Merit Medical Systems Q2 2025 Earnings Report

Merit Medical Systems EPS Results

• Actual EPS: $1.01
• Consensus EPS: $0.85
• Beat/Miss: Beat by +$0.16
• One Year Ago EPS: $0.92

Merit Medical Systems Revenue Results

• Actual Revenue: $382.46 million
• Expected Revenue: $372.47 million
• Beat/Miss: Beat by +$9.99 million
• YoY Revenue Growth: +13.20%

Merit Medical Systems Announcement Details

• Quarter: Q2 2025
• Date: 7/30/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, July 30, 2025
• Conference Call Time: 5:00PM ET

Merit Medical Systems (NASDAQ:MMSI) designs, develops, manufactures, and markets single-use medical products for interventional, diagnostic, and therapeutic procedures in the United States and internationally. It operates in two segments, Cardiovascular and Endoscopy. The company provides micropuncture kits, angiographic needles, sheaths, guide wires, and safety products; peripheral intervention, including angiography, drainage, delivery systems, and embolotherapy products; spine products, such as vertebral augmentation, radiofrequency ablation, and bone biopsy systems; oncology products; and cardiac intervention products, such as access, angiography, electrophysiology and cardiac rhythm management, fluid management, hemodynamic monitoring, hemostasis, and intervention to treat various heart conditions. It also offers custom procedural solutions that include critical care products, disinfection protection systems, syringes, manifold kits, and trays and packs; coating services for medical tubes and wires; and sensor components for microelectromechanical systems. In addition, the company provides pulmonary products that consist of laser-cut tracheobronchial stents, over-the-wire and direct visualization delivery systems, and dilation balloons to endoscopically dilate structures; gastroenterology products, such as covered esophageal stents, syringe and gauges, and balloon dilators; and kits and accessories for endoscopy and bronchoscopy procedures. It sells its products to hospitals and alternate site-based physicians, technicians, and nurses through direct sales force, distributors, original equipment manufacturer partners, or custom procedure tray manufacturers. The company was incorporated in 1987 and is headquartered in South Jordan, Utah.

Merit Medical Systems Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Merit delivered another strong quarter with 13% total revenue growth (12.5% constant currency), a record non-GAAP operating margin of 21.2% (up 109 bps YoY), 10% non-GAAP EPS growth, and $70 million in free cash flow (up 20% YoY).
• Positive Sentiment: Closed the $120 million acquisition of BioLife, adding the STAT Seal and Wound Seal hemostatic portfolio (≈$15 million revenue in trailing 12 months) into a $350 million global addressable market.
• Negative Sentiment: Outpatient reimbursement for the Rhapsody CIE faced a delay after missing a new APC assignment in the FY 2026 proposed rule; Merit will refile for transitional pass-through (TPT) by September 1, 2025, pushing add-on payment out by about two quarters.
• Positive Sentiment: Raised full-year 2025 guidance, now expecting 10–11% GAAP net revenue growth, 9.7–10.6% constant currency growth, non-GAAP EPS of $3.52–3.72 (from $3.28–3.41), and at least $150 million in free cash flow.
• Neutral Sentiment: Announced CEO succession: Martha Aronson will assume the CEO role on October 3, 2025, with Fred Lampropoulos transitioning to executive chairman and then chairman of the board.

Presentation

[Operator]

Welcome to the Merit Medical Systems Second Quarter twenty twenty five Earnings Conference Call. At this time, all participants have been placed in listen only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Mr. Fred Lampropoulos, Merit Medical Systems founder, chairman, and chief executive officer. Please go ahead.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Thank you, and welcome, everyone. I am joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer and Brian Lloyd, our Chief Legal Officer and Corporate Secretary. Brian, would you mind taking us through the safe harbor statements, please?

[Brian Lloyd, Chief Legal Officer & Corporate Secretary at Merit Medical Systems]

Thank you, Fred. This presentation contains forward looking statements that receive safe harbor protection under federal securities laws. Although we believe these forward looking statements are based upon reasonable assumptions, they are subject to risks and uncertainties. The realization of any of these risks or uncertainties as well as extraordinary events or transactions impacting our company could cause actual results to differ materially from the expectations and projections expressed or implied by our forward looking statements. In addition, any forward looking statements represent our views only as of today, 07/30/2025, and should not be relied upon as representing our views as of any other date.

[Brian Lloyd, Chief Legal Officer & Corporate Secretary at Merit Medical Systems]

We specifically disclaim any obligation to update such statements except as required by applicable law. Please refer to the sections entitled Cautionary Statement Regarding Forward Looking Statements in today's press release and presentation for important information regarding such statements. For a discussion of factors that could cause actual results to differ from these forward looking statements, please also refer to our most recent filings with the SEC, which are available on our website. Our financial statements are prepared in accordance with accounting principles, which are generally accepted in The United States. However, we believe certain non GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of our ongoing operations and can be useful for period over period comparisons of such operations.

[Brian Lloyd, Chief Legal Officer & Corporate Secretary at Merit Medical Systems]

This presentation also contains certain non GAAP financial measures. A reconciliation of non GAAP financial measures to the most directly comparable U. S. GAAP measures is included in today's press release and presentation furnished to the SEC under Form eight ks. Please refer to the sections of our press release and presentation entitled non GAAP financial measures for important information regarding non GAAP financial measures discussed on this call.

[Brian Lloyd, Chief Legal Officer & Corporate Secretary at Merit Medical Systems]

Readers should consider non GAAP financial measures in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP. Please note that these calculations may not be comparable with similarly titled measures of other companies. Both today's press release and our presentation are available on the Investors page of our website. I will now turn the call back to Fred.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Thank you, Brian. Let me start with a brief agenda of what we will cover during our prepared remarks. I will start with a summary of our second quarter twenty twenty five financial results. I will then discuss two important strategic announcements we made during the second quarter and will provide an update on our reimbursement strategy for the Rhapsody CIE. Then Raul will provide a more in-depth review of our quarterly financial results and our financial guidance for 2025, which we updated in today's press release.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Then we will open the call for your questions. Beginning with a review of our second quarter results, we reported total revenue of $382,500,000 up 13% year over year on a GAAP basis and up 12.5% year over year on a constant currency basis. Constant currency revenue growth we delivered in the second quarter exceeded the high end of the range of growth expectations that we outlined on our quarter one twenty twenty five earnings call. The better than expected constant currency revenue results were driven by a 6.7% constant currency organic growth, which exceeded the 6% high end of the range we outlined in our second quarter guidance. With respect to our profitability performance in the second quarter, we delivered financial results that significantly exceeded our expectations.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

We delivered another quarter of notable year over year improvement in our non GAAP operating margin, which increased nearly 109 basis points year over year to a 21.2, representing the highest non GAAP operating margin performance in any quarter in the company's history as a public company. We also delivered 10% growth in our non GAAP EPS, which exceeded the high end of our expectations, and we generated $70,000,000 of free cash flow, an increase of 20% year over year. This, performance was a direct result of the team's continued hard work and commitment to our strategic objectives. We're very proud of the strong execution our team delivered in the 2025. We believe our second quarter results reflect continued strong momentum in the business, and we are confident in our team's ability to deliver the total revenue guidance for 2025 we updated in today's press release.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Despite the continued challenges related to the dynamic and uncertain global macro environment, our team is executing well. We remain focused on delivering continued strong execution, solid constant currency growth and strong free cash flow generation in 2025 as well as continued progress in our continued growth initiative program and related financial targets for the three year period ending 12/31/2026. Turning to a discussion on two key announcements we made since our last earnings call. On 05/20/2025, we announced the acquisition of BioLife Delaware LLC for aggregate transaction consideration paid in cash and an assumption of liabilities of a $120,000,000. This strategic acquisition positions Merit to provide clinicians with more products designed to standardize, simplify, and minimize post procedure care and maintenance.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

