MMSI - Earnings call transcript Q2 2020 | Merit Medical Systems, Inc.

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Operator

Ladies and gentlemen, thank you for standing by and welcome to the Merit Medical Systems Second Quarter 2020 Earnings Call. At this time, all participants lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Fred Lampropoulos, Chairman and CEO. sir. ahead, go Please

Fred Lampropoulos

much. Usually, gentlemen, by we is our very joining stating you us staff present. and today. open assembled Ladies you thank and for that Thank our comments

Lloyd are Harbor activities almost like Raul Brian now The virtual staff all over of our like provision. would Brian with However, turn today, you. the today. me time to I of Parra Safe only and the Brian? read is our rest Lloyd like to to

Brian Lloyd

that everyone federal remind presentation to like I'd Fred. Safe under you, statements forward-looking protection receive securities this that Thank contains Harbor laws.

effect forward-looking global Although of materially the we those any results and economic which outbreak believe and reasonable are affecting COVID-XX these unknown to actual The differ to uncertainties. statements those subject risks they health, coronavirus known risks of and financial negatively assumptions, markets, unpredictable anticipated. is activities are or of upon public from cause uncertainties realization can based the including currently

views regarding presentation results available Form earnings furnished to measures and non-GAAP these non-GAAP a X-K. on to under today, any other our statements for specifically are in certain relied our SEC of to forward-looking as any SEC should obligation XXXX the included are most of from views detailed disclaim upon website. presentation discussion and cause as in section entitled as statements be of differ to update for July only presentation such GAAP preliminary represent date. the directly Both the our any release regarding measures also actual today's forward-looking important that statements. filings statements. with refer release also disclosure comparable refer Reconciliation Please to the factors addition, Please not U.S. and such This today's XXth, information representing In our to recent the of We forward-looking statements. measures. today's most contains presentation could

Fred Lampropoulos

taking again, the gentlemen and today. you time to ladies thank us for and join you, Thank Brian

We and our business as well tremendous which locally business by meetings training as sales Microsoft us. of have Teams, globally and to been adapted through value conducting project has

hitch. of We adapted sales our Because lower to conditions The have levels, company have strategies as with without employed primary we this and costs. health market the concern. safety reduce various accomplished to a has had

Some advance keep of of these the solutions and permanent we and the these day, order while be an emergence prepared COVID-XX in that in pandemic. of programs of for to had reductions of nimble will the the some In hear be to company started will opportunity. we many well pandemic. in modified Every have advantage programs new ways, others we

are represented as how of We also sales during view, improving. improvements. about month-over-month hear things our the things point have by quarter From improved

slowed momentum down. weeks, has the However, the few over last

We personnel have worn believe always especially are surveyed are variables Thus, we We third physicians conditions. with cautious out. and very during as the added we are tired the who seasonal to and in new conduct quarter the Many different how conversations and from administrators, ways been have which the quite forever. past. many negotiations is business our change of we have system a that healthcare and with changed

previously. Going simply forward, that resources don't products require clinical training provide while we have resources we shift and we will support more directed the from

Let me clarify for in products. a of moment our the developing direction new

have complemented of growth our For growth have quartile top in targeted core competitors. with to our years, many acquisitions the numbers helped Merit

for double-digit has promise. development. and a release which like has We note, fewer I efforts faster. focus would On allow projects with to presence, the electrophysiology us that continue market great number going forward. which this in believe has Merit The of company to We those areas of will the to discuss segment, to get ready a interest market already more us several market and products

you WRAPSODY Endoprosthesis the in Union. aware, New As Australia, now stent our cleared and system European is Zealand, are

for our and of In to has enroll developed deployed. approval this over been is the take the will The FDA. This approved Europe. anatomy process years is proceed important, by WRAPSODY PMA from next three we the are will the have ePTFE proceed for developed which to very several four monitor study WAVE company upon time the however, and received a numerous fully request opportunities we'll first with the for orders other This day to which the and in parts IDE, technology submit products Equally study United and the we FDA the the consideration. pivotal fact, States. months to

We testing my is view for and in been a of for have has dormant suspected patients This awaiting products developed also years of innovations. somewhat additional number COVID-XX. several of area new

We increase we in this rapid expect and as forward. revenues topping in a selling then segment go and

will that viable a a However, Merit this be very long we come. do believe opportunity time to for for

long company. collaboration, day, will years. discuss Parra financial the I the the the see Raul? miss the course, turn time and XX What to of and quarter. announce third the she can but value opportunities is our over and lighting to competitive. has important objectives to plan company pursue growth still I'll and time to forward Raul I to closing, professional is reporting me reliable, second importantly, the like during and would now family. Anne-Marie in to her left She every of to for Wright I, several the are areas hours has a to Finally financial data company very many immense advice, dedicated looking you sustainable, been which spend In for that of over quarter. will expect more with we the the

Raul Parra

Thank you, Fred.

financial to for the quarter. the Let now highlights me turn

million related approximately for care $X.X for basis. related collection or approximately the kit, quarter a of increased and million partially and an used Compression the Vertebral XX.X% localization second or organic and results $X.X decreased reported, $X.X EP and a constant to angiography X% million approximately sensor XXXX our samples On XX.X% X.X% to Peripheral products, trays, increased $XX.X $XXX quarter. Solutions approximately management, or $XX.X on fluid Fracture by offset million to by decrease partially front, transport the our elective OEM COVID-XX intervention to these primarily and puts of Procedural as access $X.X primarily primarily Intervention and due channel approximately hardest demand biopsy, and headwinds approximately CRM including currency our by products revenue our revenue decreased offset new as and and or period products endotherapy, testing. comparable Intervention the million by products. decreased products, approximately sales transport was sales FX Cardiac our Key over million products. takes XX.X% products XX.X% included critical sales sales kits of collect on stopped. EP increased CRM procedure million million saw primarily saw which or intervention decreased COVID-XX decrease result as sample to related of $X.X XX.X% geography kit, or was by sales. Custom for of and the the of Endoscopy our and angiography by hit

sales currency were Our division constant based follows. organic an as revenue on by contributions

