MMSI - Earnings call transcript Q4 2021 | Merit Medical Systems, Inc.

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Operator

Good afternoon, ladies and gentlemen, and welcome to the Fourth Quarter and Fiscal Year 2021 Earnings Conference Call for Merit Medical Systems, Inc. At this time, all participants have been placed in a listen-only mode. 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

Officer welcome, would XXXX Merit joined earnings by the and statements. Chief the and our Harbor Brian and Legal Safe please Chief today fourth take fiscal call Officer Financial our Parra, year conference Secretary. Raul Treasurer; everyone, you, and Medical’s Lloyd, Brian, to Corporate quarter on and you Thank call. through I’m us

Brian Lloyd

Thanks, Fred.

to Harbor Before statements remind under I we like everyone forward-looking Safe would presentation laws. that this securities receive protection that federal contains start,

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

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

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

to release of most presentation refer non-GAAP directly of Form for operations. financial comparable and section press entitled performance non-GAAP contains and to is measures ongoing information measures U.S. of This to investors measures. certain included useful trends financial presentation X-K. the certain presentation such can furnished the in Please today’s period-over-period the under regarding our also underlying operations believe financial business our However, comparisons provide the GAAP non-GAAP be useful measures. non-GAAP SEC and measures we of Reconciliation with financial

measures not financial as on measures release similarly should Both substitute that in turn our to For with consider non-GAAP the not in for our to, discussed financial prepared Readers available companies. these on presentation be of now call. Investors this note Please a GAAP. back important calculations non-GAAP information our will titled financial reporting measures comparable today’s may measures accordance website. regarding with Fred. and other the page of press I call are addition

Fred Lampropoulos

Brian. Thank you,

our start agenda fourth me a my with with After during remarks. I review as we results our will that balance revenue year. for release, sheet cover better-than-expected in Let and start an for will fiscal provide and brief you XXXX financial overview introduced will our condition. quarterly financial prepared financial remarks, financial quarter more of a the of of of opening what we with Raul formal XXXX the as well guidance a and press afternoon’s this summary results in-depth our and

revenue your We review fourth of year-over-year. revenue up reported X.X% $XXX.X Beginning quarter we a then call GAAP our in of the quarter, performance, for total open will fourth million the questions. with

Our XX% in growth total driven by GAAP revenue X.X% sales. U.S. growth growth sales and international in was a

exchange fourth revenue increased headwind as quarter total year-over-year result our revenue currency prior our basis. a of to the constant in to Excluding organic GAAP on the the period, an growth changes compared year X.X% rate in

growth a in primarily international in total driven XX.X% sales. constant X.X% sales was currency increase a and Our U.S. increase by

had X% we The our in guidance discussed updated and strong versus year-over-year. to range execution were the from fourth constant favorable OEM exceeded assumed. in guidance trends demand customers revenue and QX in four quarter revenue driven quarter implied China the range in by call increase sales our approximately more our stronger-than-anticipated currency quarter revenue from fourth solid Our would of results X% team, updated what

otherwise Note more four. detailed growth of in stated, results on and a to revenue quarter our review Turning rates all currency year-over-year are constant unless basis. a

by PI largest management catheters. and large QX, was Sales in product our total by our XX% quarter in guidewires X% product continued improving strong demand year-over-year, four, revenue half Sales the X% by growth, of In including growth products, diagnostic of quarter. compared peripheral angiography expected products categories, from localization primary sales meaningfully driven of second our total year by PI products our total sales demand of quarter four, prior approximately intervention Sales primarily year-over-year, increased one-third multiple to XX% which our quarter lines, which therapy increased roughly MAP products four. year-over-year, increased increasing stronger of growth products fourth our growth replenishing sales for sales largest XX% increasing were year-over-year. levels inventory was XX% fourth and cardiac much biopsy our CI increased of intervention of in performance diagnostic and contributor our increasing of of products with our XX% cardiology contributor X% growth Basix reportable drivers the by growth category XX% in representing year-over-year in growth and cardiovascular our segment year-over-year CI the the business OEM driven of of also interventional in than together to quarter Cardiovascular of endoscopy represented of our year-over-year, in representing terms the driven Cardiovascular the fueled Sales XX% Sales products and EP, product customers increased year-over-year. together drainage increased to largest contributed categories, Sales Sales of and products segment XX% of total products. total our products radar category our in XX% year-over-year our fluid and by CRM and products growth quarter. in kits, year-over-year respectively to envelope QX Scout period. the total the in growth

decrease offset of was CPS X% growth sales our a sales year-over-year cardiovascular by products. in partially total Our

headwind the quarter stable the $X.X from ITL our our demand from of in cardiovascular Cultura area did of sales. given XXXX, million million included sales However, the business, sales masked to year in the $X sale not divestiture. of also fourth trends was Prior which net by business sales this of contribute year-over-year a the

Excluding Cultura and X% four. our quarter category product CPS increased – ITL, sales me, of in X% excuse

a primarily as Finally, impacted sales four, EndoMAXX X% sales XXXX. quarter increase in in by our of interruption remedied quarter increased that our line the we sales the supply in Endoscopy chain in fourth segment driven of XX%

to sales Now of on brief performance summary geographic turning a a basis.

