving the transformation forward. Now that I have a firsthand view of what is really required, I can tell you that I'm very proud of our team. While we have always said that 2026 would be a transition year, we have made significant progress and reached 10 tangible milestones, including combining the vascular intervention and Teleflex interventional access teams, closing the OEM divestiture, and returning significant capital to shareholders. We expect that these efforts will enhance our financial profile in 2027, with higher adjusted margins, lower interest expense, a lower share count, and a meaningful step up in adjusted earnings per share. While much progress has been made, we have more to do to generate the long-term growth that I am confident Teleflex... can deliver. My top priorities are threefold. First, we need to strengthen our foundation by delivering our transformation, including closing the acute care and interventional urology divestiture and fully completing the integration. of our interventional business to position it for sustainable growth. Second, we need to accelerate our organizational effectiveness by fully implementing a global business unit structure and simplifying our operating model. And third, we need.

To elevate our growth profile by advancing innovation and key growth drivers within a balanced capital allocation framework. Together, these priorities are about building a more focused, agile and growth oriented Teleflex, a company that. It is closer to its customers, faster in how it operates and better positioned to deliver meaningful innovation and sustainable growth, beginning with the first priority, which is clearly the most important in the near term. We need to fully execute on the foundation. elements of our transformation to deliver a newly focused Teleflex that is built to grow. Operationally, our immediate focus is successfully completing the interventional integration. While it has taken longer than we originally planned, we made notable progress in the third quarter on the three transition dynamics I outlined in August. And I'll walk through some of the details when I cover interventionals results a bit later. Our go forward success with interventional comes down to focus and execution. I believe strongly that we now have the right strategy, great products, and people to position interventional for improving growth over the coming years. We recently strengthened the leadership of this business with the addition of Jason Fontana, who joined as president. and general manager of interventional effective September 14th. He brings more than 20 years of leadership experience across interventional markets, spanning global P&L responsibility, commercial strategy, market development, innovation.

and business growth. I've known and worked with Jason for about two decades, and I'm very confident in his ability to lead this business through a successful integration and beyond. Also critical to delivering on our transformation is complete. In the acute care and interventional urology divestiture. I want to be clear. We're confident this transaction will be completed as previously disclosed. The FTC issued a second request in March. Its review is focused on a small area of product overlap with the buyer's existing portfolio, which is a defined and manageable issue. As a reminder, this is a buyer-led process, so we're working closely with Intersurgical to support. While we continue to work to close the transaction by year-end, the precise timing remains subject to the regulatory process and could extend into 2027. That said, I'll reiterate that we remain confident in completing the overall transaction and are encouraged by the progress being made. For us to truly capitalize on the leaner, more focused Teleflex that we are building, we're going to need to change how we operate. This leads to my second priority of accelerating our organizational effectiveness. Historically, Teleflex was organized geographically, which often led to different approaches in different parts of the world. Over time, it created a complex matrix in which accountability was spread across too many people and objectives weren't always aligned. Candidly, it also created a heavy process burden that, at times, pulled our focus away from the customer.

And slowed us down. To remove those barriers to execution, we're in the midst of implementing a global business unit structure and simplifying our operating model to drive sharper customer focus, clear accountability, and faster decisions. This quarter marks an important milestone for us in this regard. We now manage and report as three global business units, vascular, interventional, and surgical. The BUs now have clear line of sight across the globe and the mandate to optimally deploy their resources to maximize growth. Each business will own its strategy, resources, and results. Our goal is straightforward, to put customers at the center of our decisions, empower our global businesses to lead, and ensure our corporate functions help them move faster. And execute more effectively. We've also simultaneously embarked on a number of initiatives to reduce process complexity and simplify our operating mechanisms. Altogether, this is another big transition for our company, for our employees. And for how we operate. But I'll tell you that our employees are really energized. There's a strong belief that we can positively change so that it's easier for our teams to get things done and better serve our customers. My third priority is to elevate our growth profile. by advancing innovation and our key growth drivers within a balanced capital allocation framework. Beyond our previously committed redeployment of divestiture proceeds, which encompasses $1 billion of share repurchases and $800 million of...

