Teleflex Incorporated (TFX) Earnings Call Transcript & Summary

Okay. Good afternoon, everybody, and welcome to our next session here in the medtech track of UBS Global Healthcare Conference. I'm Matt Taylor, the U.S. medical supplies and devices analyst. And I'm really pleased to be joined by management from Teleflex, including -- we've got Tom Powell today, EVP and CFO; and John Hsu, the Senior Director of Investor Relations. So we're set up here for a fireside chat, and I have lots of questions for the team. [Operator Instructions] But with that, I just want to welcome Tom and John to the call. Thanks a lot for joining us today, guys.

Well, absolutely. And thank you for hosting us. It's certainly a pleasure to be here.

Well, thanks, Tom. Yes. So let me start off with you in a high-level question. I just want to get an update from you on how the business has been performing. Maybe give us some reflections on how things progressed through the quarter. And you made some comments about further progression through April. Would love any thoughts you have on the near-term dynamics.

Sure. Well, first of all, I'd say that we're very pleased with the progress we're making on some of our key growth drivers, including UroLift and UroLift Japan, Interventional Access, Z-Medica, EZPlaz, and within Vascular, our PICCs and Vidacare portfolios. All of these products are accretive to our gross margins and therefore, can help us drive positive mix. An additional growth driver, OEM, will likely lag recovery by about a quarter. But notwithstanding that, we still expect this to be a significant contributor to growth in the future. I'd -- second, I'd say that we recently announced the divestiture of a large portion of our respiratory business in order to focus on our higher-growth, higher-margin strategy. We feel good about the sales multiple for the transaction, and we'll use the proceeds to pay down our revolver borrowings, adding to our capacity for capital deployment in the future. In addition, this transaction is accretive to our pro forma revenue growth, gross and operating margin profiles as well. Thirdly, I'd like to just say that we're really pleased with the financial performance in the first quarter with revenue, margins and earnings exceeding expectations and enabling us to raise both our top line and bottom line guidance with just one quarter behind us. And we also continue to feel confident that UroLift will show continued recovery, and we remain on track for reimbursement for UroLift in Japan. So all in all, we're feeling very confident coming out the other side of COVID, being well positioned for the future. We're encouraged by the recovery trends across much of the business, in particular, March and April. We feel that the overall business is in good shape. And with the recent divestiture announced, we continue to focus on that higher-growth, higher-margin strategy. We also feel good about our ability to raise guidance as well as having the financial flexibility to cover the incremental dilution associated with that divestiture. And so all in all, a really solid start for Teleflex in 2021.

Great. Tom, I got more than I was bargaining for there, but a lot of good thoughts and things that I'd like to follow up on. One is -- let's start with respiratory. It's a recent announcement, so I'd love to talk more about that. I know in the past, you've said, "Look, if there's one area of our business we might divest, it's that, because of the lower growth and lower margin." So something that really fits with your plan here. What I was more impressed by was the fact that you didn't have to lower guidance for the dilution. So it's kind of like a de facto raise. So maybe talk about that financial flexibility and what gave you the confidence to keep guidance unchanged.

Well, as we were approaching the end of the first quarter, we would have welcomed the opportunity to announce the signing of that divestiture along with first quarter earnings. As it turns out, that wasn't the case. And so we had a high level of confidence that we have signed shortly thereafter. And so what gave us the flexibility was just a strong first quarter performance where we saw a significant upside versus expectations across many financial metrics as well as continued strength as we went through April. So it was really the performance that we saw in Q1 with continuation through April that gave us the confidence to be able to cover that dilution.

Got it. Okay. Maybe let's go back to UroLift and talk about some of the trends there because in the first quarter, sales came in a little bit lighter than Street expectations. But then you called out improvement through the quarter and that continued in through April where you're projecting a pretty strong rebound. Can you talk about how the trends have progressed? And did you attribute the Q1 softness as just kind of an air pocket due to COVID?

