Jake Elguicze - Treasurer & VP, IR Liam Kelly - President & CEO Thomas Powell - EVP & CFO.

David Lewis - Morgan Stanley Larry Keusch - Raymond James Richard Newitter - Leerink Partners Matt Taylor - Barclays Matthew O'Brien - Piper Jaffray Anthony Petrone - Jefferies Kristen Stewart - Deutsche Bank Dave Turkaly - JMP Securities Matthew Mishan - KeyBanc Mike Matson - Needham and Company.

Good day, ladies and gentlemen, and welcome to the Fourth Quarter 2017 Teleflex Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions] As a reminder, today’s conference is being recorded.

I would now like to turn the call over to Mr. Jake Elguicze, Treasurer and Vice President of Investor Relations. Sir, you may begin..

Vascular North America, Interventional North America, Anesthesia North America, Surgical North America, Europe, Middle East and Africa, Asia and Original Equipment and Development Services or OEM.

In connection with the presentation of segment information, we will continue to present certain operating segments, which now include Interventional Urology North America and Respiratory North America as well as Latin America, in the all other category because they are not material.

All prior comparative periods presented in this presentation have been restated to reflect these changes. In addition, we have also included restated quarterly and annual 2016 and 2017 revenue information, as well as restated annual 2015 revenue information on our website under Investor Relations.

With that said, I would like to turn the call over to Liam..

Thank you and good morning everyone. In beginning, I would like to start by saying that during 2017 Teleflex achieved very positive results.

These include driving additional operating leverage from our various restructuring initiatives; increasing our adjusted earnings per share guidance range on three occasions, ultimately achieving adjusted earnings per share at the very top-end of our most recently provided range; and completing two large acquisitions that help transform the Company’s constant currency revenue growth profile.

And speaking of these acquisitions, our most recent acquisition, NeoTract, exceeded our prior expectations, reaching $39 million of revenue for the fourth quarter and $125.5 million for full year 2017. This translates into revenue growth of 121% for the quarter and 149% for the year.

And as we look forward, we as a management team are enthusiastic about what we have accomplished over the past few years, and that the Company is well-positioned for success in 2018 and beyond.

Turning to an overview of the fourth quarter, we saw strength from revenue growth associated with new products, which is a continuation of the trend we saw all year. In addition, during Q4 we saw strong shipping-day adjusted constant currency revenue growth within our higher-margin Vascular North America and Interventional North America segments.

However, due to some temporary softness, our consolidated revenues in the fourth quarter were modestly lower than what we expected when we last provided guidance in early November. The delta versus our expectations primarily occurred due to two items and it is our belief that they are both transitory in nature.

First, within EMEA, we saw lower than normal revenue growth, in part due to distributor conversions associated with our Vascular Solutions product lines.

During the fourth quarter, we completed several distributor conversions, and in advance of completing these distributor acquisitions, the distributors did not purchase the typical amount of product that they normally would have had there not been a pending acquisition.

I am pleased to report that because we completed these distributor conversions in 2017, we expect an acceleration in revenue growth in Vascular Solutions product lines within EMEA during 2018. Second, during the quarter we saw reduced orders from certain U.S.-based distributors which impacted some of our North American-based strategic business units.

It is our belief that this is a timing issue and the primary business units that were impacted were our North American Anesthesia and Respiratory segments. This is something that we’ve experienced previously, and in the past, distributors replenished inventory levels rather quickly. It is our expectation that this will once again occur during 2018.

Turning to M&A, as many of you are already well-aware, our two recently completed scale acquisitions will significantly improve our future organic revenue growth rates, and that is expected to begin in 2018.

I’ve already spoken a bit about Vascular Solutions and the benefit we expect to receive in 2018 because of our ability to complete certain distributor conversions in late 2017. That, however, isn’t the only growth driver in 2018 for Vascular Solutions, as we also expect to see an acceleration in new product growth.

Moving to NeoTract, as I previously mentioned, it was a real highlight for us this quarter as it reached approximately $39 million in revenue. This was considerably better than our initial expectations which called for revenue of between $28.5 to $33.5 million.

The Q4 performance, coupled with a recently received FDA clearance for expanded indications for the UroLift system, as well as NeoTract’s ability to obtain additional covered-lives through private payer insurance coverage, gives us further confidence in their ability to drive significant revenue growth for many years to come.

Lastly, we continued to deliver solid margin and adjusted earnings per share expansion in the quarter, as we increased our adjusted gross margin by about 270 basis points, our adjusted operating margin by 40 basis points, and our adjusted earnings per share by 14.6%.

As Teleflex’s new CEO, I want to emphasize that Teleflex is well positioned to drive consistent constant currency revenue growth, and that our longer-term margin expansion objectives remain fully intact. With that as an overview, let’s now look at fourth quarter and full year 2017 results in a bit more detail.

Fourth quarter 2017 revenue was $595.1 million, and increased 15.8% on an as-reported basis and 12.6% on a constant currency basis.

As you will see momentarily, the constant currency revenue growth in the quarter was due to the acquisitions of both Vascular Solutions and NeoTract, while our base business fell a bit short for the reasons I mentioned earlier.

Despite this, we were still able to achieve fourth quarter 2017 adjusted earnings per share of $2.44, which is an increase of 14.6% versus the prior year period. On a full year basis, revenues reached $2.146 billion and were up 14.9% on an as-reported basis, and 14.1% on a constant currency basis.

From an earnings standpoint, we delivered adjusted earnings per share of $8.40, which was at the high-end of our most recently increased guidance range, and an increase of 14.4% versus the prior year. It is also much better than our initial 2017 guidance range which called for adjusted EPS of between $8.00 to $8.15.

Next, as is our practice, I would like to take you through the components of our Q4 revenue growth. For the consolidated company, fourth quarter 2017 constant currency revenue grew 12.6%.

Beginning with the components of organic revenue growth, during Q4 we saw organic constant currency revenue growth excluding the impact of shipping days expand by approximately 1.8%.

This consisted of revenue growth from new products adding 2% and positive pricing adding about 70 basis points, while legacy product volumes were down about 90 basis points. In addition, during the quarter we had 5 fewer shipping days, and this caused a headwind to revenue growth of approximately 5%.