Omicron our half surge late by in the our cases, U.S. of of reporting according XX numerous both which year-over-year, year-over-year. on year-over-year December currency Services, time, up to our customers announcing related sales variant procedures business, excuse increased during Utah, the that U.S. and mid-single since hospital some to quarter could a overnight growth moratoriums for were began U.S. XX.X% increased December hospitals and took At hold back U.S. critical stay, X.X% represented and in XXXX. the Health were international the case direct most non-urgent Human sales Elective fourth our mentioned, Directly to total I As on constant systems U.S. the of Sales increased Department data counts from require of in that shortages, steady in XX% during the as quarter began quarter – digits cases four, an me, approximately staffing COVID to procedures four led until days. basis.

to during and the and the Rest XXXX, access Additionally, see procedures hospitalizations much in approximately restrictions, do although in recovery part to of variation specifically are of on XX%. large the including wide currency where pace variation trends, terms December. Sales regions, we continue XX% and continue global material earnings depending to The increased and limited as three EMA not up, World ramp from in in see impacts pre-COVID across choppy the elective said, respectively regions to were That mirrored region notable X%, quarter sales we in the Similar tighter we as we case surge quarter. geographic APAC, to the country, regions. throughout continued on world restrictions region levels. clinical counts of OUS discussed certain fourth have the in a four calls in the was COVID-XX, on access back back as XX%, on XX% of EMEA which constant the within to business,

forward coming APAC EMEA, X% revenue with EMEA virtual environment. quarter despite is in contributor Italy increased growth We the managing the possible, Russia, the results leveraging business total operating largest are France. our to EMEA sales well four. from the of and selling in overall quarter strongest are to as sales business Kingdom, challenging strategies other United international much region the drive helping was EMEA The us business as which and four,

of increased XX% impact divestiture the China the business, sales year-over-year fourth the of ITL quarter. in in increased excluding year-over-year. the Sales Although XX%

As this currently better the foresaw summary, devices proud begin range operating environment we high-end earlier, the in our were quarter quarter these The driven when contemplated in sales mentioned in advance by demand results we our in flattish China we call, sales than for better-than-expected fourth three results far year-over-year. was our in above results we year. of that able guidance volume-based are despite in purchasing quarter In tougher-than-anticipated we’re the the April deliver that to of expect of tenders to four. inflation

items I wanted the to over on call in few the turning noteworthy quarter. before Raul, comment Now other to a

we quarter another impressive improvement, flow delivered margin four. First, in quarter profitability expansion cash and of generation free

to income and increasing gross respectively, compared XX% in our the the and net profit reflects non-GAAP prior year. XX% non-GAAP period, leverage Our strong

XX%, a and us. XX.X%, managed record basis a points non-GAAP operating prudently, XXX also margin of year-over-year our expenses a gross to in us, resulted which increased Our record margin for for non-GAAP we

million $XX We worth more also cash free generated quarter. in of the than flow

to for a update on I Growth provide wanted Program. brief our Foundations Finally,

our we made progress transformative of a have to efforts we’ve believe added one Specifically, year and impact on our program, considerable company. the date in

for helping certain FFG more on course, and, line launched shareholders SKU the Merit intended and and materials initiatives optimization, creation raw benefits many than inflationary expenses. and compensation value to have and freight transfers seeing manufacturing consolidation, we including across to areas, cost initiatives in discussed program have calls. XX offset of network in product prior we’re shipping We pressures The drive is

total production. across on scrap Our resulted sites percent than in of a reduction manufacturing our has reduction a XX% in more as scrap focus

manufacturing low seeing of our targeted more are margins. products revenue the and/or improving were than the we rationalization, We of early area low obsolescence specific in for gross SKU given that also product identified X,XXX efficiency, benefits

a Resource also been already products. Growth products inactivated Program The new for we’ve to President Officer, we and with them Vice able including seeing teams, seeing and – of Foundations Talent, in HR, six Benefits. and have sales nearly are In on has and President Strategy roles, business. and Officer, We recruited are also Overall, move of cases, Global Vice Chief an EMA and and Vice all excited Chief of XX% tower, of Global execute customers. EEM Innovation Head of continue FFG’s Vice than our President management Comp including formed control initiatives account our Human the and year defined Strategic Pricing, about one to these alternative pricing, the We’ve procurement, global of XX more inside global Global we team. progress President Global results to we’re across Communications new entire

of our making revenue profile. despite most goods in line and expanded XX% flow and fiscal in basis call more in enhancing a margin cash XXXX to points for year-over-year. XXXX. generating gross our our our our for at compared We Program margins XX% than importantly, currency that XXX cost evidence towards profitability for more margin cumulative December of represent more targets we generated revenue million. of we the X%, period at of Foundations least believe our have which outlined non-GAAP cash our committed flow And we of we We constant in year-on-year growth We fiscal to ending three-year free goal $XXX We than are currency least increased operating remain increase financial long-term XX, results increased constant $XXX organic free XXXX, than clear last the basis headwinds Merit’s million year. year-over-year. to at non-GAAP financial Finally, operating progress XXX CAGR considerable year points non-GAAP Growth

in quarter you will the Now and more said, guidance, afternoon. through which time over this me introduced Raul, the financial to with fourth a who our our of review take let that results XXXX release detailed Raul? financial turn press we

Raul Parra

Thank you, Fred.

