Started. Welcome to the 44th annual Raymond James Institutional Investors Conference. My name is Jayson Bedford. I cover the medical device sector here at Ray J. It's really our privilege to have with us the senior management team from Teleflex. We have the company's Chairman and CEO, Liam Kelly. VP of Investor Relations and Strategy, and the one withoreut a tie, Larry Kirsch. With that, I'll hand it over to Liam.
Jayson, thank you very much. Good afternoon, everyone, and thank you very much for joining me today. As Jayson said, my name is Liam Kelly, and we are very pleased to be in attendance today at the Raymond James Institutional Investors Conference. We appreciate everybody's interest in Teleflex today. Before I begin the presentation, I would like to remind you that some of the matters discussed today will contain forward-looking statements regarding future events. I wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties, and that actual events or results may differ materially. Today, Teleflex is a company with global scale that is built on innovation and brand power.
We have over 23,000 products across seven clinical areas providing scale and depth. We employ more than 15,000 employees in 30 countries around the world. Our 2022 revenue was $2.8 billion. We serve more than 80,000 customers worldwide. We also have industry-leading brands that are highly recognizable by healthcare providers around the globe. Every single day, our products are used in over 24,000 surgical procedures. They have been used by clinicians in over 2,000 patients who require vascular access to care for more than 8,000 patients in the intensive care unit. They have been used by emergency responders to treat more than 4,000 patients in the field. Have been instrumental in treating patients in over 3,500 interventional cardiology procedures.
Our products also help treat nearly 200 men a day with benign prostatic hyperplasia or BPH. Today, Teleflex has a diversified product portfolio consisting of high-growth, innovative products and established franchises with category leadership, which we believe will enable us to maintain a cadence of durable growth over time. We believe our diversified portfolio also provides competitive advantages and helps to insulate the company from the impact of exogenous macro events. Our scale puts us in a strong position to leverage our broad portfolio across the numerous clinical specialties and care settings that we serve. Typically, our products are necessary in the treatment algorithm for patients, which helps keep us positioned for consistent use in critical care and surgical procedures.
In addition, more than 70% of our products have an average selling price of less than $250, which offers an advantage relative to price pressure typically felt by more expensive medical devices. Over time, our profitability has improved through positive mix shift towards higher-margin products, benefits from restructuring programs, positive price, manufacturing efficiencies, and operating expense leverage. Our portfolio adds value to highly relevant clinical areas. We have products with category leadership in seven key clinical verticals, including vascular access, interventional cardiology and radiology, minimally invasive surgery, minimally invasive BPH treatment, emergency medicine, and anesthesia. Teleflex is more than just a supplier of quality products. We are a partner to the healthcare community and can help clinicians work across key therapeutic areas and specialties.
When we look holistically at the healthcare industry, from doctor's office to the emergency room to the operating room, we deliver products, services, and education that allow clinicians to deliver quality care and improve patient outcomes. To provide a sense of our financial progress over time, our revenue growth has averaged 6% on a constant currency basis from 2012 to 2022. Excluding the impact of M&A over these periods, underlying constant currency growth also accelerated from 3.5% from 2012 - 2016, to +4% for 2017 - 2022. Importantly, we continue to expect solid revenue growth, including an outlook for 5.5% constant currency growth at the midpoint of our 2023 guidance.
Regarding profitability, we have driven significant improvement with adjusted gross margins increasing by more than 900 basis points and adjusted operating margin expanding 700 basis points for the year ending 2022 as compared to 2011. Products mix shift, restructuring benefits, operating efficiencies, and price have all been drivers of the gross margin expansion over the last 10 years. We have also realized strong operating expense leverage as we streamlined our management, realigned our sales force structures, and leveraged share service organizations. Turning to capital allocation, M&A has been a key priority for Teleflex. Most recently, we acquired Standard Bariatrics in the fourth quarter of 2022 for an upfront payment of $170 million and a contingent consideration of up to $130 million.