Moving to the contribution we received from acquisitions, during the quarter Vascular Solutions added about 8%, NeoTract added 7.4%, and other M&A added another 40 basis points. Next, I would like to provide some additional color surrounding our segment and product-related constant currency revenue growth drivers.

Vascular North America fourth quarter revenue increased 0.3% on a constant currency basis to $80.7 million. If you were to normalize for the shipping-day impact, Vascular constant currency revenues increased approximately 8%.

The increase in shipping-day adjusted Vascular revenues was largely due to higher sales volumes of existing products, an increase in new product sales, and price increases. And as we think about 2018, it is our belief that this segment will grow constant currency revenues in a similar manner to what was achieved in 2017.

Moving to one of our newly created segments, Interventional North America fourth quarter revenue was $61.7 million, which is an increase of approximately 177% on a constant currency basis.

Normalizing for shipping days, Interventional constant currency revenue improved by almost 185%, the increase is largely the result of the addition of Vascular Solutions, coupled with continued growth from the Vidacare On-Control bone marrow product line, as well as increased intra-aortic catheter and pump sales.

And while we obviously won’t see constant currency revenue growth rates in 2018 as high as what was achieved in 2017 since we lapse the acquisition of Vascular Solutions, we expect our Interventional North America business to grow double-digits on a constant currency basis during 2018.

Turning to Anesthesia North America, fourth quarter revenue was $49.9 million, which was down 9.4% on a constant currency basis versus the prior year period. Excluding the impact of shipping days, Anesthesia constant currency revenue was down approximately 2%.

The decline in shipping-day adjusted Anesthesia revenue was due to lower sales volumes of existing products, in part because of the distributor ordering pattern issue I referenced earlier. This was somewhat offset by an increase in revenues generated from the Pyng acquisition, as well as an increase in new product sales.

In 2018, we would expect our Anesthesia business to show a modest improvement in constant currency revenue growth as compared to the levels achieved in 2017. Shifting to our Surgical North America business, its revenue decreased 9.8% on a constant currency basis to $43.7 million.

Adjusting for shipping-days, Surgical constant currency revenue declined about 2%. The decline in shipping-day adjusted revenue is primarily due to the decision we made to exit a lower-margin product in the third quarter of 2017.

As we look forward into 2018, it is our current expectation that our Surgical business continues to report negative constant currency revenue growth in the first half of the year because of the difficult comparison resulting from the elimination of the lower-margin product line.

However, comps ease in the second half of 2018, thereby causing full year Surgical constant currency revenue growth in 2018 to be flat to 2017.

Included in our thoughts for 2018 Surgical revenue is that we will need to file an additional 510k associated with our Percuvance product line, and that we will be re-introducing the Percuvance product back to the market in the fourth quarter of 2018.

We do not expect any material revenue associated with this product in 2018, however, we continue to believe that this product offering will be a growth driver in the future. Surgeons enthusiasm for the product continues to be high and we believe that will continue through the 510k filing period.

Moving to our overseas operations, fourth quarter EMEA revenues were down 2% on a constant currency basis to $143.6 million. Normalizing for shipping-days, EMEA constant currency revenue increased approximately 4%. This was the result of revenues generated from acquired businesses and new product sales.

As I previously stated, we expect the Vascular Solutions distributor headwinds to turn to a tailwind in 2018, and it is our current thought that EMEA constant currency revenues will show an improvement in 2018 as compared to the constant currency revenue growth rate achieved in 2017.

Turning to Asia, our fourth quarter revenue increased 4.5% on a constant currency basis to $78.8 million. The shipping-day phenomena that impacted our North American and European operations did not have a significant impact within Asia.

As such, constant currency revenue growth within Asia was primarily due to the benefit received from acquired businesses and price increases. I am pleased to report that China grew 10.4% on a constant currency basis in quarter four, continuing the positive momentum from quarter three.

During 2018, we would expect the constant currency revenue growth rate within Asia to be slightly better than the full year 2017 constant currency revenue growth rate. In part, this is because of our decision to go-direct within China.

As you may recall, taking our business direct within China caused a headwind to growth during the first half of 2017 as compared to the first half of 2016. This became a tailwind for Teleflex during the second half of 2017 and we expect this to continue in 2018 as well. Next, I’d like to brief you on our OEM segment.

During the fourth quarter revenue was relatively flat at $46 million. This was primarily due to the fewer shipping days, and if you were to normalize for that, constant currency revenues would have improved by about 2%.

And lastly, fourth quarter revenue for the businesses within our all other category was up 67% on a constant currency basis, totaling $90.7 million. Growth here is primarily attributable to the acquisition of NeoTract, and I would like to now provide you a more detailed update on.

Teleflex completed the acquisition of NeoTract on the first day of the fourth quarter, and as such, received an entire quarter’s worth of NeoTract results in 2017.

I am pleased to say that the integration of this acquisition remains on schedule, that the legacy management team remains intact, and that we have not experienced any regrettable sales force turnover.

In fact, employee engagement remains very high, and we remain committed to investing behind this business to ensure that their hyper-growth revenue trajectory continues in the future. During 2017, NeoTract revenues reached $125.5 million, which is an increase of 149% year-over-year.

The 2017 revenue performance was also better than our initial expectations when we announced the acquisition which called for revenue of between $115 to $120 million.

As we look forward into 2018, we expect NeoTract revenue will grow at least 40% over 2017, while we continue to think that it will be breakeven at the adjusted earnings per share line in 2018.

After 2018, we continue to expect significant revenue and adjusted earnings per share accretion, including adding between $0.35 to $0.40 of adjusted earnings per share in 2019. In order to continue NeoTract’s high growth trajectory in 2018, we have a very focused commercial strategy.

The core of that strategy is driving utilization in existing accounts, or as we like to say, going deep. We believe there remains a significant opportunity to drive growth by treating more of the BPH patients each urologist actively manages. This strategy clearly delivered results in 2017, and in 2018 the emphasis on going deep will be even stronger.

Next is to methodically begin driving the adoption of UroLift into the early majority segment of the market. We believe UroLift has the clinical data, wide physician recognition and patient demand to begin penetrating this large portion of the overall market.

And lastly, with the recent positive coverage decision from United, UroLift has now reached approximately 220 million covered lives in the U.S. Our commercial team is focused on making practices aware of this broad patient access to UroLift, further facilitating adoption of this product.

