Teleflex Incorporated (TFX) Earnings Call Transcript

Good morning, ladies and gentlemen, and welcome to the Teleflex Second Quarter 2026 Earnings Conference Call. [Operator Instructions] At the end of the company's prepared remarks, we will conduct a question-and-answer session. Please note that this conference call is being recorded and will be available on the company's website for replay shortly. And now I'll turn the call over to Mr. Lawrence Keusch. Vice President of Investor Relations and Strategy Development. Please go ahead.

Good morning, everyone, and welcome to the Teleflex Incorporated Second Quarter 2026 Earnings Conference Call. The press release and slides to accompany this call are available on our website at teleflex.com. As a reminder, a replay will be available on our website. Those wishing to access the replay can refer to our press release from this morning for details. Participating on today's call are Jason Weidman, President and Chief Executive Officer; and John Deren, Executive Vice President and Chief Financial Officer. Jason and John will provide prepared remarks, and then we will open the call to Q&A. Before we begin, I'd like to remind you that some of the matters discussed in the conference call will contain forward-looking statements regarding future events as outlined in the slides posted to the Investor Relations section of the Teleflex website. We wish to caution you that such statements are, in fact, forward-looking in nature and are subject to risks and uncertainties, and actual events or results may differ materially. The factors that could cause actual results or events to differ materially include, but are not limited to, factors referenced in our press release today as well as our filings with the SEC, including our Form 10-K which can be accessed on our website. Now I'll turn the call over to Jason for his remarks.