Standard Bariatrics has launched the Titan SGS Stapler for use in sleeve gastrectomy procedures for the surgical treatment of morbid obesity. Over time, we have demonstrated that our disciplined approach to M&A can drive consistent improvements in our financial metrics. In fact, our adjusted ROIC improved to 10.2% in 2022 from 6.4% in 2012, despite the impact of the global pandemic. Indeed, over time, we have built a stronger Teleflex and have executed against our strategic initiatives. Despite our past success, I believe that we remain well-positioned for the future. We will drive durable constant currency revenue growth, achieve margins and earning expansion, optimize our product portfolio, and advance corporate social responsibility and an inclusive culture. Let me expand on the strategic priorities that will enable us to deliver on our long-term objectives as a company.
The first strategic priority is to drive sustainable constant currency revenue growth. As we look into the future, there is much to be excited about, we are positioned for dependable revenue growth. A combination of growth drivers and diversified portfolio will help to provide consistency in growth, while our continued focus on margin expansion and our revenue base will drive attractive free cash flow generation. This will be prioritized for internal growth drivers and inorganic opportunities. We view our business in three buckets, including our high-growth portfolio, durable core, and other. Our high-growth portfolio is expected to be a key contributor to our revenue growth algorithm. This portfolio has many of our most exciting products, we believe there is a long runway for market penetration. Over the course of our long-range plan, we expect to grow our high-growth portfolio at a 12%-13% CAGR.
Our durable core is expected to show steady compounded growth of 5% over the long-range plan period due to share gains, underlying market growth, and our category leadership. Of note, our durable core includes franchises with growth above the corporate average, including interventional access, OEM, and contributions from our Asia Pacific region. We intend to grow the percentage mix of our high-growth portfolio over time through multiple organic drivers, including new product introductions and market expansion. Importantly, we will continue to preferentially direct investment to our high-growth portfolio. To sustain our momentum, a key building block of Teleflex's long-term growth investment strategy will be to transform our internal development capabilities, resulting in an improved new product launch cadence and associated increase in our new product revenue. We are building on our new product development pipeline with a focus on a disciplined approach to advancing our projects.
We are also actively engaged in strategies to accelerate time to revenue of our new product development, and we are confident that we can drive increasing momentum in our new product cadence over the coming years. Looking outside of the U.S., we have an opportunity to expand our commercial presence in overseas markets. Our international sales account for approximately 35% of corporate revenues. We see a lot of potential in our Asia Pacific business with new product launches, expansion in our sales team, and a strengthening of our leadership. Many of the launches are for products already used in the United States such as PICC, EZ-IO, UroLift, and interventional access products, which reduces the risk profile of these launches. As we focus on our high-growth portfolio, we are confident in the discrete drivers for organic constant currency growth.
Of note, we believe that we are still early in our penetration of sizable market opportunities for our exciting pro-portfolio of products. Considering the six product families in our high-growth portfolio, we are just 5% penetrated in an addressable market of approximately $14 billion. With our preferential investment into our growth drivers, we believe there is meaningful opportunity to expand our global sales base. Turning now to our second strategic priority. We will continue to achieve margin and earning expansion. We are confident that there are several levers to pull that will enhance our margins. Importantly, we have a slate of margin expansion drivers that are already in place and will contribute throughout the long-range plan and complement our methodical approach to consistent productivity initiatives. Mix shift towards our high-growth portfolio will be the primary driver of adjusted gross margin expansion during the long-range plan.
