MMSI - Earnings call transcript Q4 2020 | Merit Medical Systems, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter 2020 Earnings Conference Call for Merit Medical Systems, Inc. [Operator Instructions]. Please note that this conference call is being recorded, and that the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Mr. Fred Lampropoulos, Merit Medical Systems Founder, Chairman and Chief Executive Officer. sir. ahead, go Please

Fred Lampropoulos

Treasurer; and mind Conference to the Call. Parra, harbor Secretary. Officer by Liz, Legal please? our Quarter and provisions, us Officer call Medical's through XXXX Raul Corporate and Financial Chief Earnings I'm would our Brian welcome, you, Lloyd, Merit Chief you everyone, Brian, Fourth today and taking Thank joined safe on the

Brian Lloyd

Fred. you, Thank

to harbor remind statements Before under everyone this would we get forward-looking safe started, presentation laws. that securities like receive protection I federal contains that

we these could extraordinary assumptions, of effect of uncertainties, unknown or events actual uncertainties. Although believe based or cause forward-looking upon our to differ as results unpredictable realization they risks those the transactions statements impacting reasonable materially ongoing The any are risks the from to of COVID-XX these are pandemic currently company subject including well and anticipated. as

In relied statements, section the views addition, February specifically presentation represent important required and also regarding today, from forward-looking factors of regarding actual to statements date. forward-looking entitled statements cause such results for with Please other obligation XXXX, should most disclaim statements. applicable law. views by in differ as as of as refer We these any upon to our only for such today's statements. any recent of our discussion a any disclosure forward-looking update information not except representing to be filings XX, to Please SEC refer the that could as our

United accordance States. generally are which in Our the are in prepared principles accounting statements financial with accepted

these for as financial to underlying be performance sections our our investors period-over-period now Please our other This Fred. release However, measures under of non-GAAP measures useful comparable measures to non-GAAP not presentation presentation such comparable to discussed also in non-GAAP measures ongoing that Both with for financial note the operations not calculations we is be in business measures, this our financial believe regarding similarly and notes provide a on financial financial can measures Please certain included presentation the to with the accordance financial of U.S. of turn non-GAAP information of and Readers refer SEC Form today's contains measures may with non-GAAP non-GAAP reporting back on in for substitute directly call. presentation the measures X-K. press operations. most to, comparisons and GAAP consider call of financial furnished useful and investors trends available prepared Reconciliation release measures. certain regarding the information the press to GAAP. I titled page will and are financial addition important website. of today's measures non-GAAP companies. entitled

Fred Lampropoulos

the brief progress operating cover And quarterly sheet guidance and remarks, call an the open operating the quarter, a and our fourth with the will the in-depth review as then update more an you environment. our this overview trends your agenda and for performed a start the Brian. our including provide will that my I remarks will questions. After you, I of today. fourth with results despite the will conditions. experienced during of well what during of Raul on opening as in summary XXXX provide revenue that well highlights of in quarter areas we our financial we during a release press to the Then me afternoon's introduced financial will in financial we challenging quarter. our formal balance our let we business prepared Thank of start with performance business

and above decline to compared quarter Total fourth a in prior basis flat a quarter range, to revenues GAAP year declined end constant on total high fourth our quarter benefit $XXX result of performance. revenue quarter with revenue rates X% X, to the X. of in currency period beginning quarter of reported for essentially Now year-over-year, period. results GAAP review which million the the exchange compared guidance We of called a year-over-year X% to changes year to the revenue as our in revenue X% reflecting the prior

our year-over-year, Our sales the total cardiovascular X was decrease exceeded respectively, in results performance of a ranges X. sales these of was of compared X.X% X% of for and growth our Both X% XX quarter year. GAAP offset growth revenue endoscopy our a in of sales in XX% called which partially guidance high prior which by decline by the products end driven to products, the -- to

increased revenue business reflects trends on recent that improvement the a results in basis, in experienced which overall Our we've X% months. quarter-over-quarter

I trends this sequential of was up quarter the growth X% take and for gauging exceeded growth pace above experienced during which for guidance fourth underlying and into think Medical's which recovery helpful Importantly, are we dig I high be expectations of now in, Merit range, we in end call. as of our sequential may to flat course, third of business. our want conference minute called that it to the a quarter the investors the discussed

fueled the reminder, certain continue we business, of and our By total see see in SCOUT in to of geographic continue pandemic revenues XX% fourth Access by products the come overall in sales guide peripheral variation business in and U.S., our pace roughly within of regions. recovery our world like way quarter December. variation were trends the quarter. decreased in direct recovery where notable in X% we the First, U.S. intervention sales procedure in and improving been across the from we U.S. of more November to the the regions for year-over-year part our do demand X.X% and business, where in from rapid elective X, Understandably, has up year-over-year

in to challenge our results U.S. X, other Similar the While our end total revenue U.S. the products see we continue areas drive experienced higher operating while reported we a in guidance peripheral to single of to for quarter, quarter we business intervention U.S. environment our excluding of year-over-year digits XX% our revenue cardiac businesses. intervention CPS range low strong in of in third the declined has demand helped what And in products to the increase in swabs, U.S. recovery CPS X, the overall in of business our quarter X. Cultura in our sales quarter our sales lag. continued