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

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

increased release included our items in year-over-year results quarter. website. press from the and the available We reported non-GAAP XX% fourth related Gross our reconciliations profit have our presentation GAAP on to approximately in

was in in year-over-year on gross headwinds in primarily in seeing point lesser XX.X% in product mix, margin and materials. compared period. quarter improvements by basis offset changes are logistics, extent, to XXX year to XX% efficiencies Our the approximate for was fourth raw the gross labor, we a The due increase prior partially margin in volume, higher inflationary manufacturing to

Specifically, to QX we in year-over-year increase period. increase in The X% projects, new primarily projects. on and lower XXX quarter year-over-year. in expense, spend to combination million in in mitigated – expenses, margins to related million. our fourth X% expense increased by compensation able increase certain year expense the Fourth our expense a KA commissions driven represented year income increase fourth labor by was of which and estimate increase in compared the gross higher sales by on The the was proved XX% has R&D basis we expenses period study the operating in reduce increased in the and quarter other the headwind and in to in points increased selling again to increase of quarter compared year-over-year logistics $X XXXX. focus in The than prior effective particular, Rhapsody quarter. of Medical SG&A two this SG&A managing quarter as operating increase expense to non-GAAP driven including expense XX% fourth $XX.X year-over-year for bonus clinical more the acquisition expense due continued to to related provided COVID-XX. year-over-year, effective expense expense Outside prior to or G&A X% was the the R&D were of only and a related R&D our Total a expenses,

period. Our XX.X% $X.XX other compared in expense Fourth the million expense Fourth lower effective million expense in to was operating rate lower million result $XX.X a period. was lower year as debt prior in margin a other compared year. last XX.X% compared share average or per was $X.XX net $X.X change million $X.X $XX.X the or for and QX quarter income net was interest interest of share prior net quarter to by driven balance. year per to The

our we income respectively and fourth pleased where net reported per very earnings growth We with the are of in profitability performance and share diluted in quarter, XX% XX% year-over-year.

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

in of XX, efficiency of generated performance months generation combined December strong free used reduce our free profitability flow cash for million strong Our in outstanding $XX.X strong capital flow than the quarter to quarter. flow fourth of XX free more million working cash $XXX a ended with a of We fourth XXXX. the in borrowings. We XXXX, portion cash the resulting this

facility quarter. million, which line paid XXXX, the in of during fourth down down million our including we debt we credit of paid approximately on Specifically, $XXX.X $XX.X

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

basis. net Our was December leverage of an ratio X.X on XXst adjusted times as

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

representing we the approximately foreign year-over-year. revenue range ended $XX revenue guidance Cardiovascular segment growth X%, to X% of X% to share. $X.XX diluted Non-GAAP the changes headwind or to XX assumes from X% from currency GAAP XX, The per a segment to income exchange income the the in XXXX, net $X.XX approximately respect year-over-year. to of expects For from for to December company GAAP X% or revenue the months of per net growth profitability Endoscopy to net approximately million range range With of points million, in basis $X.X XXXX, X% the headwind a million growth forecasted $X.XX GAAP in $XX.X net $X in million of $XXX to approximately our to $X.XX the growth XX assumes million GAAP share. year. The to million of net also this diluted range GAAP $XXX.X expect rates revenue net guidance of rates approximately revenue range net

purposes, approximately modeling other XXXX. margin of approximately of year XX.X% fiscal shares in assumes For our of in non-GAAP million, approximately tax year and $X million. to to compared with range of XX.X% operating approximately XX diluted Non-GAAP non-GAAP the the XX% approximately to XX.X% in rate outstanding fiscal XX%, XXXX XX.X% guidance financial compared XX.X% to of gross year in margins fiscal XXXX, range non-GAAP expenses

the first the XXXX, impacted Lastly, X% sales growth that where COVID-related assumes. quarter year-over-year, just quarter over our guidance ranges results than is increased XXXX revenue growth guidance of our first given headwinds assumes that full higher modestly our year the in of

we our currency to in basis no on Specifically, for to experienced our expectations improvements QX X% to increase QX the year-over-year on headwinds growth of X% X% COVID-related revenue a we XXXX in and material year-over-year procedures X% on basis [ph] XXXX. a total approximately GAAP expect the approximately elective XXXX. QX assume constant in increase Note,

year-over-year year-over-year gross non-GAAP With comparison. income increase Fred. against our to year-over-year non-GAAP XX% to a and easier on year an expect EPS back We I’ll driven XX% performance pressures net in call in that, decline by turn inflation-related expenses margin and prior X% approximately operating QX, to the our

