Merit Medical Systems (NASDAQ:MMSI) released first-quarter financial results and hosted an earnings call on Thursday. Read the complete transcript below.
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Access the full call at https://edge.media-server.com/mmc/p/a7nbp34k/
Summary
Merit Medical Systems reported Q1 2026 revenue of $381.9 million, up 7% year-over-year on a GAAP basis, and exceeded expectations for constant currency revenue.
The company achieved a record non-GAAP operating margin of 19.7% in Q1, with a 9% growth in non-GAAP EPS, and generated $25 million in free cash flow.
Strategic highlights include the acquisition of Viewpoint Medical for $140 million, expanding their oncology portfolio, and the launch of the Resilience TTS esophageal stent.
Merit Medical Systems updated its 2026 guidance to reflect Viewpoint Medical’s acquisition, projecting 6.3-7.8% GAAP revenue growth and maintaining non-GAAP EPS guidance of $4.01 to $4.15, despite expected dilution from the acquisition.
The company reorganized its revenue reporting into ‘foundational’ and ‘therapeutic’ categories, aiming for clearer internal and external communication of business performance and growth drivers.
Full Transcript
Martha Aronson (President and Chief Executive Officer)
Thank you Operator 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 please take us through the safe harbor statements?
Brian Lloyd (Chief Legal Officer and Corporate Secretary)
Thank you, Martha 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, April 30, 2026 and should not be relied upon as representing our views as of any other date. 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. This presentation also contains certain non GAAP financial measures. A reconciliation of non GAAP financial measures to the most directly comparable US GAAP measures is included in today’s press release and presentation furnished to the SEC under Form 8K. 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, 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 Martha.
Martha Aronson (President and Chief Executive Officer)
Thank you Brian. Let me start with a brief agenda of what we will cover during our prepared remarks. I will begin with a brief summary of the first quarter financial results. Then I will discuss several areas of operating and strategic progress that we have made in recent months, including an important strategic acquisition in the oncology space that we made subsequent to quarter end. Then Raoul will provide a more in depth review of the quarterly financial results as well as our financial guidance for 2026 which we updated in today’s press release. We will then open the call for your questions beginning with a review of our first quarter results. We reported total revenue of $381.9 million, up 7% year over year on a GAAP basis and up 5% year over year on a constant currency basis. Our constant currency revenue results exceeded the high end of the expectations that we outlined on the Q4 2025 earnings call. First quarter constant currency growth was driven by 2.7% organic constant currency growth and contributions from our acquisitions of BioLife and the C2 cryoballoon device, both of which exceeded the high end of our expectations. Our organic constant currency growth includes the impact of the strategic divestiture of our dual cap product line in February of 2026, which we discussed in our Q4 2025 call. Excluding divested revenue, our organic constant currency growth was 3.7% in the first quarter. With respect to the profitability performance in Q1, we delivered financial results that significantly exceeded expectations. 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. The team delivered 9% growth in non GAAP EPS which exceeded the high end of expectations and we generated $25 million of free cash flow, an increase of 26% year over year. We are pleased with the solid start to fiscal year 2026 and I want to thank our team members all around the world for their effort and commitment to our customers. We updated our guidance in today’s press release to include the expected financial impacts from our acquisition of viewpoint Medical on April 1st. Importantly, we remain confident in our team’s ability to drive stable constant currency growth, improving profitability and solid free cash flow. This year. Our organization is aligned around our priorities for 2026, specifically to drive strong execution around the globe and to successfully complete our Continued Growth Initiatives program which includes our previously disclosed financial targets for the three year period ending December 31, 2026. Turning now to a discussion on three key operating and strategic announcements we made since our last earnings call. First, on March 16, we announced the US commercial introduction of the Resilience through the Scope or TTS esophageal Stent. The Resilience stent is indicated for treatment of esophageal fistulas and strictures caused by malignant tumors. Resilience is designed to demonstrate the greatest migration resistance amongst currently available TTS esophageal stents and facilitates physician control and accurate placement. Resilience targets an attractive market opportunity in the United States and we expect adoption and utilization of this differentiated product to contribute nicely to the growth in Merit’s endoscopy platform in the coming years. Second, on April 1, building upon