to quarter-over-quarter on response demand to be year-over-year. of While our X% growth strong OEM to decreased customers to inventory our OEM COVID-XX. a in continues result trends sales as In quarter our business improvements OEM sales as in to reflect recover a slower product management trends adjust customers basis, U.S. X,

decreased on a sales Total outside a quarter our increased currency Now of basis. a review basis the X.X% fourth in to turning the brief reported on U.S. results international and constant sales X.X%

restrictions elective The material X.X% Our Restrictions in causing constantly in to with lower COVID-XX demand in year-over-year offset regions markets sales in sales to the of international strong sales see partially sales saw performance and a X.X% X pleased quarter. sales due APAC year-over-year sales the trends Australia, international year-over-year from are saw the sales, EMEA products fourth and we total world year-over-year were a outside other by to our cases continue of significant of fourth stronger procedures. currency our early as the from sales, in X.X% New and APAC access. rise still procedures region the OUS largest Zealand. driven the emerging Japan, decline are and for elective U.S. customers a in COVID-XX quarter. contact EMEA, These regions increase the and and recovery. the of decrease regions of was APAC All in critical this related APAC rest strong China We stages all are limitations impacts region. changing care in and in COVID and lockdowns in fourth rep Europe across hospital in respectively, XX% constant demand We approximately representing and and regions, X.X% decrease decline quarter across a XX% quarter sales to to the

in and Despite uptick as lockdown Saudi Arabia, to relative Europe in challenging sales demand Weak budgets care Iraq, infections. quarter. cases for postponed products adopted pronounced the wave Russia, critical to fourth the strong more remained being were for Europe tenders the in emerging in procedures throughout emerging in X to and led quarter as conditions However, elective due less held well to markets governments and stringent of markets or sales X, measures fight quarter Demand X, in Egypt overall primarily first health Iran challenged. the is care in to weaker up relative demand canceled. governments COVID-XX diverted notably have

operating progress quarter. a to fourth turning review brief Now during our recent the of

Pennsylvania Temecula, facilities our to manufacturing During moved Texas, and XXXX, Jordan, product we in or lines Utah. production Melbourne, and in operations closed XX of West Mexico we in California,

and in have We related closed Australia lease obligation. successfully operations PAC transferred our business in the

Kurt Our efforts forward. a company ongoing, membership outstanding total million are until of of a million, approximately for our XXXX, introductions to payment November and closing we LLC, $X at in XXXX. continue going a track deferred of Medical On the expect Dr. product acquired record we million interest founded Amplatz, new $XX of all R&D comprised and by $XX.X consideration X, cash KA of

embolization, is night added Micro a KA device, nonvascular to self-expanding Plug we our for Set arterial and product occlusion The which is Medical's CE-marked. FDA-cleared portfolio. have used As Micro result, Set embolic Plug a

our We are initiated IDE the for X late trial for other product This our and early clinical is sites WRAPSODY confirmed successfully for line. have first March. site WAVE February,

a which who target afternoon's that, the and CMS our time first financial press our release. this to -- time. 'XX, introduced of you of at XXXX continue me ahead financial will go we let results and the detailed Raul? are take patients to first end turn we We over guidance, through the review of With fourth quarter in quarter Raul, enrollment this approval the by of this awaiting and

Raul Parra

Thank you, Fred.

begin review Fred's a performance detailed will across with P&L. of our the of of financial rest results, our review I the Given revenue

quarter commentary the of the avoidance focus noted, doubt, non-GAAP the otherwise XXXX. will unless For company's during results on my fourth of

from full to We press non-GAAP decreased fourth GAAP included profit afternoon. year-over-year reported in the our quarter. related Gross reconciliations this the approximately results item in release have our X%

product to was to approximate or increased profit in decline mix, by X% in The margin prior basis million was in primarily year-over-year. manufacturing the gross decreased year partially by in improvements period. quarter expenses compared year-over-year XX.X% efficiencies. XX offset $X.X million. Total year-over-year operating XX% XX.X% Our $XX.X changes gross margin driven Fourth operating point

of reduction compared including extent, year initiatives conventions compensation in a a a and to to compared COVID-XX and other expenses margin focused a other cost-cutting XX% expenses prior operating X% operating to furloughs the efforts expenses result research a and, layoffs, travel, of SG&A spending result shows R&D reduction expenses The to was decrease the management more year as and program. temporary COVID-XX was reductions result XX.X% and driven in related among was initiatives cost-cutting targeted Our to in due items. improvement and period. and R&D lesser margin The pandemic in prior were of The in year-over-year discretionary in salary lower by and decrease pandemic XX.X% a a training SG&A discretionary period. lower expenses the largely lower expenses, as and development reduced cost

to operating expenses GAAP call expense noncash wanted items I quarter fourth out well. included as that Our X

of noncash approximately expectations impairment due product in this The with expense, acquired an asset million revenue is $X.X is associated changes line. to first intangible

fourth million our GAAP million consideration quarter, of of impacting or obligations operating in $X.XX expenses share per fair item noncash in the was the million $XX.X income value the estimated stemming or disclosed Fourth a compared changes benefit $X.X contingent from net in period. prior contingent per our acquisitions. second from year $XX.X our $X.XX to share consideration The business quarter was previously

in where to growth a respectively, period. pleased per essentially where XX% the We performance quarter, are in earnings diluted year flat the and our with very net income fourth XX% our compared prior year-over-year, quarter in share and of profitability we were reported sales