Fred Lampropoulos

exceeded that the In operating in are to we Raul. that we four, deliver you, proud despite able our closing, guidance. environment results quarter Thank challenging revenue were

throughout expansion improvement, Quarter four and also consistent quarterly represented our XXXX. in consistent generation, flow our We results the this was again also of another free impressive quarterly a fiscal note year margin throughout XXXX. cash quarter profitability results in year theme themes fiscal that

growth XXXX the to our basis first currency to environment, see elective up which X% half X% XXXX. patients over in and to access confident guidance year-over-year, a We’re for progressive total revenue operating procedures in constant we the specifically expect improvement calls on and of

while We and benefits strong also our to expect The Program. in strategic the driven gross execution related to Foundations initiatives margins flow contributions and continue non-GAAP cash XXXX, improving multi-year to business FFG are strong and Growth closely from we something material to our environment by program free for more this from operating report us avoided chain related have and are this watching navigate disruptions supply to are helping to-date, is more well inflationary the in we as struggling global companies impacts area.

made are remain We in to all delivering XXXX’s around our changes standing executing ready initiatives, our would We well like reflect performance all our members and focused despite strategic thank to and world you of achievements adapt who strong challenges. on quickly our this markets. ability team’s possible. to the the team while to of

prepared for wraps administrator that time Now we up questions. the remarks, to line like back our would and over up turn now open the and our to

Operator

And the Sandler. you, [Operator question with of first Instructions] our Piper from Bednar sir. line Thank Jason coming

line open. is Your

Unidentified Analyst

on is the congrats Jason, year taking Hi, guys. to questions Drew and for nice This and end thank you the a here. on for

Fred Lampropoulos

I Thanks – anyway, sorry. said, Jason Drew,

Unidentified Analyst

guidance to off problem. a I a bit on Not wanted start the here. little

quantify I had some think willing chain inflation we’ve they’re that tech environment, assuming macro into of comments headwinds to you’ve their on FX. made the from the given supply guidance, level some Just companies med

what your if as as to assuming is that’s more when wondering just might And normalized do? guidance, return environment? you’d be far you to something then a So operating willing

Fred Lampropoulos

answer going let Raul that, to Raul? I’m

Raul Parra

to period a kind I just normal we in – very we’re a choppy been right? of most, have time normal, from right? think been think V-shaped along for messaging, I all so, longer of we’ve a consistent to a than Yes, of our talking recovery No think about recovery. kind getting back – I

half to but of normalized this I to think get of year. start a So We this. into obviously well – we’re level, the think really we kind back back

for XXX expenses in inflationary basically see that’s XXXX that’s impacting margin we a that the gross as – somewhere basis far we into around built guidance, our guidance. headwind in our As XXXX our the points expect

Fred Lampropoulos

you, Drew? help Does that

Unidentified Analyst

what’s some being very That’s in Are to bit maybe remind on think how gains products demand? you out right throughout the just and comments higher-than-expected offset peripheral helpful. us might your China? anticipated way pricing? the to the there then side. launch China And just on you can new then sell to Thank the the cadence already product up from new you. Yes. the that going better-than-expected. Can get year? And you. a little cleared headwinds of flesh those Or the you registrations is sustainable incremental activity being about Thank pick is And

Fred Lampropoulos

forth. that Well, a splittable so of yes, we of they sheets be whether have on they wires, approved, terms in a products get new and effort kind constant be and so

in get how to approved government pricing they ways approved and the the when be then it year, up or the China, last unpredictable. really the they they many is councils, we on and so U.S. in in speak. got get whether many, So SwiftNinja have and to to get it’s approved But

So keep on along it’s constant just is and expect – know of in kind for currently pricing we pricing with cadence. April. this that moving of we the some a coming well, products, that volume We those just

of China nothing. would it last chain said, time with we events a ask are turned there what do about do of products. supply these spent We as issues, it non-event. a competitors things much you couple many but peel only about Now that all on, as out, We that being lot questions the of coming all know, and really and was a to people can in, it’s do, year that for are know so affect they how talked

you inward anything to China. Raul, people grow have X do and to that? invest to calls, to Our move to continue that cities to as said want and add in million over we’ve strategy been XX has previous move, in

Raul Parra

on XXXX, in – did would I we thing confident basis. a constant XX% only that I is And remain just at mean, The long-term for growth we for China. – currency add grew our we expectations

to So nothing that. more

Fred Lampropoulos

helps. Yes, I that hope

Unidentified Analyst

It does, you. thank

Operator

question next Wells from of with And the line Larry coming Fargo. Biegelsen our

open. is Your line

Larry Biegelsen

Fred. afternoon, a for Good questions and quarter, the Thanks congrats guys. taking nice on

Fred Lampropoulos

Thanks, Larry.

