Merit Medical Systems Q3 Earnings Call Highlights

Key Points

• Strong Q3 performance: Merit Medical’s revenue rose 8% year over year to $416 million, while organic constant-currency growth reached 9%. Non-GAAP EPS increased 22% to $1.12, supported by broad-based demand across foundational and therapeutic products.
• 2026 outlook raised: The company increased its full-year non-GAAP EPS forecast to $4.33–$4.37, implying 13%–14% growth, while projecting full-year GAAP revenue growth of 7.9%–8.4%. Gross margin still declined to 52.8% due largely to manufacturing variances and higher freight costs.
• Portfolio expansion continues: Merit acquired the remaining stake in Solo Pace for approximately $45 million, adding temporary pacing systems to its cardiac therapies platform. The deal is expected to be slightly accretive to non-GAAP earnings in 2027, while the company continues evaluating additional tuck-in acquisitions.

Merit Medical Systems NASDAQ: MMSI reported third-quarter 2026 revenue of $416 million, up 8% year over year on both a GAAP and constant-currency basis, as organic constant-currency growth reached 9% and exceeded management’s prior expectations.

President and Chief Executive Officer Martha Aronson said growth was supported by better-than-expected demand across the company’s primary product categories. Foundational-product sales posted 8% organic growth, while therapeutic-product sales grew 11% organically. U.S. revenue increased 11%, or $25.9 million, while international sales rose 3%, or $5.1 million.

“The growth is really balanced,” Aronson said during the company’s earnings call, citing contributions across multiple platforms. Chief Financial Officer Raul Parra said foundational growth was led by vascular intervention, access and OEM businesses, while therapeutic growth was driven primarily by oncology, endoscopy and OEM, with additional contributions from vascular intervention and cardiac therapies.

Profitability Improves Despite Gross-Margin Pressure

Merit reported non-GAAP operating income of $88.5 million, up 17% from the prior-year period. Non-GAAP operating margin expanded 160 basis points to 21.3%, while non-GAAP diluted earnings per share increased 22% to $1.12, exceeding the high end of the company’s guidance by $0.04.

The company generated nearly $53 million of free cash flow during the quarter. At Sept. 30, Merit had $505.8 million in cash equivalents and restricted cash, $747.5 million in total debt obligations, and approximately $697 million in available borrowing capacity. Its adjusted net leverage ratio was 1.5 times.

Gross margin declined 81 basis points year over year to 52.8%. Parra attributed the decline mainly to manufacturing variances and higher freight and distribution costs. He said approximately 80 basis points of pressure came from manufacturing variances, largely related to raw materials and platinum, while a bonus accrual adjustment reduced gross margin by roughly 40 basis points and freight added another 25 basis points of pressure.

Merit has validated an alternative to platinum for the affected product and is ramping that alternative, Parra said. The company maintained its estimate for approximately $16 million in incremental tariff impact during 2026, though Parra said tariffs were not a significant contributor to the third-quarter gross-margin decline. Merit expects an additional roughly $1.3 million in tariff refunds, although it does not expect to receive those funds until early 2027.

2026 Outlook Raised

Following the third-quarter performance, Merit raised its full-year non-GAAP EPS outlook to a range of $4.33 to $4.37, from prior guidance of $4.25 to $4.35. The updated range implies year-over-year EPS growth of 13% to 14%.

• Total 2026 GAAP revenue growth is expected to be 7.9% to 8.4%.
• Constant-currency revenue growth is expected to be 7% to 7.5%.
• Organic constant-currency growth is expected to be 7.1% to 7.6%.
• Non-GAAP operating margin is projected at 21.2% to 21.4%.
• Fourth-quarter revenue is expected to range from $418 million to $426 million, with organic constant-currency growth of 7% to 8%.

Management maintained its assumption for approximately $7 million of 2026 U.S. revenue from WRAPSODY CIE, its renal-therapy product. Aronson said the technology continues to perform well clinically and has generated positive feedback from physicians, though the company is facing what she characterized as expected competitive responses in the market.

Parra said the company’s outlook included a modest reduction of about $4 million to its second-half China expectations. Management said China remains a challenging market due to volume-based procurement, pressure favoring local products, and increased scrutiny of physician education and other industry activity. Excluding China, international organic growth was 6% in the third quarter, according to Parra.

Portfolio Additions and Strategic Planning

Merit announced it acquired the remaining equity in Solo Pace for approximately $45 million on Oct. 13. The company had previously held an 18% ownership stake and served as exclusive distributor for Solo Pace’s temporary pacing systems.

The acquisition adds the Solo Pace Control and Solo Pace Fusion systems to Merit’s Cardiac Therapies platform. The products are designed for transcatheter aortic valve replacement and other transcatheter heart-valve procedures. Aronson said the transaction is immaterial to 2026 results and is expected to be slightly accretive to non-GAAP net income and EPS in 2027.

Aronson said Merit will continue to pursue tuck-in acquisitions while evaluating each platform’s technology gaps and deciding whether products should be developed internally or acquired. She noted that Merit has used minority investments as a way to follow technologies before deciding whether to acquire them, citing both Solo Pace and View Point Medical as examples.

The integration of View Point Medical, which added the OneMark breast lesion-marking technology, is progressing, according to management. Merit is targeting new accounts rather than existing SCOUT customers initially while also rolling out its next-generation SCOUT MD system. Aronson said the OneMark integration has encountered some delays and complexity but that the company remains positive on the long-term opportunity.

Merit is also nearing completion of its strategic plan for 2027 through 2029 and plans to host an investor event at its Salt Lake City headquarters on Feb. 11, 2027. Management expects to provide new three-year financial targets at that event. For the three-year period ending in 2026, the company continues to target organic constant-currency revenue growth of 5% to 7%, non-GAAP operating margin of 20% to 22%, and more than $400 million in cumulative free cash flow.

About Merit Medical Systems (NASDAQ:MMSI)

Merit Medical Systems, Inc is a medical device company that develops, manufactures and distributes disposable products used in interventional, diagnostic and therapeutic procedures. Its devices are designed for use by healthcare professionals in hospitals, outpatient facilities and other clinical settings.

The company's product portfolio includes devices for vascular access, angiography, intervention, drainage, embolization, oncology and cardiac procedures. Merit also offers products used in peripheral intervention, spine procedures and other specialized areas of minimally invasive medicine, including kits, accessories and related procedural equipment.

Founded in 1987 and headquartered in South Jordan, Utah, Merit Medical serves healthcare providers through a global commercial and manufacturing network.

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