review XX, sheet balance and of December a condition to XXXX. of Turning financial our as

quarter, fourth fourth the of in efficiency, combined strong of flow Our year-over-year. strong generation resulted working strong capital operating XX% cash profitability million, an with the in performance in increase $XX.X quarter

in more $XX in decrease strong Our to XX%, year-over-year which fueled fourth of cash of very control expenditures a generation the roughly quarter. efforts our capital million in than resulted free flow CapEx

focused a of Our is profile team early and from year-to-date are generation flow result the clearly that cash free importantly, the going great of profitability and, flow our evidence forward. enhancing company execution cash we on

compared and of XXXX, $XXX As of hand of to of of XX, of of million $XXX million borrowing cash $XX.X approximately as approximately long-term cash available December $XXX and XX, million million million $XXX available our borrowing debt on approximately capacity December $XX.X capacity, debt of obligations million, approximately on XXXX. obligations long-term hand

of Our net adjusted basis. as was ratio an XX leverage X.XXx on December

of Turning release. afternoon's guidance, review introduced this to earnings which a XXXX our fiscal we year in

for revenue XX fiscal range the XXXX, $XXX of XXXX months representing For range of the to assumes XX, year $XXX.X the expects revenue to approximately segment XX $X.XX XX, the as cardiovascular company GAAP revenue ended the XXXX. million billion, between $XXX.X in December year-over-year guidance an increase ended December The million of net the GAAP representing million year-over-year X% revenue million XX revenue net GAAP of the X% million to compared X% and increase XX approximately net approximately an from as and of months $XXX.X for X% XX, for December XX, revenue from of ended to GAAP December net as months compared segment an to million, million, of X% increase year-over-year ended representing endoscopy net and of $XX.X revenue of months compared $XX.X to $XXX.X XXXX. the net between X% million $XX.X XXXX.

of to XXXX. months to million changes income for per share in ended the share compared expect per the Non-GAAP basis net to $XX.X in the XX, tailwind December benefit XX, to XX December year. $X.XX XXXX, million to exchange ended $XXX.X compared $X.XX of XX rates, $X GAAP net range $X.XX XXXX. XX million from rate net the GAAP XX $XX.X $XXX.X net income $X.XX our the to $X.X growth We per of to include for XX, GAAP loss million or ended net months foreign revenue to per of December this or approximately or in share $X.XX representing $XX.X GAAP for share of points million $X.XX a for our range of income months a approximately non-GAAP

largely of purposes, XX.X% modeling margins increase offset well selling gross sales in For partially of fiscal higher to range and out by year reductions, QX our expenses non-GAAP financial temporary in non-GAAP approximately largely expenses, of increase management XX% the the shares approximately salary driven the modest interest to G&A in lower in operating phasing million result a XX.X rate and by obligations outstanding. compared in expense to prudent approximately prior the and XXXX marketing expenses, by as our guidance non-GAAP year. diluted as of expense $X reduction related of assumes other and XX.X% A tax as approximately driven debt to as million range outstanding XX%

COVID-related back expect basis year-over-year continued turn year-over-year first call to in decline Lastly, X% approximately With currency the given basis a of we 'XX. a and expect approximately we throughout I'll on GAAP XXXX, constant the quarter revenue on X% declined to that, total Fred. the QX headwinds our

Fred Lampropoulos

well, I Raul, thank Okay, to a and that's you. digest, lot want to

in I questions, the to revenue few the bear our guidance. Before as for mind wanted a assumptions to community to key investment call evaluate and XXXX considerations we open provide they

XXXX to results headwinds as that in material items our have call contributors XXXX. out We assumes revenue rates growth our to X represent the guidance to

half a the expectations have color. also And revenue some me our XXXX. assumption We over of key give impacting XXXX you let additional second

exit agreement me, the Regarding the we areas XXXX, we disclosed during strategic the with expectations, million contribute results disposition filings Merit's Australian in and Healthcare XXXX XX.X% Medical decisions quarter of headwinds businesses our of Together, XXXX, fiscal August to product facility that $XX.X represent Hypotube -- fiscal the XXXX in assets closure X manufacturing first, in revenue the excuse the revenue the these announced in and our to to of and discussed of X XXXX. suspension year prior our during of will procedure to ITL in year approximately contributed revenue not calls business of as related first the in distribution Merit's businesses: NinePoint pack XXXX.

result changes critical organization and of used swab prepare pandemic. test and beginning revenue for Second, last holidays, and this important manufactured Cultura April to developed, the in to XX of and the XXXX testing We market of we to need kit believe only customers. to direct and by quickly ability tirelessly, in swab worked to quickly to in a of shortage help the year, XXXX Merit's sales transport initiative our our as weekends, our demand directed we the to quarter and Cultura swab resources was product and and this to capabilities, time-sensitive Utah COVID-XX state markets second R&D which of technicians but of the The example and neighbors a the of represents our staff results this to nasopharyngeal our from engineers, to samples in the to development collect for marketers kits a distributed in our a great response respond days. benefited not COVID-XX as response strong production from adapt our bring manufacturing and