quarter, a worldwide and our was the the a revenue reduction and as direct worldwide XX.X% operating steady resulted June, elective million down The saw For cases The from and the operating down and XX%, half areas approximately the in from impact limited. slowdown $XX emerging We Operating the for to revenue decrease impacted XX%, of the markets COVID-XX OEM of of function million over XXX cadence $X endoscopy flat. our COVID-XX is includes improve basis in XX%, off-plan, line, non-GAAP increased million of million $XX in margin sales points really seen at million which $XX and EMEA period. direct margin, EMEA U.S. plan. QX. plan, April first basis slight U.S. related the the dealers low in down the COVID-XX. margin down lower a a regions at but X%, U.S., quarter, QX comparable in $XX currently of are in July below procedures business, EMEA a in a decrease was QX certain $XX most a through which on year-to-date are million dealers under have is for year

was related operating were XXX to mostly margin Our XXX to related comparable and or of in gross COVID-XX. increased points over basis the a again, basis offset gross non-GAAP in by points product non-GAAP margin the basis mostly The revenue $XX a on mix, decrease decrease on expenses cost, period. decline obsolescence, freight million and pullback by

These times. promotions. lower saw operating lower and savings our we including operating the expenses decreases sequentially employee on expenses discretionary are a additional dropping approximately expenses million trade R&D, with Additionally, quarter by and third of consecutive primarily came management marketing, for shows, these travel, costs, non-GAAP in basis. unpredictable Overall, $XX pleased from our cost

our we increase continue addition, and to In evaluate efficiencies. our operational to footprint headcount

As our part we our operational Australia manufacturing site. to business program of close XXXX, PAC have decided with in along efficiencies the in

done be to XXXX. margin the by to of end in the to operating this and expect accretive We year early be

be We back disclosed previously improvements. continue to track on for our

settlement. by to approximately addition, period. in quarter. XX.X% the for rate rate on was be In the paid mix comparable a primarily quarter basis expected and the June third one-time is driven earnings. $XX difference accrued tax the charge take sometime million change This a Tax of is in non-GAAP a compared of in DOJ as was of XX.X% the did forecast of for we to amount for The the

$XXX quarter our revenue. period. $X.XX items million, and are improvement let hit a taking Debt sheet Available how we impact adjusted everyone. as on COVID-XX on color some up, so and COVID-XX far to net of for on an comparable ratio earnings On for balance wrap happy few opportunities cash operating remain balance $XXX we flow net putting capacity and certain $XX X.XX balance non-GAAP was Again, us basis. to committed leverage was of the approximately times the these front, was borrowing through add cash expense were me even our managed $X.XX million and a the basis on plan have advantage our at for the a To with million. earnings compared with

of Our approximately is debt X.XX%. cost

The cash of started and recovery decline to in [G&A] procedure A COVID-XX. see slight July. May of on the quarter $XX CapEx primarily in expense increase that The million. $XX of which and stock the continued color million, in capital expenditures. QX flow April for $XX from a report through was volumes and and brings year-to-date approximately of Working we little to million, slowdown seen have to in receivables we cash June, happy quarter free first are had level more capital free driven approximately comp million $X.X in We came was quarter our the in by $XXX some $XX observed at million. total flow million, but

in some believe COVID-XX optimistic. We cautiously are we be also continue a continue tailwinds. to headwind XXXX, will that We're but seeing to

volumes sample saw the $X.X able not Our position and collection guidance transfer and to to provide we tailwinds previously limited outpace will sales procedures headwinds. when how million. Visibility the for we are procedure expect not approximately disclosed, for do year the we predict annual or as is financial to XXXX. remainder we recover a quickly of Accordingly, kits of for are nor the in

in and portfolio We financial pace markets this operations as of results. estimate weather cannot on of but and our precise timing process more be from advanced impact and particularly the the the is to on recovery. to some storm, product continue suited Models also pandemic try we to of states our give broad us we optimism feel our the some well

see our this know predict sales. the areas can't with rebound, to and fluid but very some business we than it down, also situation is we normal have how areas higher of with we However, will long other a some take

elective procedures place pull We access up and back on procedures. open to have or seen only some limits states elective

has return it's U.S. X% will the example, year. sales our average current Having the see the that, in on a belief gradual reviewed we to For based of the days. normal sales have decline remainder through XX-day said our seen that information XX a last

and in we in fluctuation the any assumptions, models to position year. for underlying not the a make concrete with forecast However, are

decline to As QX in business historically many to seasonality of from see QX as a of a you know, has sales it. level our we

We impact to which on QX, and believe try we forward following assess is information. some of or for trends third down look the QX. revenue anomalies we causing on COVID-XX, the the current and forecast that anticipate based up for we quarter be X% could from based sequentially fluid X% As

operating our the a roughly reductions be in gross in salary we to a expenses gradual close and to of to QX as preparation approaching We ease line QX some margin temporary furloughs expect with we direction carefully our expect gradual recovery. and in increase levels of

great disclosed our as previously of stabilize, to efficiencies execution operational through impact start the had deck for significantly the evidenced shows, to improve. while and we to demand and As end and Anne-Marie Australia we levels manufacturing officers capacity I'd ensuring our for and on the current reductions meantime, based organization controlling reference so with following see made controlling demand. manage In our disclosed and continue events; jobs to will COVID-XX some employees; our sufficient please continue PAC discretionary She executive models or the and all adjusting we to the thanking inventory on across most as deferring of business, continue non-production take to implementing years trade some including salary project easier. like markets on travel, previously her continued steps: service. update closure capital an insights plans; of support by spend for slide spend; the

are and on Pat role, have we her. asked miss meantime, Judy VP the role. of take the to Communications We In as take we to McCarty, fill definitely on Finance to Corporate look her Wagner to the IR going

We is someone the be identified. filling externally Fred? once will position

Fred Lampropoulos

lot you information of much. Raul, A Yeah, very thank there.

the think issue. cash free and cash the is a I significant flow flow

on that think of we the on I projects announced previously projects spending the and focus transfers the are are schedule.