BioLife is headquartered in Sarasota, Florida, manufacturers unique patented hemostatic devices under the brand name STAT Seal and Wound Seal. These products are effective differentiated hemostatic solutions for percutaneous devices with a broad range of clinical applications including vascular closure and indwelling catheter bleeding complications. Sales of BioLife products generated approximately $15,000,000 of revenue over the twelve month period ended 12/31/2024, and we believe these products will have a significant potential growth opportunity as they penetrate an estimated $350,000,000 global addressable market. Many Merit products operate through small openings in the skin that require efficient solutions to stop bleeding, promote patient recovery, and minimize costly complications. In such cases, STAT Seal specifically works with the patient's blood to rapidly form a protective seal over the procedure site.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Adding STAT Seal to Merit's hemostatic portfolio is intended to provide health care partners with an additional effective solution that complements a wide range of percutaneous procedures, including interventional radiology and cardiology, dialysis, electrophysiology, biopsy, and drainage. On July 7, we announced the appointment of Martha Aronson as Merit's new president and chief executive officer effective 10/03/2025. I'm very excited to welcome Martha to Merit and believe that she is uniquely qualified to lead the company into the future. As discussed on prior calls, the board executed a thorough search and a selection process as part of our CEO succession strategy. Martha brings extensive expertise and understanding of the industry.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

And more importantly, she was identified as an exceptional fit for the organization consistent with the Merit way, which we believe makes her the ideal leader for Merit's next stage of growth. I will continue to serve as president and CEO and chairman of the board through 10/03/2025. Upon Martha's appointment, I will continue to serve as chairman of the board. I would like, now to provide an update on our commercial strategy for the Rhapsody CIE in The United States. As outlined on our investor call in January, our Renal Therapies Group launched The US commercial strategy for Rhapsody CIE following our PMA approval last December.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

This strategy is comprehensive and multifaceted, including a a comprehensive marketing plan focused on raising awareness and expanding upon the existing strong physician relationships and clinical partnerships supporting the current RTG portfolio offering. Engaging with new and existing customers to work through the back approval processes as well as working with the largest GPOs and some of the largest IDNs across the country, and hosting physician training events at centers of excellence with physician partners who are passionate about the product and educating their peers on the benefits of the Rhapsody CIE. The RTG team has executed The US commercial strategy for Rhapsody CIE well during 2025. And more importantly, they have exceeded our expectations with respect to leveraging the new access to customers from the early commercialization of Rhapsody CIE to identify opportunities to drive adoption and utilization of the rest of our dialysis product portfolio. By way of reminder, our pricing strategy is an important input to our US commercial strategy for Rhapsody CIE.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Specifically, our go to market strategy is based on selling the Rhapsody CIE at a premium price relative to the competitive coverage dents offered in The US today. We believe the Rhapsody CIE is a completely new treatment option for patients as evidenced by our breakthrough designation from the FDA. The Rhapsody CIE is a novel differentiated product that improved dialysis maintenance procedure outcomes as demonstrated in the compelling body of clinical evidence evaluating safety and efficacy to date, and we offer unique size offerings with our fourteen and sixteen millimeter diameter devices that represent potential treatment options for clinicians previously not available in the marketplace. The data suggests that the Rhapsody CIE requires fewer reinterventions to maintain patency at the lesion site, and more importantly, that the access circuit remains functional, which is key for any dialysis patient. We believe the Rhapsody CIE offers a compelling opportunity believe to not only improve patient outcomes, but also to reduce the cost of treating this patient population. These factors together with demonstrated clinical outcomes and the fact that the

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Rhapsody Rhapsody CIE CIA is the only device that has been designed specifically for dialysis access maintenance supports our belief that the Rhapsody CIE is a premium product in the market. Our US commercial and pricing strategy was designed to maximize the compelling long term opportunity for the Rhapsody CIE in The US market. And importantly, these strategies were aligned with our efforts to secure reimbursement coverage and payment as well. As discussed on prior calls, our reimbursement strategy is focused on securing add on payment for procedures completed in both inpatient and outpatient sites of care. For the inpatient setting, our efforts to secure add on payment remain on track.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

On April 11, CMS released proposed fiscal year twenty six payment rates for the hospital inpatient prospective payment system, which included CMS proposal to approve the Rhapsody CIE for new technology add on payment or NTAP for the fiscal year twenty twenty six. CMS proposed that the maximum new technology add on payment for a case involving the use of the Merit Rhapsody CIE would be $3,770 for fiscal year twenty twenty six, which if finalized as proposed, would support our anticipated cost to the hospital inclusive of all components and accessories of $5,800. We understand that the effective date for this NTAP add on payment is anticipated to be 10/01/2025 for CMS 2026 inpatient fiscal year. With respect to our progress towards securing add on payment for procedures in the outpatient setting, candidly, a fulsome update requires additional discussion and clarification. First, and for the avoidance of doubt, our strategy for securing reimbursement for Rhapsody CIE procedures outside the hospital inpatient setting has not changed.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

However, we would like to clarify the terminology we have used in the past to describe our strategy for this portion of the market. Our strategy has been focused on the out hospital outpatient or HOPD setting instead of the office based lab or OBL setting as we have previously referenced. The outpatient setting represents a significant portion of the initial addressable market opportunity in The US for the Rhapsody CIE. According to Clarivate's dialysis access treatment devices, market insights US report published in September 2024, there were 95,000 stent units implanted for dialysis access maintenance in 2023, approximately seventy nine percent were implanted in nonhospital sites of care, the majority of which were in the outpatient setting. We would also like to clarify a point concerning our application for reimbursement for Rhapsody CIE in The US HOPD setting.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

In late February, we submitted an application for new technology ambulatory payment classification or APC assignment under the hospital outpatient prospective payment system or ops. This was the first time Merit pursued reimbursement for a PMA product, and we engaged external advisers to assist in that process. Our external advisers filed an application to secure an APC assignment and confirmed filing prior to the deadline. Unfortunately, our team believed that the application filed was for the transitional pass through or TPT add on payment. Our internal discussion and references to this portion of our US strategy as well as our public commentary reflected this misunderstanding.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Rhapsody CEIE was not awarded a new technology APC assignment as part of the calendar year 2026, ops and ambulatory surgical center proposed rule published on 07/15/2025. We are executing on a strategy to respond to CMS's determination on the Rhapsody CIE APC assignment. We have engaged with CMS in recent weeks to understand why we were not awarded a new APC assignment for 2026. While the review of our application has been completed by CMS, we are utilizing the sixty day common period to provide further supporting evidence which CMS will review. The deadline for submission of additional information is September 15.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

