MMSI - Earnings call transcript Q2 2022 | Merit Medical Systems, Inc.

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Operator

Welcome to the Second Quarter of Fiscal Year 2022 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 Fred Lampropoulos, Medical Systems Founder, Chairman and Chief Executive Officer. Please go ahead, sir.

Fred Lampropoulos

everyone, earnings Medical's conference welcome, fiscal quarter and 'XX year call. you, to second Merit of Thank I'm joined Legal today Officer Secretary. and with Raul Parra, and Lloyd, our Brian our Chief Officer Corporate Treasurer; and Chief Financial would please? statements, Brian, safe mind through taking the you harbor us

Brian Lloyd

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

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

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

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

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

Fred Lampropoulos

quarterly guidance a of with in-depth And you, as let as and financial what overview Raul start formal remarks. XXXX will second Thank our financial in quarter. I prepared will the me a during an will with a Brian. that review our provide we opening of for with results revenue start for the sheet condition. better-than-expected more brief cover and press After my we well balance of agenda summary financial remarks, release of updated you results our today's

your questions. for the will We call then open

reported revenues a second our GAAP million year-over-year. beginning We up of with Now revenue review second performance. the of quarter in $XXX X.X% quarter, total

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

expectations rates growth that constant Our year delivered We prior in discussed total headwind the revenue increased the basis, our growth exchange second one quarter our constant to X.X% changes an revenue compared results excluding related year-over-year currency that the earnings to we to in in quarter revenue call. on the exceeded organic currency GAAP period.

more stronger-than-anticipated of -- and by demand execution flat year-over-year were EMEA our a and constant constant Rest in anticipated of from World driven Specifically, the favorable in international we solid in growth shared regions. We X% our sales QX. U.S. trends, results currency than particularly expectation revenue currency strong team, range the for revenue in top the the

with detailed provide our approximated of Now otherwise growth product sales categories. all a results currency are our revenue more the and and you in review primary let Note, a quarter, in of reportable performance unless each me year-over-year constant beginning rates basis. stated, the with are on second

breast for the segment were customers increased from was to quarter in and Second largest were stronger sales intervention of and this Sales from improving nearly of of than total the categories, X% products our highly two representing continuing embolics, identifying driver our PI quarter roughly inflation including management, product by wireless fluid Within contributor used X.X% system driven XX% XX% demand We hemostatic and valve of contributions growth PI notable total and our X/X our intervention Sales to and OEM growth in largest second growth intervention of multiple driven basics XX% two, removal increased business, demand year-over-year our Cardiovascular differentiated in total our quarter increasing in category, to quarter products. expected continued increased a localization sales two in sales increased products, contributions sales which total positive -- year-over-year. assess two. X%, CI access, a interventional Notably, driven quarter quarter cardiac products localization total in conserving and increasing cardiac year-over-year, We total within in angiography increased coatings quarter growth of standout strong sales contributed all XX% representing larger PI in our kits. of by in of during of deliver in our surgeons revenue demand device, access products. for breast pickup our and the had of driven segment driver PhD X.X% for two, year-over-year. by radar tumors of of products peripheral surgery. two growth to Sales year-over-year, year-over-year. products in sales Scout year-over-year, by increased growth products a X% growth growth X% cardiovascular in our the sales drainage our products cardiovascular largest radar-guided together endoscopy