Thank you, Larry, and good morning, everyone. Let me begin by saying it's been a great start to my time at Teleflex. Over the past 2 months, I've really focused on learning our business, our products and our organization. This has meant considerable time visiting many of our sites around the globe, meeting with employees across the organization, engaging with customers and physicians and reviewing the company's portfolio, operating priorities and long-term growth opportunities. While it's still early, a couple of things have stood out immediately to me. Our employees are fantastic. They're dedicated. There's real pride and belief in what we do for patients, and they're eager to build on our accomplishments and drive execution. Second is the strength of Teleflex's underlying businesses, we have great products with market-leading positions in many important categories, strong brands and a substantial global commercial footprint. My initial observations have also reinforced my belief that there is substantial opportunity ahead for Teleflex and that we have the right foundation to capture this potential. We remain focused on executing key initiatives underway, including completing the announced divestitures, deploying the proceeds through our committed debt reduction and share repurchase initiatives and mitigating stranded costs associated with the divestitures. Taken together, these actions will create a more focused portfolio give us greater exposure to core critical care and high acuity hospital markets and further strengthen Teleflex's financial and strategic flexibility in its next phase of growth. The divestitures and capital allocation plans reflect a thoughtful and proactive approach to value creation, but realizing our full potential will require continued deliberate action and consistent execution across the company. As I step into this role, my top priority is to thoroughly assess the business and to develop the strategic and operational plan that focuses our resources on the areas where we see the greatest opportunities for sustainable growth, innovation and operational leverage with the objective of maximizing value for our shareholders. While this review is ongoing, like most medical device companies, the focus will center on operational rigor and predictability across the organization, accelerating growth in innovation-driven platforms and ensuring disciplined and balanced capital deployment. I look forward to partnering with the leadership team and our employees to build upon the strong foundation that's already in place and continue advancing Teleflex's transformation into a more focused medical technologies leader with durable long-term growth. Now I'd like to transition to the second quarter highlights. Our overall pro forma adjusted constant currency growth was 4.7%, while adjusted operating margin was 19.6%. We delivered better-than-expected revenue, adjusted margin and adjusted EPS with excellent performance in the Vascular and Surgical businesses in particular. At the same time, Interventional performance fell short of our expectations as the integration associated with the BI acquisition is taking longer than anticipated. As John will discuss, we have updated our full year revenue outlook to reflect a more tempered expectation for Interventional growth while maintaining our adjusted operating margin outlook and increasing our adjusted EPS guidance. We've previously emphasized that 2026 would be a transition year for Teleflex as we become a stronger, more focused company for the future. To that end, I'm pleased to share that we're making significant progress on our strategic transformation and our commitment to maximizing shareholder value. In December of 2025, we announced agreements to sell the Acute Care, Interventional Urology and OEM businesses as part of our overall transformation plan. As announced earlier this week, we have successfully closed the OEM divestiture which resulted in proceeds of approximately $1.5 billion in estimated after-tax proceeds of $1.25 billion. The OEM strategic divestiture generates the majority of the proceeds from the planned strategic divestitures and will fund both debt reduction and share repurchase. John will get into more details on the use of proceeds from the OEM close and capital allocation in a few minutes. Turning to the Acute Care and Interventional Urology divestiture, we remain confident in closing the transaction. As previously disclosed, the [ FTC ] issued a second request in March, seeking additional information in connection with its review of the transaction. Both parties are working cooperatively with the FTC. The strategic divestiture is currently anticipated to be completed in the fourth quarter of 2026, although the timing is dependent on the regulatory approval process and remaining steps to complete the transaction. As I focus on durable future growth, driving innovation is a key priority for Teleflex. I am excited about the new product opportunities we are developing, and over the past several quarters, we have deliberately increased our R&D investment with R&D expense at 7.9% of sales in the first half of 2026. As I look ahead, we will focus on effectively allocating capital to new R&D opportunities that fortify our existing product portfolio, leverage our call points and are accretive to our long-term growth profile. Importantly, we have had a number of exciting new product innovation developments recently, including the late July BLA approval from the FDA for EZPlas freeze-dried plasma as well as the achievement of important clinical trial milestones for Freesolve, our novel drug-eluting resorbable magnesium scaffold. EZPlas, which will expand the emergency medicine portfolio in our Vascular business, represents a novel solution to administering plasma to critically injured patients in combat [ and prehospital ] settings. Approved for the treatment of adults with uncontrolled bleeding resulting from traumatic injuries when plasma is required in other plasma products are not available. EZPlaz is the first freeze-dried plasma licensed by the FDA. EZPlaz uses an innovative, flexible plastic bag technology that enables quick and efficient reconstitution of freeze-dried plasma. It fills an unmet need by enabling the transfusion of plasma in situations where it is critically needed. Including on the battlefield or on air and road ambulances, where the use of traditional plasma products is limited by logistical and operational challenges. Turning to the future for the Interventional business. and as part of our commitment to increasing R&D investment in innovative technologies. We continue to advance our clinical study program with a highly differentiated Freesolve drug-eluting resorbable magnesium scaffold technology. Freesolve caries temporary scaffolding with drug delivery to target a long-sought goal in Interventional cardiology and is anticipated to address the rapidly growing trend in coronary and endovascular procedures towards treatments that leave nothing behind. During the second quarter, we announced several milestones from the Freesolve clinical program. 