Cultura product approximately going to revenue to million in for sales than compared for $XX to gain line to $X in we This merit product forward in our expect represents headwind profile and material not million a line more this a million Importantly, is core $X year-over-year XXXX. XXXX XXXX. from

half to for the is when impacts our XXXX wanted key growth assumption third over to our revenue item that The of investors revenue APAC profile XXXX. evaluating the consider second I highlight

during growth of total to Our revenue as guidance year-over-year tenders as the half in the revenue of the the headwind a XXXX. digits pricing headwind pricing we single despite our XXXX, Overall, approximately expected increase related of to lower $XX $XX of in year. China strong over million a result expect to low includes in unit million second result

that we to this to offset note the $XX pricing expected lower headwind of the million $XX strong unit represents XXX growth. pleased driving to total While constant related pricing that to growth we we our to points company year, approximately able the headwind tenders such demand were are million currency basis see

color not, This with initiatives into forecast add from whether it to us heard lot are is, the know, this about have this important various by to local kinds a about I'd Not we talk course, government. there's that have a the issues built because number we little and sourcing was but Now here. -- come discussion our the a of issues. other really of more do just this, these we to thought but We've them and and these put they China, or of Chinese only don't of other companies. for

the exited from X.X% in excluding as Now Cultura our of well revenue second on headwinds XXXX contributions as the total year-over-year the over growth expected of fiscal year currency X.X% China from basis. the and a revenue guidance for businesses sales in reflects range half, XXXX constant tenders the pricing to

the Now an wider to we first our fueled patient XXXX, vaccinated move while procedures of see elective percentage to as measured our guidance Americans, improvement vaccines half availability expect we environment in access XXXX. over of environment, by operating in no assumes the improvements operating the through of and increasing material

to growth, items we our revenue of XXXX. earlier, low first X% year-over-year X revenue year-over-year discussed X% outlined while over assumes we Raul GAAP on excluding currency decline the first the of constant half a X.X% expect impacts of currency basis, above, guidance the As the and still quarter on basis constant a a end

to a in third trends improvements progressive growth XXXX. normalized assumes and guidance these of headwinds the return Our in year-over-year quarter

wraps we'd foundations operating kind execution gross free multi-year program. time, improving related to lot up we'd it margins initiatives and up. the open non-GAAP but strong And our for growth turn strong report by questions. to now and of over to cash a information, contributions also driven that from like for like strategic expect XXXX, the and flow We to Liz, this for and That's a of at time it to

Operator

first our question from will And Needham Instructions]. Mike with Matson Company. come [Operator &

Michael Matson

you're with cushion and some happening? to are China, case Are tenders the So they be kind assuming actually going an aware product thing in this on I'll categories? putting happen? based to this you in I start of guess every thing? maybe in be is you more just that ongoing you're there do tenders different type of one-and-done that of of And recurs this rotate year through Or do kind over then a time expect is

Fred Lampropoulos

people Well, particularly of types Yes. what I other listen, like companies balloons from Mike. and Thanks, other other announced. of Medtronic types in PTCA seen things and have decreases players, these are we've that think

So understanding sure products, and go felt cardiovascular basically to we're they've able a it looking the the year have explaining this of like on making to that We make excuses. at not back end on we want be this prudent we focused to to when thought and possibility. don't is be through this that

not that they pending lots based that tender changes and in But of sourcing we it single something that's we'd invoice wise, we've we're thought can and much this. to administration going governments chatter we things. directive wise but change be or with the hearing, again, call do local what so what a on thought We So what on received. the see, have and a we it's program,

so basis way the talking this budgeted and And year, for today. we about that's the for this

Michael Matson

Okay. do But mentioned guidance in business -- the more XXXX. long-range also your plan activity? includes exits also that out or, of any know And I you that that XXXX? of in of contemplated guess, kind what include to planning mentioned some your you Are the that of that then I guidance sort of -- some you you divestitures, that. the three laid about revenue you're

in more lead Or that an effect 'XX? that will would revisions will of does And 'XX? happen? see of So guidance if more we have to it potentially in it

Fred Lampropoulos

that Yes. really talking advance. not of about and it's our But X-year part our in for we're plan foundations growth. Mike,

into X We're So you that. a months know, plan. that's as X-year

our part the but table, products be into will more to but that an X-year of this be will moving is of And as out going growth Mexico We had or announce not was it nothing our things If will we'd on certainly something of point. we're just for part or discuss this foundations that, come, all to year. of plan. a it like at ongoing, this number to be that today. really there. we But something There lay imminent

Operator

Piper question Matt Sandler. Our with comes next O'Brien from

Unidentified Analyst

This [ph] mixed on on things trends as COVID. medtech is far QX. U.S. both Matt. as bit We've little the a start the and I Gerome Appreciate outside across wanted out the just to fairly QX for on commentary heard domestically

So to maybe of could a kind assuming a a things you operating quarter. us just since mean And not improvements you of that from correct? that? material drag give whether you environment. better, then assume the in I bit then guidance are a you little patient bit throughput little assuming And of your perspective, a flavor mentioned any material is last worse for gotten have how

Fred Lampropoulos

ahead we Yes. and business and quarter, saw other. Ireland the they're in of further through December somewhat lockdown first They down. X of this announced Well, the soften and locked that expectations months and still the listen, in