In addition to the items I just discussed regarding how we are going to grow the NeoTract business in 2018, I am pleased to say that we recently received 510k clearance for changes to the IFU for both the first and second generation UroLift devices.

This 510k clearance included the removal of the obstructive median lobe contraindication that previously existed on the devices, the addition of a median lobe indication, as well as lowering of the minimum age of men who could get the UroLift procedure to men 45 and older, as compared to the previous IFU which stated that the minimum age was 50 and older.

Given that the treatment of patients who have a median lobe can be different than those that do not, we intend to embark upon a methodical sales training process during 2018. As such, we don’t expect to see an increase in 2018 UroLift revenues associated with the receipt of this 510k.

However, the removal of the contraindication should be another catalyst for revenue growth in the future. Lastly, before I turn the presentation over to Tom, I’d like to give you an update on another significant market opportunity that we also recently received some good news on.

For those of you who may not be familiar with it, RePlas is a lyophilized fresh frozen plasma product which was originally developed by biologic scientists at Vascular Solutions and is now being developed in collaboration with the U.S. Army.

When Vascular Solutions was a stand-alone public company, it sized the potential market at approximately $100 million, and we agree with that assessment. Following Teleflex’s acquisition of Vascular Solutions, in May of 2017, we commenced a Phase I clinical study to assess safety and tolerability.

Following the completion of the Phase 1 study which is expected to occur around mid-year 2018, we initially anticipated that we would need to do a second clinical trial and that we would not be able to commercialize the product until late 2020.

However, in December of 2017, the FDA and DoD launched a joint program to expedite the approval of medical products that are intended to save lives of the U.S. military, including freeze-dried plasma.

Members of our Vascular Solutions biologics group had a meeting with the FDA in early January and the FDA confirmed an accelerated BLA approval pathway, and confirmed that an efficacy study is required post-approval.

We continue to dialogue with the FDA and it is our current hope that we will be able to launch earlier than our initial expectations which called for a launch date of late 2020.

We will continue to inform the investment community as to when we will be able to launch RePlas as we learn more from the FDA, but to date our conversations have been quite positive and we are excited about the opportunity to get this valuable product into the hands of the U.S. military as soon as possible.

That takes me to the end of my prepared remarks. Now, I would like to turn the call over to Tom for a review our financial results for the fourth quarter and our initial financial guidance for 2018.

Tom?.

Thanks, Liam, and good morning everyone. Given the previous discussion of the Company’s revenue performance, I’ll begin at the gross profit line. For the quarter, adjusted gross profit was $336.3 million versus $276.7 million in the prior year quarter. Adjusted gross margin was 56.5%, a 270-basis point increase when compared to the prior year period.

The expansion in adjusted gross margin was largely due to an increase in sales of higher margin products and the acquisitions of Vascular Solutions and NeoTract which are accretive to gross margin. Adjusted operating margin improved 40 basis points to 25.4%.

The improvement was related to the gross margin flow through, somewhat offset by the addition of NeoTract, which operates at a higher OpEx cost structure. Adjusted net interest expense increased to $23.5 million from $11.7 million in the prior year quarter.

The increase reflects the impact of the additional borrowings to finance the acquisitions of Vascular Solutions and NeoTract. Turning to our adjusted tax rate, for the quarter it was 10.9%, which compares to the prior year period rate of 16.5%.

On a GAAP basis, the 4th quarter tax rate was 163.6%, reflecting $107.9 million of tax expense recorded in connection with the Tax Cuts and Jobs Act.

$107.9 million tax expense reflects both a $46.1 million net tax benefit resulting from the reassessment and revaluation of deferred tax balances and a tax expense of $154.0 million for the one-time toll charge on the deemed repatriation of undistributed foreign earnings.

We intend to pay the one-time toll charge over the eight-year period prescribed by the TCJA. I do want to point out that the net $107.9 million charge has been provisionally calculated and will be subject to further confirmation. Moving to the bottom line, fourth quarter adjusted earnings per share increased 14.6% to $2.44.

Turning now to select balance sheet and cash flow highlights. During 2017, cash flow from operations totaled $426 million or an increase of 4% over the prior year. The increase was primarily the outcome of improved operating results, partially offset by a tax refund received in 2016 that did not re-occur in 2017.

Finally, during the quarter our gross debt balances remained constant and our leverage per our credit facility definition stood at 3.57 times. That completes my comments on the fourth quarter. Now I’ll move to 2018 guidance. Beginning with revenue. For 2018 we expect total constant currency revenue growth of between 12% and 13%.

Included in this estimate is an assumption that our organic constant currency revenue growth is between 5% and 5.5%. This represents an improvement from the 3.2% of organic growth that we achieved in 2017, and this acceleration can be attributed to a few items.

First, the headwinds we experienced during 2017 associated with our distributor conversions in China and Europe are expected to become tailwinds for 2018. Additionally, during 2018 we have one additional shipping day.

And finally, we anticipate that the combination of Vascular Solutions and NeoTract will add approximately 1.5% to our organic growth rates. This reflects 10.5 months of contribution from Vascular Solutions and 3 months from NeoTract.

And as a reference point for 2018, if our organic constant currency growth were to be calculated assuming a full 12 months of organic growth, for both NeoTract and Vascular Solutions, then the pro-forma 2018 organic growth rate would be in the range of 7.0% to 7.5%, or 200 basis point higher.

Turning next to M&A, we project previously completed acquisitions to contribute between 7% and 7.5% of revenue growth in 2018. This is largely comprised of Vascular Solutions and NeoTract, with a very modest amount coming from Pyng and Airway Medix.

Lastly, our assumption is that FX will create a 2% tailwind, and as a result, we expect as-reported revenue to increase by 14% to 15%. Based on our currency assumptions, this translates to an as-reported revenue range of $2.447 billion to $2.468 billion.

A stronger Euro relative to the USD is the primary driver of the projected 2% foreign exchange tailwind projected in 2018. For 2018 planning purposes, we had assumed a Euro/USD exchange rate of $1.18 which approximated the spot rate at the time we established our 2018 financial plan. Turning next to gross margin.