X% posted growth in in a pleased our are fueled that We trades. double-digit two, products growth see to of sales low CPS quarter of by sales

our in which expectations two, the Elation manufacturer contract increased in last we strong X% products, to as for our sales ahead call. esophageal saw balloon a Endoscopy in business our disruption of third-party Finally, expected demand offset with segment quarter issues related discussed earnings

the sales on a a turning basis. X.X% summary second of basis, geographic year-over-year on Now to in a increased sales constant quarter brief currency our U.S. performance

a sales basis. X-year Importantly, quarter results our X- reflect U.S. second and growth both trends on improving

despite saw Asia environment in quarter than growth that modestly two, basis. global than region expected, Southeast offsetting the our year-over-year and customers mid-single-digit was of our in basis X% macro quarter quarter increased consistent in outlook international our Our improving total the Greer in in challenging was largely contributions of sales Western international sales by growth international second Africa regions largest constant international quarter demand two encouragingly, posted Japan, on and XX.X% currency decline Nordic results trends two, growth contemplated X in reflect conflict the was world. each on X-year sales and regions our a the total the with around more sales a of in from X-year the And two. on in growth We growth driver trends EMEA softer growth Europe, quarter a sales in representing the world primary EMEA in not strong to given basis. customers Russia, ongoing growth driven and sales which APAC China. which to with

particularly trends team's growth marked of year-over-year strong posted XX% rest in encouraged the growth the despite of of another demand by Brazil. a strong ahead summary, proud Latin well was in and execution we region saw world our as America improving Our In environment. two, customers challenging which operating and quarter by from quarter we're expectations

other Before on we wanted over items the call comment the quarter. few I Raul, noteworthy in to to turn a

we of year-over-year, expansion flow profitability net income non-GAAP XX% non-GAAP -- profit, impressive non-GAAP XX% quarter income generation and in increased First, operating and another gross and respectively, We quarter in two. free quarter our cash improvement, X%, two. delivered margin

a points XX non-GAAP continued margin year-over-year inflationary margins and increased to gross headwinds, XXX XX.X%. non-GAAP increased Our year-over-year record despite operating basis points basis our

our that of we for which million. X% period at outlined revenue and cumulative non-GAAP free more Growth flow We to targets organic long-term cash of growth the XX% represent least at the generated quarter. we CAGR remain $XXX margins free program the currency ending half XXXX are in second enhancing the profile. and quarter also first cash results making Merit's financial and believe that our evidence generated $XX.X We of in constant XX, further of the million financial in X-year increase We flow goal of a the December progress for of at profitability to our towards call committed least operating than Foundations XXXX, for

evidence months with Second, the our our to the towards strategic of recent we initiative are clinical products. expand for pleased in progress body

Specifically, the treatment Rhapsody our for stenosis being study studied of investigational within the the device study, clinical to dialysis progress. stent occlusion endovascular circuit graft or of WAVE continues upload an

clinical patients. actively sites XX have enrolling We

Canadian cell South subjects observational X-year blockage hemodialysis to dialysis and associated treat experience demonstrate of vessels in diagnosing Zealand. we're -- accordance study the first This associated is a The initial announced period of rapid vascular the receiving study narrowing in Canadian in STREAMLORK the guidance clinical of facilities will months, over and for cancer. receiving also patients required cell in STREAMLOk to X with Australia, to placement blood the breast patients with evaluated instructions will that utility its We access. broccoli of the benefits at without a patient throughout system the is improve surgical up use Europe, enrollment be recent the Scout study and for a of the Permian studies hemodialysis study. Endoprosthesis multicenter mark. medical or with evaluate new prospective centers workflow in intended after RAP study preblendoprosthesis New and XXX outcomes stenosis or America, occlusion clinical RAPS a the in CE RAP efficiency registry of The

and is center to surgery further time biopsy measure surgical guidance IFU and XC patient utility scores care to system. to is system the impact designed of of the according the X. health visits The of invasive By of at procedures when public study secondary study objective of with insertion the this XXX the VRad safety this refractor biopsy, breast to consented in evaluate the the and the Scout value used to assessing quantify patients performance Canadian the between or the for on

products and -- September. Malagari's with to use abstract Now our to Merit's the expand products, the completed publications on opportunities of transarterial efficacy metastatic loaded work clinical in efforts our was forward to leading evaluated the Katarina DaviMolagar's value which continue meeting study, to our feature December Dr. of we MCRC MCRC registry with XXXX. the with liver The identify KOLs European and to and to will to HepaSphere the respect with awareness be clinician Siris look accepted Barcelona cancer chemoablization in abstract in was microspheres that rinotecan. of study colorectal for a European

intervention meeting technologies, a RAP our in platforms, GAE overview team inaugural KOLs. in to around excited And with studies Our and new them I world opportunity host and just these this fairs wonderful Jordan, marketing to multi-day were and it of the WAVE our to offered a week. topics, and variety a including endovascular a meeting South valuable engage is Summit with here an the This planning. say is from medical Wasa meeting of meet would embolic