4-year follow-up data from the single-arm BIOMAG-1 study were presented in May at the Paris course of revascularization, demonstrating sustained long-term performance in a favorable long-term safety profile of Freesolve. We also announced the completion of patient enrollment ahead of schedule for the BIOMAG-2 study, which is the first randomized controlled trial for Freesolve run outside of the United States. This positions us for a late 2027 data readout. Finally, we commenced the BIOMAG-3 randomized pivotal trial in the U.S. with the first patient procedures completed in June at the MedStar Washington Hospital Center. While this comprehensive clinical program is still in its early phases, we are encouraged by the data to date and excited about the optionality that Freesolve provides us in the future. In summary, taken together, all of these updates and actions reflect a more focused portfolio, disciplined capital allocation and innovation progression. We believe they position Teleflex to deliver improved execution and stronger long-term performance. We are building a clear financial profile impact to value creation through improved adjusted margins, lower interest expense and stronger adjusted earnings per share over time. 2026 remains a transition year for the company, and our transformation is well underway with tangible milestones being met, including the close of the OEM strategic divestiture and return of capital to shareholders. As we continue to execute on our priorities, we expect a meaningful step-up in our financial performance in 2027 and beyond. Now let's move on to our second quarter continuing operations detailed results and updated financial guidance for 2026 all growth rates that I referred to are on a year-over-year pro forma adjusted constant currency basis, unless otherwise noted. Pro forma adjusted constant currency growth for 2026 excludes the impact of foreign exchange, the $9 million Italian payback measure recorded in the second half of 2025 and the impact of approximately $14 million in continuing operations product revenue that was discontinued at the end of 2025 due to a strategic realignment, but includes revenue generated by the acquired Vascular Intervention business for the prior full year period. All comments relate to continuing operations for the second quarter of 2026. For the second quarter, Teleflex revenues were $570.3 million, up 28.9% year-over-year on a GAAP basis and up 4.7% on a pro forma adjusted constant currency basis. In the quarter, our revenue performance reflected strong execution in our Vascular and Surgical businesses, partially offset by the performance of our Interventional business which was impacted by integration and restructuring activities related to the VI business. Second quarter adjusted earnings per share was $1.76 a 1.7% increase year-over-year and ahead of our expectations. Now let's take a deeper dive into our second quarter revenue performance. I will begin with a review of our revenues by global product category for the second quarter. Starting with Vascular. Revenue was $246.3 million an increase of 8% year-over-year, primarily driven by growth in our hemostatic products and in our central access portfolio. In our Surgical business, revenue was $112.1 million, an increase of 9.2%, which was primarily driven by strong performance in ligation clips, our instrument portfolio and skin safely. Moving to Interventional. Revenue was $211.9 million, a decrease of 1%, while several categories, including hemostatic products, right heart catheters, intraosseous and complex catheters, outperformed, growth was softer than expected in the quarter, reflecting ongoing integration and restructuring activities associated with the VI acquisition. Although 2026 was always expected to be a transition year, the integration in the quarter was slower than anticipated, reflecting several transition factors that we expect to be temporary. We are making progress on mitigation actions to address the primary drivers of these temporary impacts. And we remain confident in the long-term strategic and financial prospects for this business. That said, while the original plan contemplated that the integration would be largely completed towards the middle of 2026, we believe it is prudent to extend the time line for full integration through the second half of 2026, given some of the lingering transition issues still impacting the business. I've spent the last 20 years of my career working in the Interventional space, and that experience gives me real conviction in the opportunity ahead for Teleflex. At a high level, the legacy Teleflex Interventional and acquired Vascular Intervention business fit together very well and with highly complementary product portfolios and geographic strengths. I believe that these are the right assets for Teleflex to expand its presence in Interventional coronary and peripheral procedures. Drilling down a bit more. We have great products. a broad portfolio that includes specialty devices that physicians rely on and appreciate. I see meaningful opportunities to gain share, expand geographically and bring new products to market including through our innovation pipeline, which features differentiated products like Freesolve. As we actively work through the 2026 transition year, my focus is on positioning the business for success in 2027 and beyond. My broader review is ongoing, but my immediate priorities are clear, complete the integration associated with the VI acquisition and position Teleflex for improved growth as we continue the overall transformation of our business. That completes my comments on the second quarter revenue performance. Now I'd like to turn the call over to John for a more detailed review of our financial results. John?