our oncology platform, we announced the acquisition of Viewpoint Medical for an aggregate transaction consideration of $140 million, of which 90 million was paid in cash at closing. Viewpoint Medical is based in Carlsbad, California and manufactures the OneMarc detection imaging system and OneMark tissue markers. This unique ultrasound enhanced technology offers an innovative solution to localize more lesions at the time of biopsy, representing an estimated 1.3 million procedures annually in the United States alone. This represents an expansion of the annual addressable procedure opportunity of approximately three times. For our oncology business, Merit has built a market leadership position in wire free non radioactive breast localization procedures. Our leadership has been built upon our SCOUT platform which utilizes the precision and accuracy of radar. The OneMark system is US FDA cleared for percutaneous placement in soft tissue tumors to mark biopsy sites or lesions and it consists of a surgical detection system and ultrasound enhanced tissue markers. After placement, the tissue markers are designed to be visible across commonly used imaging modalities and engineered to minimize interference with future imaging studies. This acquisition expands our portfolio of therapeutic oncology products dedicated to the diagnosis and localization of breast and soft tissue tumors. The combination of Scout and OneMarc provides physicians with localization options during the initial diagnostic biopsy, which may reduce the need for a separate procedure to mark the location of the tumor prior to surgery. We believe this acquisition presents multiple strategic and financial positives and importantly, this acquisition is consistent with our Continued Growth Initiatives program. This acquisition represents another example of MERIT selectively investing to expand our product portfolio in key strategic markets that leverage our existing commercial footprint. Finally, I want to highlight our new presentation of revenue which we formally introduced in a Form 8K filed on April 13. As discussed on our Q4 call, Merit’s new executive leadership team and I have been working through a comprehensive analysis of the business and it became clear during this process that we had an opportunity to streamline our internal planning and reporting processes with the goal of aligning how we think about, evaluate and plan each of our underlying businesses. We also identified an opportunity to streamline how we talk about the business externally as well. We believe there’s significant value in aligning how we talk about the business both internally and externally, and we expect these changes to help the investment community not only better understand the composition of our business today, but also the underlying growth drivers of our business going forward to that end. As disclosed in the Form 8K on April 13 and reported in our earnings press release today, we are now reporting our revenue in two product categories, foundational and therapeutic. Foundational products are used primarily for access and enabling functions in vascular and other procedures. Merit’s foundational products comprised about two thirds of our total revenue in 2025 and sales increased at a 6% compound annual growth rate over the last three years. Therapeutic products are devices and systems that treat disease in a number of very large markets that together represent significant growth potential. Merit’s therapeutic products comprised about one third of our total revenue in 2025 and sales increased at an 11% compound annual growth rate on an organic basis over the last three years. Given that we call on a wide variety of clinicians and our products are a part of so many procedures, we have solidified our new operating model internally around eight access, vascular intervention, procedural solutions, cardiac therapies, renal therapies, oncology, endoscopy and oem. The access and procedural solutions platforms are comprised entirely of foundational products. The vascular, intervention and OEM platforms are comprised of both foundational and therapeutic products and cardiac therapies. Renal therapies, oncology and endoscopy are comprised entirely of therapeutic products in the form 8K. We shared four years of historical revenue in each of these platforms. So to reiterate, going forward we plan to report revenue results by foundational and therapeutic products. In addition, we intend to continue to highlight additional color on the underlying drivers of growth within the underlying platforms. As I shared last quarter, each of our platforms is being co led by a marketing lead and a research and development lead and each team is comprised of cross functional and cross geographic members so that we have better alignment on product and commercial priorities, improved communication across functions and geographies, and a team who feels accountable for that platform globally. I am very pleased with how our teams are taking ownership, increasing communication and thinking about how best to serve our customers in each area. I truly believe that focusing our efforts in this way will enable us to drive even greater growth within each one of these platforms in the years to come. With that, I’ll turn the call over to Raul for an in depth review of our quarterly financial results and our updated financial guidance for 2026.