Larry Biegelsen

better. Hope you are feeling

Fred Lampropoulos

where I better. of a I lot a on ago, couple come now. yes, am, months That like was

Larry Biegelsen

know. I know. at you pretty times, Fred, net for I guys. X.X the debt-to-EBITDA low

the of Valuations it’ll down. come And you kind just been thoughts Do deals? on be on more criteria year? think are I front. you your M&A? your some You’ve active M&A have – What the pretty are of one us follow-up. have kind where quiet – of update Could this are where for on

Fred Lampropoulos

thing first flow say, plan. Larry, with the couple the Well, cash I’ll Yes. is Foundations how for last pleased we generated years free our we’ve of over on are Growth that

our But valuations in I the year there position very, and think looking at sure that time, are substantial in we we’re a very you out. we’re last coming showed I we and think same good discipline making down as pointed out looking, you we that at mean, I have best and I committed, to your and seen as Growth. show continue is the for question mistakes. we’re as last answer real make – of part didn’t the will in issue way Foundations me the for to

expectations, to do we’re not we have those going anything So but exceed – just to consistent or be going to do is it.

works this put It’s We’ve a and employees in them. enthused our think to of for plans able place here. lot got for pay we So well. been everybody

in the going criteria, never you’re And program. then from meet We’ve our all things anything. better not Raul? are Larry, right are out just to been and We’ll chase will There So position. debt, said, are hopefully but In we’re for been the they of we’re in to all right. looking not and in help a we meantime, here, pay dead We’ve things be those. looking. depart able opportunities. we for down when being the But right continue. we’ll out going thing the participate here not some the this the past. That pay out to that strategy, we’ll

Raul Parra

that. add anything can’t else I Yes, to

I I a focused, overcome. we’re look guess M&A when one discussion has kind It’s focus, think And really point. to definitely at and that obviously, Larry. right? targets, the the that’s FSG. committed that’s it’s very we’ve we And of been of what acquisitions hurdles that, And target – to

Fred Lampropoulos

I hope that helps, Larry.

Larry Biegelsen

one pulling end, that a XX%. much. only of deliberate? Raul. Obviously, more you questions. talked so low like range XX% targets, the And gross Growth hear taking because for people Foundations the Thanks about for Very XX% to that I When to that – Raul, you that you made for Is operating the there’s margin. was Is the for didn’t inflation challenging? low more has margin Are the end? target. just mentioned

Raul Parra

the first, on we’ve about we’re well, targets. at at operating very think our been this And messaging, we’ve that look, margin, Larry. the this and look in committed call done those we feel Larry would based I XX% goals Yes, that our good where one, say non-GAAP a from we on that, we’ve day been based of that consistent delivering year, guidance consistent least think think very FFG what on right? kind have year, I I reaffirmed people we can and I on right? are to at

a XX%. XX% said, XX%, we’ve we lot of So say the just consistently confident. guess – and would target look, that talked feel I I to about we’ve the

committed we’re FFT the of to We’re and fully that target. aware

Fred Lampropoulos

I’ll he everybody and what Larry. for reiterate said just here, And

XX%. that to committed are We

We of Foundations work lot increase to There’s be shareholder to to It’s we’re working. provide the track to this are we the right it’s committed a for going value. be think done an Growth. because on to able and track stay

where So – that’s Raul, anything finally?

Raul Parra

XXXX, think we at think look just wood off and you for we’re done XXXX talk this our in year. year last of would what what and get year we brings confident had if and what going chop too. say, a guidance Still that when lot we’ve I I how I at to look we’ll finish about we look, you we’re performance that do the there. But again, No. feeling this to

Larry Biegelsen

so guys. Thanks it. much, Got

Fred Lampropoulos

You Larry. Good bet. hear Thank you, from you. to

Operator

the line Mike Needham. from coming Matson question of next our And with

is line open. Your

Mike Matson

thanks. Yes,

you on heard prices going tenders. more mean, we’ve down of heard orders the correctly said you some companies typically inflators what where of seems demand go and opposite the the the kind lines of tenders, because deferring of it for people saw China I from the you a from balloon actually if I I – comments So on the to ahead along the think they’ve seen tender. are little the other bit something with

just I that. to So wanted about ask

Fred Lampropoulos

a it’s demand. time. a We’ve was been good It Yes, there question. a long pent-up

We’re the player. quality

leader. those did simply you what We We’re all – we exactly things we that others were have not. market might seen. that’s stated and Mike. the this, There We numbers… play all And see talking what into you as are about mean, thought the – this, I

Raul Parra

mean, it rider. mean happen. a and just I talked didn’t kind had else didn’t we of I just it everybody saw, expected we – expected what Yes, about