We believe we will hear CMS's final decision on this application as part of the calendar year 2026 ops and ambulatory surgical center final rule, which is expected to be published in November. We appreciate the discussions with CMS in recent weeks, and we believe we have a solid plan for utilizing the common period to enhance our case that Rhapsody CIE meets the requirements for an APC assignment. Separately, we are preparing our application for TPT add on payment under Medicare's ops system. We are targeting submission of our application by 09/01/2025, deadline and anticipate receiving a decision with respect to the award of TPT add on payment for procedures in the outpatient setting in December 2025. With all of that said, I want to reiterate that our reimbursement strategy for the outpatient setting has not changed.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

However, Raul and I are disappointed. Our intention with respect to all of our US Rhapsody messaging was to be transparent, with the investment community regarding the key milestones related to our reimbursement strategy following PMA approval. We did not communicate the strategy effectively. We are correcting our mistake this afternoon, and we are focused on executing the strategy for this significant portion of The US market. Clearly, we all have a better understanding of the process and terminology from this experience.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Importantly, we recognize that this represents a two quarter delay in expected timing for securing add on reimbursement in the outpatient setting. We have not changed our expectations for the long term addressable market in The US, for, Rhapsody CIA growth or the potential contributions to our long term growth profile as we commercialize this technology in years to come. With that said, let me turn the time over to Raul now for an in-depth review of our quarterly financial results and our updated financial guidance for 2025. Raul?

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Thank you, Fred. I will start with a detailed review of our revenue results in the second quarter, beginning with the sales performance in each of our primary reportable product categories. Note, unless otherwise stated, our growth rates are approximated and presented on both a year over year and constant currency basis. Second quarter total revenue growth was driven by 10% growth in our cardiovascular segment and 81% growth in our endoscopy segment. Cardiovascular segment sales exceeded the high end of the expectations we outlined on our first quarter call, and endoscopy sales came in at the high end of our expectations.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Our total revenue results included approximately 19,600,000.0 of revenue from our acquisitions of the lead management product portfolio from Cook Medical, the assets of Endogastric Solutions, and to a lesser extent, the acquisition of BioLife following the May 20 closing. Excluding sales of acquired products, segment revenue growth on an organic constant currency basis was 6.8% for our cardiovascular segment and 1% for our endoscopy segment. Turning to a review of our second quarter revenue results by product category. Cardiac Intervention product sales increased 23% and represented the largest driver of cardiovascular segment growth in the period. Excluding the contributions from the sale of acquired products, cardiac intervention product sales increased approximately 10% on an organic constant currency basis, well above the high end of organic growth expectations we assumed for q two.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Rounding out the q two performance across the rest of our cardio segment, sales of our peripheral intervention products and our custom procedure solutions products increased 6%, which was in line and above the high end of our expectations, respectively. Sales of our OEM products increased 4% in Q2, modestly lower than our expectations. The softer than expected OEM performance in Q2 was entirely related to sales to OEM customers outside The U. S, which continues to see demand trends impacted by the macro environment. Sales to OEM U.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

S. Customers increased in the high teens year over year in Q2. Turning to a brief summary of our sales performance on a geographic basis. On the second our second quarter sales in The U. S.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Increased 17% on a constant currency basis and 10% on an organic constant currency basis, exceeding the high end of our organic growth expectations by 30 basis points. We were pleased to see continued strong demand from our U. S. Customers in the second quarter. International sales increased 7% year over year and increased 2% on an organic constant currency basis.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Sales results in APAC exceeded our expectations. EMEA was in line and sales results in the Rest of the World Union were slightly below their expectations supporting our Q2 guidance range. With respect to China, specifically, sales decreased 6% compared to a low single digit growth rate assumed in our guidance. We attribute the softness to the broader macro environment as the BBP impact was essentially in line with expectations in Q2. Turning to a review of our P and L performance.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

For the avoidance of doubt, unless otherwise noted, my commentary will focus on the company's non GAAP results during the 2025, and all growth rates are approximated and presented on a year over year basis. We have included reconciliations from our GAAP reported results to the related non GAAP items in our press release and presentation available on our website. Gross profit increased approximately 17% in the second quarter. Our gross margin was 53.2%, up 167 basis points. Approximately half of the increase in gross margin was driven by lower tariff impact versus what our guidance contemplated, with the balance coming from favorable product, geographic revenue mix and improvements in pricing.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Operating expenses increased 15%. The increase in operating expenses was driven by a 13% increase in SG and A expense and a 24% increase in R and D expense compared to the prior year period. Total operating income in the second quarter increased $13,100,000 or 19% to 80,900,000.0 Our operating margin was 21.2% compared to 20.1% in the prior year period, an increase of 109 basis points year over year. Second quarter other expense net was $2,300,000 compared to income of $1,400,000 last year. The change in other expense net was driven by lower interest income associated with lower cash balances, offset partially by lower interest expense compared to the prior year period.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Second quarter net income was $61,000,000 or $1.01 per share compared to 58 $53,800,000 or $0.92 per share in the prior year period. We are pleased with our profitability performance in the second quarter, where we leveraged stronger than expected revenue results to drive significant expansion in operating margin and strong growth in non GAAP diluted earnings per share, both of which exceeded the high end of our expectations. Note, our second quarter non GAAP EPS results included incremental dilution related to our convertible debt that represented approximately $01 to Q2 EPS. Turning to a review of our balance sheet and financial condition. We generated 70,000,000 of free cash flow in the 2025, up 20% year over year.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

As of 06/30/2025, Merit had cash and cash equivalents of 341,800,000.0, total debt obligations of 747,500,000.0, and outstanding letter of credit guarantees of 2,900,000.0 with additional available borrowing capacity of approximately 697,000,000 compared to cash and cash equivalents of 376,700,000.0. Total debt obligations of 747,500,000.0 and outstanding letter of credit guarantees of 2,900,000.0 with additional available borrowing capacity of approximately 697,000,000 as of 12/31/2024. Our net leverage ratio as of June 30 was 1.7 times on an adjusted basis. Turning to a review of our fiscal year twenty twenty five financial guidance, which we updated in today's press release. For reference, we have included a table in our earnings press release, which details each of our formal financial guidance ranges and how those ranges compare to our updated guidance ranges issued as part of our press release on 05/20/2025.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Our updated 2025 guidance assumes the following: GAAP net revenue growth of 10 to 11% year over year, which we expect to result from net revenue growth of approximately 9% to 10% in our cardiovascular segment and net revenue growth of approximately 32% to 34% in our endoscopy segment and a tailwind from changes in foreign currency exchange rates of approximately $6,200,000 or approximately 46 basis points to growth year over year. Excluding the impact of changes in foreign currency exchange rates, we expect total net revenue growth on a constant currency basis in a range of 9.7% to 10.6% in 2025. Among other factors to consider when evaluating our projected constant currency revenue growth range for 2025 are the following items. First, the midpoint of our total constant currency growth range now assumes 12 growth in The U. S.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