...debt reduction, our approach to capital deployment is to invest in R&D and capex to fund organic growth, maintain a strong balance sheet, and use excess capital for share buybacks or eventually M&A. ...growth standpoint. Historically, the vast majority of our R&D went to sustaining products in iterations, and planning cycles tended to be shorter term. We're changing that. We've taken R&D investment from historical levels of about five to six... ...percent of revenue to close to eight percent, and we're directing more of that spend toward substantive innovation. Freesolve, our resorbable magnesium scaffold, is one example. As we reported this summer, we completed... ...enrollment in the Biomag-2 trial ahead of schedule, with a data readout expected in late 2027, and our U.S. pivotal trial, Biomag-3, is underway. More recently, we completed the patient enrollment in the European Biomag-L... ...Clinical Study, which is assessing the clinical efficacy and safety of extended length 35mm and 40mm Frizolv-resorbable scaffolds in long lesion lengths, which remain among the most challenging lesion subsets in... ...PCI. Finally, we were excited to announce two weeks ago that Frizolv received breakthrough device designation for PCI from the FDA, which signals the novelty of our approach and provides us closer interaction with the agency... ...as we move the program forward. EasyPlaz is another substantive organic innovation example where we see meaningful future potential. Its approval in late July was a landmark for Teleflex and, on our last call, several of you asked how we think about the opportunity.

When we spoke in August, I said we had more to learn, and over the past quarter, we've learned a lot. EasyPlaz is the first and only FDA-licensed freeze-dried plasma, and interest from customers has been high. It addresses a significant unmet need. Today, the standard of care is frozen plasma, which has to be stored frozen and thawed before use. That limits where plasma can be deployed and how quickly it can reach a patient. EasyPlaz is stored at room temperature and is ready to reconstitute in minutes. Plasma available on the battlefield, in air and road ambulances, and in trauma centers that want immediate access to plasma in every situation without waiting for it to thaw. Our flexible bag is also a meaningful differentiator against the glass container formats we expect. from future freeze drive competitors. As the only licensed product with these attributes, we have a first mover advantage and we believe EasyPlaz will set the standard against which any future entrant is measured. On market size, I told you last quarter that I wanted to thoroughly assess before putting a number on it. Our work is not finished, but we are now confident that over the long term, the potential U.S. market opportunity is at least $200 million in a meaningful growth. I do want to be clear about the pace. Our first priority is the U.S. government and military, which we expect will account for the majority of our current manufacturing capacity. We are actively engaged with the Department of War, and those conversations continue to.

progress. The path from here still runs through procurement solicitation, contract negotiation, and execution before we deliver commercially. We continue to expect EasyPlaz revenue to be immaterial in 2026 and to become a contributor in 2026. Beyond that, we expect a modest revenue ramp over the first several years. We have to build the market and scaling production of a complex biologic like this is a substantial undertaking, not a routine capacity addition. Meaningfully increasing supply will require a significant multi-year effort and we will be thoughtful about how we sequence those investments. This is a long-term opportunity that we are building carefully and we are focused on positioning Teleflex to capture it over time. Overall going forward, we will disproportionately deploy resources to our best growth opportunities, including through opportunistic tuck-in acquisitions that fit our three core businesses and capital allocation framework. We are improving our processes for opportunity evaluation and execution monitoring. with oversight by the Growth and Operating Committee of our board, and we've added relevant expertise at the board level. Sean Salmon joined our board of directors effective September 8th. Sean brings more than three decades of global leadership. experience in the medical device and pharmaceutical industries, including more than 20 years at Medtronic. He most recently served as executive vice president and president of its cardiovascular portfolio, a global business with fiscal 2025 revenue.

of approximately $12.5 billion, where he was instrumental in developing the growth strategy. I'm excited to work with Sean and the entire board to continue to progress our strategy, to drive execution of our priorities and to elevate growth for Teleflex. Now, let's move on to our third quarter Continuing Operations Detailed Results and Updated Financial Guidance for 2026. All growth rates that I refer to are on a year-over-year, pro-forma, adjusted constant currency basis for 30 years. Third quarter, 2026 continuing operations, unless otherwise noted. For the third quarter, Teleflex revenues were $567.8 million, up 0.2% year-over-year on a gap basis and up 3.0% on a pro forma adjusted constant currency basis. In the quarter, our revenue performance reflected continued solid growth in our vascular and surgical businesses and the impact on the interventional business from the integration and restructuring activities related to the VI business. Third quarter adjusted earnings per share was $2.63, a 39.2% increase year over year and ahead of our expectations. Now, let's take a deeper dive into our third quarter revenue performance. Starting with vascular, revenue was $243.5 million, an increase of 4.6% year over year, primarily driven by growth. In our interosseous portfolio, hemostatic products, and peripheral access products. As expected, growth moderated slightly from the first half as we saw some distributor inventory destocking associated with normalization following the lidocaine recall earlier.