Fred Lampropoulos

happen, which us. didn’t is good for Just

Mike Matson

Okay, of from a that. actually not so having than just was worries. an No, less impact of no benefiting issue negative

category, you’ll and or the And then very organically seems is So is you other small separate what’s It that business, with categories Endoscopy of small, plan very there – it’s the maybe new that acquire categories. other something Is grow plan guess. that in? just kind to be that get with to you your I bigger, potentially – something you’re a that that synergies is mean, there? the relative develop I divest? it internally? can Or and to any things or business that something where products

Fred Lampropoulos

Well, okay.

areas So that correct. the on focusing of one It scale. really you’re is we’re for

looking for So been we’ve some time.

in that have successful our research And very of development in and devices. technology it’s of – our and something are us. that that ongoing there but and that our They’re other of The complementary business, do we is used, do we are that in it is core one for larger areas our product stenting a and are we new – part unique new base. products warehouse is inflation but area, a

So We you’re more scale need there. right.

In reason see we any consider terms don’t that. of to divesting it,

build how to on concentrating We’re that business.

Mike Matson

it. Thank Okay, got you.

Fred Lampropoulos

Thank you, Mike.

Operator

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

Your is line open.

Jayson Bedford

Good taking thanks the afternoon, on and questions progress. and the for congrats

whole. China constant X% few rather here. And factored currency some guys kind just really guess, April? don’t want year. I we the have showed this X% of guide? I the You improvement down do in nice sure for then But go this first, is tender occur that tenders, assume And the to second, this into a questions I will know to that can with we

Raul Parra

happen expectation our built going our into is and I guidance. mean, they’re it is that Well, to

and understand But just not We April. expect there’s – right? right? in just it’s comes goes, I know, again, coming. it consistent, you it I to mean, We guess it’s as start

happen. seeing We’re it

You’ve it happen with stents. seen

You’ve happen with joint. large it the seen

some – guess, regional it seeing You’re trauma of are the, I happening. tenders

to So we’re right? it’s the up the to at you, with Chinese be mercy honest and just of provinces a we’re – government, definitely temp, happening. It’s the

Fred Lampropoulos

I we’re leader. and And you have go that and valves we the That’s to have want I asking this and that they’re the things have other back and fact market that products, to told. we the the what the to hemostasis with were price previously what own on is, go said range Again, that provinces their along list. remember of

think field of is on So – spent we’ve it’s about what nothing like seen And may we down, It’s these programs, It they to rabbit said, Merit just information as time sound get going lot but back a last inconsistent. it. inconsistent, we at the went going the I you hole, to year that all. we from there’s happen. think that’s not

growth So the it – it’s guidance, of growth region. in of APAC material the but expect, we but driver China a that XXXX whole will be the terms that assumes

So that of see come what you slower it we’re life. places year, part the was to recall it. to starting back is Last

into So region. we area and improved that whole the excited we’re really quite APAC this whole about

in I So throw to well. want just as that

Jayson Bedford

in what’s earlier, but I Foundations Okay. kind this of tied Program? That’s of helpful. Growth to the missed lifts apologize I terms for big if left

Fred Lampropoulos

are with three these that years. start you out – Well, listen, that programs

it’s what I take initiatives, it XX people just consolidation, and compensation You than program, product issues look we I last to did to and at gross lines We’ve SKU them, incentivize have to optimization, we’ve keep the in addition We make margin. transformative. we the network and made sure any that can would manufacturing been done considerable Mexico. we think launched year, and with like mean, we progress. implement more benefits

I digging So we’re but it’s ongoing times, but the a There’s anything, believers. we’ve transfers. you the think you many SKU committed as tougher. getting it’s Jayson, other start to And to an optimization. part – when of is first There’s a hole, But it. dirt relatively just little bit the process. start when more more And like stuff, easy, talked we’re

importantly. We’re

been their are breeds or hit success. rewarded hit success or All they’ve year goals believers all because bonuses of their and our this employees

to So we’ll today a continue lot do. to we commitment – we’ve and what finishing said going to it say of our we we said were

and that $XXX another period, cash in to operating million margins flow that’s and over Let me over to go important free X% of three-year issue. again, X%, through it XX%, XX%

program, can not everything everybody we’re Just it’s exceed three-year for goals. to those that program. we or one-year clarify Raul? it’s doing meet a to And a

Raul Parra

we’ve in and to we’re I’m for take what cost expense. mean, do. just some of did really look, off the our our price shipping helping going XXXX. I I really material, the things employees certain the to seeing some Yes, company raw is of in it program able you’re in and been and kind the advantage mean, that we of proud highlight freight FFP of inflationary P&L, us

reduction site resulted on XX% across than focus more reduction scrap the Our scrap. in manufacturing has in

of of also alternative our have no and almost inactivated, specifically products, the some about rationalization. of moving margin manufacturing XX% no products. seeing all We’re improving or revenue, benefits X,XXX in been rid those got We early efficiencies, but to gross of cases nearly the SKU

EMEA got tower. made, we’re an In global global We’ve programs We’ve addition, account. control doing We’ve got got from new we’ve standpoint. got procurement, investments the say that HR, I’ll that strategic with organizational we pricing.