And 8% growth outside The U. S. The 8% constant currency growth we expect outside The U. S. To assume low double digit growth in EMEA, mid teens growth in Rest Of The World region and approximately 2% growth in the APAC Region.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Second, our total net revenue guidance for fiscal year twenty twenty five also assumes inorganic revenue contributions from the business and assets acquired from Endogastric Solutions, Cook Medical and BioLife on 07/01/2024 11/01/2024 and May 2025, respectively, in the range of 56,000,000 to $58,000,000 in the aggregate. Excluding this inorganic revenue, our guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately 5.6% to 6.4% year over year. Third, for the full year 2025 period, we now forecast U. S. Revenue from the sales of Rhapsody CIE in the range of $2,000,000 to $4,000,000 This updated range reflects the impact of our revised timing for securing add on reimbursement in the outpatient setting.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Our prior guidance range assumed the 2025 would see strong customer adoption and utilization trends as a result of the incremental add on reimbursement improving procedure economy economics. For CMS guidelines, applications for TPT add on reimbursement submitted by the next deadline of 09/01/2025, if awarded, will be eligible for use beginning 01/01/2026. With respect to profitability guidance for 2025, we now expect non GAAP diluted earnings per share in the range of $3.52 to $3.72 compared to our prior guidance range of $3.28 to $3.41 The change in our non GAAP EPS expectations for 2025 reflects the flow through of the better than expected financial performance over the 2025 at both the low and high end ends of the non GAAP EPS range, specifically 35¢ and 21¢, respectively. The low and high ends of the updated non GAAP EPS range also reflect the impact of higher interest expense and a higher non GAAP tax rate assumption, representing the offsets the aforementioned first half twenty five EPS flow through of $04 and $07 respectively. The high end of non GAAP EPS range also includes our updated projected impact of tariffs, trade policies and related actions recently implemented by The U.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

S. And other countries. Specifically, the high end of our updated guidance range assumes tariff related manufacturing costs in our total cost of goods line of approximately $7,000,000 compared to $26,300,000 previously. Importantly, the $7,000,000 figure is based on available information as of 07/30/2025 and does not include any impact from new and or additional tariffs or retaliatory actions or changes to currently announced tariffs, which could change the anticipated impact to our non GAAP EPS in 2025. The ultimate impact from new and or additional tariffs or retaliatory actions or changes to currently announced tariffs on our business will depend on the timing, amount, scope, nature of such tariffs, among other factors, most of which are currently unknown.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

The tariff situation and potential retaliatory measures by other countries remain highly uncertain and dynamic. As such, the low end of our EPS range continues to reflect a tariff related impact on our 2025 cost of goods of $26,300,000 Returning to a discussion of our updated 2025 financial guidance assumptions for modeling purposes. Our fiscal year 2025 financial guidance now assumes non GAAP operating margins in the range of approximately 19% to 20% compared to 17.6% to 18% previously. Note, the change in our 2025 non GAAP operating margin expectations is primarily attributed to lower expected impact from tariffs and, to a lesser extent, the flow through of stronger than expected financial performance in the 2025. Non GAAP interest and other expense net of approximately $8,000,000 compared to $4,800,000 previously.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Non GAAP tax rate of approximately 22.5 compared to 21% previously, and diluted shares outstanding of approximately 61,000,000. Note, our weighted average share count assumption continues to reflect incremental dilution of approximately 900,000.0 shares related to our convertible debt facility. We continue to estimate incremental share dilution related to our convertible debt facility represents an impact of approximately $05 to our non GAAP EPS in 2025. Finally, we continue to expect to generate free cash flow of at least $150,000,000 in 2025, inclusive of the expectation that we invest approximately 90,000,000 to $100,000,000 in capital expenditures this year. We would also like to provide additional transparency related to our growth and profitability expectations for the 2025.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Specifically, we expect our total revenue to increase in the range of approximately 8.6% to 10.5% on a GAAP basis and up approximately 8% to 9.8% on a constant currency basis. The midpoint of our third quarter constant currency sales growth expectations assumes approximately 7% growth in The U. S. And 11% growth in international markets. Note, our third quarter constant currency sales growth expectations include inorganic revenue in the range of $13,300,000 to $14,300,000 Excluding inorganic contributions, our third quarter total revenue is expected to increase in the range of approximately four to 5.6% on an organic constant currency basis.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

With respect to our profitability expectations, for the 2025, we expect non GAAP operating margin in the range of approximately 16.9% to 18.5% compared to nineteen point two percent last year and non GAAP EPS in the range of $0.76 to $0.85 compared to $0.86 last year. That wraps up our prepared remarks. Operator, we would like now like to open up the line for questions.

[Operator]

Thank you. If you would like to ask a question, please press 11 on your telephone. You will then hear an automated message advising your hand is raised. If you would like to remove yourself from the queue, press star on 1 again. We ask that you please wait for your name and company to be announced before proceeding with your question.

[Operator]

One moment while we can pile the Q and A roster. The first question that I have for today will be coming from the line of Jason Bednar of Piper Sandler.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

Congrats on another nice quarter with the P and L here. I'll I'll kick things off on Rhapsody, and I'll just preface this by saying I'm sorry for any confusion. It's just a busy afternoon here and bouncing between a few calls, but I'm I'm not receiving TPT. May maybe just lay it out. Was there I guess, was was there a problem with the actual filing or and sorry.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

Just with with with trying to read through the script, it was it was not necessarily clear to me. Did you receive feedback from CMS? You know, I mean, maybe talk about your engagement with CMS since. I think a lot of investors are trying to handicap the likelihood of receiving TPT under the new December timeline. So maybe you can clarify and just, you know, what gives you confidence in this new timeline?

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah. Jason, this is Fred. Let me walk through the Rhapsody fact based story so you can hear this all in sequence. Again, we provided an update on The US reimbursement, in an outpatient setting. We applied for new technology APC assignment by the 03/01 deadline.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

CMS did not award a new APC assignment as part of the proposed rule on 07/15. Now that the application for the new APC assignment is completed, you know, we intend to submit an application for transitional pass through or TPT. The deadline for that submission is nine one. And if awarded, it'll become effective 01/01/2026. Revised 2025 revenue expectations for US Rhapsody due to the six month delay for potential contributions related to TPT add on, and we have not, you know, we have not changed any of our expectations for the long term addressable market in The US, for the Rhapsody CIE, or the potential contributions to our long term growth profile of the company.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

We corrected our prior commentary on the application for reimbursement in the outpatient setting. And for the avoidance of doubt, our prior commentary regarding our submission for TPT add on by the March 1 deadline was not correct. We are targeting submission for TPT add on by September 1, which is the deadline. So I hope that that brings it and that we I I hope that answers your question.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

Yeah. That's helpful.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Lot of information.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

Yeah. Yeah. I know. It's always always, you know, fun and complex dealing with reimbursement and just some of different rules and deadlines here. But maybe, Frank, can you to follow-up, can you maybe give investors the confidence or maybe describe what gives you the confidence on hitting that new deadline or securing not necessarily hitting the deadline, but securing TPT under the new deadline that you have set or the expectations you've set here.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

And then, yeah, I'm I'm sure you don't wanna go there on unpacking all the different possible paths, but maybe you could talk about the commitment you have to securing TPT, you know, against maybe a more aggressive commercial launch without TPT. Let's if into the scenario that you don't receive in December. I guess I'm just curious how many times you wanna go down this road, yeah, in in going after it. I would think a lot because we it's economically attractive, but there's some there's some puts and takes here. So maybe if you can have that discussion as well, it'd be helpful.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Well, just go ahead, Ronald.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah. Just just to clarify, Jason, I I think, you know, essentially, what we're saying is we were we were the under the assumption that we had filed for TPT, right, but but that had not. So it's it's it's not like we're refiling. We we went for APC. It was clear that that, you know, that was filed timely.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Didn't get the outcome that we wanted, just to be just to be clear. We're engaging with CMS, and and having those discussions and and and making sure that we're clear. But we are we are, we we are confident, you know, that we'll we'll meet the the deadline for for TPT. I I I would say that nothing has changed. We we we continue to like our, you know, our expectations for for for meeting all the TPT guidelines.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

