Merit Medical Systems Q1 Earnings Call Highlights

Key Points

• Merit beat the high end of Q1 expectations with total revenue of $381.9 million (GAAP, +7% YoY), delivered a record first‑quarter non‑GAAP operating margin of 19.7%, $25 million of free cash flow, and 9% growth in non‑GAAP EPS.
• Subsequent to quarter‑end Merit acquired View Point Medical for an aggregate $140 million, a deal that roughly triples Merit’s oncology addressable procedures, is expected to be $0.05 dilutive to 2026 EPS but accretive thereafter, and management projects View Point sales growth of at least 20% with strong margins.
• Management flagged a sharp 14% decline in OEM sales (attributed to APAC macro weakness and U.S. inventory destocking) and a $4.6 million tariff hit in the quarter; they expect OEM to recover to mid‑single‑digit growth in Q2 and assume a $15 million annual tariff impact (≈$0.19/share) in guidance.

Merit Medical Systems NASDAQ: MMSI reported first-quarter 2026 results that exceeded the high end of the company’s expectations, driven by steady U.S. demand, contributions from recent acquisitions, and record first-quarter profitability. Management also detailed a post-quarter oncology acquisition, a new endoscopy product launch, and updates to 2026 guidance that incorporate the newly acquired business.

First-quarter results top expectations

President and CEO Martha Aronson said Merit generated total revenue of $381.9 million, up 7% year-over-year on a GAAP basis and up 5% on a constant-currency basis. Constant-currency revenue performance “exceeded the high end of the expectations that we outlined on the Q4 2025 earnings call,” Aronson said.

Constant-currency growth included 2.7% organic growth plus contributions from the company’s Biolife and C2 CryoBalloon acquisitions, which Aronson said “both exceeded the high end of our expectations.” Merit’s organic growth also reflected the divestiture of its DualCap product line in February 2026; excluding divested revenue, organic constant-currency growth was 3.7%.

On profitability, Aronson highlighted a record first-quarter non-GAAP operating margin and stronger earnings and cash generation. “Our non-GAAP operating margin increased 47 basis points year-over-year to 19.7%, representing the highest first quarter operating margin in the company's history,” she said. Merit reported $25 million of free cash flow, up 26% year-over-year, and delivered 9% growth in non-GAAP EPS, which management said exceeded expectations.

Revenue mix and OEM headwinds

CFO Raul Parra said total revenue rose $18.6 million, or 5%, exceeding the high end of the company’s prior outlook. By geography, U.S. sales increased $14.5 million, or 6.8%, while international sales rose $4.1 million, or 3%, both “modestly” above expectations, he said.

Under Merit’s new external revenue reporting, Parra said first-quarter growth included a $10.1 million increase in foundational product sales and an $8.5 million increase in therapeutic product sales. On an organic constant-currency basis, foundational sales increased 1.5% and therapeutic sales increased 5.2%, with acquired products contributing $6.6 million and $2.5 million, respectively.

Parra said organic growth in foundational products was driven by the vascular intervention and access platforms, offset by declines in OEM and procedural solutions, with procedural solutions affected by the DualCap divestiture. Therapeutic growth was led by cardiac therapies and endoscopy, along with “solid growth” in vascular intervention and oncology, offset by declines in OEM and renal therapies.

Management also addressed a sharp decline in OEM sales. Parra said OEM revenue fell 14% year-over-year in the quarter, “significantly lower than what was assumed in our guidance.” He attributed weakness outside the U.S. to macro trends—particularly in APAC—and said U.S. OEM results were affected by inventory destocking tied to product line transfers to Tijuana, Mexico. Customer orders were lower than expected, but Parra described the shortfall as “transient or timing-based rather than a reflection of share loss,” adding that Merit still views normalized OEM growth as “mid to high single digits annually.”

In the Q&A, Parra said early order activity gave the company confidence in a sequential improvement, stating OEM in the second quarter should be “at the very least…mid single digits” growth.

Margins, tariffs, and balance sheet

On the income statement, Parra said non-GAAP gross margin was 53.2%, down 20 basis points year-over-year but “notably stronger than our internal expectations.” The quarter included a $4.6 million tariff impact versus none in the prior-year period, which Parra said equated to a 120-basis-point headwind to gross margin.