UroLift 2, MANTA, Hemostatic products, EZ-IO, and uncontrolled intraosseous family, and PICC all represent products that have margins in excess of the corporate average. Furthermore, we expect the Titan SGS Stapler to become accretive to the corporate margin during the long-range plan. Separately, our existing restructuring initiatives will be another incremental driver to margin expansion as well as other operating efficiencies. Turning to our sales infrastructure. We continue to have an opportunity to drive distributor to direct conversions and positively influence gross margin. This has been a successful strategy for Teleflex, and we see an opportunity for additional conversions. Finally, as we execute on our acquisition strategy, we will reload on our opportunities to convert to direct sales over time. Offsetting a portion of our margin expansion will be purposeful and disciplined in incremental investment to maintain our current momentum.
We will allocate investments to drive global product launches, expand our geographic footprint, and develop new products. Although these directed investments will increase operating expense as a percent of sales through the planning period compared to 2022, we will be targeted in our spend. We are confident that our strategy is prudent and will continue to position Teleflex for sustainable high growth. Our third strategic priority is to optimize our product portfolio through new product introductions, continued M&A, and thoughtful divestitures of non-core assets. We have a history of successful acquisitions across our business units. From 2011 - 2022, we completed over 80 M&A transactions while deploying $4.8 billion in capital. Of note, as our business development competencies have strengthened, nearly 80% of the capital we deployed for M&A since 2011 has occurred over the past five years.
In this time frame, we have executed on multiple scale transactions, including the acquisitions of NeoTract and Vascular Solutions in 2017 and HPC and Z-Medica in 2020. As we look into the future, we will continue to pursue a steady cadence of acquisitions with a focus on long-term shareholder value creation. Teleflex has been a thoughtful acquirer over the past decade through a disciplined approach to identifying and deciding which opportunities fit our key criteria. We are targeting assets with category leadership, obvious clinical benefits, the ability to lower the overall cost of care, and strong intellectual property protection. We also pay close attention to opportunities that allow us to leverage our infrastructure and expand our geographic footprint.
From a financial perspective, we are seeking assets that are accretive to growth and margins with a focus on exceeding our weighted average cost of capital in a reasonable period of time. Moving forward, you can expect Teleflex to continue to maintain a routine M&A cadence with a disciplined approach. At year-end 2022, Teleflex had a net leverage of 1.8 x. Combined with our outlook for strong free cash flow generation, we have ample flexibility to execute on our strategy. We will continue to optimize our portfolio through a disciplined review process focused on M&A as well as divestiture opportunities. We will endeavor to learn from our portfolio moves and be relentless in our focus for continuous process improvement. Our fourth strategic priority is to systematically advance corporate social responsibility and an inclusive culture while remaining true to our core values as a company.
These values define our company, shape our corporate culture, guide our business practices, and direct the way we interact with our stakeholders, including healthcare professionals and their patients, our employees and shareholders, our suppliers and distributors, and the countless individuals who make up the communities in which we live and work around the world. We believe that fortifying our culture, creating a welcoming work environment, and looking out for the safety of our employees is foundational for Teleflex. These elements are fostered by our Teleflex core values. Our core values are an entrepreneurial spirit, building trust, and making it fun with people at the center of everything we do every day. Persevering through a global pandemic and a significant macroeconomic shocks, our more than 15,000 employees have come together while exemplifying our core values. Moving to our capital allocation priorities.
We are focused on four key priorities for our cash generation. First, we will continue to invest in the business with the potential for capital investment to execute on footprint consolidation and other productivity initiatives. Second, portfolio optimization remains a priority with a focus on M&A. Third, we will pay down debt when appropriate. Fourth, we will maintain our dividend. We will continue to prioritize our capital allocation to enhance our returns while retaining flexibility should business conditions change. In summary, we are well-positioned to drive long-term durable growth driven by our four key pillars: sustainable revenue growth, achieving margin and earnings expansion, optimizing our product portfolio, and advancing corporate social responsibility and an inclusive culture. Thank you very much for your time and attention today, and I'll turn it over to Jayson for some Q&A.
Great. Thanks, Liam. Well done. I guess just a general question to start, and probably it's an important answer here, but 2022 was a frustrating year, you know, for the industry, for shareholders, for pretty much all constituents, I would imagine. What makes you more encouraged about 2023, and how are you approaching 2023 differently?