We we think, we think we meet them. Obviously, clearly, have to submit. And, and then we'll then it's a waiting game. And but I I think we we all around here, are encouraged, just by the fact that, you know, we have the best data. We've got a great product, and we know we'll we'll do what we we thought we were gonna do and and and, know, and submit the application Yeah. By its deadline.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

So, Jason, you know, this was the first time that Merit pursued reimbursement for a PMA product, and I think you said that it's complicated. And we engaged, you know, external advisers to assist. Our external advisers filed an application on the APC assignment and confirmed filing. So, unfortunately, our team believed that the application file for TPT add on payment was the APC. That's how we understood it, and we own it.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Our internal discussion reference to the you know, to our strategy as well as our public comfort, you know, comments reflected this must under you know, the misunderstanding. We expected to receive a response, on the application on the proposed rule for 2026 issued on the July 15. And as we pointed out, CMS I CMS did not award an APC assignment as part of the proposed rule. And now that that application is complete, we intend to submit an application for the TPT, as I mentioned, and Raul mentioned on 09/01, which is essentially thirty days from now. Yeah.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

Okay. And I'll I'll let others hop in here. But just to Okay. You know, to maybe to put a bow on it, high confidence on securing TPT later this year.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

We believe in our product. We believe in the data. We believe that it is the product we think it is, and we believe all of those things, and we have high confidence in that product. Yes. And this this process, even though we made a mistake.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

I think we we've said that. We own it. Nobody else owns it. We own it. And it it it's gonna delay, but that's, I believe, the only thing that's going to

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

I think, you know, just bottom line, nothing, you know, from a long term perspective has changed from, you know, from our standpoint, strategically for this product. And so, you know, the unfortunate part is, obviously, we thought we had filed the TPT. We got the wording wrong. Obviously, we filed for APC. Now we know where we stand on that, and and we move on to the next step, which is TPT and, you know, have a high level of confidence in the product, Jason.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

Understood. Thanks, guys.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Thank you.

[Operator]

Thank you. And our next question will be coming from the line of Jason Bedford of Raymond James. Your line is open.

[Jayson Bedford, MD - Medical Technology at Raymond James Financial]

Hi. Can you hear me, Fred?

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

We've got you, Jason.

[Jayson Bedford, MD - Medical Technology at Raymond James Financial]

Yeah. I wasn't sure who who who got picked here. So, jeez, I really wanna use a three letter acronym here, but I'm not gonna use it.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

No. Please don't.

[Jayson Bedford, MD - Medical Technology at Raymond James Financial]

Yeah. So I I think I understand the difference between APC and TPT. I think a lot has to do with the newness of the technology, but I'd love for you to describe maybe why you're optimistic that you may be able to secure a TPT if you got rejected for an APC. Right? So I I guess my point is why would, they not apply the same logic?

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Okay. I'm gonna let Yes. It up. So Go ahead.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

This is all, you know, new to us. Right? And we're now now get to the expert in it. But APC is essentially around the procedure, Jason.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

Correct.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Right? And that that's that's kind of the the distinction where TPC is is is cost based around the product.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Does that help does that help, Jason?

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

It it it does.

[Jayson Bedford, MD - Medical Technology at Raymond James Financial]

I I assume APC kinda lumps you in with everyone else, whereas TPT acknowledges the difference. Is that fair?

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Again, I think what Raul said it's procedure based. And

[Jayson Bedford, MD - Medical Technology at Raymond James Financial]

Okay.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

And that was I'm not they couldn't see the difference. We believe that procedure was different. The CMS believe that there are other, you know, situations like that that are covered, which is why we didn't receive it. TPT acknowledges the differences in the performance of the device, but it's cost based.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

Yeah.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Does that help? So and and, Jason

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

yeah. And and, you know, one of the things that we, you know, we do get a common period, right, even though the APC assignment is complete, we do get to comment, and we we can, you know, provide additional information as to why we think it's it's a different procedure. But at the same time, we also know what that outcome is, which means that we can take the the the other road and file for TPI's TPT. Sorry.

[Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies]

Okay.

[Jayson Bedford, MD - Medical Technology at Raymond James Financial]

Okay. Maybe just two two other quickies. Down 6% in in in China, not necessarily related to VBP. Is there a specific category? Is it competition, or would you chalk it up to just general demand?

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

No. I I mean, I I think it's just the the the current environment, you know, the the macro environment, Jason. But I I think, you know, other than that, there's there's not much else else to see. We we continue to expect low single digit growth in APAC for 2025. I don't think, you know, that's changed for us.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

So I I I'd say it's it's kind of as expected, quite frankly. You know, that takes and puts, but, ultimately, we're kinda where we thought we'd be.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Puts and takes of the whole up and down thing. Yeah.

[Jayson Bedford, MD - Medical Technology at Raymond James Financial]

Okay. I'll I'll leave it at that. Thank you.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Great. Thank you.

[Operator]

Thank you. One moment for the next question. And the next question will be coming from the line of Robbie Marcus of JPMorgan. Your line is open.

[Robert Marcus, Senior Analyst at JPMorgan Chase]

Great. Congrats on a good quarter. Thanks for taking the questions. Maybe I could start on margins. Obviously, a really strong margin upside both on gross and operating margin.

[Robert Marcus, Senior Analyst at JPMorgan Chase]

Some of it came from less negative tariff impact, but part of it was also underlying. Maybe you could tease out what's what in gross and operating margin and then walk us through the balance of the year on both.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah. Look. I mean, I think, obviously, you know, super proud of the team of of how we're performing. I I think there's two things that I'd like to highlight. One is, obviously, our sales force continues to execute at a very high level, you know, with another strong quarter.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

That obviously helped, you know, from a leverage standpoint on operating expenses and also gross margin. Gross margin, it's it's a lot of, you know, everything. You know? I think, you know, ops lessons helped us. You know?

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Pricing helped us. Our mix has helped us. Again, our Salesforce, you know, delivering, you know, really good, you know, kind of mix and and geography mix. Fred

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah. And, Rob, I was just gonna say, I think it has to do with foundations for growth, and it has to do with continued growth initiatives. Those things have not left us. They're still, what we use as alignment for compensation and how we measure ourself, and very candidly, how our board measures us.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

So those are that's part of it too in that momentum. I also think the, more attention made on pricing and positioning the product and so on and so forth.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah. Really, the only, you know, kind of, you know, sore spot I would I would call is is the tariffs, which were kind of outside of our control that we had to deal with. You know? So, we ended up with about half of what we anticipated, in the p and l, but we're able to overcome it with strong sales and obviously the discipline that we showed on pricing and mix.

[Robert Marcus, Senior Analyst at JPMorgan Chase]

And how should we think about the cadence, particularly on gross margin in third quarter or fourth quarter and the upgrade there? What's less negative tariffs and what's underlying?