So in particularly countries. emerging issue, locations, think in I part of of we some COVID see the the these still

is there's still about discussion, of a seeing I in outside looking more. seeing in even confidence this, cases, do some of and more half of this talking but year. But and is, we're the think some course, are getting of the -- people I the this part of lower national cases, think we like, anecdotal, amounts lower for instance, We're initiating lockdown second So I mean, there, the vaccinated. have people lot at COVID U.S., of this

still the long going it's we've the thinking other think we been it's thing in COVID. this of second talked back there's weather. if all control, saw as that but been in we -- not It's that we to that -- we 'XX. know, one it's kind also under totally to that's this of We -- be year bumpy. the kind the But it's of for February looked pockets, the last I while. way a the Steve, it saw point could, is issues so about has way about And we incidentally, a And half and I time. where at So think

but not suffered reasons, hard, we hit in got we somewhat down So Texas.

there, Our We to had this plant news We well watched away a ability to last work. on We shut down. facility keep the affects that employees. had have our week, was deliver. people from we all and

was contemplated you the that wanted to we sure that? of So add considered numbers use. we that wanted want that anything we as to another part that to Raul, we make this, to do

Raul Parra

No. it, right? reaction X% lot I as -- you Fred kind obviously, portion that impact. see to down related weather. of essentially for I we've a the the QX, said year-over-year. I And mean mean, think COVID our A big mentioned, of is,

think, I we're we're, So it. expecting yes,

Fred Lampropoulos

Yes. your question, Steve? answer Does that

Unidentified Analyst

detail. maybe then you I a us your for with there, provide couple call of Yes, guidance the more foundations margin hesitant detail a absolutely. And cadence. bit growth ago, of on were on lot months now, little could out to you a bit in guess, But help understand a little

term. near improvement think the focus big the the I was margin in gross

maybe baked big you far do kind you then on and are you're baking for process? And give your component guidance much of idea XXXX could I gross a the the margin guess, into obviously an more in have of that's along on of SKU rationalization, have And us you you just how So how what XXXX? it, started that side?

Fred Lampropoulos

of the terms we started it. answer have. I'll we Yes. The in answer is question yes,

have We with of me. various first by that assessment met was teams -- met They've driven it work of internally the being It's initial a of silo and program. all, in leaders. done lot part be with to to update. necessary needing will of in do. agreed been how couple weeks were something to We've on get I meeting an we but and them a we've aggressive It's proceed. going

of in our of a business number segments. So it is terms in SKU momentum full rationalization in

over the to rest So it the I'll part, I'll answer of other. that to and turn then answer Raul

Raul Parra

Yes.

of maybe kind how So guidance you the FfG on we think color components from Malvern the to really initial for year. mix. the And the including give There's get margin, the to X gross revenue gross margin and contributions of some I on activities. ITL initiatives, the

the And on come procedures seen expecting, the that quarter-over-quarter bottom. as we've back, higher revenue mix, we're essentially So the obviously, margins. elective since

faster growing is than U.S. the XXXX. mix, revenue OUS geographic addition, In in

So that contributes.

those guess, XXX, is then to lower I to range, benefits. Obviously, kind driven by roughly items sales would XXX the half at end it higher of half And -- down if the the other mix. upper roughly break of basis mix the is related foundations end points, you be or growth. for related So X of FfG

Operator

next Lichtman Our from comes question with Oppenheimer. Steven

Steven Lichtman

the of that as obviously, over what target. the months? near think of I about the that XX pipeline, sort the here corporate product and terms you're average in you above growth of Fred, XX the WAVE appreciate, lines long-term remains looking term, a some on So to next big are in Wondering to update

Fred Lampropoulos

Thank others we've of stock. Yes. products, And good to to during back products of lot electrophysiology XX to that that I with CE hate have There's news restrictions. -- FDA, the to continued X the -- have, vascular this, regulatory either committees. Listen, the but of right are a the get It's do is have do to and have the they The our still we products, process going. have part to that hard products the is now to it's say keep first and R&D hospitals. but locks things to are inflation get things, approvals, hard into or access think about this I you. we devices,

other The want until side get can we these know we to out there. don't inventories is products build that

the me are additional years what would just expect that, previous in I'm So new we've done I say started that but we've think think let of to that, being trying just cadence, be not developed. number and we that in about products it

that that comments, selling our Merit to in just in be in is the itself going terrific that we of exciting -- weeks, be at as things So stopped. present in for we we year, second belief which once to half we business, We haven't to I trial. lift, as with new then, said as it's we're believe the why a the selling start WRAPSODY least very start open the the optimistic, our is products. Europe will of few is hope position think well. these The in a time things up, mentioned course, And very, because these a next and going is we

And for are in go queue many ready We and many, hospitals have our X go, relatively the least more soon. WAVE at that to after be ready to another that X we'll study.

give on our Raul, patient. want do comment? more we that you treat we'll as detail first to So you

Raul Parra

no. No,

enrolling. announcement when out our press next We'll a we will I -- start be Just release... let think

Fred Lampropoulos

soon and lot -- and as that's -- the patient as product soon hits ahead think know, its a we you first that very deck kind and -- future As we'll and which then we'll thing Merit. is at of a because monumental all go this of

So it's a big opportunity.