In our surgical business, revenue was $114.0 million, an increase of 5.1%, which was primarily driven by strong performances in ligation clips and skin stapling. As expected, we also saw a moderation in growth of the surgical business as compared to the first half due to the challenging comparisons from the acceleration of our new instrument portfolio in mid-2025. Moving to interventional, revenue was $210.3 million, an increase of 0.2%. While growth continued to be impacted by the ongoing integration and restructuring activities associated with the VI acquisition, there was improvement compared to the second quarter. Several categories, including complex catheters, hemostatic products, right heart catheters, and on control outperformed. In August, I outlined several transition factors impacting the interventional business that we expect to be temporary. We made good headway in the third quarter with tangible evidence of progress on the mid- investigation actions, and now we are on the steady march towards improvement. Let me provide some additional detail. The order to cash transition is now mostly behind us. In Q3, we diagnosed the causes of customer and process disruption. And aggressively implemented mitigating actions. At the end of the third quarter, approximately 90% of vascular intervention customers had been converted to the Teleflex ordering platform, and we expect substantially all customers to be transitioned in the near term.

Distributors, the majority of the indirect vascular intervention business has now moved to Teleflex distributors and is now under our control, which has given us better visibility and predictability into the business. While some distributors... ...transition activity will continue, we now have the line of sight required to implement more comprehensive action plans to drive a steady improvement in this part of the business. On the Salesforce front, we've made great progress filling open territories, with openings down... 63% from their peak. It will take time for new reps to become fully productive, but I'm encouraged by the quality of our hires and the interest in joining Teleflex, which reflects the strength of our portfolio, the culture we're building, and the opportunity ahead. Under Jason Fontana's leadership, we expect to complete the remaining transition work, sharpen our focus on new product opportunities, including differentiated technologies like Freezolv, and accelerate growth over time. Our focus remains... on positioning interventional for long-term success, and I remain confident that we have the portfolio and the team to do so. Now I'll turn the call over to John for a more detailed review of our financial results. John?

And good morning. All results that I speak to will be on continuing operations basis for 2026. Due to the reclassifications of discontinued operations, historical continuing operations reflect the impact of stranded costs in all periods presented. Following Jason's discussion of revenue. I'll begin with margins. For the third quarter of 2026, adjusted gross margin was 66.8%. The 450 basis point increase year over year reflects the 290 basis point benefit from a refund in the quarter related to IEPA tariff payments made in 2020. And foreign currency exchange rate fluctuations partially offset by an increase in quality remission charges. Third quarter 2026 adjusted operating margin was 25% up 300 basis points year over year. Driven by gross margin expansion. This was partially offset by business investments and higher incentive compensation, which reflects both the lower accrual in the prior year quarter and a stronger performance this year. Adjusted net interest expense total 18.9 million for the. third quarter as compared to 30 million in the prior year period. Year over year decrease is primarily due to lower average debt outstanding, reflecting the use of a portion of the cash proceeds from the OEM divestiture to repay debt. Our adjusted tax rate for the third quarter of 2026 was 11.1% as compared to 9.3% in the prior year. The year over year increase is primarily due to less favorable jurisdictional mix in the quarter and additional costs from the capitalization of certain R&D expenditures.

At the bottom line, third quarter adjusted earnings per share was $2.63, representing a 39.2% increase year over year. The year over year performance was primarily due to higher sales volume. Lower interest expense and shares outstanding, as well as the impact of tariff refunds. At the end of the third quarter, our cash, cash equivalents and restricted cash equivalents balance was $444.3 million as compared to $402.7 million. As of year-end 2025, net leverage at the quarter end was approximately 1.4 times, down from the second quarter leverage of 2.8 times, primarily driven by the reduction of debt following the completion of the OEM strategic divestiture. Moving to our capital allocation strategy. We remain committed to returning cash to shareholders under our previously announced $1 billion share repurchase authorization, while reducing debt by $800 million. Since July 1, we have repurchased a approximately $350 million of our common stock, which was ahead of our expectations at the time of the second quarter earnings call. The repurchases were through a combination of our now completed $250 million accelerated share repurchase program and an additional $100 million in open market. Repurchases representing approximately 2.7 million shares at an average price of $128.96 a share. Our updated 2026 continuing operations guidance reflects the impact of these repurchases. Through the date of this call, but does not assume any additional share repurchases for the remainder of the year. As of November 5, 2026, the company had $400 million remaining available under the current authorization. During the third quarter, we paid off the $700 million.