Raul Parra (Chief Financial Officer and Treasurer)
Raul thank you Martha. I will start with a detailed review of our revenue results in the first quarter. Note Unless otherwise stated, all growth rates are approximated and presented on both a year over year and constant currency basis. First quarter total revenue increased 18.6 million or 5%, exceeding the high end of the expectations we outlined on our fourth quarter call. Excluding sales of acquired products, our total revenue growth on an organic constant currency basis was 2.7%. At the high end of our expectations, excluding divested revenue, our organic constant currency growth was 3.7% in the first quarter. By geography, our total revenue in Q1 was primarily driven by growth in the US where sales increased 14.5 million or 6.8% and international sales increased 4.1 million or 3%, both of which modestly exceeded the high end of our expectations in Q1. Turning to a review of our revenue results by product category, first quarter total revenue was driven by a 10.1 million or 4% increase in sales of foundational products and an 8.5 million or 7% increase in sales of therapeutic products, including the contributions from acquired products of 6.6 million and 2.5 million respectively. Sales of foundational and therapeutic products increased 1.5% and 5.2% respectively, on an organic constant currency basis. Organic growth in the foundational product category was driven primarily by our vascular intervention and access platforms, which offset year over year declines in sales of OEM and procedural solution products, the later of which impacted by our divestiture of dualcap product line. Organic growth in the therapeutic product category was driven by strong growth in our cardiac therapies and endoscopy platforms and contributions from solid growth in our vascular intervention and oncology platforms, offsetting year over year sales declines in our OEM and renal therapies platforms. We were pleased with our first quarter total revenue results that exceeded the high end of our expectations, despite the notable headwinds to year over year revenue growth experienced in our OEM business in Q1. OEM sales declined 14% year over year in Q1, significantly lower than what was assumed in our guidance. Sales to OEM customers outside the US continued to see demand trends impacted by the macro environment, particularly in the APAC region, and these headwinds were largely consistent with our expectations. OEM sales to US customers were impacted by inventory destocking dynamics related to product line transfers to Tijuana, Mexico, as expected. That said, customer orders came in lower than expected, which we would characterize as transient or timing based rather than a reflection of share loss. Our OEM business remains healthy despite the quarter to quarter fluctuations in growth rates. We continue to believe the appropriate normalized growth profile of our OEM business is in the mid to high single digits annually. Turning to a review of our P and L performance for the avoidance of doubt, unless otherwise noted, my commentary will focus on the company’s non GAAP results during the first quarter of 2026 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 most directly comparable non GAAP item in our press release and presentation available on our website. Gross profit increased 7% in the first quarter. Our gross margin was 53.2% down 20 basis points year over year but notably stronger than our internal expectations. Q1 gross margin included a 4.6 million impact from tariffs compared to no impact in the prior year period representing 120 basis point impact to gross margin in the period. Operating expenses increased 5% in the first quarter. The increase in operating expense was driven primarily by a 5.4 million or 5% increase in SGA expense and to a lesser extent a 1.1 million or 5% increase in R and D expense compared to the prior year period. Total operating income in the first quarter increased 6.9 million or 10% from the prior year period to 75.3 million. Our operating margin was 19.7% compared to 19.3% in the prior year period, an increase of 47 basis points year over year. First quarter other expense net was 1.2 million compared to 1.7 million for the comparable period last year. The change in other expense net was driven primarily by gain loss on foreign exchange and higher interest income. First quarter net income was 56.7 million or $0.94 per share compared to 52.9 million net or $0.86 per share in the prior year period. First quarter net income and EPS exceeded the high end of our guidance range by 3.7 million and seven cents respectively. Turning to a review of our balance sheet and financial condition as of March 31, 2026 we had cash and cash equivalents of 488.1 million, total debt obligations of 747.5 million, an available borrowing capacity of approximately 697 million compared to cash and cash equivalents of 446.4 million, total debt obligations of 747.5 million and available borrowing capacity of approximately 697,000,000 as of December 31, 2025. Our net leverage ratio as of March 31 was 1.6 times on an adjusted basis. The increase in cash and cash equivalents in the first quarter was driven by a combination of strong free cash flow generation of $24.7 million and $25.5 million of proceeds from our divestiture and sale of the dual cap product line, offset partially by $6.3 million in cash used for financing activities. In the period subsequent to quarter end, we acquired Viewpoint Medical for an aggregate consideration of 140 million. Of that amount, 90 million was paid in cash at closing, and two deferred payments of 25 million each are scheduled to be paid no later than first and second anniversary of the closing date respectively. …
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