Steven Lichtman

anything free cash on in What CapEx or then in not, just And could provide you of again, obviously, quickly, if or able we flow, inputs, of range that it to provide XXXX. see terms Great. if solid you anything do like relative kind think that? to Raul, you're in XXXX can

Raul Parra

items. million look, Yes. think we for FfG right? I X-year about I mean, a related of $XX per plan, million think for we maybe So -- $XX $XX I were year, maintenance, million Capex, announced kind

approximately we XXXX, a We as you cash free overbuild. XXXX. slowed, take for obviously, $XX know because going it for good to I to think just flow, had big a I go if number. sales of from inventory compare want that's we kind capital didn't down working impact think million did in we we're

up. So just as heads a

Operator

Company. Our Sidoti next Jim comes from Sidoti question with &

James Sidoti

I hope you're well. all

a quarter. the couple Just on more details

$X did the said the second notes, And the of third. swab million were the around looking I'm you in $XX the year, about for $X think sales million. about my I think in back million in quarter, I you

So million? safe was $X about fourth for am that million quarter that to I to $X assume

Fred Lampropoulos

You are.

James Sidoti

more just me right. quarter well embolic And to of you mentioned was? in Can the an you you detail to a bit, product related little the as it was release, line. little embolic as there you fourth you acquisition device sales a and And did press talked as in the about All give you think it what that that's something the pull-through will that acquired? do then

Fred Lampropoulos

for blocked of one be for Embospheres, small as Jim. in so and on to off. larger to PAEs is These have are know, vessels very Merit leaders larger spheres the and and forth. so areas very, QuadraSphere. UFEs that are, really Thanks used are asking, however, Yes. that There and embolize Listen, you

medicine What time, they at he the in individually larger takes to and the bought Amplatz and be each take as a XX vessel. Snare, block people Neck got had by trauma XX instance, Dr. that a you've artery first bleed. oftentimes moved. AGA. months And take got You this today, We the could a And to tremendous company critical time, patient. of was this has -- one Wire, which that Goose about I and Amplatz case, Amplatz you splenic coils, in device. small doing mean catheter. to have this issue, coils And they see licensed could Kurt company ago. in physician, are name to is and that a he one will XX mean he off Amplatz of Well, Amplatz out there the to in will all, for Amplatz. a founded and have, was need is you in get and passed away had innovator you've a well,

we you devices of a licensed was that that's smaller what were PFO that these bought. they billion. St. sold over Some recall, AGA Jude others and to that had of will back and devices But $X company for some Jim,

Jude, is these the the a So would that you're If stomach, it's isotope. disease. they which for St. into get cure be YXX, things is license, from devices instance, Abbott the for an now worse that than used if because acquired those is doing

you small usually it and Medical, look to And would larger can you that it and vessels vessel X these them, and at very, are these So one, these and or off website, plugs and -- that takes X go micro in they X the then deploy into to X are millimeters. from these will very go block KA -- these minutes.

it's So used embolic really that our that our our market. are this larger again, same uses get person and allows these by an radiologist, a tool whole part of PVA, Embosphere. that to a them things the EmboCube, And Torpedos are interventional

So we're sometimes, hearing it a gelfoam. quite we in it chase go excited more about road they'll the opportunity here. Because as let's with, with microcatheters, use And it PVA of it and down pull-through the hole. yes, will in be how guidewires say, be primary embolics. this fits that will opportunities, and other they'll something or as And with about terms then other you'll

great you we've market, hard So get but can I excited we But product about, product, see, pretty you quiet it as I got kind it worked the kept is this know until me of really on a on the lot the and technology. a about acquisition.

James Sidoti

fair it that this the is on gross average? the to above And margin assume product is corporate

Fred Lampropoulos

it be think it's I above would average. that corporate safe the assume well to

James Sidoti

And that seems to be the trend.

gross that mid-single-digit guidance EPS you're look it XX% you about top margin much that of growth of If about growth XXXX, because X% forward? for from line Is going think we should bottom that way Is the with but to X% forecasting the rate line rate, on coming line at company most better about a top in gross margin. Merit improvement?

Fred Lampropoulos

Yes.

ahead let to Jim, I and sure I'll I'm make nail to the fire you -- think, go let on want you one. going head. that hit I Raul, the

Raul Parra

just CAGR. target, mean, out contemplate growth X% think I right? the set to Foundations X% for -- Well, I X-year a we

very how So XX% details mean, we're there, historically get out that it's sure I And profitable. think again, a obviously, gave operating we is I than there. to X% think to we've slower had. yes, to focused XX% get on I we rate margins, slightly Jim, there just X% making we're on wanted But growth

Fred Lampropoulos

think midpoint But XX% right I is target. increase on of earnings the

Raul Parra

That's right.

Fred Lampropoulos

Yes.

James Sidoti

to out just have million clear, been in discontinued China. And products you right. phased had about for year, issue the have of be or this you $XX products then All and that

that, to line would without rate top or have So your closer X%? been X%

Fred Lampropoulos

correct. That's

Raul Parra

That's correct.