During 2018, we anticipate that adjusted gross margin will increase by 170 to 220 basis points to a range of 57.5% to 58%.

Of the expected 170 to 220 basis point increase, approximately 125 to 150 basis points is attributed to NeoTract and Vascular Solutions and the remainder attributed to operations cost improvement programs and benefits from our previously announced restructuring programs, net of inflation. Moving to adjusted operating margin.

We anticipate that our adjusted operating margin will increase by approximately 100 to 140 basis points to a range of between 26.1% and 26.5% in 2018. Gains from gross margin will be the principal driver of the increase, which will be muted somewhat by the addition of NeoTract which carries a higher OpEx cost structure.

That takes me to our preliminary adjusted earnings per share outlook for 2018. This slide serves as a bridge from our full year 2017 adjusted EPS, to our full year 2018 adjusted EPS outlook.

Beginning with 2017 Adjusted EPS of $8.40, from an operating standpoint, in 2018, we project our business will add approximately $1.61 to $1.71 per share, or growth of approximately 19% to 20%.

This will be primarily driven by positive revenue and mix, the continued reduction of manufacturing costs, as well as the positive contribution from acquisitions. Turning to FX. Based on our current estimates, we expect foreign exchange will create an adjusted earnings per share tailwind of approximately $0.26.

Moving to taxes, during 2018 we project that our adjusted tax rate will be between 15% and 16%. That would mean that taxes could range from a headwind of approximately $0.07 to a tailwind of approximately $0.03.

Our estimate is that adjusted weighted average shares will increase by approximately 500,000 shares to 46.9 million for full year 2018 which is dilutive by $0.10 per share. And finally, we expect interest expense to be approximately $109 million and a headwind of approximately $0.55 per share in 2018.

Our interest expense assumptions for 2018 reflect no changes to our current capital structure. However, we are forecasting additional rate hikes during 2018 that will impact our revolver and term loan, which are floating rate instruments.

In total, our outlook for 2018 adjusted earnings per share is $9.55 to $9.75, representing growth of between 13.7% and 16.1% versus 2017. Given the recently enacted Tax Cuts and Jobs Act I’d like to provide a little more color surrounding our current expectation for how the TCJA will impact our adjusted tax rate going forward.

As the initial House and Senate drafts of tax reform began circulating in late 2017, our initial assessment was that tax reform would negatively impact our future adjusted tax rate. However, once the regs for TCJA were published, our initial assessment was that the impact would likely be neutral for our tax rate going forward.

However now that we have had more time to assess the specifics, we now expects tax reform to provide a modest benefit to our 2018 adjusted tax rate.

Combining the benefit of a modestly reduced tax rate with improved access to offshore cash is a positive outcome for Teleflex, and certainly a better outcome than was envisioned just a couple of months ago.

And while it is not our practice to provide specific quarterly guidance, I did want to highlight some considerations regarding variability between our 2018 quarterly expectations.

During 2018, we expect that the percentage of revenue generated each quarter will mirror the quarterly percentages achieved in 2017 when we achieved approximately 23% of our full year revenue during first quarter, approximately 25% in both the second and third quarter, with the remainder in fourth quarter.

For the first quarter, we have one fewer shipping day in 2018 versus 2017. We will then get the benefit of one additional shipping day in each of quarters two and four, while there is no change in the number of shipping days during third quarter. Overall, we will have one additional shipping day in 2018 as compared to 2017.

From an adjusted earnings perspective, we also expect that the cadence of our quarterly earnings will closely resemble the percentages attained in 2017, with about 45% of our full year 2018 earnings generated during the first half of the year and about 55% generated in the second half.

And specifically for the first quarter of 2018, adjusted EPS growth is projected in the mid to high single digits. I would like to close by saying that during 2017 Teleflex delivered numerous positive outcomes. We completed the acquisitions of NeoTract and Vidacare which will serve to accelerate our future revenue growth and margin expansion profile.

The China and Vascular Solutions distributor conversions are largely complete placing the revenue headwinds behind us and positioning us for growth in 2018. Also in 2017, we raised adjusted earnings per share guidance following each of the first, second and third quarters.

And we achieved the upper end of our most recently provided adjusted EPS guidance range. As we look toward 2018, we are guiding to constant currency revenue growth of 12% to 13% and organic growth of 5% to 5.5%.

Gross margin is expected to expand by an additional 170 to 220 basis points as an outcome of the recent acquisitions and ongoing operations productivity initiatives. On the bottom line we expect another year with adjusted EPS growth in the mid-teens.

And as a final thought, we have scheduled an analyst day for May 11th in New York City when we will share with you a longer term financial outlook and will provide strategic updates on key businesses and product offerings. That concludes my prepared remarks. At this time, I would like to turn the call back to Liam for some closing comments..

Thank you, Tom. In closing, while we had some transitory issues that impacted our fourth quarter results, we feel very good about our full year 2017 performance and remain confident about what Teleflex can accomplish in 2018. Let me briefly recap some of the drivers in 2018 as we see them.

First, our two scale acquisitions are transforming our organic growth profile. NeoTract is poised to continue driving adoption of UroLift and delivering rapid revenue growth. And Vascular Solutions is poised to accelerate momentum in the business with tailwinds from our go-directs in Europe.

Next, we see double digit growth in our Interventional North America segment and accelerated growth over 2017 growth rates in both our Asia and EMEA segments. And lastly, new products are expected to continue building leadership positions in key niche markets and taking share in others.

Overall, we believe we are in a great position to deliver a meaningful improvement to our organic constant currency revenue growth rate, demonstrated by our guidance of 5% to 5.5% for the full year. When you combine that with our adjusted EPS guidance of approximately 15% at the midpoint, we believe that makes for a very compelling 2018.

That completes my remarks. I would now like to turn the call over to the operator to begin the Q&A session..

[Operator Instructions] Thank you, and our first question comes from the line of David Lewis with Morgan Stanley. Your line is open..

Liam, I want to start on organic growth for a second and the Company had a lot of successes, but organic growth progression has not been one of them. So, as new CEO two part question.

What can you do to break this cycle? And as I think about 2018 expectations, our sense is 5% to 5.5% underlying maybe that's 3.5% to 4% in the core, one point from BSI, maybe 0.5 point from NeoTract, but why should investors believe those are appropriately risk adjusted here to start to year? And then I've a quick follow-up for Tom..