set. the CapEx budget the parameters, we think well-disciplined well which and within I is

after these the pleased and ways. comment on of that explain you call, the that in of we and prepared many A will in the to previously and things earnings on was again our pleased for the time new I inventory that a well, comments deal future with but in to we're as today finalized, hope of to we and products and not spending the have business the forward calls. tell that and and a reducing opportunity the we for focused essentially think did to story. won't challenges, revenue with the DOJ, made new and line. all we'll are all more business do look I All that on improving do the despite week on is opportunities in busy business the being you're lot as I comment really opportunity you're with the So mentioned that the said, our to side of hope preparing deal doing. an come, and taking a work We why more structure lot today lot I wish being thank we the time very costs,

not or be you may and will need and So and hour clarifications time issues administrator the with that that have good calls to the will two following said, turn back we'll of we and ahead over for understood the take your clarity. your go questions questions for also a or we here

the and structure present that you over go said, thank and again for ahead the go administrator to being time ahead calling to comments. turn our we'll and So

the is well, Okay, away. administrator

Biegelsen's So take ahead thank you go and call first. again. We'll Larry

So they you Larry, here. don't you, but unmute I to speak, we have Question-and-Answer can know if Session if are

Operator

Our first Instructions] line with Wells of Larry comes the [Operator from Fargo. Biegelsen question

open. Your line is

Larry Biegelsen

environment in cash on and result for thanks congrats nice afternoon, flow to is see. questions. the taking tough better-than-expected Well, result a a Good the free

Fred Lampropoulos

you. Thank

Larry Biegelsen

kind worldwide than to it the was a willing I us a little basis So and helpful what year-over-year better. the July trending to June on June of on worse disappointing that all what you understand it I X% your worse a basis? assume XX% worse basis. you July July you on talked to worldwide Is and about, hear comment the is although growth got color. growth in basis, wanted year-over-year on the -- decline the worldwide decline in Fred, rate are QX June? see the was worse, in a saw better the recovery it give negative for growth through than was bit worldwide Thank little is a a the trends in July you and U.S., to but

Fred Lampropoulos

Larry Yeah, average. some came slow. in little seeing a just to this remember, a a We're the a June, again seen dealers. it bit the little and in back there. end. We on slowdown go issues Still a saw XX-day strong trends bit still and China, in Europe we've bit is then And with back look and little watch something we

every could signs We around, that's of and see month down see that. that we're say one although to we know. year, pent-up you just demand, they'll what in you'll reverses, do well, just see we've what of comments, I mentioned this busy first or thought month problem. still bit full We and big trying XX but was in concerned is is customers know this, to a at in talk slows or just I this and I little was a turns saying, take bit. just know, reasonably a break physicians quarter, of in is and July thing and a It to So for little take I my the then it's in out, there's in a are going different sequentially this and don't it and that seen what to XX we remember our just look, talking then we're hear sounds as bit maybe like talking a serving a and I strong I be the They're our this holiday least quite now, countries. that and physicians tired, and it would see summer the slowed then going worn to month, tells then and five me just than days no to me that, half issue we're an less when And people normally ahead don't the quarter. we're just go

of is, about predict. So a minus X% remember, of maybe X% we view X%, that end every difficult there's slow June to and plus we April, Raul? and year, always I not talk up talk two sequentially. we all just in decline did to it we've how know, seasonal going of about it's always it just don't have we trying down this see and we third May to we kind it's say we're but don't bit because neutral, the moment. going point said know of better to months. this improve I'm seen see for in slowdown, comment but case, to little but on a point that month, From any a the a let quarter, kind Raul say -- a I'm we else still

Raul Parra

and maybe know, these give Larry, what were selling We May progressed Yeah, rough you days. down of kind some a little looked but numbers, are to of quarter only number April. the roughly, of on than worse because color the like. you XX% April,

I X% factor when that June, approximately talking in decline XX%. you saw about to And roughly in X% in, So then you're sales.

optimistic So, how trending. mentioned, hopefully a July, And that little of as I color saw we're gives progressing. but are of Fred back, you the bit a are step things cadence how of think a of we things

Fred Lampropoulos

willingness talk about and modified people back that that administrators. I people other of hospital. U.S., to electives interesting where at that treat comments, both as they one much It's these they as can much it with we that do there Yeah, as patients that's Larry, to they're the and get in go the the not of from haven't dealt that think least according and still us things to a to is the not are as

was OBL and to a on So hospital hospital East quiet. their Coast instance we for were swamped the is saying talking the is very and that he

the there. don't have have treatment for is in So again, way at the -- thing time patients and demand Great not to the I And they're least it's going confidence we're by that to it's at to point that want the back same and get take view some to a the to going that our It think Britain. problem there. just in not hospital hearing

consistent acute people So the chronic, back these patients that from the patients willing is if being somewhat what to is I'm problems hospital. story they're it's go about that get that and same are telling it's to just may telling that to the mean, they're foregoing. means us that's, are I worried Unfortunately,

Larry Biegelsen

you. Thank helpful. That's very

of or half -- you you and ones one in I for I you I QX of are -- did any the half Fred, think and sales. $X.X your thanks rapid quick -- two from and to for is the in how big and for know say growth have first questions. you, it's market be in in a color kind Just kit, second can but I'll forward. me you in that XX% said could provide taking the you, slides China good China was is sample of opportunity said One, the that prepared the drop. what you in heard. to big disclose remarks million increase -- the difficult willing said Could a be about Fred, could a you predict, you to that opportunity going could revenue Anyway Raul,

Fred Lampropoulos

China then test on the and answer the part come it on have of kits. back me I'll first Let Raul

Raul Parra

Yeah, growth. XX% Larry, on an organic was constant currency about basis, it

Fred Lampropoulos

the we've to seen last that's But like compared XX% in growth. year, what year-over-year past

approval So imminent the ability go that the what and take VTM, approval test there. awaiting Media We kits. drives ramp our let We're is business part and up FDA. of to the that's I believe from me the from Viral think Test to of

it all solution. are fine, is really and but So the well and the kit entire swamps

to say all Xst its own vials. September, going will are its is -- Another thing September, of that -- we Merit by Larry have doing of I'm

here they'll and pieces. and are qualified tooled we then all be So have of we'll once are the those molded

still we news as can CapEx get as the vendors. I capacity ability promised, is those from our restraints staying but within we capital, our what it and biggest OEM vials so be that own really have invested And drives that's well for limitation both for that to the good right of The the other we've think is now kit.