Fred Lampropoulos

there’s to ourselves be of think what I original a our it we’ve to in And about and to done. lot the our – be There’s mean. proved involved shareholders, work but come show everybody company question, that’s back a we lot analysts, to of that to to can needs work the done, to

and that this uses it chop be we’ll we’ll ready Raul chop. pathway. chop on I the and and and language continue the of we’ll think go, wood down trees get to we’ll is a it still there’s But to up lot

Jayson Bedford

enough. Fair Okay.

for me. one last Just

labor that and what – were, costs But you think they the impact mentioned when My margin gross the in about When logistics here guess very start You strong point do logistics headwinds? fourth to and labor I a abate? think they to stay. number quarter. are a is do was basis the that XXX

Fred Lampropoulos

always any accuracy, we’ve I answer never if I well, I’ll set that we’ve along We’ve them find start other the it way. been thing looked, will adjust they’re methods, because and the Yes, and come been time. them do that doing we’ll this really which all wrong. could think – in things to that as answer with a rush they dates to or think We they adapt

me say I let for people big have other idea. companies. no So a just experience logistic of And we lot that full-time worked with have here have

We can and I what’s know. to Jason. we that’s would have I and night way do? what that that we to happened, a thing. of we whatever to it things mean, we’re that aware and It’s best and is, and circumstances can, out there, the that everything just it’s we’re So of that adapt were can answer the be how – out we for does hard But, but and conditions all where hopes the it thought you tough the be give sort adapt last I’ll way the can’t the doing and affect, say aware it’s – work we’ll Raul? is But best question the who I time, don’t date. a marketplace to we and does in working we’re are a there

Raul Parra

some Yes, freight, control specifically we think can things. around we

we’ve One allow and more to – lanes. is that allow our going group to done shipping of we’re inventory on time to the for build additional during things the capacity

that Fred that some mostly... help on to got that But things and we control expense. think try of we’ve hit we’re control going So to can mitigate yes, I

Fred Lampropoulos

talking do on FFG. is we anybody meet there the to day we’ve at I and the be else, think to needs last what – and than the And And proud part of it best customer got the mall of the we’ll we’re start two of to in accomplished end big I’m better that’s And our about years and we that business. We the about know year to – – mall go to more have then started. finish I start, – from think and go I it has have just there. where you and or all big

We’re already that now. it, just as as can Jayson, on about saying we be. best But thinking we’re I’m

Jayson Bedford

Thank great. Okay, guys. you,

Fred Lampropoulos

good It’s you, to right. you. Jayson. hear All Thank from

Operator

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

is Your open. line

Fred Lampropoulos

Jim. Hey,

Jim Sidoti

taking for questions. afternoon. good Thanks Hey, the

quarter. You called reasons the Rhapsody went is R&D out one of why the in up

that be on R&D should level expect us update just you around can next is few to in this we give quarters? the an So how trial And going?

Fred Lampropoulos

much lot still yes. quarter. in We be enrollment spend has can targeting The we’re We’ve increased trial that generally, as I and of parameters say, the of There pace a dedicated. end to the we would fourth within XX the completement the were that of the want sites progress have made were year-to-date, activated. as XXXX. we of and by

they’re but not lot little So recently. the with be our It and of Jim, we’ve slow I have people their I of record – progress lot we’ve a people because to a progress. and to in sites to out to people, was made results. particularly be made the be able a But start able that of clinical think to this think staff to –

now. acceleration see to starting We’re

Jim Sidoti

is quarters then about the of this level, as couple And the or…? expense Okay. for as next far right

Raul Parra

I get mean, at know – did then… called out QX, Well, color think, it Jim, some And I I leave think we’ll around our that. we’ve and guidance. We we’ll

Fred Lampropoulos

in In our it’s other words, numbers.

Raul Parra

Yes.

Fred Lampropoulos

Yes.

Jim Sidoti

anything Got XXXX. what Russia us on going give sense a you I it. Can And that What’s you know now? what’s about on – in that some that, right on an that say had you going can area with there? was growth

Fred Lampropoulos

driver and not in does for first represent the watch just Russia to in was plan and interesting going our really growth been Russia to on what’s it’s not of in market XXXX But material importantly, so business key And all, XXXX. Ukraine our today. Yes, revenue. a Ukraine our

So to not important, say it’s it’s – just but not not it don’t I is want material. an important

Jim Sidoti

Got it, okay.