Well, when we saw Q1 performance unfolding, certainly, January and February, COVID impacts were a little bit more than what we initially envisioned. So we kind of had a sense for that as we are providing our guidance at the year-end call. And we expected that things would continue to improve, and that's what we saw. So we were really pleased with the trends that occurred in March and April. As we said on the first quarter call, the trends really improved relative to what we saw in January and February. In March, UroLift grew 30% year-on-year. And just recognizing that 2020 was somewhat of an atypical year. If you look back how the growth compares versus 2019, that's also about 30%. What we said on the call was that UroLift growth in April improved relative to March. And based on the trajectory, we project that UroLift will continue to progress through the second quarter and the rest of the year, with revenue dollars improving in the second, third and fourth quarters versus prior quarters. And this is being buoyed somewhat by a further recovery from COVID in addition to the full year direct-to-consumer marketing campaign as well as training of additional urologists. In the first quarter, we trained 115 urologists, adding confidence that we can remain on schedule to train 450 to 500 new urologists in 2021. As a final comment, we continue to see procedures about 40% in the hospital with the remainder being performed either in the office or ASC. So I would say that UroLift continues to perform and improve relative to what we saw as the year began. So call it an air pocket or whatever, but it does look like that was a bit of an anomaly as we got the year started.

Okay. Great. Great. Well, what about -- what are you seeing geographically? Because you do have a relatively large business in EMEA and that was pretty hard hit in Q1. Can you elaborate on that and tell us what you're seeing in some of the different geographies and how recovery is progressing in those areas?

Okay. Well, in the Americas in the first quarter, we grew more than 8% after you adjust for shipping days. And it's our current expectation that we'll continue to see improvements of growth rate for the balance of the year in the Americas. To your point, EMEA revenue was down 17% in the first quarter. Now 2 things I want to point out is, first, a difficult comp, where there was a large $8 million order in the prior year March. And so it created a bit of a comp headwind for us. And also, we had 2 fewer selling days in the first quarter versus prior year. So if you normalize for that, EMEA was down closer to 10% constant currency. Now with that being said, EMEA has also been somewhat slower to roll out vaccines versus the U.S. And as a result, we believe that EMEA would take longer to show a recovery than the U.S. or in APAC. And if you took a look at some of the new case trends throughout the early part of the year in some of the major European countries, they were showing some pretty significant spikes. And we've now seen that downward trend in new cases. And so that gives us some confidence that EMEA is headed in the right direction. We do expect EMEA to return to positive growth as we move throughout the year with a stronger second half performance versus the first half. And then turning to APAC. In the first quarter, they grew double digits for us. It showed nice recoveries in both China and Korea. Now as we progress throughout the year, we expect APAC to continue to deliver a consistent, double-digit growth for each of the quarters going forward.

Okay. Super. And related to some of those comments, you did have a strong Q1. You raised guidance. Now you expect high single-digit growth for the year. And maybe you could just discuss some of the key assumptions that play into that guidance. And what would bring you kind of higher or lower in the range? What are you assuming about recovery and return to a normalized environment?

Sure. Well, our outlook is predicated on the assumption that COVID will continue to be a disruptor during the first half of the year with the second half of the year returning to much more normalized procedure and revenue growth levels. I would say that some of the positive factors that give us confidence is that when you look at the CDC vaccination rates, they're quite encouraging, especially for older Americans who typically consume more health care. More specifically, from a UroLift standpoint, we're definitely encouraged by the fact that more than half of men aged 50 to 64 are fully vaccinated in the U.S. And that compares to only about 10% being vaccinated at the end of March. So I think that the key message is that with more than half of our target audience now fully vaccinated, as we move throughout the second quarter into the back half of the year, we're very encouraged that, that will bode well for continued improvement in UroLift. Regarding swing factors for guidance, it's really about the pace of recovery from COVID versus our baseline expectation that could swing things one way or another. The areas of the business that would likely be most impacted possibly or perhaps adversely would be those that were impacted most of last year, which is Interventional Urology, Interventional Access, Surgical and to a lesser extent, Anesthesia and OEM.

Got it. Okay. All right. Why don't we take things back to how we might view growth post normalization? So you had a prior, long-range plan that call for 6% to 7% growth, you're actually doing more like 8%. But maybe you could talk about some of the key pillars of growth on which that plan was based and where you could see some potential upside to that plan in the go-forward rates post normalization.