So, the then customers demand we our and use for to will will OEMs. kits excess full provide for we

So the mean? then It's weeks two final next In does factors. could which imminent. the as my I in our those What week And approval, own having molding. are view. so, meant be the imminent getting or

So it's to think of the Once pretty kind the dynamics demand. mouth changes quickly hand to on up us now. on things those in-house, right I vials and molded are then ramp allows it parts the to meet the

Larry Biegelsen

so Thanks guys. much

Operator

Thank you.

next Lichtman from Oppenheimer. Our comes question the of with line Steven

Your open. line is

Steve Lichtman

Hi you. Thank guys.

As shutdown how into we of ahead versus at is look saving of of would you COVID? response savings obviously that the temporary looking expense sequentially in to some opex XQ, say much -- durable that sort the you

Raul Parra

I a think question. that's great

back our Since guidance, then, few we other were we've kind original cost If keeping expenses you flat. of to identified measures. remember a essentially operating saving

of operating kind is So better permanent we be more to number compare standpoint. on I of to a I QX kind expect think essentially where QX, think it if a a expenses from you

I think we've furloughs the QX reductions and of obviously has some the salary and temporary done. things of a lot

baseline. So is a QX I better think

savings. think to where identified should be any I that's kind if trying you're new to point before we and of cost

Steve Lichtman

it. Okay, clarification, just then Raul. And got a

the So that U.S. you in down mentioned XX-day

in growth that was that was were about, average? So down it talking year-over-year rate year-over-year XX-day that you

Raul Parra

saw XX little just it days, we we recent we looked trends, noticed most Yeah, the no, that's right? dip. prior compare that to So we to a really at, our comparing it as

slight dip. a Just

Steve Lichtman

in mentioned in prepared lots healthcare, lastly, the remarks, your you then and is a Fred, it of delivery lot Got fluid. of obviously, changes

and Just changing how wondering that? Merit things are means what to to that you prepare at for

Fred Lampropoulos

that you. this level level in those one that down on thank the of and things of And allude of that on of were you're the and in the that's to various although guys. or issues always instance down like what's driven, where for not that's driving it. specials almost kits, in with at at where release like the of the level we it's the and lab. you lab you I That's the kind cath products, would and types Premier working part do contract or unit test Listen, we Yeah, is being done for if the that administration

So I part thank wanted that, I other it didn't, say I and is for an the but think use today. I and this you the that of are here this I one and will of changing the question, things think important to things thing asking word and

our very accounts, sticky by Some get used people Merit mean and that that bids are using there things they people although pieces and the national that of parts and and business that products products. like, may are use of are like other I and and this that be routinely they to they things people

to we're and looking to of just bit, like up of one ease those is a bit think alluded the support, somewhat that products, a it but going we're not that I WRAPSODY like Raul been that we a take quite Cianna and at I and level kinds technical our as things biopsy some that much lower directing -- and we've those but products or stand think take on at of to we can a look a have their our bit the products areas more that and Europe, higher products like in higher the those much while margin have say the own margins. support resources require of

I'll shift kind products. of do have on on going the proprietary to position us the think higher legacy say than our we where that we margins some more much we're a of and give just emphasis I areas

Teams people one it, my got that that's finally, three in but and room And business months way past is we've in doing we do things things the past, look believe at four know way do and change then the and we've I the what now and things this in and the that Zoom I've money. right we way for and on truly lot of and that see and training this been those been and don't dramatically the of works that things we've and and for of a really that go at on this that say less we use operating will we'll So doing the this all been business think heard. I you to now. the that these need We've costs and one I'm the to things. to sorry

take put money think we for Raul the the change business elsewhere because comment it in or Merit to business So we've we to coffers can done every I use is do day. how on that just you going and past that structurally this and and want talk into about

Raul Parra

this. probably I is experiencing think mean everybody I

I like think they're face business to and to face. people doing used to face face

I really a testing think I how just what work business fine. is I kind allowed see of conducted things mean think webcast. this big to would via out environment being was

I skipped beat lot haven't think a people finding that. a of We are and

as ROI I think really to we've space, look think think our getting. meetings, and our type I those sales got we're shows, at our about meetings and office So we of all see what things

Fred Lampropoulos

Well and very casually, even investor conferences.

of Now, things. and going the think I cost those and week-after-week we all forth, the back time all spend

we efficient do us get to costly, virtual do message we're a be to going we than the I the guys. a for we better There's have out that virtual We things will be think and allow in of lot that very can less candidly more think day. our us, can I investor past. think

my would those be So comments, Steve.

Steve Lichtman

Got it. you, Thank guys.

Fred Lampropoulos

bet. You

Operator

Thank you.

Canaccord. question the of from comes next Cecilia Furlong line Our with

is open. line Your

Cecilia Furlong

could to guess with targets start just pipeline Raul. Fred, more and what of bit are a your focus your see terms commentary your and of provide and focus your and EP on are? around questions. really your prioritization wanted our you what if just I color Thanks Fred in areas for taking Hi, there I

Fred Lampropoulos

the Cecilia, those on balloons sorts defibrillators, about and players but talk could've and you picked really do I if Jude, know we the mean all are to bigger those to the almost those, Medtronic, that systems various Access the a we -- help types areas, but were and things course, a you have delivery trying out for removing of are and a we and doing cannulation, of few Many about EP products mentioned think eight the the I you the St. and I they of pacemakers, have are. others on on use problem boys to things, then, closure, in we Abbotts, leads. to that of Boston just go point and I talk they several and cardiovascular need of double-digit who could when a let's there we sinus our just of I of being couple of have those or opportunities. preserve we life area to one coronary more. products seven go number developed that that area. was of growth bailout and Yeah, area, and have

our the Thomas full margin, this up Boston, of use which system they So we've don't see in we technologies a in sell we of ePTFE the file on the procedures an XXX(k) all the of a around the people, I'm there. it. competitive Mean, make that XX talk number we've had $XX I we've the for can we we WRAPSODY can lot physician products, there things our other and are I high and we that in a be and on $XXX and opportunity for in again I by of buy think it pipeline we came When want we catheters said and and it the about to Merit and for made access approval we steerable fact, of It's development things it'd and even that needles, We to days products. that WRAPSODY, good paying as got using with that done the give a focused terms Medtronic, some which that out they do and the and almost do side, based my no delivery in transeptal will those I year, of the have Medical whoever WRAPSODY. developed you of for to the Abbott, I that file we're that but we end of ago, away any And product these what I sorts a capabilities as and correct that at. example, What ancillary $X,XXX. things buy matter the Australia. the years want technology have go whether a have to other WRAPSODY, quality one on all of Those part lot advantage, pending. misstatement, files. that special while a have advanced over is government developed well, acquisition about had we're if