I Finally, products. specifically well key the to team strategic highlight commercialization clearance development, towards where initiatives, and executing has another of new wanted one our area our of been

Scout with portfolio. system for BX need progress breast device During for embolization breakthrough visit our or additional most releases. BX additional the XXXX, opioid-use knee synthetic tissue devices highlighted have notable prior arthritis. half and delivery breast procedure. a The these is for and microspheres biopsies system, stereotactic on to the patient breast press use placement We used related guidance designation in of with Scout me, office visit in guided received genicular first clearance localization the This addresses allowing We Oncology artery notable MRR the MRI RCO an and received and stereotactic X compatible the of to for refectory roughly merit areas the performed to avoid soft in addition market, under biopsy impose XX% for commonly we surgery. the an

systems, and to many localized offering such the enhanced to We our reflector reflector also in X difficult shorter tissues Scout supports time and in tissue of X launch perform the multiple designed as use supports drainage standard the soft RESOLVE to reflector bracketing. in Mini than invasive that pneumothorx other affected the is announced at contains in Scott allows test. of Scout or areas. outside Discount or open reflectors. systems, component surgical nodes all plus neo-adjunctive an including RESOLVE post to use nodes The Mini for of trade launch and is utility more achieve Scout avoid peripheral supporting sets The breast latest for lymph of and procedural trades, keep new offering of tissue biopsy needed fluids use. new treatment offers breast trade trade. pinpointing placement indication the the millimeter the or drain and stent air within reflector, a use and cancer measures The a scout length, consistent accuracy, needs thoracostomy efficiency minus of pre standard Merit's drainage soft used procedure Each is The be of ease the directionality minimally placement chemotherapy in addition XX% millimeters lymph products precise malignancies, Scout with placed pneumothorax patients tissue for more minoreflector of use, breast also And announced procedure use trade can the and interventional the to complementary pneumothorax saying portfolio finally, Scout from order for of in in procedures. bottles, the broadening of treatment. traditional technology catheters, vascular finally, we I Merit's resolve technique

areas to of Now, I'm and clearance strong the in team's the continued of commitment development, commercialization proud execution products. new of

Now that said, my this and will filing. with last be

over we financial updated you through our XXXX release. call of Raul, today's the turn detailed the Raul? quarter guidance, financial in me will to Let and who take review press second our which results

Raul Parra

Thank you, Fred.

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

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

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

by basis primarily year-over-year for to XX.X% costs XX in gross year lower mix due year was period. period. and manufacturing obsolescence the the the The compared Our point quarter variances prior and to margins offset in unfavorable to primarily in product second purchase XX.X% to was changes increase compared variances related prior margin freight gross partially expense, price higher

in As logistics, seeing expected, second our materials. reflect results the headwinds inflationary quarter we are in labor raw and increasingly

costs from quarter while higher quarter Specifically, of material to our expenses. basis an the non-GAAP XXXX, points assumed raw our included prior our headwind to higher-than-expected second gross of material approximately raw incremental margins guidance second XX compared results

in SG&A period. year-over-year decreased X% operating decrease expenses a quarter operating quarter X% decrease compared was R&D driven expense in expenses XXXX. compared prior the The decrease to by X% in Second year second the and of to a expense