Thanks, Jason, and good morning. All results that I speak to will be on a continuing operations basis for 2026. Due to reclassification of discontinued operations, historical continuing operations reflect the impact of stranded costs in all periods presented. Given Jason's previous discussion of revenue, I'll begin with margins. For the second quarter of 2026, adjusted gross margin was 61.7%, a 280 basis point decrease year-over-year was primarily due to the adverse impact of tariffs and the addition of the Vascular Intervention business which has a slightly lower gross margin than the corporate average. Of note, there were no recognition of [ IIFA ] tariff refunds in the second quarter. Second quarter 2026 adjusted operating margin was 19.6%, a 520 basis point decrease reflects year-over-year gross margin pressure and higher operating expenses associated with the acquired Vascular Intervention business as well as increased R&D investment. Adjusted net interest expense totaled $26.5 million for the second quarter as compared to $20.3 million in the prior period. The year-over-year increase is primarily due to the borrowings used to finance the Vascular Intervention acquisition and a portion of the open market share repurchases in the second quarter of 2026, partially offset by lower interest rates. Our adjusted tax rate for the second quarter of 2026 was 9.9% as compared to 14.1% in the prior period. The year-over-year decrease is primarily due to the beneficial tax provisions included in the One Big Beautiful Bill Act increased utilization of U.S. tax credits and favorable jurisdictional mix in the quarter. At the bottom line, second quarter adjusted earnings per share was $1.76, representing a 1.7% increase year-over-year. The year-over-year increase was primarily due to a lower share count and tax rate and to a lesser extent, higher adjusted operating income, partially offset by tariffs and higher interest expense. At the end of the second quarter, our cash and cash equivalents and restricted cash equivalents balance was $316.9 million as compared to $402.7 million as of year-end 2025. Net leverage at the end of the quarter was approximately 2.8x, up slightly from the first quarter, primarily driven by borrowings to fund the share repurchases completed during the second quarter. Pro forma net leverage for the OEM strategic divestiture were approximately 1.9x. Turning to our capital allocation strategy. We remain committed to returning cash to shareholders under our previously announced $1 billion share repurchase authorization while reducing debt by $800 million. To accelerate the return of capital to shareholders. During the second quarter, we repurchased approximately 1.9 million shares of our common stock for $250 million through open market transactions at an average share price of $130.85. With the close of the OEM strategic divestiture, I am pleased to announce that we intend to commence an additional $250 million accelerated share repurchase on August 7. The remaining net proceeds from the OEM strategic divestiture are primarily used to pay off the $700 million Term Loan A-2 associated with the acquisition of the Vascular Intervention business. and we will replenish funds deployed for the $250 million share repurchase that was completed during the second quarter. Turning now to our financial guidance framework. As we previously indicated, 2026 results include a number of transient factors related to our strategic divestitures that will impact our near-term results, which we expect to be mitigated with the close of both transactions. Therefore, we anticipate 2027 will be more reflective of the underlying business, ultimately building a clearer financial profile with significant improvements in adjusted margins, interest expense and adjusted earnings per share. As previously announced, we have also launched a multiyear restructuring plan that is expected to achieve approximately $50 million in annual pretax cost savings upon completion in mid-2028. The restructuring activities, which are on track began in the first quarter of 2026, and our guidance continues to assume savings from these activities will accelerate in the second half of the year. We are also identifying further cost reduction opportunities and remain committed to mitigating the stranded costs associated with the strategic divestitures. With that context, I will review items that will impact our 2026 results. First, our assumptions for 2026 continued to reflect the impact of stranded costs, partially offset by TS agreements associated with the recent close of the OEM strategic divestiture. Of note, the TS and MS agreements associated with Acute Care and Interventional Urology strategic divestitures are more expansive than those for OEM due to the buyer requiring more support, which will drive adjusted margin expansion in 2027 as we offset stranded costs. Second, the exact timing of the closing of the Acute Care and Interventional Urology strategic divestiture will pace our ability to deploy additional capital during the remainder of 2026. Third, our 2026 adjusted gross margin assumption does not reflect any benefit from IEEPA tariff refunds. As we look forward to 2027 and beyond, we anticipate our capital deployment actions in combination with the impacts of the TS and MS agreements and our efforts to further mitigate stranded costs and rightsize the organization will result in a significant increase in our adjusted operating income, adjusted margins and adjusted EPS. Moving to an update on our 2026 guidance. Please note that our 2026 guidance is provided on a continuing operations basis and excludes the Acute Care, Interventional Urology and OEM businesses. We now expect pro forma adjusted constant currency revenue growth for 2026 to be in a range of 3.5% to 4.5% as compared to 4.5% to 5.5% previously. The updated guidance reflects the performance in the first half of 2026 and extended time line for the integration of the Interventional business and our expectations for the Vascular and Surgical business for the second half of the year. Turning to adjusted earnings per share. We now expect an increased range of $6.90 and to $7.20 in 2026 versus our previous guidance of $6.25 to $6.55. Our guidance includes the second quarter results, our updated expectations for the second half of 20 including the benefit of the second quarter share repurchase activity and lower net interest expense. Our adjusted EPS guidance does not include any benefit from the proceeds resulting from the Acute Care and Interventional Urology strategic divestiture and the anticipated positive impact from additional share repurchases in the second half of 2026, including the $250 million ASR referenced earlier in my remarks. Also for the avoidance of doubt, our adjusted EPS guidance does not assume a benefit of tariff refunds at this time. We will recognize the tariff refund upon full confirmation from the U.S. government. We anticipate these actions will result in meaningfully lower share count and significantly reduced interest expense in 2027 and beyond. Taken together, we expect share repurchase and balance sheet deleveraging activities will contribute to significantly higher adjusted EPS beginning in 2027. Additionally, for modeling purposes, you should consider the following: the impact of foreign exchange for 2026 is still expected to be approximately $14 million tailwind to our pro forma adjusted constant currency revenue growth. We continue to expect our 2026 adjusted operating margin to be approximately 19%. As previously discussed, after addressing standard costs, we believe our steady-state margin profile will be approximately 23%. Looking forward, we see opportunities to improve upon that a state operating margin through operating leverage associated with revenue growth and other cost-saving initiatives. Moving to assumptions below the line. For net interest expense, we now expect approximately $85 million for the full year 2026 as compared to the previous assumption of approximately $105 million. The change in outlook primarily reflects the $700 million debt reduction associated with our recent close of the OEM strategic divestiture as well as the opportunities to optimize our near-term borrowings. We now expect our adjusted tax rate to be approximately 12.25% in 2026 as compared to approximately 13.5% previously. Finally, we expect shares outstanding to approximate $43.3 million which excludes any benefit from the announced $250 million ASR. That concludes my prepared remarks. I would now like to turn the call back to Jason for closing commentary.