I correct So, it. I and to to want that that on opportunity take misspoke

that do have of appreciated. products we arts that this, as like candidly and ideas think what offshore along of that in those everybody and been we kind it. I still a things need, of which There been along that trying advance of lot just meet products is of that's molding about, to with products science see, trying kit and was area. we is it's a things found going newer talk to and and of did here demand, found here areas an coatings meet confidence just to new producers is Again, very So in we be the really those and and existing the there to in just some what there's is the can and have of come and Merit that a coming lot things open of lot area quality highly people while to instead test with capabilities that we in, like are then have are up that a low we that, we level the able

we've XX more a we projects, area one clarification. maybe had is too, is, we've size We're have actually things done stopping XX, the done of biggest we've headcount increased And some those. what more there we've and team had focused reductions number where we'll We R&D. we've that cut impact. of the just not but on maybe the our What to have in

We ability higher get too on And and and we it impact a so will we'll we many that think has sometimes an things have on more the and Merit it for can revenues, impact focused both products that on to focus -- we our have brought on company. down. better better focus margins on

want I maybe get to to address make So I sure that.

thank you. Any questions? So, Cecilia, other

Cecilia Furlong

you thank going Fred, about you just a little could and talk just around outlook for wondering bit I one your Fred. forward. if that, Cianna was follow-up Yeah,

strength and how your view the relative Just other really unlock portfolio the to focus. you your full And ability view versus evolving potential areas potential of of that?

Fred Lampropoulos

of elective. elective Yeah, it's in about you think we're interesting, mean whole to because know, capital a It starting essentially We're a that at. balancing this units one part a now part really one was that's was had talking I that's good and it cancer, breast And We've cases with -- Europe. -- are it's I it of placed had be and looked that issue Europe. woman doing those to areas it. question. in

we've at she the the the coming to to call and want four used I but are product you I now this. say, I time and me had months looked we call Of it into talking to time physician me was know starting course, missed and and a competitive said she took or to took that this, see who all day a with three to other light

is get Yours hospitals. other product and it in the these to want best I

things will it early in that's of particular and of and beyond things it that the deliver where next and don't the And there be to about we be next year part year, if in to fall in most I the we part one of about comforting that from that always stopped area. So have and results. start even we'll year-end are exciting that as have we the I but know R&D -- not point or do hope we of of is the that the or have it the some kinds talking forecast those is to art our advance things talk think we today

actively that we the engaged, we've working of all a but should, on. the stuff things people practicing some pretty neat activity and is office been there So in we're lot

a enthusiasm Cianna. a point to want We very something market-leading the terrific going have we think I that's increase a think We So we in it's not future. of for to lost have clear. from and make our technology any technology. technology lead that's it's view sure

Operator

you. Thank

Barrington Our with Petusky next question Mike comes from Research. line of the

open. is line Your

Mike Petusky

guys. evening good Hey,

year guess, Thanks. sort you next think just maybe I contributors free of to 'XX, of had that. turning Thanks the investors, second to and that metric in we're So last going you pretty and year. speak I cash stubbed to for around two Can and you a way. on of delivering or delivering flow reassured significant biggest three your start you guys sort I out half hey, you were toe

Raul Parra

coming talk focus. monitor Fred about essentially there I every going think day out changed we that flow. the the that by we a and CapEx. we pipeline. cash I, what's understand of we meeting We're Group Yeah, I help goes isn't making sure free and mean three weeks how door, it with that FP&A on the down what's our

think liking see. act and projects Fred for also developed helps also and driver, on big pressure. we that's it's reduction and very ease quickly in kind I a the decisions mentioned. So as opportunities make R&D focus process, so That our essentially that nimble able We've of a really the to the we're

Fred Lampropoulos

with information stand where we're and comes data being on If a to the attitude. just the to forward. this we a going pay off could and this, down going -- to We about budget say for or we back group, have ops it's we sit defer having need R&D the FPA and have we do is to here's myself this, Mike, if to about able that. and and have we the I have if the Raul, -- It's OK, having to give to up then essentially group do do do budget, then and have data. what and to then this we're

So should FP&A we kind been Group, that's think of data bringing I doing about having have it on keeping and the and ago. it it eye forward time a new it's the an it's from just -- long and

who credit but think to or is goes of So problem the lot great the the folks discipline, have really don't the data. -- it's a have if you have to dividend I

the So Go window that's we're and rearview looking front a Raul. ahead, And at the looking big mirror. not help. at

Raul Parra

QX in QX. drop color for sales. demand, a payment give but got -- was to with out obviously also, might depending going QX. the what, We've specifically So bit receivables, to we if the rebound, a some forward, I quarter the helped thing to out you going us, That $XX Maybe know, builds eat will little start of into obviously that We that's DOJ into a on million. collection good one very in sales think inventory might that, eat in too. the on

but want the as So continue I excited and move we're to set number still forward, and to deliver obviously, the Mike, on we just kind it. expectations we're about we focus year, excited QX to very want think we for level hit but is there can it, for the about of

Mike Petusky

Excellent.

Okay.

quarter other conservatism X% in -- which commentary to anything range, So the time than down or the and minus two-thirds and in comparing that of just the super was you're turning the to April plus range QX you're sales, having because aggregate specifically to around a is guess a the of particularly the believing I XX%. hard expectations. I'm May, quarter comparing bottom-end

down corona hard just X% X% shut of X%? deterioration for me severe for is me terms down how sort widespread in assumes you hard speak It's just of -- a unless a to a see what's expectation. downs. and realistic in minus it's Can the the to to So just see anticipated

Fred Lampropoulos

Yeah, about it in year. of talk prior let's maybe just terms the if the we

QX assuming did the X% we you at kind year growth bottom. as you in $XXX that did kind of rate last same puts have around you So million of that

be XX% year-over-year QX. of kind essentially You'd for at growth

decline go that sequentially. in increase of to over If you That kind the X% X% gets to you roughly sales XXXX. of QX top,

that from kind a we're with decline some out of historically, the in to look in what again progression little in along but so what, we to seeing QX of a and COVID-XX. to way, it look, you in I sales that kind do think do on decline factor we've see help that if see QX, So you Does at got bit? sales