Okay. Well, just going back to 2018, where we held an Analyst Day and outlined expectations for the next 3 years on key financial metrics, and so that took us through 2021, included in that was an annual revenue growth target of 6% to 7%. And the revenue targets included the assumption that our big business, excluding UroLift, would continue to grow in the 4% range as it had been doing in recent history. And then UroLift would be adding another 2 to 3 points of growth to that. Now Vascular, Interventional Access, OEM in Asia are expected to be kind of the key drivers behind that 4% base business growth. Now when you look at our performance in 2019, we clearly exceeded the expectation where we grew about 8%. And then in 2020, obviously, COVID hit and impacted our revenues adversely. I'd say that since establishing the growth target, we've acquired Essential Medical, then HPC and more recently, Z-Medica, which reinforce our ability to deliver or exceed the 6% to 7% growth target. So I'd like to think that we're well on our way to achieving if not exceeding the top line growth objectives. And have also since strengthened our portfolio and some key acquisitions that brought MANTA, QuikClot, QuikClot Control+ as well as some OEM capabilities in the higher tech neurovascular sector.

Understood. Understood. So how do you now think about mid- to long-range growth across your key businesses? And how has kind of recent performance -- some of these deals, how is that informing how those different businesses could be over time?

Well, I can tell you that we're excited about the growth potential as a result of a number of these areas that we've strengthened over the last couple of years. So we can't wait to go into more detail at our upcoming Investor Day this November. I would say that conceptually, it's worth noting that relative to that prior plan that we put out there, there are incremental growth drivers in place including MANTA, HPC, Z-Medica as a result of the acquisitions post that guidance. As well as EZPlaz, we had only assumed a minimal volume when we gave that 6% to 7% guidance. And then UroLift Japan has also been added as a new driver. So as we think about the mid to longer term, we're really excited about what some of these new additions indeed for us, and we'll go into more detail at the Investor Day this November.

Okay. Great. And just back on UroLift, such an important driver for the company. Could you speak to any changes in the reimbursement landscape or the competitive environment? Has anything changed that would cause the growth rates to differ? And how do you view your competitive positioning versus some of the other traditional or MIS options that are out there?

We really don't see a significant change in the competitive landscape. What we're focused on is making UroLift the standard of care. And I think that UroLift is fast becoming that standard of care. And while certainly, we're aware of other competing technologies, UroLift remains the leading minimally invasive treatment for BPH. UroLift patients see dramatic improvements in their IPSS scores. They suffer no adverse sexual side effects and limited, if any, catheterization is required for the procedure. So essentially, you can have a UroLift procedure on Friday and be back in the office on Monday. Now from a clinician's perspective, reimbursement is also attractive, both from a coverage and a payment perspective. We have more than 300 million covered lives in the U.S. And our indication enables treatment of well more than 90% of the patients with BPH. And these are advantages that we've built over a number of years. So we continue to believe there's a wide moat behind us with a multibillion-dollar opportunity in front of us. And what's attractive about UroLift is that any way you look at the market, we're still just scratching the surface of the opportunity. If you look at the number of doctors trained, we trained roughly 25% of the potential in the U.S. So we've got about 3,000 of the 12,000 U.S. urologists. Relative to the $6 billion drug dropout opportunity in the U.S., we did a little bit less than $300 million last year in revenue. And so it's only scratching the surface of the total market opportunity. So as mentioned, in 2021, we expect to train 450 to 500 doctors. And we also have the national DTC investment, driving increased awareness of the product. So we're feeling very good about the product itself, its positioning versus competition and the size of the market opportunity for the future.

[Audio Gap] a way of some of them growing your UroLift practice. Now you've got kind of 2 years of training stacked on top of each other. Maybe just talk about how that could play into the UroLift growth rates going forward. And could that productivity catch-up help you in the second half of the year?

Okay. I think you broke up a little bit in the first half of the question. I think you were asking about urologist training and how that could impact the growth trajectory well. First of all, I'd say that in 2020, we were able to train 425 urologists. I'd say that the first and more so probably the second quarter were a bit lighter due to COVID. However, the new training picked up in the second half of the year. So we were encouraged by being able to do that much training despite the COVID situation. Now in 2021, we've been able to get access to doctors, and we continue our training and expect to train between 450 urologists, as mentioned. We did train 115 in the first quarter. I would say that typically, 2/3 of our revenue growth is driven from existing doctors and the remaining 1/3 is driven by new doctors. So when you think about all these doctors that have been trained, there perhaps is a little bit of momentum that we can see as far as an uptick as we go into the back half of the year. Just given the number we trained last year and perhaps a lower level of penetration into each one of those accounts, given patient reluctance to some level until we get further past the COVID situation. So I think that is the potential to perhaps see some additional acceleration in the back half.