I would agree that 2022 was a frustrating year. I do think though that we saw the environment improve as we went through the year, especially in the hospital environment. The end markets did show signs of improvement, and some key aspects of our business began to show improvements as we went through the year. In particular, interventional access, OEM, our Surgical business, and also our Asia Pacific region. We also saw inflation as we went through 2022. Heightened inflation more than anyone would have anticipated at the start of the year. I do believe that that peaked as we went through the fourth quarter of 2022. I think we should begin to see a more normalized level of inflation as we get into 2024.
For 2023, because of the dynamics of cap and roll and all that fun, you will actually see a similar level of inflation in 2023 compared to 2022. I do believe that the environment will get better out the other end of 2023 and into 2024. I also believe that if we do see disinflation, which is not contemplated in our plan, that would be an opportunity for us to let the bulk of that flow through to investors. Investors were impacted by inflation in 2022, I do believe that they should see the benefit if we get into a disinflationary environment. As we head into 2023, those businesses that perform better in the back half of 2022, we would expect that momentum to carry through into 2023.
Also, we won't have the full, as big an impact in the respiratory divestiture in 2023 as we saw in 2022.
That's helpful. UroLift. We won't spend too much time on it here, but it's worthy of a mention. Is the strategy in 2023 much different than in 2022?
Our strategy is very much similar to 2022 from a focus within the United States, with some nuances in the international market. Within the United States, everything that is within our control, we will control. We're gonna continue with our cadence for training new docs. We would expect We'll train a similar amount of docs in 2023 as 2022. In 2022, we trained approximately 400 urologists, and we would expect a similar cadence. I think that we've rolled out the UL2 now in 2022, so that new product is out there. We're actually seeing better patient outcomes from the UL2 versus the UL1. The suture is tightening better, and anecdotally, we're seeing fewer bone strikes because of the angle of the suture.
We will continue with our DTC campaign. We actually launched the new ad campaign in February. The initial feedback is really good, and we're getting good feedback from the customer base. The DTC campaign in 2022 exceeded all the metrics that we had laid out at the beginning of the year. We're seeing good patient pull-through from the campaign. That continues to be a positive. I would... Internationally, we began in Japan in 2022 from April, we expect to continue to build out the organization in Japan, continue to penetrate that market. The U.S. market for UroLift is a $6 billion market. The Japanese market is a $2 billion market opportunity for us. We'll continue to roll the product out in China.
On the international markets, they're really the needle movers in the future, Japan and China. We will also, we'll begin in 2024 in Taiwan. We're rolling it out in India. We will continue to look for reimbursement in Brazil. We will continue in Spain, Italy and France, and we will continue to seek reimbursement in Germany, which we should get at the back end of 2024, maybe into 2025.
Is the DTC investment in 2023 bigger than the one in 2022?
We've maintained, whilst we don't disclose the exact amount of our DTC investment, it is our plan to maintain a normalized cadence of investment since we began in 2020. The metrics that we look at, Jayson, would tell us that it is a really good return on our investment. The number of impressions that we make, the number of patients that respond to it. Our research tells us that 53% of men, the first time that they hear about BPH and UroLift as a solution to BPH is through one of these campaigns, let it be our TV, radio or digital. It takes seemingly, the world of advertising is amazing.
It takes four to five impressions for somebody to actually impact and make a decision to either click or call the 1-800 number.
Commentary around urology office visits seems to have improved over the last month or two. Are you seeing that translate into more interest and better procedure flow from a UroLift perspective?
We saw two dynamics during 2022. We saw patient flow come under pressure in 2022, and how that manifested itself was in Q2 and Q3, patient flow was down 10%, 2022 versus 2021. It did get a little bit better in Q4. It was -3% to -4% in Q4 as compared to 2021. 2021 versus pre-pandemic also had a decline of double digits, around 10%. Since the pre-pandemic level, we've seen a significant reduction in patient flow. That coupled with a shortage of staff, in particular in the office and ASC side of service, is what really dampened the growth in UroLift in the United States in 2022. We are encouraged by the -3% to -4% in Q4.