Mike Petusky

there out that of particularly high Yes. sort going causes speak of to to you long-term punt guys And to last water, any a come in you're of up or come I guys normalized that coming target sort road longer-term one sort for sort Fred to you're chance or of a and down target margin. with committee COVID Is think the QX. around that's you guess and part hell are of trying maybe the I operating that with Fred. uncertainty

Fred Lampropoulos

old Yeah, I term, like I'll -- this the don't but use it.

into can't the spit wind. You

operating at to the that plan a at you goal want do want help what this, to take if we is take We're other you analyze longer-term sure a the do want we us, growth we've what look of sure doing consultants I kinds be six we our think and you if mean looking people is having want that's would to at look make the the I met I at times. at think and business we that. doing least and goals. or situation are under a and rates to of Listen, that if and look Chairman five a group, we that. again, we but is responsible Carpenter to in see look Board, recommendation to and Lonny a a that that goes we these that have can our take normal conditions income, make

to Merit working to are times being to and we've be we of game done. at it quite other will parties sustainable. professional, going are who And premium able the doing. the and of realistic, our works and in bona to look to out be FP&A a they over can lay I do and a saw every various be being goals, prejudices sure we can way yourself compensation you've improving my knowledge the kind are or complemented first it's when things, part it this, of third it facilities, get you've they working growth know, be quarter, in of be got I all whether the these developing Group very starting answer already Here's be to forward, formulate you to mean the comments, but to second we've a many it quarter, of taken past make kinds to the SKUs, I been think I the in talking Boston with Mike. you need working to period being of the some the this but in already consultant think worked we being continue companies that really will. in analyze, those and Raul and of take it guys ourselves. a of we've is have the it's through and engaged that, with ourselves and to those dealing Pat all saw there's somebody so, this something with some with work this, McCarty and the a these it kind honest we that in and and possibilities the deliver toward climb of but know, we to going star, are I have working think the seen in We companies and done, some and stuff we've the but required and I and and those by the -- but about which rationalization that kind and with I we're be we are team we've employee we of with we're call where process is the a the Group this process we back a past what see, successful people pointed at that goals. gross on and other something, about We whether be that try that the it's academic things kind need we quarter, than and tied people, and that, be the we're that, XX of wanted track think and we necessary they've -- we the that honest hard consolidation. at technology the goals champions. whether that you end plant issues you're hear us larger different the to then this, company out about on there'll to they whether the table terms our have what do time, making we've going this of on do I we're will say up have don't deliver it's we're tell cash looked seeing preconceptions are are And we as business to together, those of whether that need third it off Consulting we implementing only first will see margins, today lot that engaged you while all we've we as of and it plan a about sure couldn't kind so already that plan think to go unreliable those to our to with set by you're of we have of the and I can company, it, days being want look the and reach be structuring the seen things or next the we be of out the and have we to and it some results really to with that work in forward, other the quarter the business started it what do of enthused numbers that think then can questions, in going company to the don't other, bring and fide, areas fourth not entire get on Raul? then think of of other you'll day-to-day run When and see basis, And yourselves several future. the free but we are flow, that the ask Many we'll before through doing got things the company premium we of just them are the it I on going be that's be have it that whether on we very I

Raul Parra

the the Pat, lead we to no, the Yeah, I who dedicated That's his He's a head specific on it he's committee Fred out long-term guy I dedicating job. our you of did sit mean was laser will focused out can transformation. Frost day-to-day I Ron one with carve on see as going it. Group. and going to we're be and carving and and and that as and we're along serious a person think job by about FP&A job, and

Fred Lampropoulos

really they note, Yeah been taking side billion. several we're the they business -- through company members on the that been and that had who've go this. mean of are haven't and is even They've right. convinced them other experienced, the through billion who $X on into other What by are to people of that a to have committee I I'm we the saying melded

are really it all improvement goal. have developed it's group and good fighting things an who to has to well been toward common our the improved but threatened. think see the go is we're just Board We're offended, we to foreign I Board move the and all had are of to Board them. directors There a you'll that one's together remember say no working and forward. out members and is going who of committee, business. as I one's unit. in it's hard. They've these this like working full benefit together all a we of I'm working business to at flat -- a this our good We're people approval, have in no and on it mean work these the isn't this it So for into and to

some You've [Indiscernible]. my you'll even but seen more see of already, it in view.

Mike. right, all Okay,

Operator

you. Thank

the from Bedford Jayson next Our comes of question James. line with Raymond

Your open. is line

Jayson Bedford

little appreciate guys. Hi me, detail. Excuse I on got a late. call the all the

this been has So I apologize any covered. of if

U.S. China. relative in bit in I you other softness any the seeing a in and guess July? softness mentioned July in Are geographies You

Fred Lampropoulos

-- sales, but mean slow has They've little a Southeast a We a in little never small just Yeah, a few places has been been places like that. is of there been it's part there slow of good very but It's there's of in some Russia few are up, I had I like recovered. Brazil our but a heated kind areas. -- Asia. think has those,

Raul Parra

if again here. softness think think it, about I Yeah, emerging kind and is talking -- slight we're you the of markets

don't point really want out. So to that kind of

June Just -- good a slight as not general but as slowdown,

Fred Lampropoulos

we're a and average Yeah, remember July this -- XX-day is we about rolling talking average. saw

to don't or things us, we that do you but them sure and that So I want the I I'm that perspective, but is conservative ignore think in that repeat that need to going I happen. not mean said, OK, keep have past it we to sure make we that well happened say in let's and spooked what make we we're and can't

it off up be side and So if XX realistic irresponsible and other and I didn't we but I the conservative, think be it we're the would takes tomorrow back table, mean, attention but the this to days we trying on that maybe next picks have and to we will. pay

Jayson Bedford

I slimmed out underlying down back I even structure? you digit realize growth, let's exact question it do sustain not with $XX the you a and high-single is X%, cost growth is, but lost $XX revenue, I that the an think million implies I here, science in, revenue about can it X% million the if Okay, think guess related call COVID