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

You know, I was hoping you're gonna forget about that question, Robbie, because, you know, we typically don't guide on gross we we actually don't guide on gross margin. But I think if you look at the expectations for our operating margin, clearly, we we took that up. You know, we're in the 19 to 20, you know, range for the year. Clearly, we expect some, you know, margin to be a con a con gross margin to be contributor. And so I I'll just leave it at that that, you know, we continue to feel, you know, really, you know, good you know, comfortable with with our our guidance for operating margin.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

I think we're you know, as we as we look to finish up the second year, I think it sets us up really well for for CGI and what we wanna do, for you there. I mean, I think if we hit the high end of our guidance, you know, we're already looking at the bottom end of of CGI, which I think is is a really good spot to be in.

[Robert Marcus, Senior Analyst at JPMorgan Chase]

You can't blame me for trying given all the moving parts.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

No. I appreciate it. Yeah. Yeah.

[Robert Marcus, Senior Analyst at JPMorgan Chase]

Alright. That's it for me. Thanks a lot.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Great, thank you. Thanks, Robbie.

[Operator]

Thank you. And the next question will be coming from the line of Steve Littman of Oppenheimer. Your line is open.

[Steven Lichtman, MD & Senior Analyst - Medical Devices at Oppenheimer & Co. Inc.]

Thank you. Hi, guys. I want to start first with the sales beat in the quarter, particularly around cardiac intervention, which saw a nice uplift even ex the acquired products. Can you talk a little a bit more about what the drivers of that were and what kind of sustainability of that growth, we could see?

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah. Let me pick that one up.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

You know, we generally don't mention names of products, so I won't do that. But I think a lot of this comes out of Merit's products that we have developed internally. I think a lot of it has to do with presence in the lab, and I think the, Cook acquisition and the presence in the cardiac area is important. And, and very candidly, we expect that to continue with other products and other things that Merit develops internally.

[Steven Lichtman, MD & Senior Analyst - Medical Devices at Oppenheimer & Co. Inc.]

So Yeah.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

We think it's gonna continue to be one of the strong areas in the company that we focused on. And it's a lot of things that other people overlook, and we just don't.

[Steven Lichtman, MD & Senior Analyst - Medical Devices at Oppenheimer & Co. Inc.]

Yeah.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

So that's where we're focused.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Add a little more color. Right? I I think, you know, Fred mentioned the the Cook acquisition, which obviously isn't organic yet. But if you remember, one of the reasons we did that acquisition, the strategy behind that was to get deeper into our cardiac, you know, bag and, you know, specifically those products. And and you see the Salesforce, you know, focused on them.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

They're excited about that. And so, you're seeing a little bit of uptick there too.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

There's some pull through too with the access products that Merit makes. You gotta get in there, and that's kind of our strong suit. So that's another part of it as well.

[Steven Lichtman, MD & Senior Analyst - Medical Devices at Oppenheimer & Co. Inc.]

Great. Just shifting to margin. Obviously, you're benefiting here by being from your conservatism on the first quarter call relative to tariffs. Raul, you talked at that time about some work you'd look to do to offset tariffs. How much of that work can still flow through and maybe drive excess margin now even at the lower hopefully, lower tariff impact?

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Well, I think we're trying to be nimble on some of those things that we're doing. A lot of it was things that we could do easily, redirect shipments, you know, product line transfers that were already on the books. You know, can we pull those forward? Those are all things that are that are that are being worked on. I I think, you know, the hard part, quite frankly, is that it's a fast moving target that changes almost on a daily basis.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Right? I think we had two changes just this week. One was confirmed, and one is you know, was just a rumor out there that, you know

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

And the president can change his mind. They're gonna see what he thinks.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah. So so look. I I think that the nice thing, quite frankly, is, you know, just just being, you know, as transparent as possible on these tariffs. I think our guidance covers a lot. Right?

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

I mean, I I think when you look at the high end, you know, we we we've got, you know, roughly $7,000,000, you know, of of, you know, impact there. When you look at the low end, we essentially left, you know, that original amount of, you know, $26,000,000 that we'd originally called out, in the guidance. So I think we have a, you know, a good number in within the range of our guidance to to cover all sorts of, you know, changes that may come our way, but it is a moving target. And so I would just say that we're comfortable where we're at. I think our operations group is doing everything they can to try and and mitigate, you know, the expense, but we're also making sure that they stay focused on what really matters, and that's their CGI targets, which is things that they can control. And getting getting products to our customers.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Products to our customers.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

That's key to all of us no matter what.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah. Yeah.

[Steven Lichtman, MD & Senior Analyst - Medical Devices at Oppenheimer & Co. Inc.]

Got it. And then just my one last question on and on Rhapsody is what's happening or going to be happening on the ground here as sort of reimbursement work is being done? Obviously, you have an approved product, you have great data. What's going on in terms of education, training so that when you hopefully get that reimbursement sorted out, kinda hit the ground running?

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Well, yeah, listen. I think our updated range assumes that we maintain a premium price. We believe it's a premium product. That has not changed. We do not expect to see a ramp in adoption utilization in the outpatient setting in the second half, but we do expect to gain market share in the hospital setting where we have approval and where we have, you know, NTAP.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

So, anyway, we we, we have plenty to do. It gives us more time to train, more time to get ready for other expanding markets that, you know, from a regulatory point of view. So, you know, the we we got you know, this was a punch we took, but it didn't hurt very much. It hurt I mean, it hurts. Don't get me wrong, but our

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

eyes are watering, but we're still still in the fight. But we're

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

still in the fight. We're still swinging.

[Steven Lichtman, MD & Senior Analyst - Medical Devices at Oppenheimer & Co. Inc.]

So Got it. Thank you, guys.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah. Thank you.

[Operator]

Thank you. One moment for the next question. And the next question is coming from the line of Jim Sidoti of Sidoti and Company. Your line is open.

[James Sidoti, Analyst at Sidoti & Company]

Hi. Good afternoon. Thanks for taking the question. Talk a little bit about BioLife and and distribution for Statfile. Do they have international sales?

[James Sidoti, Analyst at Sidoti & Company]

And is that something you could put through your reps?

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah. Part of the attractiveness of this whole deal was they had four distributors in The United States. I can tell you that we've converted all of those and negotiated through all of those, and all of our sales are now coming in direct. So we get orders, and we deliver those directly to customers. On the international side, they're approved, but they didn't have any footprint.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

We do. So that's always been the attractiveness for us is the growth potential of the product with Merit. And this goes back to the cardiac, and you'll see that fall into line in that part that we were talking about earlier. So it's, it's something, again, I've been watching for ten years. It's something that our physicians have encouraged us to to look at because they use it.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

You need to have this. And and finally, the the right time came up, and, away we go. We we, we feel very good about the product. But maybe more importantly, the last thing in the room is the Salesforce. They're the guys that are out there that are fired up about it, and that's what we always want. It's that enthusiasm that drives the revenue.

[James Sidoti, Analyst at Sidoti & Company]

Right. And, know, with regards to cash flow, another another good quarter for cash flow. Are you think you're at a point where you'll start to pay down some of the debt going forward, or do you think you're gonna keep the cash in the bank for additional deals? Yeah. No. I mean, I'll I'll, you know, I'll

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

I'll take this question and and, you know, use it to highlight our free cash flow again, which was, you know, $90,000,000, you know, year to date, $70,000,000 in the quarter, which is, you know, just fantastic. You know, for now, Jim, we'll we'll continue to, you know, to to to hoard the cash, I'll say. We do have some capital expenditures that are coming in the back half of the year as we, you know, get, you know, get started on this building. I say started, but we've already got walls up, and, it's it's gonna be coming at us here pretty quickly. And so, you know, we but but for now, we'll

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

They're all in our forecast.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

They're our guidance. They're in everything. So so we're feeling pretty good about it, and, you know, you gotta continue to deliver strong free cash flow. Again, I'll I'll highlight our operations group, think, is doing a pretty good job of, you know, balancing the inventory, which is the primary driver of our working capital, allowing us to, you know, to to have these strong free cash flow numbers.