Thanks, John. In closing, I will highlight our 3 key takeaways from the second quarter of 2026. First, Teleflex had a very solid second quarter. delivering better-than-expected revenue, adjusted margins and adjusted EPS. We expect continued solid performance in Vascular and Surgical in the second half of 2026, albeit at a more moderate growth rate than the first half. Alongside extended time lines to full Interventional integration. We have reduced our pro forma adjusted constant currency revenue growth guidance to reflect these dynamics with the low end of the range contemplating no improvement in Interventional revenues versus the second quarter for the remainder of the year in addition to typical third quarter seasonality. Second, we are committed to returning significant capital to shareholders. accelerated share repurchase and debt reduction in the first half are driving an increase in adjusted earnings per share guidance. The recently completed OEM strategic divestiture fueled additional repurchases and debt reduction going forward. Third, we are continuing to successfully execute on our transformation to a more streamlined portfolio, which will position us for acceleration in 2027 and beyond. We expect meaningful increases in adjusted operating margin and adjusted earnings per share in 2027. Additionally, recent positive innovation milestones with EZPlaz and Freesolve highlight our increased focus on future growth opportunities. That concludes my prepared remarks. Now I'd like to turn the call back to the operator for Q&A.

[Operator Instructions] First question comes from the line of Vik Chopra of BMO Capital Markets.

Two for me...

Sorry, just one moment, I'll get you back. Your line dropped off here. We'll take the next one. Your next question comes from the line of Jayson Bedford of Raymond James & Associates.