Fred Lampropoulos

bit. this just I little did I'm that, to and Yeah, going address a well, say

cost the the -- areas taught without this people certain amounts competitively -- has like that sticky of priced are several we they certain because I with certain are our of products. this our use word a and our in breadth like sales they this things and portfolio, buy of what buy business and through seen our of and products, as and is they that we've think are that, person I weight being and us what there without put products,

to are I redirect and kind growth we higher going we areas take the think that think of for resources have opportunities.

side we're So and much we opportunities and higher don't that and kind legacy there's require it's what and is, areas focus to the support those areas. on areas margins have that I'm as other think growth of really some saying higher going expense to and pivot

So a we do think at that ago have, again months than or we looking we of can different sustain let's ago. growth, set but we're six say through it would just a year eyes

Jayson Bedford

key of a margin drivers help could if here absorption Okay, that that's you drag. helpful. there Gross kind levels? the just a overhead revenue level of gross is little where And less becomes the from these can maybe margin, identify a expand

Raul Parra

mean driven, right, of really kind I lot sales a I of unfortunately. it Yeah, is think

April but working initiatives you, we looking and To be to honest obviously actually obsolescence, to and we are because to some less fairly the That costs less turned So negative we're to we've at. during variances out May. of a with be there's month which the is got on good had leverage it we revenue, freight. June that had freight one that think some we COVID-XX we're and created is be customers, there related had shipping up. of

a percentage margin. fixed of they're kind as of squeezing the of almost kind So and revenue,

some think should these progress as start margin see rebound we of the products grows, come margin gross revenue and specifically back. as to I So I we think higher

Fred Lampropoulos

our back. business, as esophageal -- business GI come as is coming it's business Yeah, back. our Cianna starting to which

also I think to it's has do with mix.

critical if take of So relatively last care we needs a business, National with CBCs, Health of to those Service bags all that the of our things some margin. quarter pressure and meet lot demand you look low are a infuser at in had the

to to that costs think of and matter those a as there back along including I happen is then form will drop we over think normalization at of shift So you'll starts WRAPSODY. That will it's just those some some there. absorption in what see point. go come And products and

and effects the and down. buying of much going customers that So as it not really seeing as this, they've and things to forward. already I think we're We're was there products mix like were tubing started and COVID what slow the

need now those other to previously. an gross products the to the that see seen come and time back think just margins we in improvement back with we've So of you'll I area over

Jayson Bedford

figure mentioned Okay closing and just to Australia. that to business a you last are out products those is you think it I'm I move you down. trying shutting -- or one in just manufacturing the Do revenue or impact for elsewhere? there me, PAC

Raul Parra

those manufacture will would No, in once that's and fully accretive products million, so impact revenue sell be it shut we down. The but be about Australia. $XX immediately

in of So QX XXXX. sometime

Jayson Bedford

to margins or [indiscernible]. Accretive

Raul Parra

gross EPS, margins, operating margins. and Accretive to

Jayson Bedford

you. Okay, thank

Operator

you. Thank

Fred Lampropoulos

Okay, let's go.

Operator

& from the Sidoti Sidoti Jim Company. with Our next of question comes line

line Your is open.

Jim Sidoti

couple a ones. just So of quick

in but being put it you see launch approved pattern Europe, able to of WRAPSODY kind can in to in until got are now You've reps you a are physicians? or get holding your

Fred Lampropoulos

No, no, it not in is holding.

received have fact launched it. orders. in We've We

I another the have We think or three cases four before out. is week

enthusiasm this superior you'll you the what like man performance most so tell physicians what outcomes Now, my will the of because this first -- superior being in these the but were our patients. were a that's that is we things a that's hospitals, access done before, Europe. -- all did not especially our many said, and and dialysis much all and gives product view, as are they that and Jim, ability man I there people recall, in In is in for of first in you of

hospital. You want out the of to them keep

have So sorts of product restenosis a important. reduce if you that thrombus that's can and and things those pretty

It's is it than than no, to it's starting launched. like So, I'd be, slower It expected. I've slower it up. not what is but

product be and for engaged company, XX arteriovenous will an that. be it's in deal. about that And to efficacy future exciting it's future. exciting -- going the the that's a There's very again, study, were the WRAPSODY is Australia we'll out WAVE approved special in Remember, New Zealand. we've And access as cases I done talking there. on and then mentioned, this be hospitals big in it So some about U.S.

Jim Sidoti

Are now or COVID COVID down you waiting even you patients able are to patients start to start the before calm enrollment you with in enrolling -- of for next

Fred Lampropoulos

the It's enrollment. but are in don't say, we hospitals, get Well, we the Jim. to

had arguing I to that hospital an call you This Coast down was patients -- negotiated convince me able an they kind we KOL not example, being this study. of but to significant. to they procedures, I We treat I to COVID need as proper to actually and have mix contracts come is will hospitals -- already was online. ought East they trying hospitals tied an so-called and mean things the yesterday arguing, be they had are up give a who me number those please, that a procedures -- are Individual find and more of is of in get how -- and how the in from be, all are and elective treat elective

them that's So got calling see. kind thing to me a I've of and nice

we've well. So as seen that

Jim Sidoti

you're All years quarter, kind on with last legal. the right of expenses next a and me lawyers. the drip, going on for then couple and it's drip, last that know the settlement the to the of announce I legal drip, one but you have been details

does Now about resolved, you that this go is away how that? spending that were much and on

Fred Lampropoulos

our over Yeah, X.X It that there and money say it lot defend drip, than was in all little to of I in information all ourselves to a -- a is of in a would it's go is there. all drip, our K more was disclosed and drip. this Q, years.

to being next be done, court. I our think the and to then and and statement story now that the very I'll final could become this when we've use we but will you, said, is to we do it this, the We'll Jim, story. the in it Now eight in situation and government to of agreed four make day was they'll is weeks, the that something have will said all I've our I'm documents to to you and done say again, what I they're looking what exactly very, think the side will clear forward our their so-called, tell get if telling

Let's just put it that way.

Jim Sidoti

an in away the should XXXX, So as well. that from we fact goes flow see that in that expense improvement cash

Fred Lampropoulos

talk something the a was Yeah, that I both future. we'll money big it drain about time mean for in of and

Raul Parra

We spent last in about legal $X.X costs [X.X]. million and year

Fred Lampropoulos

Yeah, bite drip. more bite, a instead bite, drip, of like drip, that's

Jim Sidoti

to cash? but free down all should Okay, that go

Fred Lampropoulos

correct. That's

Jim Sidoti

Thank you.