Fred Lampropoulos

Jim. you, Thank

Raul Parra

X.X%. to X.X% Yes,

Operator

James. comes question Next from Jayson Bedford Raymond with

Jayson Bedford

to the a comments. few of just guess growth on follow-up I

for this I the the I missed What's line? First, 'XX assumption on FX and top if role. in apologize

Raul Parra

It's about XX points. -- million basis $X XX to

Jayson Bedford

say, Okay. not to And the getting that in guidance? COVID-related let's or the terms recur. to China disclosed, that's China the you've is of then revenue And the into back dynamic, just factored strategic headwinds dynamic the going then divestitures,

Fred Lampropoulos

you one we're is the of situations had And device little me PTCA, as give do that to big Yes. things more These really color mentioned. let concerned Jayson. one, a on course, about I of a And we're with player. inflation

been nothing's to if down, very other we're come it you side devices, on of the it going inflation nothing's see may that But pronounced. big player see on a capability which this Now on there. side, you're over

were wise that in sure to just we our wanted and about we sand we this. didn't put So head make the that

explain weren't later didn't on. trying why So we we it to do

if doesn't, in going comes it it will we'll of then said it advantage, just aspect. that will If the we're be Whether to be more our just guidance, our not, it we or icing on to speak. cake, take so and So comes, particular to it the be prepared.

Jayson Bedford

heard Okay. And basis I the I that XXX impact thought points. was

Raul Parra

roughly Yes, to Jayson. Yes. $XX million $XX million,

Fred Lampropoulos

be to trying just can things. glean Yes, these that's so we're... we're mean And transparent, you I all.

Jayson Bedford

hasn't like It set. I the on been know? Appreciated. guess when we'll just the sounds timing tender

just to as curious I'm will kind know? we So when of

Fred Lampropoulos

come could planned So going it, and our in see indicated leadership of second the it it how we've forward. that's and we that China kind management year, if have the of half

Raul Parra

to revenue our that we items Jayson, also, deck, are there's on slide just then growth. the about talked reconciliation And the Yes. a impacting

a as up. just So heads

Fred Lampropoulos

that that trying things are are things already but have just And in ready do. these get case again, as to you not for they these know, happened, we're

Operator

Our next comes Biegelsen question Fargo. from Larry Wells with

Unidentified Analyst

color [ph] months first that Can Larry. in have your an for start QX? little segments terms on to Wei on which to in is I business question relative want been December you to of relative in give -- relative more asking you, the there's for you that calling year to by It's expectation of of mentioned a relative that think been And if response outperforming. -- ahead color I any of earlier has couple the expectations.

Fred Lampropoulos

answer Yes, that ahead and I'm Raul one. going let go to

Raul Parra

the if I mean, I X think mean, currency. constant a I year-over-year, X% guidance -- X% first for implies not on We're look at months, you it our decline

and So business it. we softness our are in for have seeing accounted

weather we impact addition to that in on item February. mentioned In the the

Unidentified Analyst

Okay. then at And just year. second cadence my looking for revenue the question is the

second in half. second the revenue for China see context, but about the talked sequential that potential the normalized tender can you COVID growth growth half, So impact there's half, in In the the through we year? headwind in first

Raul Parra

the our growth, for year, it I if think the I that, growth you right? think if our in implies of it growth mean, at Yes. essentially essentially you half at I first QX. some look implies look

to out. get So kind to environment, of head QX into QX QX normalize. right? see do kind have And plays and on normal that we're today's think I expect that back and growth of of QX how as -- So out we'll then based we to we that's and

Unidentified Analyst

assuming see China that still second again, tender in And that's, half, the would normalized growth? impact is you

Fred Lampropoulos

That's correct.

Raul Parra

Yes.

think mean, -- I yes. yes, -- I we'll

Operator

Instructions]. [Operator

from comes with Research. next Petusky Barrington question Our Mike

Michael Petusky

quarter quarter this earlier, D&A may give by the comp for the missed you but Raul, a did any for and have stock expense I chance?

Raul Parra

Yes, I can.

me a Just have my here. I to for bit. a for went here, it But minute on for here second a give computer sleep me you

see. let's So

we've D&A, got -- on So see. let's

Fred Lampropoulos

Mike, while looks at that. he

you another a -- If second question? have

Michael Petusky

Sure. Yes, I do.

down many touched So that missed is And on The days facility, I estimate a this twice. have quantification may think was just curious, the again, I like and how was there I impact? it of because of for? was Texas an

Fred Lampropoulos

Yes.

course, now. damage we're We of homes, have sort of running back up employees in of their did had who thing. some and that think I and disruption,

I'm to approximately was say it to of going days X X production. So

Michael Petusky

catch up Okay. I you forward? on something move actually show in Or is does mean, that and up just quarter? then the you that

Fred Lampropoulos

the catch no, it's up quarter. in not up the catch quarter, the the you mean, you'll with it road, -- mean, producing on product, I road. down show you're going if but Well, we'll I to But in down it

Raul Parra

Mike, it which is me, in impact Yes. in obviously to of Yes. find mean, was I QX. I mean, couldn't we're it front trying up. is why it. I right make an it

then in comp. stock million D&A and the on XX.X So $X.X

Michael Petusky

also? what I'm sorry, was And CapEx

Raul Parra

million. $XX.X CapEx was

Michael Petusky

in million. And the million I correct? quarter, was did $XX $XX.X cash free hear

Raul Parra

Yes, $XX.X million, roughly.