Let me start with first part of your question. How do we address this? I think David what happened in the fourth quarter, we see it as predominantly transitory, really our full year guidance calls for a total constant-currency growth of 14.25, 14.75.

Within our full year performance for sure, there're puts and takes, NeoTract performed better than expectation as did our smaller M&A and new products continue to show progress, BSI and the core business underperformed modestly, due to two -- and I again say they're transitory events, in all in all our final results were 14.1% constant-currency growth, which was approximately 7.5 million of the shortfall in the middle of our guidance range.

In this entirety Dave, we're talking about 30 to 40 basis points on a full year basis and really the drivers of the shortfall are continued destocking by the BSI distributors and also despite a really strong flu season, we see distributors in the United States file less inventory.

Both of these, as I said are one-time transitory in nature, and we have seen in the past when U.S. distributors destock, they normally normalize their stocking levels in subsequent quarters. So it's a factor of having 50% of your North American business going through distributor.

Now to address your question on the full year and bridging to 2018, the components of our organic constant-currency growth are as follows. We're guiding to 12% to 13%, so if we remove M&A of 7% to 7.5%, on organic, true organic growth of 5% to 5.5%.

Vascular Solutions and NeoTract contribute 4.5% to that organic growth resulting in an organic growth of 3.5% to 4% from our core business. Now our growth in 2017 Dave was 3.2%, we have an additional billing day in 2018, which should add 40 basis points, and that gets me to the lower end of my range.

Headwinds and tailwind combined like Surgical as the China go-direct and positive pricing from our go-direct really make me feel very comfortable with the guidance range and our ability to achieve it.

I would also like to point out that the one-time impacted quarter or revenue have not hold our thinking on 2018 revenue and I really remain very positive on that and a real highlight for me I think was the over performance of NeoTract and I've often said this, that none all of rules is equal.

And I continue with that hypothesis the growth that we delivered and areas of our performance, where our higher margin categories such as NeoTrack, our Vascular business unit invest in North America with Vidacare including intra-aortic delivering again over $20 million.

So, I think that the future for 2018 looks relatively bright when you feel back the other elements of our organic growth, I would feel it's quite deliverable..

Okay, Liam, thank you, that's very clear. And then, Tom, just thinking about 2018, the real surprise obviously is tax, and there's all the maturation these last two months. So, if I think about the tasks, a couple of questions. One, I feel like on the margin with the tax guidance, the 2018 earnings guidance seems conservative.

So could you talk about, the level of reinvestment of some of these tax savings given how late in the year they occurred? And then this rate you've talked about, for 2018, is that the rate we can think about for this business for the foreseeable future?.

Okay, so David, as you point out, we do see a tax reform being a nice benefit for us versus NeoTrat expectations as we think about 2018 as Teleflex has become a more complex organization as a result of our recent acquisitions and growth, you know, there are some investment areas that we want to put some money towards to continue to build out our capabilities.

We think the numbers of these are investments that will serve us well into the future. So we are reinvesting some of that tax savings. As far as the rate going forward, we've got a couple of things going on.

First of all, as more and more of our income is generated from some of the recent acquisitions that could put some unfavorable mix in our tax rate as a result of having more US based income.

Now with that being said, we're in early stages of assessing the recent tax reform regulations and it's, our expectation that we'll continue to work through those regulations in the coming months, to try and identify additional areas for planning.

So as we think about the rate, I think it's a good baseline to start with, with the expectation that, that mix will be unfavorable in the coming years given more income in the US, but you know, we'll, we'll look to find opportunities to offset that with the future tax planning ideas..

Thank you. And our next question comes from the line of Larry Keusch with Raymond James. Your line is open..

Liam, I just wanted to circle back on, on the distributor side. I think, the one thing that's going to be bothersome them to, to folks today is obviously the 90 basis point decline in the core volume. So, again, as you, as you look at your businesses that were impacted by the distributor ordering patterns.

I guess the question is why do you really think that occurred? And do you have any insight as we see here on February 22nd as to kind of what those distributors are now doing?.

Thanks Larry. So, why it occurred given that we had such a strong flu season. It just the timing of as when these distributors would stock up for that flu season. Encouraging thing for me Larry is that we do have a very strong flu season. It's predominantly impacted in our Anesthesia and Respiratory businesses in the fourth quarter.

And our expectation is that as it did previously it will come back in 2018. We do see positivity in the first month of 2018 early in the quarter. So I'm poised by that quite frankly, Larry. And the other thing that we did look at in quarter four was to fix our end customer volumes to ensure that there was no -- lots of share in any of these segments.

So what we found was there our end customer volumes with trades being demonstrated a solid 5% end customer demand. So in my mind Larry, it almost an elderly has to normalize through the early part of 2018..

Okay, very good thank you for that. And then just two other questions. So on NeoTract, I guess they have when do you expect to launch the second generation device? And really why do not anticipate any real revenue generation from removal of the median lobe communication? And then the other question is on RePlas.

I understand that you meet with the FDA now in January and they said that you're trial can come post approval. So what happens as you understand today, what's the sort of pathway to getting this on the market and would it only be available for military use until you complete that other trial? Thank you..

Okay, so I will start with RePlas, Larry. So, we did meet with the FDA in early January, they meaning was very positive I would say first of all, secondly we're still wining for absolute, as to what the recruitment is to get approval and what that approval would mean.

So our anticipation is that the first clinical study would be provisioned with additional bench testing to get approval and that should accelerate having RePlas in the markets from late 2020 to area of that. We’re still waiting more clarity from the FDA that will mean jus military approval or general approval.

Personally, Larry, I think it's only likely that they would go for a specific approval for military because it would be hard to a put a wall around this and to stop linkage of the product into other areas in view, but I still for the FDAs going back.

We will have the update on this and we should have more clarity by the time we get to our investors day in March. Your second question was around the median lobe and around the median lobe. I think that clinicians as the use the euro products can make their own determination as to whether this is used for a median lobe.

Obviously, we cannot promote this for that application. And secondly there is a significant amount of training that we need to do in order to prepare our sales force to be prepared to promote this product for the median lobe. That’s going to take a number of quarters and that’s why we expect, the revenue pick up from this to be a little bit later.