Maybe just first for Jason. Jason, you're walking into a situation here where the strategy through transformative deals is largely set. Are there any pieces of the strategy that make you uncomfortable? And if you can point out any areas of opportunity that maybe were not clear when you stepped into the role?

Yes. Thanks, Jayson, for the question. Actually, one of the things I was really -- that really attracted me to Teleflex as I was looking from the outside was this transformational strategy. I thought that it was the right approach to provide better focus for the business. And as I've come in, I remain confident in that strategy. There is nothing that stuck out to me in these first 2 months that make me think that we're on the wrong path. Obviously, we need to determine what the long-term path is beyond that. So I'm in the middle of that, what I would call my comprehensive assessment of the entire organization. And over the coming months here, we'll put together the long-term operational and strategic plan to really drive long-term durable growth and shareholder value.

Okay. And then just maybe as my follow-up, can you elaborate a bit more on the VI integration issues what is the issue? And what needs to happen to fully integrate the business?

Yes. Great question. So the first thing I want to emphasize here is that this is absolutely not a product issue. So with the coming together of these 2 portfolios, the legacy Teleflex Interventional portfolio in the BIOTRONIK VI portfolio, they really fit beautifully together. And I think all of you guys know that I spent the last 20 years in the Interventional business. So I know this space well. And what I can tell you is that when I took this role, I got countless numbers of messages, text messages and e-mails from KOLs in the space that basically said, "Well, you have a great bag, we're excited to see what you do with it at Teleflex." So this isn't a product issue. What it is simply is just integration transitions that are continuing, that are transient that we need to work through. And I would primarily point to 3 areas the first would be order to cash transitions. The second would be distributor transitions and the third would be sales force transitions. All of these are manageable. So if I start and go into a bit more detail from the OTC perspective. So any time you change an ordering system for a customer no matter how smooth your internal transfer goes, and it was smooth for us, it's a change for the customer. And so there's an opportunity for disruption and confusion with them. And so that's what we are going through right now. We've identified where we have customer confusion and any lingering issues, and we're systematically working our way through those. What I can tell you is that the vast majority of our OTC transitions happened in Q2. And so that gives us a real good line of sight into how we can work through any of those lingering customer confusions. The second is really about distributor transitions. And any time you move from one distributor to another, there's often a timing issue. So your original distributors start working down their inventory. And so they stop buying, and you haven't yet got to the point of the rebuy or the start-up buys for your new distributors. So obviously, we're closely tracking all of those transitions from distributor to distributor and making sure we drive to completion of those. The final area is really about sales force transitions. When you bring 2 sales forces together, there's obviously going to be some territory realignment. And so you end up with some reps that have new customers. You end up with reps that have new products to sell. And in some cases, we found that we didn't have the right reps to sell this combined bag. And so we have open positions. And so we have a very comprehensive plan in place to make sure we have enhanced training as well as to make sure we have a very clear hiring plan, and we're already making really good progress against that hiring plan. So again, I'd say all of these are transient issues related to the integration. And we have this really strong foundation of really great products. And trust me, I wouldn't be here if I didn't think that there was great opportunity in the Interventional business.

Our next question comes from the line of Vik Chopra of BMO Capital Markets.

Jason, you've had about 2 months to assess the business. I'm curious how quickly you expect to communicate the outcome with your strategic review? And should we invest -- so should we expect a formal long-range plan? And then I had a quick follow-up, please.

Yes. Thanks for the question, Vik. Obviously, as I said a couple of minutes ago here, 1 of my biggest priorities is really to fully assess the business and put together that long-range plan. I would -- I'm only 2 months in, so I need a little bit more time. I would expect that I'll have more to say in a little more color on opinions of future direction here by the next earnings call.

Okay. Great. And a quick follow-up on BIOTRONIK. I'm curious what level of confidence you have that the current time line reflects the full extent of the delay?