[James Sidoti, Analyst at Sidoti & Company]

Yep. Alright. Thank you.

[Operator]

Thank you. And our next question will be coming from the line of Larry Biegelsen of Wells Fargo.

[Analyst]

It's Lei calling in for Larry Biegelsen. My first one is just around your guidance update. So you beat Q2 revenue by about $10,000,000 But at the midpoint of your guidance raise on a constant currency basis, the increase is less than 10,000,000 Is that all due to Rhapsody being moved out six months, or is there anything else that changes about your second half outlook? And I have another question after that.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Sure. Sure. I I mean, there's there's takes and puts, you know, across the board. You know? But I think, you know, generally, our practice is to kinda look at the, you know, the first half beat and obviously, you know, flow some of that through.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

I think we ended up in a really good spot. Like you said, the midpoint of our updated guidance is is about, you know, $10,000,000. I I think we we all felt, you know, pretty good about where we are. You know, there there's a lot of uncertainty out there. I I think the business continues to execute at really high level.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

But just with all the tariffs and all the noise, there's a lot of things out there, you know, that, you know, just kind of give you a little bit of pause as well as the business is doing. So I I I'd say we feel pretty good about the guidance, and I I think it it it, you know, it it we have a high level of confidence in it. I'll just say that.

[Analyst]

Got it. Okay. That's helpful. And then second question is around tariffs. Raul, I think in the past, you said you can offset up to 45% of annualized tariffs for in 2026.

[Analyst]

Is that still true? Any commentary on how we should think about tariffs for next year? Thank you.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yes. I mean, I would say that that was true based on that that initial assessment of what happened then. Right? I I think we'll we feel pretty confident that we can overcome some of them. I I just have to see, quite frankly, where we end up at the end of the year.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

You know, what's what's real, what's, you know, what's a news headline. But I think we have a good game plan, and I would say nothing's changed from from that last update that we gave other than things have gotten a little bit better, and we've gotten some clarity, but it's still kind of a lot of moving parts. So I'll just say that I think our guidance kinda contemplates everything that's out there right now, right, on the high end and the low end. And so we feel we feel pretty confident. And, also, I'll just you know, one one additional item is is we have not changed our CGI targets.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Right? We're still committed to those, which I think is really important.

[Operator]

Thank you. And the next question will be coming from the line of Mike Matson of Needham and Company. Your line is open.

[Mike Matson, MD - Senior Equity Research Analyst at Needham & Company]

Yeah. Thanks. Thanks for taking my questions. I guess I'll ask one more on Rhapsody. Hopefully, this wasn't addressed earlier.

[Mike Matson, MD - Senior Equity Research Analyst at Needham & Company]

But just you you did say something about OBLs in the prepared remarks. And, you know, just curious if are you do you have any plan to pursue re you know, any additional reimbursement in the OBL setting? And, you know, how important is that? I mean, how many of these procedures are done in that setting? Yeah. I mean, the Go ahead.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

The focus is on is on outpatient. Right? It's it's it's the largest, you know, area of the market. And so I I think that that that, you know, that's the biggest percentage, and that that's where the focus is right now, Mike.

[Mike Matson, MD - Senior Equity Research Analyst at Needham & Company]

Okay. Got it. And then just just one more on the BioLife acquisition. So, you know, given the the nature of the products, are those gonna be sold by you know, in both the peripheral and the cardiac business? Because I can imagine they could be used in both types of procedures potentially.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yes. The answer is yes. It's used on radio procedures. It's used for PICC lines, ports, any place where you're bleeding and where you're, you know, where they're using those as we speak.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

That's one of those exciting parts about that business when we when we acquired it is that it's it's one of the few products that we've acquired that really fits in just about every bag that we have.

[Mike Matson, MD - Senior Equity Research Analyst at Needham & Company]

Okay. And then just I think you referred to having some prior sort of some sort of prior hemostatic product that you guys were selling. So what were those, and how do those kinda fit with BioLife BioLife products?

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah. Some of these are things that actually work together. So if you take a look at this patch to stop the bleeding, they'll oftentimes put use a sink and use this. In fact

[Mike Matson, MD - Senior Equity Research Analyst at Needham & Company]

Radial compression device.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah. Radial compression device. So they'll use that and this to get faster hemostasis so that you can get to an ambulatory state and get them out of the, you know, out of the hospital. So, you know, they're they're often used. In fact, as I mentioned earlier, Mike, you know, this was something that physicians encouraged us to look at because they used it and say, it would be nice just to buy this from one company and some of that has a full suite of products.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

And that was something that was said years ago, and we just kept following along until they finally aligned.

[Mike Matson, MD - Senior Equity Research Analyst at Needham & Company]

Yeah. Got it. Thank you.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

K. Thanks, Mike.

[Operator]

Thank you. And the next question will be coming from the line of David Rescot of Baird. Your line is open.

[David Rescott, Senior Research Analyst at Baird]

Can you guys hear me?

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah. We got you, David.

[David Rescott, Senior Research Analyst at Baird]

Great. I wanted to ask on guide for the year, particularly on the lower end of this EPS guide since, in general, it's probably a good gauge of apples to apples from earlier in year since you have the $26,300,000 in there from the tariff perspective. I guess, one, why, I guess, keep that headwind at the low end if we're halfway through the year already? And we know that China tariffs are significantly less than what they were a couple of months ago. So is there anything else in the other updated tariffs that are kind of getting you back to that 26.3?

[David Rescott, Senior Research Analyst at Baird]

And then second part to this, I think you beat by $0.15 or so. The lower end went up by $0.02 4 I think or so. So there's about a $00 delta of the, you know, underlying business versus BioLife. I I think the the convert impact is the same. So can you just help us, you know, bridge the gap on on what was better in the quarter versus second half? Yeah.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah. I'll I'll I'll I'll walk you through. So, right, so q one, we had about a 14¢ beat, so we flowed that through. Q two and this is obviously I'm just talking strictly low end, so I don't wanna confuse anybody. On the low end, we flowed through the 21¢, you know, for q two. As you pointed out, we didn't make any changes to, to our tariff amount.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

And then you had an offset there, you know, for interest, expense that increased. So that's gonna be 4¢, and that's due to the, you know, obviously, to the acquisition that we just did. And then as you know, there was some tax changes, that were just signed, into law, and so that that'll be a 7¢, impact also. So you, you you know, you end up with the 24¢ that you that you just talked about. But this is this is I I you know, I'm glad you said what you said, you know, David, because this is exactly why we left the low end the way we did.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Because you just implied, right, that the the the China would be better. Well, that's just a rumor. Right? That there's that that's that's what you know, that that was a headline that came out two days ago. There was two conflicting stories on it.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

We actually don't know if that's gonna happen. I think the the the president said that it might. You know? So I you know, the the the I I think from our standpoint, still a lot of complexity to this, you know, and a lot of moving parts to it. And I I think we just felt like the low end just reflects a high level of confidence in in our twenty twenty five outlook if there's significant changes to the tariffs.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Right? And, you know, so so I I think we we felt comfortable just leaving it as is.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

And, you know, this is a point of interest. In Feet, there's a big article today about the issue of the, Chinese navy and the the increased tensions in the South China Sea. Yeah. Is that gonna affect, you know, what's going on with tariffs and that dialogue? And the answer is absolutely.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

So, again, who knows how that shakes out? You know? So I I think we're taking the right approach. I agree with you, Raul. I mean, that's what we've talked about for a long time and, you know, several times in the last several days.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah.