In my mind, Larry, one thing that it does remove is an advantaged system of our competitors kind of that they can talk to the physicians and say, our buyers is applicable to median lobe and lateral lobes. So I think that will help our sales force out there in the market place. Your last -- I am taking in reverse order, Larry, I apologize.

Your first but I'm addressing last is the launch of UroLift 2. And we're still in pre-market study with that Larry and we will update as soon as we have that completed. And we may once consider given that we've got the train -- sales force in the median lobe, just deleting that a little bit, but will assess that as we go through.

We don’t want to overburden this sales force. I want to have them selling this product because it's such a rapidly growing product and we have as we said, plus 40% growth planned in -- at least 40% growth planned for 2018 for NeoTract..

Thank you. And our next question comes from the line of Richard Newitter with Leerink Partners. Your line is open..

Liam, just going back to the timing of the kind of the U.S. distributor orders that you said, your confidence is coming back. In a follow-up, you said that the flu and the impact of having on the ordering that was one of the kind of the main reasons that gives you confidence, it's going to come back early in the 2018.

I guess compared to the situation that you've experienced when this has occurred in the past, was it also the flu or was it something else? And I'm just trying to make sure I understand what's path for Urologic. Thanks..

Yes, they are linked but not absolutely. So a strong flu facilitates the burn off of the inventory that they preorder. What happens in quarter four, Rich was we anticipated the normal buying that happens for the flu. We experienced it in our Vascular business, but in our Respiratory and Anesthesia business, it didn’t happened.

The flu is very strong so that is why I'm pretty confident that buying will happen in 2018, and we firmed off because the flu season is actually at a its more prevalent than last year it's a strong flu than last year, and therefore I would anticipate that we would see this recovery in 2018 as distributors restock the in customer demand as I've said that we've seen in quarter four with substance being at that and the early signs in January would also defend to yourself..

Okay, and just to be clear though you think that will come back in the early part of the year like I said this is first half phenomena and or is this it's something that kind of that get spread out through '18.

I'm just trying to make sure we get our models right here as we think of the quarter?.

So, you would anticipate seeing the recovery in the first half and what we'll be watching closely as the normal a destocking in quarter three. So the normally destocking quarter three for inventory department through, so it may have as it may take it's through three quarters to materialize Richard..

Just another one on Percuvance, I think you made some comments. What if anything is contemplated in 2018 guidance and can you highlight some of the vascular new product releases that is that you are looking forward to..

Okay, so again I'll start with Percuvance, as I said in my remarks Rich, we anticipate -- we will be these back in the Americas following in the 510k in quarter four so therefore as we don’t have a revenue plans in 2018. We were looking forward to getting back in the markets, resurgent, enthusiasm is still very-very strong, for the products.

And we're running the Vascular new products, we're still very encouraged by our new PICC portfolio with our positioning system.

Our Medline catheter that has obviously got our folding technology on it to help prevent infection and those and our endurance products, so we have a good bowl of the new products coming through our vascular business that has been to buoy the solid revenues that we've seen within vascular in quarter four and that we anticipate in 2018, and beyond and vascular is one of our stronger margin business units, so having solid growth there, back to my hypothesis not all growth is equal, I think will be very encouraging for us..

And one just last one, UroLift, I appreciate that you're not committing to when precisely that UroLift is due -- is going to come out.

What is key feature that you're going to think this is going to add? And then anything we should be thinking about on the gross margin side, when it does launch?.

So, I've starting and then gross margin and then I'll go back to the features Rich. So the gross margin we anticipate -- the current gross margin in the low 70s. We think that once we have fully cannibalized that this has potential to move it into the high 70. Then regarding the features, I feel the features are really around ease of use.

So, the new product is ease of use, there's also less waste. And when you consider that the amount of the procedures that are done in the doctors' offices, and DACs with the doctors' offices are on roughly around 60%, having a large volume of waste, is a problem for them, and this will make it a lot of easier for them.

For Teleflex, it will help us comply with some of our green initiatives, but also for the customer it will mean less waste in the procedure and less products we held on the shelf, and the product that is actually easier for them to use and it should help them in positioning the system easier when they're delivering the implant..

Thank you. And our next question comes from the line of Matt Taylor with Barclays. Your line is open..

So want to follow-up on some of the components of organic growth you've been talking about here. If we look at the five to 5.5 and consider that you're getting 1.5 from Vascular in NeoTract.

Can you talk about the shift from headwind to tailwind of distributor conversions? How much that adds? And then in terms of the come back on easy comps with the distributors in the U.S.

how much does that add, and we kind of have base with 3.5 to four?.

So, as I said earlier when I was talking about our guidance, our total mix versus the mid range of our guidance was approximately 2.5 million, less than half of that came from the North American distributors, more than half came from the EMEA destocking, so that would probably help you.

As I look to choosing guidance, and the headwinds and the tailwinds, the tailwinds we had said that the headwinds for the China go direct was approximately 20 basis points in the year 2017, so that we would expect that to come back in 2018.

The exit of the surgical business is approximately $8 million to $9 million in the first half of the year, so that's why you see Surgical come back quite stronger in the second half of the year.

And then the distributor go-direct, which would be seen in pricing and that would have a better return for than the Surgical destocking and from the best way from the appointment. So you can see why I'm fairly comfortable with the guidance range that I've put out there today..

And I want to follow up on Percuvance, you made some comments there, but generally before you would talk about that is the biggest organic opportunity for the Company.

Is that still your view given some of the delays that we've had here? Or do you think that the ultimate contribution could de=lever?.

So first of all, I clearly made those comments before we acquired NeoTract, regarding the biggest organic growth opportunities.

We still see the macro potential for that in the $300 million and the lot of pent up demand for the product, a lot of enthusiasm for surgeons and we look forward to getting back into the marketplace and what we do get back, we'll reassess the growth trajectory for it. Quite frankly, I think that we were still early in the adoption call for surgeon.

I don't see this having a longer term impact on Percuvance and are percutaneous offering in the longer term. The important thing for me is to get back with a very solid product that works and then do the market a little bit like what we did, -- what we're doing with NeoTract today.