We actually don't have data yet for Q1, so I can't tell you what the trend is so far in this year, 2023. I would envision that it would improve. Our expectation is that the end market will improve as we go through the year through 2023. Therefore we should expect that the UroLift will return to growth in 2023.
In the U.S.
Globally, it'll return to growth in 2023.
Okay. Okay. Just switching gears a little bit. The 2023 guide, the implied first quarter ramp is actually pretty robust. Basically implies a bit of a deceleration in the second and third quarter. What are the dynamics that lead to that kind of shape over the next few quarters?
Yeah, there's a few things going on. I don't think there's any investor in the room that would object to a front-end loaded plan, by the way, rather than a back-end loaded plan from a revenue perspective. I think you're right. We are seeing, if you look at the fourth quarter normalized for the respiratory divestiture, we grew at around 4.3% in the fourth quarter of last year. The first quarter implies a step-up to 6%, and then our total midpoint of our guide for the year is 5.5%. There's a couple of dynamics going on there in the first half of the year versus the second half, and all these numbers I'm speaking of are days adjusted constant currency, just for clarity.
As I said earlier, we've had a number of businesses that have shown momentum as we've gone through 2022 as the end market, in particular in the hospital side of service, improved through 2022. You've got interventional access, you've got OEM, you have our Asia Pacific business, and in the fourth quarter also we saw some improvement in the hospital within UroLift, third and fourth quarter within UroLift. We would anticipate that that momentum would carry in through Q1, and there, that's why we feel that 6% revenue growth in Q1 is achievable. As you go through the year, why it's a little bit front-end loaded is that some of those businesses hit tough comparators in the back half of the year, like interventional access, for example, and OEM.
The other dynamic is that anesthesia has a tough comp in Q2, and you have Standard Bariatrics rolling in in Q4. That's why it's a little bit front-end loaded, just built on the momentum, and that's why it modestly decelerates a little bit as you go through the remainder of the year.
Okay. Just on M&A. It's been historically a core competence of Teleflex. It's part of the growth engine going forward. I've been a little bit surprised by the fact that there haven't been more deals. I'm just kinda curious, is it Teleflex being patient, or are you just facing unwilling sellers?
I think that we're very disciplined in our approach, and we've always been very disciplined in our approach to M&A. I constantly remind the team internally that we don't get credit for M&A. That's not what Teleflex get we get credit for good M&A. Finding the right asset, and I want investors to be assured that when we do bring an asset into Teleflex, we have done the appropriate due diligence. We have, we've kissed a lot of frogs to find our prince or princess, whatever way it works out, and we've done the diligence in finding these assets.
I would say that as we went through 2022, I think it was becoming more favorable for assets to come onto the marketplace as you went through the back half of 2022. I would anticipate more M&A in general in the space in 2023 as compared to 2022. We are disciplined in our approach, we are active in the marketplace, and we have got sufficient firepower to execute on our M&A strategy. We will look for assets that will fit within one of our verticals, and we will look for assets that are immediately accretive to our revenue growth and gross margins.
In the comment on expect more M&A in the industry, that holds for Teleflex as well? Meaning more in 2023 than in 2022, at least anticipated.
Yeah. I would say that is the case. I mean, we executed in Standard Bariatrics in the fourth quarter. The last two transactions we did have been immensely successful. Z-Medica has done exceptionally well, and HPC within the OEM franchise has performed exceptionally well, growing, strong double digits last year.
Okay. With that, I think we're actually out of time here. Liam, thank you. We'll carry on the discussion downstairs in, I think it's Amarante One. Thank you.
Thank you very much. Appreciate it.