Okay. Great. And in the beginning, you mentioned the progress that you're making with UroLift in Japan. So I wanted to ask you about progress in international markets in general, Japan is probably the biggest one. But remind us how much is derived from outside of the U.S. today with UroLift. And give us an update on some of the key geographies that you plan to launch and the timing there, the size, maybe just frame up the next few big geographies you're going to enter.

Okay. Well, right now, UroLift is predominantly U.S.-based. 95% of our revenue comes from the U.S., 5% outside the U.S. And right now, we're really only in Australia and U.K. OUS. Japan is next, followed probably by France. Other key markets include Italy, Spain, Germany, Brazil and China. As far as timing of Japan, we expect to have reimbursement documentation submitted in time for a June reimbursement meeting. And as soon as that's submitted, we'll begin working on a key MDA study that's required for the sale and marketing of the product. As such, we're not really planning on any revenue in Japan until 2022. We're hoping that we do get reimbursement approval in the third, perhaps fourth quarter. We expect reimbursement to be comparable to the U.S. and the total addressable market is currently expected at about $2 billion. So a very large market that we're eager to gain access to. As far as France, reimbursement came a little bit earlier than we expected. We received reimbursement mid-March, and we weren't expecting it to be received towards the end of the year. However, reimbursement was incorrectly coded to an endoscopy procedure, and we're currently working to get that corrected. So we expect reimbursement, once that's corrected, it will be slightly less than the U.S. The TAM currently is estimated to be a couple of hundred million dollars. And we expect to begin performing the first cases in the second quarter. Now at our Analyst Day in November, we'll plan on laying out a more detailed view of our UroLift OUS market picture, and how we look for timing in some of the other countries that I mentioned are our top priorities.

Okay. Super. And then one of the other initiatives here with UroLift has been the rollout of UroLift 2, which has been in the works for a while here as you've made some changes to the product. I think it's limited launch now. Maybe just walk us through the key benefits and the design changes versus the prior generation. And then the time line for a full launch and the impact that, that could have on sales and margins.

Okay. Well, we began a limited or measured launch in February, and are still expecting a more fulsome rollout as the recovery improves towards the second half of 2021. Our target was full rollout by the end of 2022, but we want to make sure we're balancing that objective with the assurance that we aren't disruptive to the current sales focus of the UroLift product. I would say that clinician feedback has been very positive regarding the streamlining of the procedure due to a single-trigger mechanism, which allows you to essentially install the product with 4 squeezes of a trigger whereas currently, there's a trigger as well as a couple of levers that need to be deployed. There's also a favorable reaction to the reduction in waste as a result of moving to a system that will use one handle with multiple insertable cartridges versus 4 or so totally disposable handles, which would provide a lot more waste -- or the new product will provide a lot less waste, I should say. And we remain confident that the UL2 conversion will occur in that we're going to get additional margin pickup as a result as we convert the base more fully. And so we had estimated that margin pickup to be about 400 basis points. So it will be a nice increase in the margins as a result of that conversion.

And if I can just jump in for one second quickly, just to clarify one point on Japan. So we're still on track there, as Tom mentioned. And I think that the message there is we're excited about the $2 billion opportunity. Clearly, there's a clinical study. But taking a step back, there -- they do meet 4x a year for reimbursement. I don't think we have clarity necessarily if we're going to get it in by June. But if we don't get it in by June, our baseline assumption is that we should get a decision in the September time frame, late September. And from there, we do have to do a Ministry of Health-mandated clinical study that could take up to a quarter. So really, the message is we're excited about Japan, $2 billion opportunity, and it's really more of a '22 event. And we feel good about our UroLift guidance, not -- are not expecting anything material from Japan to meet that 30%-plus for the year.

Got it. All right. Thanks, John. Thanks for the clarification there. Great. So I want to -- I think we did a lot on UroLift. I wanted to pivot to some of the other growth drivers that you mentioned in the beginning that are kind of additive. One is MANTA or the product from Essential Medical, the acquisition that you did. Maybe just talk about how that stacks up competitively versus some of the other options. What are the key selling points? How has adoption been? And elaborate on your market sizing and TAM assumptions underlying the MANTA estimates.