I'm going to say that the strongest growth opportunities for Teleflex in the next number of years is really NeoTract give them that the growth profile about that asset and given them the fact that it closed much stronger than we expected in quarter four and even with that strong close, obviously that has the jump off point.

We haven't changed our, our hypothesis that it should grow by 40% in 2018. So therefore I think in 2018, 2019 and 2020 and beyond, that will be one of the fastest growing organic acids in the Teleflex portfolio for a number of years to come.

And based that on the fact that just exclusively when the United States, we've done $125.5 million in 2017 in the addressable market of about $6 billion. We've only begun to penetrate the urologists, we're at the very early stages of that and we've just now got 220 million lives covered.

We're almost at the stage where we have full coverage across the United States..

Thank you. And our next question comes from the line of Matthew O'Brien with Piper Jaffray. Your line is open..

Liam, not to push too hard here, but the two year stack growth of NeoTract actually accelerate in Q4. So. clearly there's a lot of momentum here. Love to hear exactly what drove some of that acceleration you saw in Q4, again on a two year stack. So adjusting for the seasonality already.

But then, the 40% outlook for the business, it's a pretty meaningful deceleration given what you're doing, I get bigger numbers.

So why would it just be 40 against, given how much momentum that we're seeing?.

Yes, we see we see that momentum as well and we're very encouraging by it Matt. The way we look at this is, we have now trained and converted many of the area the doctors, for this technology. We are now moving into the early majority.

We believe, perhaps we're being conservative in our view, but we believe that going deep rather than going wide, and we moved to this area majority meaning potentially take a little bit longer to convert that part of the market, but it’s the most bigger segment of the market and once we do begin to convert it.

We see the potential that we accelerate that within the future.

So that the view that we have today, that’s the view of the new attractive management team and it's consistent with what they would have pursued themselves the price company before the acquisition, and that has a reason we left that stand along business unit to bring that expertise to bear.

And we believe that perhaps it may be somewhat conservative given what we see in the growth rate but right now, we start to see trajectory on that really majority we think that’s an appropriate guidance of at least 40% for 2018..

It's the follow up question. Just on the gross margin range, it's kind of a broad range 170 to 220 basis points of improvement.

So, can you just give us a sense for what gets you to the low end of that range versus what get's you to the high end of that range?.

I'm going to actually ask Thomas to cover that..

So, with any given year makes certainly the factor and in this area we got a pretty high growth profile going on with NeoTract. I'd say that pushes the upper end of the range and you’re looking for stronger growth in some of the higher margin products about frame level.

I wouldn’t say that necessarily there is anything that we envision right now that’s going to cause us to not the headed right towards the middle of that range. So nothing extraordinary that would need to occur this to get there. And again you get the upper end of the range its more growth in the higher mix products, on margin products excuse me..

Thank you. Our next question comes from the line of Anthony Petrone with Jefferies. Your line is open..

Maybe a couple of questions just on a quarter again distributor as it relates to flu and then few on NeoTract. Just on looking ahead to second quarter, third quarter when you do actually get a restocking from distributors, just given that extent of food this year, you think that restocking event will be up year-over-year.

And then on NeoTract, I know the strategy here is to go deeper. Can you us a sense of average utilization today of urologist that are users UroList usres maybe on a monthly basis and no where potentially that can go over time. Thanks..

I will start with the distributors and what we would anticipate is to see in the first half given the strong blue, some think of within our Anesthesia and potentially Vascular and respiratory businesses. The really, the cutting point for it will be quarter three where there is normally a destocking.

If it burns off the inventory which would be flu season that we’re having, I would anticipate that, that would occur. We would anticipate being a smaller destocking in quarter three. And then again, you're right back into the flu season for the restocking and order forth, so would be depended on what the blue looks like in quarter four.

Regarding the customer, the NeoTract question, pardon me. What we see is that coming from existing customers in 2017, 63% of the revenue growth it came from existing customers in 2017 and in order to support this business we have continued to invest within the sales channels.

And I know as we were anticipating in having a food sales organization of consultants and associates of approximately 70, we actually went above that in at the end of the year for that group of people.

So that we will see so we continue to invest behind it to drawing and accelerate that top line growth, but then to your specific question 63% of the growth was coming from existing customers who in 2017..

Our next question comes from the line of Kristen Stewart with Deutsche Bank..

I was wondering if you can give us, what exactly you are expecting from NeoTract in terms of the sales because I'm a bit surprise that given the strong momentum that you are seeing.

In the fourth quarter, why you are not seeing any level of accretion on the bottom line? I would have expected maybe a little bit more like maybe $0.05 to $0.10 or $0.10 to $0.15 just given the higher numbers I guess you are seeing in fourth quarter and it would have struck me as a little bit higher than you would have expected at the time in the acquisition as well.

Why isn’t NeoTract at least modestly attractive for 2018? Is it just reinvestments that you are doing?.

So, I would start and then I'll pass it over Tom who can give you much more detail on the components of the NeoTract. But in essence, the OpEx is much higher in this business to drive the revenue growth.

The leverage for NeoTract really start to kick in 2019 and beyond, and as we have said in the past that we expect $0.35 to $0.40 of ESP accretion in 2019.

And Kristen, that's a function of the continued top line growth and then you try to get leverage within the P&L based on the top line growth and the percent of OpEx required to run this business, as a percent of decreases that's why you try to get the leverage.

So, the growth that we expect on the top line at least 40%, if we took at 40% we'd be approximately $50 million of growth, but we are investing behind this asset. We are doing registrations in Japan. We're gaining more clinical data.

We are recruiting educators were trending on the median lobe, we're adding to the sales force in order to continue the hyper growth that we've seen. And I'll ask Tom to add any other color that he would like..

Well, Kristen, as we think about it, initially our expectation was growth of approximately 40% for 2018 and now based on the strength, so I think it's at least 40%. For the extent that we do see those revenues growing at a higher level and initially expecting, we should expect to see a little bit of the EPS accretion coming through.

But right now again we're not modeling that higher level of growth, so our guidance is based on that 40% level..

And I guess just with all of the potential growth opportunities is it your view that if NeoTract continues to be better than expected, would be likely to reinvested in all of these opportunities or would you like that flow to the bottom line? How should we think about that?.