Raul Parra

in real watching And as developments things time. region in we’re the obviously, the unfold

Fred Lampropoulos

eye keeping an material. But We’re on just things. not

Jim Sidoti

right. you then year buyback? Would its of cash All share –I there. another the $XXX flow, And ever great a consider million free mean,

Fred Lampropoulos

take I But we talked sheet. and interest want very this we’ve We an question increasing. look have a it’s that rates listen, off we balance we about. want and have opportunities, think and pay debt, at are to one, strong to interesting Well, a

that this that, look on ourselves for we’ll rather is So to opportunities do do the discussed I think committing or we’re today. – we’ll call on the program on, we’ve stay this than just

were disciplined get are We very We We we to. don’t anything. looking. We chase and intend didn’t crazy didn’t last year.

lot Go I are to waiting been that up. there a On And that’s values, and pop of the think that opportunities then other better seeing thing Raul. valuations. the ahead, we’re for, hand, start into different of we’ve things play kind

Raul Parra

expect to in Yes, flow think generate cash we strong again free I XXXX. look,

modeling is a It’s that FFG think million we $XX purposes. good CapEx important the to are the to planned to about XXXX. that for think to million $XX going about to range for some consider target drive $XX million I full to investments related have year our of

meet key earlier the we and can and want about in make I strategy capital. the to just of of free And assumes have we as that’s needs. flow part we’ve guidance to for. required an kind our payment related sure that accounted two stock of build uptick is And our higher of kind think items investments continued customer inventory taxes the our safety a really working our to cash in about. things proactive of Additionally, that talked We’ll that balances cash demands kind that additionally, a to everybody one

to chain a any integration has customer take helped us supply inventory and out, has make able have that I for needs. to be think want right us we our of we been big the really levels advantage factor its and sure vertical to

Jim Sidoti

right, Thank you. All

Fred Lampropoulos

Thank you. All Good right, to from Jim. hear you.

Operator

from next Our Plovanic of Bill line Canaccord. question the with Instructions] [Operator coming

now is open. Your line

Fred Lampropoulos

Bill. Hey,

Bill Plovanic

Hey, how thanks. Hey, you doing? are

Fred Lampropoulos

Good.

Bill Plovanic

answered. been questions Thanks. have My

Fred Lampropoulos

Bill. you, Thank Okay.

Operator

Steve our Oppenheimer. question the And of Lichtman coming with next from line

Your line is open.

Fred Lampropoulos

Hi, Steve.

Steve Lichtman

Thank Hi, Fred. you. Hi, guys.

guidance tax quick much the how And tax XXXX you rate? compensation? rate One, Just that did a couple of stock-based on modeling any does Raul, assume guys in benefit the questions.

Raul Parra

address so on Yes, just to did at year rate XX% low kind – our wanted thank non-GAAP I kind pretty this tax because a a have question because for of tax the to you of we rate, last basis.

a that our So people to kind understand. rate in our mentioned, you the make sure at around call I as guidance, of assumed will is non-GAAP just XX%. basis base higher tax XX.X%, rate on is out

those we this color to for And behind obviously, a I it of is the usually the options. of back of, come we’ve built we’ve our – we hope half the and of And the kind kind some benefits for And modeling – options exercise stock in towards that weigh so as year that’s year. And the of the year. stock assumed back guess purposes. just base for to benefits rate in half some the really

Steve Lichtman

it. Got

Okay, rolling in. thanks for

the cadence the on trying that to year, for secondly Just out. you’re map

true. I think that’s

year? So saying the the you’re average the of quarter line rest pressure you the in guess, a first line the little Can the on drives quarter will the, the through versus first top bit? be walk on greater But what of above that I bottom comp. because the

Raul Parra

did we inflation we’re the out pressures quarter. A of seeing. decline COGS lot call the XX% X% it that is to in so an around Yes,

first period, December during we to us addition the In down to, you then quarter. if time ramp remember, in the up back takes shut it holiday and

two combination seeing, pressures just inflationary a plus normal of the the that with process. in there’s cadence So those manufacturing we’re our

Steve Lichtman

it. Got

it’s on So little on a bit and that elevated earlier trend really side then will COGS the be down, okay. that

Raul Parra

because… just little operating a right, bit of And too, Yes. expense,

Fred Lampropoulos

our from the be out. that, hopefully down more revenue there’s well, what increased And course, from hope road. Yes, comes and will people of more getting we access

a expense little than bit there’s last year. we So more had

Steve Lichtman

got All guys. Thanks, it. Okay, right.

Fred Lampropoulos

you. Thank Great. Yes.

Operator

further like for conference back at now turn any to to any Lampropoulos I Fred questions remarks. closing this I’m the not would Mr. time. showing

Fred Lampropoulos

our business, much joining pleased let great thank you want research momentum creates that year. going we’re track the with we’ve and stick Foundations to as we’re to our think our very opportunities with for that you We in at to the again, know stick and Well, how we looking other Again, products. for Growth, our performance us. the last been I why development are something to commitment core on for continuing that and to is

important So issues. those are

will next you I we’ll you Good hours, interest to up three for try pretty it. night. best that Lake and hours, two joining the appreciate now and We well you pick things may have. and being be off all Raul for that think from clarify there. for us. you Signing I covers around Thank Thank company, your wishes. the in City. Salt and questions

Operator

Thank conference Ladies and gentlemen, that for participation. does your for conclude our you today.

You may disconnect. now

Merit Medical Systems (MMSI) 26 Feb 222021 Q4 Earnings call transcript