Okay. Well, just to start out with, MANTA grew 30% in the first quarter and generated just under $5 million in revenue in the first quarter as well as about $5 million in the fourth quarter of last year. Now our 2021 guidance contemplates 8% market penetration. So at the midpoint of our TAM, that's about $20 million, which, as you can see, contemplates no real acceleration from what we did in the first quarter. So if things continue to improve, our hope is that we could overperform that 8% -- the 8% target. Now during the first quarter, we did see improvements each month as to have our procedures continue to climb back towards pre-COVID levels. So we're obviously headed towards an improving trajectory and look forward to continued improvements in the future. I'd say that new account growth met and exceeded our expectations, and continues to trend towards a more normalized level with utilization remaining consistent. For those who have adopted a surety of closure, faster time to hemostasis, getting hemostasis within 20 seconds versus 10 to 12 minutes for other technologies, and a low rate of complications and major complications are key features of the product. Now from a competitive standpoint, there is no other product that we're aware of that has large-bore closure indications. So it's really just a matter of getting access to clinicians and going through the [ vax ] in order to continue to drive adoption. I would say that initially, we did a measured rollout to do some price discovery work. And I believe we've settled into a pricing strategy that makes sense for us as well as we've heard good feedback from customers regarding that level of pricing. Regarding the TAM, we've sized the market to -- at $200 million to $300 million globally. And that consists mainly of TAVR with some EVAR and a small tail potentially of Impella procedures. Now as TAVR and EVAR continue to grow and return to more normalized growth rates, those markets will increase in size and perhaps we could get something larger from the Impella market. So we'll need to continue to monitor that. And if anything, the TAM will continue to grow. And we'll likely have an update available at the Investor Day to provide our latest thinking on that market size.

Got it. Okay. Great. And then the other one I want to get an update on is EZPlaz. So we went from, I think, RePlas to EZPlaz. I always forget the order. Maybe we should just call it [ EZ EZPlaz ]. But how are you thinking about the launch timing there with the submission of the BLA now? And can you discuss the market sizing and some of the key assumptions there that you're making about to predict the growth in the TAM.

Okay. Well, first of all, EZPlaz addresses what we see is a $100 million market, $25 million in the military, $75 million in civilian. And our plan is to begin with the military market. They've been our partners in the development of this product. In terms of getting approval, we're very encouraged by signs from the FDA. It's been a good working relationship between Teleflex, the FDA and the military. We've received feedback from the FDA following our BLA submission that the application was sufficiently complete to begin a substantive review. And that review has been assigned a priority review classification, which indicates that it's on a fast track. Our hope is that we could get approval by the fourth quarter of this year. I'd say that EZPlaz locks in really nicely behind Z-Medica in our hemostatic cause. So we're building essentially a presence in hemostasis and being able to leverage the call points along with EZPlaz. Regarding the margin profile, scale, we expect this gross margin to be accretive to Teleflex' corporate average. So it's a real nice product opportunity for us and one that we'll keep pushing towards. Now in terms of our expectations on revenue, really, we expect this to be a 2022 revenue story versus anything sooner.

Got it. Okay. And you talked about Z-Medica and the meshing of those products and the strategy in the call point that you have. And Z-Medica seemed like it did really nicely out of the gate there in Q1. Maybe just talk about that deal, how it fits into the portfolio. And elaborate on the potential synergies and growth and margin impacts to Teleflex from Z-Medica.

Okay. Well, we view Z-Medica as a very attractive growth asset, a high single-digit growth profile with differentiated products, solid IP and commercial opportunity across multiple call points. So it brings a portfolio of hemostatic products that help the body to stop bleeding. It's used in a variety of use cases ranging from gunshot wounds prehospital to laceration wounds in the ER to solid organ surgeries and traumatic bleeding. So a variety of applications for the products. The deal is accretive to Teleflex' constant currency revenue growth rate, its margins and adjusted earnings per share. So it's a nice addition financially in addition to strategically. It essentially leverages existing call points in emergency medicine and military. The gross margin profile in the high 70s, low 80s could actually improve over time, driven by product mix. The operating margin is currently in the 30s. However, once we realize fully the synergy potential, this could move to the high 40s and low 50s over time. And we previously discussed that we estimate $10 million in cost synergies are available and are tracking towards realizing those savings by year 3. And then regarding potential revenue synergies, there is an opportunity to increase the size of our existing sales force in the emergency medicine, trauma and military call points, while maintaining the best talent from both organizations. So it fits in nicely and allows us to better leverage our selling system. And this is essentially another one of Teleflex' classic transactions that checks the boxes both from a strategic standpoint as well as a financial standpoint, and it has a $600 million TAM associated with it. So a real nice addition to our portfolio.