Fred Lampropoulos

to hear Nice Jim. voice you, again. Thank your

Operator

Thank you.

Company. with question Needham next from & Matson comes Mike Our the line of

is open. line Your

Mike Matson

just since me around of you're launch launched design the WRAPSODY Thanks. you for potentially talk question Hi, limit I'll the gone product you call in to about just and WAVE U.S. that follow-up thanks in have fitting for an hour, can the and here, could the the trial and one has WRAPSODY product when over timing expectations enrollment in the but U.S.,

Fred Lampropoulos

Yeah, let couple enrolling hit January. We'll me of a start patients that. in of pieces

XX are in we inventories months got of sites, So to Mike, all you have XX we make stents don't you've XX place there few everything and could a to where have squared around, places and have one, sure the still have maybe many you get accounts. these in

the the issued that with involved here of this go need then three will So all breakthrough the in don't the you questions way, future by the and is it then the through the saying appropriate assessment is status in product. the patients. years we are My I to regulatory don't and you've staff near and and that the did agreement for done We'll them the oh, years January get way, fully first the say forget -- follow-ups. the a very and people them will in my data, things it's done. my text got of to FDA They to I've by to all incidentally put according least we've think have I'm me them want we've long just all of this man the sending data, important FDA to to got and publish this in guy the a and come the there about filling I cohorts. X.X man on working an product this numbers cumbersome I'm through information regulatory to and be that we patients. were but else say and that in what me is hope which from looking, lot sometime to worked first of believe to we about in that, but with process they then XXX so with worked -- on X I start approved significance They're that the in very follow with I they'll data, that fabulously. it's a of for and to an answer all take at size as know hearing XXX on and well by I'm we had is have my which getting estimates to an and IDE

and that's I'll from have if for it way So stuff me the answer regulatory, have more best to some my follow-up. Mike, we a

just to more So line, nothing that's out of but your questions.

Mike Matson

that's Okay, helpful. you. Thank

Fred Lampropoulos

Okay, sir. much. Thank you so

Operator

Thank you.

Our of Sandler. O'Brien Matthew from the with comes Piper line next question

line Your open. is

Matthew O’Brien

it's on year, the what final to how to DOJ, million, which COVID one-time, million do going of and $XX about Afternoon. next beyond those would where a selling the on had we year, do you've margin And give where about we specifically $XX know if excluding Thanks free free and debt together benefits and if just ask cash is DOJ and etc, you've the for year benefits I that million the such year-to-date, don't kind you can $XX we if for COVID for or is it flow taking like net a to inventory look thinking then there the collections What were here expect if hoarding going benefits to what not you you you're $XX thing or does the from, like exclude you're what that decision should a but committee and a how about as the to are coming the two extrapolate million on been know derived in margins, just questions. performance, are more benefit then are else exactly that going side, full that going be you've payout kind COVID metrics given cash come metric of benefits we think the we drop. have going exactly that. think Are commentary. stuff, that. -- from due the is here and you that I'll the flow seen for the of then cash paying you I COVID you. Raul, on Fred, out products got operating you things typical on do future, gross makes Thank be of next what's around quarter? just should you to margin Who stop as year lower side to kind use this but the far necessarily cash, down aggressively as operating things. probably and commit

Raul Parra

quick. real so Sure,

I out think cash originally $XX free year, $XX to the had the flow beginning of we thrown of at million. million

or that's think everything in million love given $XX somewhere happened, we'd to I be range. $XX to million the closer

Matthew O’Brien

number? adjusted the that's Raul So

Raul Parra

number. That's the excluding the adjusted yes, DOJ, that's

Matthew O’Brien

million would So, the to of $XX million. then the you why Why you're side to be be the lower $XX business making at million million versus would end the improvements you elsewhere? on range $XX CapEx of if $XX these

Raul Parra

going have will to AR going inventory. to you're come as back Because have sales come you're then and that also back

back. QX, working flow, a I the questions think that because a to I of and little bit cash did capital essentially as mention expect see ago of few we that free bounce negative just component -- things

shooting that I can we're So of now $XX then we'd but you'll that and love the eat Matt. QX, the think to range, for in retain low-end the see year-to-date -- we'll there for million much is hit into of right upside, but how we

it hopefully think we can how We'll get I out. see there. works

Matthew O’Brien

then, side? and Fred, on committee operating the Okay

Fred Lampropoulos

by the the So The is made myself. again and full decision directors Board. it's three new ultimate

what don't I we want met do of that's various Starboard in to we of of do of We want committee. have get it to that think to don't we're can others analyze, done a done, have looked at analyzing and with they've we out types and that the in capabilities say ourselves how front something just including advisors want of me and number get analysts irresponsible. front what and Let we and the don't and models

that two and assignments weeks and So we then in are that then think will we forward. we committee bring between I meeting thing have every

ahead will presentation brought we'll we then sustainable. committee, our As to what a we that's go of think buys with bring you walk the I call, realistic, on if then at going full is shareholders staff in quarter. the what those to the establish in that know Boston we have as that that and end is full they and Board I recommendations don't and they Merit And the we the will mentioned, business will next negotiation and then recommendation will formulated works and and all the through will Consulting consultant make Group who into the we think decide the to the for are things Board, make were

of So that's the kind scenario.

Matthew O’Brien

thank Okay, you.

Fred Lampropoulos

You bet.

Operator

I'll Thank and been pleased day. know quarter. people appreciate over reporting the I'm today turn management busy a again, in the to this out ladies I you. showing queue. I'm Boston bunch you've and the and gentlemen, with had so on we for call. call had be no further questions of and closing. We we time a taken CONMED back the there it's to whole Well

to next and entire committed look think we engaged we'll and the I the forward the we're call and like staff is challenge.

day. So company you if thank be again, and good you Raul clarification on thank a things. you some again. and to night. the you you. I here next will And all Good thank I now of hours for off in God want we the bless interest and couple need wish for Lake Salt you sign City. your from We'll

Operator

Thank and for you conference. participating. gentlemen this today’s concludes Ladies

may disconnect. now Everyone You day. have wonderful a

Merit Medical Systems (MMSI) 30 Jul 202020 Q2 Earnings call transcript