[David Rescott, Senior Research Analyst at Baird]

Okay. And then I might have missed it, you know, in in the earlier q and a. I I I know you set out earlier this year with the seven to nine for the contribution from Rhapsody. I believe at the time that didn't necessarily contemplate any reimbursement kind of uplift, whether it's CBT or NTAP. Have you reiterated that contribution for the full year?

[David Rescott, Senior Research Analyst at Baird]

And then how are or how is kind of the sales force in your view responding maybe a little bit this, delay in the reimbursement uplift? Has anything changed on the commercial front over the next couple months until you are, able to to secure that if if you are? Thank you.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Well, I mean, no. So right. So we updated our range to 2 to 4,000,000, David. I'm I'm I'm not sure if you caught that. But, and just just for the sake of clarity, our our guidance originally included all sorts of scenarios and assumptions, around the adoption and and utilization of of of these add on, you know, reimbursement processes.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

And so, you know, clearly, for for for us now, we've got clarity on one. We still think that, you know, we're obviously gonna use the comment period to to add additional color, you know, to CMS. And then we're also gonna follow, you know, follow for for the additional add on on the on the TPT.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

David, you know, as you know, we're just delayed six months and on that one product. But let's talk about you asked about the Salesforce. You know, that RTG group is doing extraordinarily well. They have numerous products.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

We're seeing, strength in all of those products across the board. So, yeah, I'm sure that you'd like to have everything in the bag, but they're doing very well and have plenty to sell, and all of those are doing well. So I've talked to several of the sales force, about, you know, their enthusiasm, about their targets, and this, that, and the other. And they're all, aligned, and they're all I mean, I hate I mean, I'll use the word. They're on fire.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

These sales guys are fired up because they have products that are distinct.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

I mean, we're we're we're I mean, we we we're gonna hold our premium pricing.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Yeah.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

I know our competitors are not, and I think they're listening. But, you know Yeah.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

There's a there's a few of them on the call.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Four to be exact. I was wondering when you were gonna raise that. Okay. I hope that helps.

[David Rescott, Senior Research Analyst at Baird]

Yeah.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Is that it your question? Okay.

[David Rescott, Senior Research Analyst at Baird]

That that that's great. And I I did miss the the two to four updates, though, so thanks for clarifying that.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah. No problem.

[Operator]

Thank you. The next question will be coming from the line of Michael Potinsky of Barrington Research. Your line is open.

[Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates]

Hey. Good evening. Hey. So I to ask, and maybe I missed more fulsome explanation, but China, the language you're using around the China quarter is sort of similar to last quarter where you sort of say, well, soft macro environment, this came in below what we thought, but not anything, unless I missed it, with real specificity. I'm just curious, like two soft quarters in China not related to EDP is is not typical for you guys.

[Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates]

And I'm just curious if you're digging into that, or or or did I miss a a more, full explanation of that? Thanks.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Well, I mean, I I think well, I think the the big explanation is that, you know, we continue to expect low single digit growth in APAC for 2025. Right? I mean, I think we've been very clear about that all all year long, and China's China's a big contributor to that. And so, you know, I I I would say that, yes, it it came in lower than expected, but, also, we we just it's it's China. Right?

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

There's just a lot of you know, it's it's a it's a tough macro environment, you know, there. And, I would say that we've had quarters where we've done, you know, better than anticipated, but I don't think anybody around here is kinda hitting the the panic button, you know, Mike, to be honest with you. I mean, I just think it's it's just the environment we're in right now. It's it's not isolated to any one customer or any any one, you know, segment. It's just it's just a general softness.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

And that's all, you know, that's all I have to say to it. You know? And, obviously, volume based purchasing continues to be a headwind and as as we as we've talked about over the last couple of years.

[Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates]

Okay. And I just wanna ask a quick question, and it's it's hard to keep track of how long any any of these tariffs were actually on in the second quarter. But what is any of the

[Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates]

7,000,000, was it actual like, did any of that actually hit in Q2? Was was there an impact from the Yes.

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Had about $2,000,000 that that that flowed through that's included in the gross margin.

[Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates]

You said 2,000,000?

[Raul Parra, CFO & Treasurer at Merit Medical Systems]

Yeah. Or 1.2, sorry. Dollars $0.02.

[Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates]

Okay.

[Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates]

Gotcha. Okay. Thanks. And then just last question for for Fred. Just curious, the the balance sheet leverage is, you know, despite you guys being fairly active the last couple of years is still pretty low in part due to the good cash flows.

[Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates]

So just curious, are there assets out there that are interesting? What are you seeing? What are you seeing in terms of valuation? Anything you can add on that would be great. Thanks.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

I'll just be very broad. There are opportunities. We look at them. If they're right for merit, we'll do something about it. If not, we'll just continue to march.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

We may have to wait ten years like we did for one of them. They're out there, but it it gotta be patient and and but they're there.

[Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates]

Okay. Fair enough. Thanks, guys. I really appreciate it.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Thanks, Mike.

[Operator]

Thank you. And this concludes today's q and a session. I would like to go ahead and turn the call back over to Fred for closing remarks. The floor is yours, sir.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

Thank you very much. Ladies and gentlemen, thank you very much for your time on such a busy day. You know, it's an interesting time for me. This will be the last publicly held quarterly report that I will speak to. I'll still be involved in the company.

[Fred Lampropoulos, Founder, Chairman, CEO & President at Merit Medical Systems]

I will be the executive chairman after October 3, and I'll still be a member of the board for a number of years. But I I wanna thank you for all that you've taught me. I wanna thank you for all the scolding you've given me and helped us as a business and brought things to our attention that were necessary. So best wishes to all of you, and, again, thank you. And signing off now from Salt Lake City, Utah, the home of the twenty thirty four Winter Olympics. Good evening.

[Operator]

This concludes today's presentation. You may all disconnect.

Participants

Executives

• Fred Lampropoulos, Founder, Chairman, CEO & President
• Brian Lloyd, Chief Legal Officer & Corporate Secretary
• Raul Parra, CFO & Treasurer

Analysts

• Jason Bednar, MD & Senior Research Analyst at Piper Sandler Companies
• Jayson Bedford, MD - Medical Technology at Raymond James Financial
• Robert Marcus, Senior Analyst at JPMorgan Chase
• Steven Lichtman, MD & Senior Analyst - Medical Devices at Oppenheimer & Co. Inc.
• James Sidoti, Analyst at Sidoti & Company
• Analyst
• Mike Matson, MD - Senior Equity Research Analyst at Needham & Company
• David Rescott, Senior Research Analyst at Baird
• Michael Petusky, MD & Senior Investment Analyst at Barrington Research Associates