Right. Right. And that's been a hallmark of the company, your M&A strategy over the last several years, a lot of good deals. And maybe we could talk a little bit more about that. You mentioned before you got some cash from the divestiture that you can work with. So can you talk about M&A goals? And just comment on things like current valuations are high. There's a lot of stacks. And so how do you think the current portfolio sits? Are there adjacencies you'd like to look at? And how tough is it to get a deal done in this environment?

Well, I would say that in terms of capital allocation, our preferred use of capital continues to be investment in internal growth opportunities or operating efficiency opportunities as well as M&A. We consider ourselves to have M&A as a core competency at Teleflex. We dedicate significant internal and external resources, the M&A due diligence, identification and integration processes. And we've had a history of success in this area. So it's an area of focus that will continue into the future. I would say that at the end of the third quarter, our net leverage was below 3x. If you fast forward to the end of the second quarter, pro forma the respiratory divestiture, we expect that leverage to be approximately 2.5x. So we'll be well positioned financially to continue to pursue attractive opportunities. As far as valuations, we've all seen valuations creep up over time, however, we continue to see attractive opportunities that could make sense both financially and strategically. I would say the business development pipeline continues to be robust. If you look at 2020, even during a time with COVID, we were able to close 2 transactions that we thought made a lot of sense. And then certainly, with the recent divestiture, we're pleased with the outcome there. As far as internal investment, we just announced a restructuring at our Q1 earnings call that will incur about $10 million to $13 million of restructuring and restructuring-related expenses, and will deliver savings in the range of $13 million to $16 million once the plan is fully implemented. So we also have a number of previously announced manufacturing footprint activities that are still ongoing for the next couple of years. And in total, for all of those active programs, we expect to realize savings of $53 million to $67 million, and deliver the majority of those savings -- or I should say about half of those savings in the next 2 years with the vast majority of them being delivered by 2024. So if you just think about that level of savings relative to our revenue, that creates a meaningful margin expansion opportunity by itself.

Right. Right. So let's do a more fulsome margin discussion. You talked about the restructuring, I think that something you said could be about 200 basis points, that's just the math. And in your longer-term margin goals that you set in '18, obviously, the timing has changed because of COVID, you've talked about gross margin 60% to 61% and operating margins 30% to 31%. So how do we think about your ability to get back to those margin targets in the near term? What are some of the other moving parts that are going to allow you to get the margin expansion that you had talked about in the past?

Sure. So I would say that we continue to believe those are the right targets for Teleflex, and it's a matter of when, not if, we'll achieve them. So if you look at a lot of the activities we've talked about earlier on this call, a lot of it is designed to continue to drive margin expansion. So we feel really good about the longer-term prospects for margin beyond those initial goals that were set out. I would say that in the first quarter of this year, the 200 basis point year-over-year expansion in gross and operating margin gives an indication of the leverage that our P&L can generate. As we look to 2021 and beyond, the main drivers of margin really are mix and restructuring with some OpEx leverage. If you think about some of the products in our portfolio and their higher-growth rates tied to higher margins, that's really going to be the principal driver, and we expect that to provide margin growth -- excuse me, margin expansion for a number of years into the future. The restructuring programs I just mentioned that are currently announced in active can deliver another 200 basis points alone just based on completing those programs. And we do expect to continue to get some OpEx leverage as the business continues to grow. But I would say the -- really, the driver going forward is going to be mix followed by the restructuring programs. And so one thing that we're looking forward to is that in 2021, as we see some of the businesses that were most impacted last year, those are our high-margin businesses. So as they continue to recover, our expectation is we'll continue to see a nice mix impact throughout the year. And again, as we plan to host an Investor Day this November, we'll make sure to spend considerable time on the margin story and what our expectations are for the future.