So we've already actually even in quarter four accelerated investments within the sales organization to drive to top line growth. We're still early in the adoption curve. We would obviously at the time making assessment, but I am inclined to continue to invest in a productive state of channel driving a low 70s gross margin products.

But we'd be thoughtful on that and take a balanced approach to delivering shareholder return and securing the long-term growth of the NeoTract portfolio..

Thank you. And our next question comes from the line of Dave Turkaly with JMP Securities. Your line is open..

I just wanted to talk Percuvance just quickly again.

Is this the same issue like the -- I know you said 510k you expect it 4Q '18 but did something additional happen in the quarter, any product reworking or is this still the same initial thing that happened late last year?.

Nothing, new David, this is ongoing. When I spoke in quarter three, I was not anticipating having to re-file the 510k, and that directly what's changed our thinking is the fact that we have to re-file our 510k, which means putting together significant dossiers and doing a filing to the FDA..

And then on NeoTract, I wondered if you could just give us an update on sort of the sales force size there, and maybe if there's sort of a plan in terms of how many you plan to -- how many new folks you plan to hire and sort of what you think they can do from a productivity standpoint when they're fully ramped?.

So, I'll go back to the history in 2016 there were approximately 50 sales reps, at the end of the year between neurology consultants and associates, we actually thought we'd end up with 70, we went modestly over 70, we continue to see that cadence of as in reps and associates in 2018 to drive the growth..

Thank you. And our next question comes from the line of Matthew Mishan with KeyBanc. Your line is open..

First off just on Vascular Solutions.

If you have the numbers the year-over-year, what was the growth in Vascular Solutions for the quarter and for 2017? And then why would there be a -- why would a shortfall from distributed conversions be a surprise to you, I mean you've kind of done this before?.

We have done it before and when we have done it before, Matt, we've been dealing with Teleflex contracts. In this instance, we were dealing with Vascular contracts, which added some additional complexity unfortunately and calls a bigger impact then we were expecting.

Turning to the VSI growth and almost all of the headwinds in VSI had been in the EMEA because of these go direct, so I am going to give you a number without the EMEA with the global growth on a full year basis Matt which is probably a better indicator then doing that, and that is 10%.

And the other comment I would make is that the Interventional North American business that we have merged with VSI also grew about 12% organically in 2017. And that is being sold by the same sales organization to sell VSI.

So that’s why we are reasonably confident on the double-digit growth, we've got the go-direct in 2018, we've got the go-direct become a tailwind, we got a motivated sales force, our excluding EMEA, the overall business is growing in that double-digit range.

And once we have the EMEA, transitory issues behind us, we think that we are setup for success in 2018 and beyond..

Okay, great that’s helpful.

And just two more, first on the freeze-dried plasma, with the accelerated approval pathway, how quickly can you manufacturing of RePlas? And last on the tax rate, what have you accounted for with stock options starting to shift?.

Okay, with freeze-dried, we have enough capacity, we believe to supply the military demand all with the next four five years. So, as we bring on commercial demand and this is dependent on the FDA clearance, we should have enough capacity to carry through 2.5 to 3 years in the ballpark.

We are moving constantly has said that, as we roll the product out, but I think we have enough capacity Matt, and it's not something we are concerned about, in the near to near to medium term. And on the tax rate, I let Tom, sorry Tom..

And then with regards to the windfall in the tax rate, so certainly last year, annuity in terms of the change in the accounting, so we monitored how that went throughout the year and we pushing it in our plan for this year, we included in the estimated, both for the restricted shares that are vesting or the restriction lapsing, as well as an estimate for stock options and that’s based on historical exercise as well as just looking at the number of options out there and available.

So, in 2018 the level is slightly elevated from what we saw in 2017 and that’s been included into our tax rate..

Thank you, [Operator instructions]. And our next question comes from the line of Mike Matson with Needham and Company. Your line is open..

Tom, I think you said you expect mid to high single-digit EPS growth in the first quarter, did I hear that correctly and buyback lower that kind of the guidance for the full year, if I did hear it correctly?.

Well first of all, you did hear it correctly and I think that with given any quarter, there is variability and that’s why we managed to a full year number.

Now as we specifically look at the first quarter, couple of things going on, first of all, there is one pure shipping day in the quarter and then as you start to look at the seasonalization of both near track and after solutions operating profit, you start to see some good acceleration sequentially, quarter in quarter out, so we are seeing as more and more growth as the year progresses, so obviously Q1, having a least.

Additionally, when you look at the interest expense headwinds for the year, there is a $0.55 headwind and if you look by quarter, the greatest headwind is in the first quarter, about $0.27, so that $0.55 just given how we put debt in the last year to finance the acquisitions, we have got more of a headwinds until we start to anniversary those debt issuances.

Now I will say that the first quarter it's been benefited by having a full quarter faster solutions where last year it had have.

So those are some of the big moving pieces, in addition last year was a pretty busy year and as a result were distracted from a number of projects, they are studying out the year with a lot of enthusiasm and getting a lot of projects up and running. So those were be the key factors that I would point too..

Okay thanks and just one more on with regards to RePlas, a senior member with Vascular Solutions said, it was somewhat expected to be somewhat dilutive to the gross margin, but there wasn't really expected a lot of sales and marketing expense or the drop there or the incremental operating margin on that. The sales were expected to be pretty high.

I think your gross margin for lower than vascular solution was in standalone, but just curious.

Is that still the case that incremental OpEx on this particular product is pretty low and there is the drop there of if the sales would be pretty high?.

So, Mike, it's Liam here. Normally, we would expect a lower OpEx on any sales that you sell in respecting to a military call points just because of their structure. And we already had a channel in the EMS sector because our Vidacare portfolio. So that should also help.

We haven't finalized pricing for the product yet, so it's really hard for me to comment and gross margins. We're very focused on getting the accelerated pathway and the approval and then we will -- once we have that we will enter into negotiations on what the price points of this product will get..

Thank you. And I'm showing no further questions at this time. I'd now like to turn the call back over to Mr. Jake Elguicze for any closing remarks..

Thanks, operator, and thanks to everyone for joining us on the call today. This concludes the Teleflex Incorporated fourth quarter 2017 earnings conference call. Have a nice day..

Ladies and gentlemen, thank you for participating in today's conference. This does conclude the program and you may all disconnect. Everyone, have a great day..