management ongoing expected and in XX% better increased QX was Our challenges income year-over-year delays second modest $XX.X the reflects the operating million. Total in as labor expenditures than in continued as operating market. quarter million hiring performance $XX.X given or in well to expense the prudent expense

basis operating QX point basis in period. to Our the compared margin non-GAAP and change by gross to compared primarily expense margin year our margin year reduction the XX.X% a prior XX.X% XXX driven The period. increase prior our XX in margin was for non-GAAP operating in in point operating was the year-over-year

of related effective Second last expense interest balance expense expense was compared as a The $X.X in interest to a year. despite decreased was rate. net higher average other debt million net quarter to result lower change $X.X other primarily million

compared $X.XX or income million share share per per net $XX.X to period. prior quarter million or the in $X.XX was year Second $XX.X

We the higher-than-expected earnings are in tax with performance XX% our in pressure diluted of our very pleased year-over-year and share in reported rate the quarter, non-GAAP respectively, XX%, period. and a growth profitability net margin second despite on where and the we incremental gross per income

Gross basis year-over-year sales sales of review brief representing constant million, a first on period. of year-over-year. in year X XX to period, first $XXX the XXXX per year the $X.XX growth XXXX to ended of the decrease point X% the in to increase year-over-year Total of XXXX. X% XX.X% XX% in XX% increased prior XX% compared or a half revenue the profit basis half Net first June share million a a income sales sales the $XX.X year-over-year. year-over-year in of results XX.X% $XXX.X basis. currency $XX.X Operating million, of year-over-year to to financial XX $X.XX prior of million period, to year over XX.X% in XX representing share point increased to increased the approximately $XX.X compared of Turning up profit million. or for prior was our per compared half months or million $XX.X

a and review sheet financial to Turning of our balance condition.

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

the XX quarter. $XX.X June flow in Our to second quarter, adjusted second ratio of generation our in XXXX, flow capital basis. million profitability combined on investments, cash with resulted X.Xx as strong free cash working the With second net strong our leverage strategic quarter respect performance was in in of the an of generation

working safety requisite working cash of our build cash in to In flow the recent in June capital to strategy second have stock XXXX. represented and invest our we prior months quarters, X inventory of As ensure levels. the period. increased This ended high generated discussed cash quarter. year during proactively $XX our for use balances a our expected, of strategy to capital customer free of the We million total X/X use roughly XX, service compared

cash million investments and target generation free to range note, related year in XXXX. to planned $XX million Of generating in investments flow remain on program goal track to in assumes at expected to cash CapEx $XX cash flow least $XX our for Foundations the the expect to We free $XX of continue of drive this of million million this strong flow free our Growth that XXXX. are to deliver

which press guidance, today's review XXXX to our in updated of a Turning financial year fiscal we release.

approximately the For X% was of from to of revenue XXXX, year-over-year. foreign to GAAP approximately an growth in impact XXXX to $XX points XXX approximately Non-GAAP results headwind headwind Endoscopy million $X.XX net currency million income million With X% approximately headwind range the million $X.XX reflects in to $XX.X in now Cardiovascular $XX.X in second to or to expect revenue representing million, GAAP we the forecasted in of range the GAAP to $X.XX the of X/X revenue assumes the this from diluted diluted our approximately to realized increase December net assumed. X% ended segment of respect in income we X% revenue in roughly of This X% our share. a in a compared XX million This guidance expect basis this GAAP revenue decline net QX range of rates FX of incremental revenue $XX.X and months now year. net $XXX.X $XX.X headwind per now growth GAAP per to XXXX, XX, net rate net of share. the the balance to range increase exchange a XXXX. expected now year-over-year. prior The an Note, the incremental of or range the to approximately $XXX.X assumes as GAAP impact $X.XX profitability with half had guidance FX million changes for of to our growth net our X% range guidance in segment

and XX.X% For range in XXXX raw of compared assumes expectations gross to reflect of logistics. the XX% materials gross to XX.XX% approximately guidance financial freight in revised areas previously. to modeling margins margin and year purposes, the of our non-GAAP inflationary now pressures fiscal a XX.X% The range in