Got it. Understood. Great. But first, we've already talked a little bit about the respiratory divestiture, but maybe just spend a minute on why that was strategically the right move. What does that portfolio shaping do for you? And what was the rationale behind investing on it?

Well, I would say that we have continuously looked at our portfolio of businesses with the overarching objective of improving the rate of sales growth and margin expansion. And this is one that we've talked about for a number of years as potentially being a move that we would make. It tends to be a number of products that are not differentiated, more commoditized products. As a result, pricing and other pressures come into play with them. So we decided it was the right time to make this move, and to focus on those higher-margin, higher-growth opportunities for us. I would say that the transaction is accretive to our pro forma top line and gross and operating margins on a full year basis. We're pleased with the transaction multiple, which compares favorably versus some of the other comps we've seen recently in the marketplace for similar assets. And also, I want to just reinforce the point that we're pleased that the strength of our results year-to-date allowed us to cover the dilution associated with the transaction. So having that flexibility was a real positive coming out of the first quarter. As noted, we plan to pay down the revolver with the net proceeds in the transaction, which will give us expanded firepower to continue with capital deployments and to focus on M&A with. So there's a lot of strategic rationale as well as financial rationale behind this. And it has been something that we've signaled for the past couple of years was a potential for us.

Okay. Great. In the Investor Day in the fall, excited to see that happening again. Hopefully, it will be in person. What are some of the things that we should look out for at the Investor Day? Can you give us a little bit of a preview on the kind of things you'd like to cover there?

Well, yes. As stated, we do plan to hold an Investor Day this November. Our hope, too, is that it will be in person and we're currently sorting through that, but that would be really nice if we could all get together in person. Now if we take a step back to when we started the journey back in 2011 as a pure-play medical device company, at that time, revenue growth was pretty limited. Gross margins were in the 47% range and operating margins in the 16% range. So over the following decade, we really invested in organic and inorganic growth opportunities, which accelerated revenue growth to low single digits or actually the low to mid-single digits. And we also set forth a number of restructuring programs to improve our operating cost structure. Then in 2017, we made 2 transformative acquisitions, NeoTract and Vascular Solutions, which moved us to the realm of a 6% to 7% top line grower with significant margin expansion potential. Now at the upcoming Investor Day, we plan to set the stage for the next phase in the company's evolution. And I'm really excited to share the strategic vision for the future as we aspire to be one of the fastest-growing, diversified medtech companies with continued margin expansion potential. At the Investor Day, we'll provide updates on key products and acquisitions as well as the details of growth drivers, margin expansion opportunities, capital allocations and our multiyear financial targets. I hope at that time, we have improved visibility towards the COVID recovery situation. So it should be a really good meeting for laying out our vision and strategy on how to take the next step with Teleflex and provide some targets for the next couple of years. So really looking forward to it. And again, we, too, hope that we can do that in person.

Great. All right. We're almost here at the end of the meeting. I just wanted to ask you if had anything you'd like to leave investors with. Any misperceptions that you think investors have about Teleflex or big picture thoughts on how we should be thinking about the business and its trajectory?

Well, I would say that as of late, there's been a real heightened focus on UroLift, certainly a key product for us. And so while I wouldn't necessarily say it's a misperception, I would kind of direct investors to the fact that we are excited about many significant catalysts that we have in front of us, including our Vascular portfolio, including PICCs, MANTA, EZPlaz and now Z-Medica, which are now all on the fold. So I would say that many of these catalysts were incremental to what we saw during the prior Investor Day and when we provided financial targets. So as we think about the upcoming Investor Day, we're excited to share our multiyear strategic and financial plan with these new catalysts putting a nice wind in our back. So I would say that not necessarily a misperception, but rather there are now a number of exciting opportunities and catalysts that can drive us forward for the next couple of years, both from a top line as well as a margin perspective. So I would say the next couple of years is a really exciting time, and we look forward to getting together come November.

Great. All right. Well, that's a good note to end on. Thanks a lot, Tom, for the time. Thanks, John, as well. And we appreciate you spending the afternoon with us, and take care. We look forward to tracking your progress and seeing you at the Analyst Day this fall.

All right. Thanks, Matt, and thanks to everyone who dialed in.

Thanks, Matt.

Great. Bye.