Michael Petusky

that? Can mean, you about was mentioned region. Or you specifically? I offsetting you think strong quantify in China up it sort then, China, I talk APAC And what guys in can the negative just of you Fred, XX%? saw otherwise demand

Fred Lampropoulos

have front of me. Yes. in number don't I the

Raul Parra

X% we currency up second, a here Give me year-over-year basis. was China constant a go. on

Michael Petusky

fourth the for quarter year? or the In

Raul Parra

quarter. fourth the Is Fred? For that right

Fred Lampropoulos

quarter. in Yes. Yes, the fourth X%

Michael Petusky

lot obviously, end next what years, now at talk your be months, I'm do prudent. et since I'm think here, even then Fred, And of it but more terms you what's out Can the question. next want out XX sort you generating Obviously, guys and you're the about appetite? cash feels free in to your one more there's flexibility ask generally sort as a Okay. there are X of M&A, cetera? appetite, you going to things, just you of seeing of like and to

Fred Lampropoulos

And I down We've, think, right. you're have also that over really for next of all, flow this of free first our years situations. foundations our our growth. and you paid Well, taken made seen as debt. We Yes. the commitments improved part we've X sheet. the cash balance really We've the like little

that's there. right pretty the our wheelhouse been had Things seemed out expensive to our existing have of shown us. things product so couple for to KA Medical that silos. are -- was be We've part that And a of in a in

open. second our in the second that. bit that half I a said quarter, what were are the see we certainly gone that of advantage, go haven't talking And in these with but improving have have we key give There and about chasing been but footprint. gradual the will be this really, performance, be we that that for improving we into little And they're to we you've able And as although they not very trends. will be say and last to Mike, see the of year, is they other about to but some, fit to something our going with with able feel guys the they WRAPSODY to talking year, year, that hockey to road seen an properly, have headwinds. them stick. think about and anything. we've our to eyes to it be global even us. we do the they a down a attractive companies, bought Remember improvement. weren't business And for mentioned, think, the were substantially have have us expensive, I coming year, that some I And We again, resting first and will but were that we're like I

anything. is doing a to have do now long-term think year more like we're strategies fine the growth we at have have it don't with price, would our than the we things thing the opportunistic time for will deal but If the we fits around, and spend right right ago. -- certainly we're the some we and we going but have and to then right So we feel we be

Michael Petusky

challenging very Congratulations through a on year. managing

have well. guys really You performed

Fred Lampropoulos

Thank you, Appreciate Mike. it.

Raul Parra

Thanks, Mike.

Operator

from comes Doug Free next World Capital with Our question Group.

Doug Free

mentioned have local of to et as as participants single and you explored viewed local Chinese To or a market sourcing you a initiatives, be through more more China, with with invoice headwind regarding what program a cetera. the solution So partner? consider, kind extent local to joint ventures along partnerships increased government

Fred Lampropoulos

It's good they to we products time Doug. lot in that a that make products registered a Yes. to we were The good were could sure we've that spend and I question, IP, talking innovative. approach Listen, of mean, that listen, the past is had the about really chosen China. way really

that's Amplatz our You in to we've are And approved. guidewires name marketplace. not of some available again, also think steerable not and Amplatz now easy and do launched microcatheter, the there the generally we've SwiftNinja done Amplatz, that, other over speaking and our the guidewires of that

back at I about about go on I been our these look could fear on We've to this looking been reluctant, bit. I've of I've that's know-how. stuff, and our think, And or because of about these and to our losing the hold IP, been So -- property done, have backwards. going other resistant concerned been is which what we've I'm partnerships. always always but concerned a issues intellectual and

as of have to question, partner that that companies there's and solution reexamine to we with to and of in a if all Chinese I can I needs take that we then though, conditions all be fairness ways your in look and think, think meet a part the economy.

the discussed the considered. areas long-term probably company in are protect the again, about we'll past. that be for things more But also So to the have concerns my that things the that at to I've look than

that spend we'll probably more at now. time So

nicely fine. well, there why grown just our say, think very it past? model in years, worked the you we've listen, might Someone didn't And do for and answered question. I've And I has over the

I And say, good time evaluating not who in this. these not we'll just other to going China, we as opportunities Manager but more time together now for have produced Merit looking looking pricing Joe the adapting okay, for In and for forward. oversees spend as to Now Wright, probably to be Lam, have time you pivoting, everything and that issues. area anybody be trying spending area, and and the will is and us spent resident is we're going is to evaluating General but Leon wildly. marketplace at words, and our some going this who pivoting

Doug Free

with As That's a IP. a is And you. the quick I follow-up. agree high consideration protecting

on target your XX What guidance the by China about XX% is is in current PAC Asia or penetration revenues. So into regarding the China, contribution the of revenue next market to months? U.S. XX market the

Fred Lampropoulos

of don't mean, comment important APAC. Doug, than all respond. us, I China Yes. has don't we to Other that. just always we been so but has on

detail. to any be answer I'm So that unfortunately in just to able not going

Operator

I'd I'm like this showing back closing remarks. no further in questions the queue turn for at time. to call

Fred Lampropoulos

stuff I you and are much. very you lot going on of to Raul jump Well, of there, and a out very lot out. know much. here. jump a meetings you've and had thank thank Liz, there's listen, I in

calls. scheduled have We

give the I for be you next, will that's here We to on think, the from best each We'll -- do color give hours. to the appropriate X of you.

Thank much. another always always for your of as this engaged and we're night. good forward and to So improvement. we thank you very look have and excited you you always, known Thank We're And about to you you much, know soon. support, looking we're forever, forward year very business. talking and

Operator

our for Thank you does your participation. conference That for today. conclude call

Merit Medical Systems (MMSI) 25 Feb 212020 Q4 Earnings call transcript