not that While pleased on over dissipate assumptions. area in we expenses these see FSG seeing logistics that of our in to material the months. half guidance a guidance and uptick are in second XXXX, based seen we assumptions logistics the these material With include cost of we respect And half as continued increase in progress our with raw freight did headwinds are and freight XXXX. increases have prior result the easier prior of costs contemplated in given in the were initiatives recall and pricing, would the a our we of the costs, second recent comparisons

benefits freight now air assumes second do XXXX. Our versus over of as comparisons we not the mix realize updated we these the a guidance easing of higher half now of shipping assume freight

of world. Importantly, this XXXX. decision for modeling review for a updated our to our result stronger-than-expected assumptions direct strategic to demand Returning the the financial guidance respond is our products key to a supporting around other of

previously. range We XX.X% other to of of GAAP to previously. XX.X% non-GAAP and million, in expect diluted a shares million approximately $XX.X to non-GAAP and respectively, million compared $X.X compared approximately million of approximately range expense operating approximately $X.X margins outstanding $XX X.X% XX.X% of macro the growth quarter tax to related range to Late and previously third continued the versus global full for XXXX XXXX. additional of profitability the uncertainty XX% year our XX% provide of XX% approximately environment, to of expectations and to would a like in the rate transparency we

range of X% year-over-year to approximately total our GAAP X% the currency to up expect on X% increase basis. a X% in a year-over-year and revenue to X% basis constant we increase to approximately Specifically, on

of Our third for the of quarter growth reflects XXXX X note. expectations items

growth sales year-over-year the approximately approximately third First, expectations constant OUS in markets. U.S. in the midpoint X% year-over-year X% quarter and of third -- assume growth of currency our growth

manage the issues contract related manufacturer. sales to return quarter to we as to expect with specifically, to a this endoscopy range disruption the third-party wide end We of low view Second, a guidance XX% notably our disruption and XX% a end normalized for on of transitory materials on pressures the driven decline high approximately With to increase -- quarter, third compared of continue an see business by range devices. as assumes we previously trends more costs and flattish and gross in growth profitability raw non-GAAP declines our margin to incremental third freight fourth mentioned a on and the expectations modest logistics the to compared expect to to respect are basis, quarter. year. seeing quarter-over-quarter last prior of we year trends inflationary in

We non-GAAP change the in in tax the end Fred. to the last up income to trends also to see in X% year. that, to last compared improvements year combined X% to margin to With non-GAAP call range end. back expect X% non-GAAP operating a net modest on margin are flattish EPS and expectations, These compared I’ll to to the to remain on increase X% of drive turn with a our expected notable down year-over-year high year-over-year low rate

Fred Lampropoulos

We're we Well, X% to in constant were very, closing, calls a and thank revenue environment proud exceeded deliver that on confident you. operating And despite our currency quarter basis profitability XXXX two, able which total very of results I'm X% expectations. now for revenue in to growth in challenging year-over-year. the that guidance,

the of Foundations strong driven and program. and free from and and Growth gross expect to continue procedures related to non-GAAP improvement our margins specifically We move to our in to through see operating I continue by execution XXXX. also -- elective access contributions flow in to strong to we XXXX expect strategic multiyear improving environment, cash operating progressive as initiatives patients we report

like remains ready well execute adapt to quickly on strategic continues of to thank team our would in standing focused and initiatives members. changes to team We to our markets. our Our while all

performance can't the to any the XXXX really of for without globally, the open that that time I by And half of now first will said, way, the operator, the made possible. with we'll and our questions. made this our line up team that do entire You over turn back

End of Q&A

conclude That conference Thank call sir. Instructions] your participation. for [Operator you you, Thank our does Thank for today. you.

Merit Medical Systems (MMSI) 28 Jul 222022 Q2 Earnings call transcript