term loan A2 associated with our acquisition of the vascular intervention business and paid down a portion of our revolver. Turning now to the financial guidance framework. As we previously indicated, 2026 results include a number of transient factors related to our strategic divestitures that will impact our near term results, which we expect to be mitigated with the close of both transactions. Therefore, we anticipate 2027 will be more reflect. of the underlying business, ultimately building a clear financial profile with significant improvements in adjusted margins, interest expense, and adjusted earnings per share. As previously announced, we have also launched a multi-year restructuring plan that is expected to achieve approximately $50 million in annual pre-tax cost savings upon completion in mid-2028. The restructuring activities, which are on track, began in the first quarter of 2026, and our guidance continues to assume savings from these activities. We are also identifying further cost reduction opportunities as remain committed to mitigating the stranded costs associated with the strategic divestitures. With that context, I will review the items that will impact our 2026 results. First, our assumptions for 2026 continue to reflect the impact of stranded costs partially offset by transition service agreements associated with the close of the OEM strategic divestiture. Of note, the transition services and

manuals. Manufacturing service agreements associated with the acute care and interventional urology strategic divestiture are more expansive than those for the OEM due to the buyer requiring more support, which will underpin our adjusted margin expansion in 2027 as we offset. Second, the exact timing of the closing of the acute care and interventional urology strategic divestiture will, to some extent, pace our ability to deploy additional capital during the remainder of 2026. Third, our 2026 adjustment. The adjusted gross margin assumption has been updated to include the receipt of IEPA tariff refunds, which reduced third quarter adjusted cost of sales by 16.5 million. As we look forward to 2027 and beyond, we anticipate our capital deployment actions in combination with the impacts of the transition services and manufacturing service agreements and our efforts to further mitigate stranded costs and rightsize the organization will result in significant increase in adjusted operating income, adjusted margins. and adjusted EPS. Moving to an update on our 2026 guidance. Please note that our 2026 guidance is provided on a continuing operation basis and excludes acute care and interventional urology and OEM businesses. We continue to expect pro forma adjusted constant currency revenue growth for 2026 to be in the range of 3.5% to 4.5%. Turning to adjusted earnings per share. We are increasing the range to $7.50.

to $7.75 in 2026 versus our prior guidance of $6.90 to $7.20. Our guidance includes the third quarter results, our updated expectations for the remainder of the year, repurchases of a common stock. through the date of this conference call and a $0.31 benefit from IEPA tariff refunds for continuing operations associated with 2026. Our adjusted EPS guidance does not include any benefit from the proceeds resulting from the acute care and interventional urology, strategic divestiture, or the anticipated positive impact from additional share purchases. We anticipate these actions will result in meaningfully lower share count and significantly reduced interest expense in 2027 and beyond. Taken together, we expect share purchases and the balance sheet deleveraging activities will contribute to significantly higher adjusted EPS beginning in 2027. Additionally, for modeling purposes, you should consider the following. The impact of foreign exchange for 2026 is now expected to be approximately $9 million to $10 million benefit to our reported revenue as compared to $14 million previously. We now expect 2026 adjusted operating margin to be approximately 20%, which includes the impact of the $16.5 million IEPA tariff refund on gross margin. Once the acute care and interventional urology divestiture closes, we are confident that operating margin will approximately 20%. 23% in year one as manufacturing and transition service fees offset stranded costs. Looking forward, we see long-term opportunities to improve upon the steady state operating margin through operating leverage associated with revenue.

growth and other cost savings initiatives partially offset by continued investment in the business. Moving to assumptions below the line. For net interest expense, we continue to expect approximately $85 million for full year 2026. We now expect our adjusted tax rate to be approximately 11.5% in 2026 as compared to approximately 12.25% previously. Finally, we now expect our shares outstanding to approximately 42.5% million for 2026, which reflects share repurchases to date. That concludes my prepared remarks, and I would now like to turn the call back to Jason for closing commentary.

In closing, I will highlight our three key takeaways from the third quarter of 2026. First, Teleflex delivered a strong third quarter, expanding adjusted margins and growing adjusted earnings per share. Vascular and surgical remain solid, and interventional is moving in the right direction. Given this performance and our outlook for the remainder of the year, we are maintaining our pro forma adjusted constant currency revenue growth outlook and raising full year adjusted EPS guidance for 2026. Second, we made meaningful progress and our transformation this quarter. The interventional integration is moving forward with new leadership in place and we remain confident in completing the acute care and interventional urology divestiture. We are also advancing longer term growth opportunities with innovations like EasyPlaz. We have a clear path forward built on three priorities. Strengthening our foundation, accelerating our organizational effectiveness, and elevating our growth profile as we fund our innovation engine. Together with our capital return and debt reduction including the planned completion of our $1 billion share repurchase authorization following the close of the acute care and interventional urology divestiture, these priorities set us up for a meaningful step up in adjusted operating margin and earnings per share in 2020. and sustainable growth beyond. While there is still work ahead, we are building a more focused, agile, and growth-oriented Teleflex, and I am confident in our team's ability to deliver on the opportunity in front of us.

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And thank you to everyone who joined us on the call today.

This concludes today's call.