Operating expenses increased 5%, driven primarily by a $5.4 million rise in SG&A and a $1.1 million increase in R&D. Non-GAAP operating income rose 10% to $75.3 million and operating margin expanded to 19.7%. Net income was $56.7 million, or $0.94 per share, versus $52.9 million, or $0.86 per share, a year earlier; Parra said net income and EPS exceeded the high end of guidance by $3.7 million and $0.07, respectively.

Merit ended the quarter with $488.1 million in cash and cash equivalents, $747.5 million in total debt, and about $697 million of borrowing capacity. Adjusted net leverage was 1.6x, Parra said. Cash increased during the quarter due to $24.7 million in free cash flow and $25.5 million in proceeds from the DualCap divestiture.

Asked about tariff refunds, Parra said the company had “started the process of reimbursement” and had “essentially filed for the majority of that,” though he noted the situation remained subject to potential challenge through May and would be revisited with second-quarter guidance.

View Point acquisition expands oncology offering

Subsequent to quarter-end, Merit acquired View Point Medical on April 1 for aggregate consideration of $140 million, including $90 million paid in cash at closing and two deferred payments of $25 million each due by the first and second anniversaries of closing, Parra said.

Aronson said View Point, based in Carlsbad, California, manufactures the OneMark detection imaging system and OneMark tissue markers. She said the technology is designed to help localize more lesions at the time of biopsy and represents an estimated 1.3 million procedures annually in the U.S. alone. Aronson said the acquisition expands the annual addressable procedure opportunity for Merit’s oncology business by about three times, complementing the company’s SCOUT platform.

In Q&A, Aronson described Merit’s oncology business as “about a $100 million platform” that has been “pretty much a one product platform,” and said adding OneMark expands the addressable portion of the breast biopsy market. She characterized the offering as a “market expansion play” and a “better and a best offering,” emphasizing physician preference between radar-based SCOUT and ultrasound-enhanced OneMark.

Parra said the deal is expected to be $0.05 dilutive to 2026 non-GAAP EPS, but projected to be accretive thereafter. He also said Merit projects View Point sales growth of at least 20% per year, with 70% non-GAAP gross margins and non-GAAP operating margins above the company average.

2026 outlook updated; new revenue reporting structure

Merit updated 2026 guidance to reflect View Point contributions. Parra said that from April 1 through Dec. 31, 2026, View Point is expected to contribute $2 million to $4 million of revenue and dilute 2026 non-GAAP EPS by about $0.05. For the full year, Merit now expects GAAP revenue growth of 6.3% to 7.8%, and constant-currency growth of 5.6% to 7%. Excluding inorganic contributions, the company’s constant-currency organic growth outlook remains 4.5% to 6%, Parra said.

Merit maintained its full-year non-GAAP diluted EPS guidance of $4.01 to $4.15, representing 5% to 8% growth, noting the range reflects the $0.05 dilution from View Point. Parra reiterated the company’s tariff assumption embedded in guidance: a 12-month impact of about $15 million, or $0.19 per share, though he cautioned the tariff environment remained “an evolving situation.”

For the second quarter, management guided to revenue of $400 million to $410 million (about 4% to 7% constant-currency growth), including $4 million to $4.5 million of inorganic revenue. The company expects second-quarter non-GAAP operating margin of 18.7% to 20.4% and non-GAAP EPS of $0.90 to $1.00.

In addition to financial updates, Aronson said Merit is now reporting revenue in two product categories—foundational and therapeutic—following a review aimed at streamlining internal planning and external communication. She said foundational products comprised about two-thirds of 2025 revenue, while therapeutic products comprised about one-third and have shown higher organic growth over the last three years.

Aronson also highlighted endoscopy progress, including the U.S. launch of the Resilience through-the-scope esophageal stent on March 16 and strong performance from the C2 CryoBalloon acquisition. She said the company expects Resilience adoption to contribute to endoscopy growth “in the coming years.”

About Merit Medical Systems NASDAQ: MMSI

Merit Medical Systems, Inc is a global manufacturer and marketer of a broad range of medical devices used in diagnostic and interventional procedures. The company's product portfolio encompasses vascular access, drainage, embolotherapy, and interventional oncology devices, as well as radiofrequency ablation systems and hemostasis solutions. These products serve physicians and hospitals in critical care settings and support minimally invasive treatment options across multiple specialties, including cardiology, radiology, oncology, neurology and endoscopy.

Founded in 1987 by Fred Lampropoulos, Merit Medical Systems has grown through both organic development and targeted acquisitions to expand its technology offerings and geographic reach.

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