Yes. Yes. I think that when we look at the -- as I said, the main causes of the integration delay we have mitigations in place, and we're already seeing progress in those -- in each of those factors. So we have pretty good confidence or really good confidence that we will -- we should be able to work through that by the end of the year. and thus, our guidance also reflects that.

Our next question comes from the line of [ Patrick Wood ] of UBS.

Amazing. I'll do 2 quick ones upfront. Just looking and thinking about the business, I know it's obviously a few months for you, but the guide implies [ evesa's ] slightly more conservative second half, I think, like plus 3% or so. Is there any reason in your mind that midterm, there shouldn't be a business that can grow 4% or so? Is there anything that we might be missing, whether it's procedure environment or anything like that would preclude 4% plus as a reasonable midterm benchmark?

Yes. Thanks for the question, Patrick. I don't think there's anything major that you're missing here. And let me go back to the guidance and be really clear. So we -- as we look at this revised adjusted revenue growth guidance of 3.5% to 4.5%. This is for the full year and for all of RemainCo. And we're not going to guide on individual businesses. That said, the entire reduction in that guidance from previous guidance is due to this integration slowdown in Interventional.

Our next question comes from the line of Matthew Taylor of Jefferies.

This is Mike Sarcone for Matt Taylor. I guess just a follow-up there on the guide. I think in the prepared commentary, you mentioned maybe some more moderate growth expectations in the back half of the year for Vascular and Surgical as well. Can you just kind of square that away and elaborate there versus your response to the last question around your guide?

Sure, no problem. So again, the reduction in the guide is solely due to what we see in Interventional -- that said, we did provide some additional color in the prepared remarks to give you confidence in our ability to get to the lower end of the range. And that was that -- the low end of the range really contemplates no growth in Interventional for the remainder of the year. And so it take that Q2 revenue that we had in Interventional and assume that, that's what it would be for the remainder of the year with just some additional seasonality in Q3.

For the other 2 businesses for Vascular and Surgical, we expect them to continue to perform really solidly. But they've been growing at a high single-digit rate through the first half of the year, which is fantastic, but these are not high single-digit growth markets. So if we look at Vascular, for instance, we did see with some of our major distributors, the inventories creeped up a little bit in H1. So we would expect that eventually that's going to normalize. If I turn to the Surgical business, when we get to the second half of this year, we just frankly face tougher comps. So if you look at H2 of last year, that's when we started to see some of the strength in the instrument portfolio.

Got it. That's helpful. And maybe just, can you comment on whether or not you've seen any impact from ACA subsidy expiration and just kind of patient demand and utilization?

We haven't seen any impact from that.

Our next question comes from the line of Jason Bednar of Piper Sandler.

I want to go back and double-click on those 3 buckets you stepped through earlier impacting the revenue outlook. The first 2, OTC and the distributor dynamics, those to me, sound pretty manageable, very controllable. It's the last one, the sales force piece, but I'd love to get your thoughts around that, just being fully resolved by year-end. As some of those roles are still open and in medtech, we've all seen that you should take a little bit of time on ramp-up. So just given where we are in middle of the year, just your comfort or confidence around addressing that sales force, [ Keith ].

Yes. I think that's a great question. I'm confident we can get through the hiring plan. I'm confident with our current reps, we can get through the enhanced training that we need to do. But as you as you know, in these spaces, typically, it takes a good 6 months or so to get a rep up to speed. So I would assume that our ramp-up is not going to be a step up but a ramp up, exactly what you're saying.

All right. Helpful. And then I don't mean to ignore all the heavy lifting here in 2026, a lot of us are understandably trying to hone in also on where growth goes for '27, where EPS has for '27. And just based on the margin normalization, capital deployment, all the things that are in play, it's not hard to see EPS move to something that's like $11.25 or $11.50 in that neighborhood for next year. Jason, I know you kind of first call here. I just love to get your reaction to that.

Well, look, I'm going to -- I'll pass that one to John to talk about what our expectations are on the EPS. But, yes. Go ahead, John.