Q3 2021 Merit Medical Systems Inc Earnings Call

October 28, 2021

Good afternoon, ladies and gentlemen, and welcome to the third quarter 2021 earnings Conference call.

At this time, all participants have been placed in a listen only mode.

Please note that this conference call is being recorded.

The recording will be available on the company's website replay shortly.

I would now like to turn the call over to Mr. Fred Lin Propolis Merit Medical systems, founder Chairman and Chief Executive Officer. Please go ahead Sir.

Thank you and welcome everyone to Merit Medical systems third quarter 2021 earnings Conference call.

I'm joined on the call today with that Raul Parra, our Chief Financial Officer, and Treasurer, and Brian Lloyd, Our Chief legal officer and corporate Secretary.

Brian would you mind, taking us through the safe Harbor statements place.

Thank you Brad.

Before we get started I would like to remind everyone that this presentation contains forward looking statements Safe Harbor protection under Federal Securities laws.

Although we believe these forward looking statements are based on reasonable assumptions they are subject to unknown risks and uncertainties.

The realization of any of these risks or uncertainties as well as extraordinary events or transactions impacting our company.

Could cause actual results to differ materially from those currently expected.

In addition, any forward looking statements represent our views only as of today October 28 2021.

And should not be relied upon as representing our views as of any other date.

We specifically disclaim any obligation to update such statements, except as required by applicable law.

Please refer to the section entitled cautionary statement regarding regarding forward looking statements in today's presentation.

Information regarding such statements.

Please also refer to our most recent filings with the SEC for a discussion of factors that could cause actual results to differ from these forward looking statements.

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

However, we believe certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of our ongoing operations and can be useful for period over period comparisons of such operations.

This presentation also contains certain non-GAAP financial measures.

Reconciliation of non-GAAP financial measures to the most directly comparable U S. GAAP measures is included in today's press release and presentation furnished to the SEC under form 8-K. Please.

Please refer to the section of our presentation entitled non-GAAP financial measures for.

For important information regarding non-GAAP financial measures discussed on this call.

Readers should consider non-GAAP financial measures in addition to.

Not as a substitute for financial reporting measures prepared in accordance with GAAP.

Please note that these calculations may not be comparable with similarly titled proceed measures of other companies.

Both today's press release and our presentation are available on the investors page of our website.

I will now turn the call back to Fred.

Thank you, Brian and let me start with a brief agenda of what we will cover during our prepared remarks.

I will start with an overview of our better than expected revenue and financial results for the third quarter.

After my opening remarks, Rob will provide you with a more in depth review of our quarterly financial results and the formal financial guidance for 2021 that we reaffirmed in this afternoon's press release as well as a summary of our balance sheet and financial condition.

We will then discuss some recent corporate developments.

For opening the call for your questions.

Now beginning with a review of our third quarter revenue performance.

We reported GAAP revenue of $267 million in the third quarter up nine 4% year over year.

Our total GAAP revenue was driven by a five 9% growth in U S sales and a 14, 5% growth in international sales.

Excluding the benefit to our GAAP revenues as a result of changes in exchange rate compared to the prior year period. Our total revenue increased eight 8% year over year in the third quarter on an organic constant currency basis.

Our total constant currency growth was driven primarily by a 7% increase in U S sales and an 11, 4% increase in international sales.

Our third quarter revenue results exceeded the guidance, we provided on our quarter two call, which called for quarter three constant currency revenues to increase in the range of approximately five three to seven 6% year over year.

The strong revenue results in quarter, three were driven by strong execution from our team and more favorable sales trends in China versus what our guidance range had assumed.

Excluding the benefit to our revenue results this quarter from the lack of tender related pricing headwinds.

Our total revenue increased approximately 8% year over year.

On a reported basis.

Little more than 7% year over year on a constant currency basis.

Importantly, these growth rates would have been at the high end of our guidance range, which reflects the strong execution of our team during the third quarter.

Yeah.

Now turning to review of our quarter results in quarter three.

Unless otherwise stated all growth rates are on a year over year in constant currency basis.

In terms of our sales performance by our primary reportable product categories.

Third quarter total revenue growth was driven primarily by a 9% growth in sales of cardiovascular products offset partially by a 3% decline in sales of endoscopy products compared to the prior year period.

Sales of our peripheral interventional products increased 16% year over year.

Representing almost two thirds of the total cardiovascular segment year over year.

Sales of our scout radar localization products increased 27%.

27% year over year and quarter, three and represented the largest contributor to total <unk> growth in the quarter.

Sales of our biopsy products increased 19% year over year, and our greener and envelope therapy products, which together represent roughly one third of our total PAE business increased 18% year over year and quarter three.

Sales of our cardiac intervention.

Products increased 15% year over year, representing the second largest contributor to local cardiovascular segment growth year over year.

We saw a balanced contribution to total ci product categories in quarter three from strong sales of our intervention products and geography products and sales of our fluid management products, which increased 923, and 34% respectively year over year.

On the intervention side, our basics and map lines posted mid teens growth.

On the fluid management side, our medallion products more than doubled as they continued to benefit from higher demand as a result of COVID-19 vaccination programs.

On the angiography side, we had strong demand for our diagnostic guide wires cardiology diagnostic catheters and control to range products.

Sales of our OEM products increased 22% year over year in quarter, three driven by improving demand from larger customers.

Playing machine inventory levels.

Our total cardiovascular sales.

It was partially offset by a 13% decrease year over year and our Cps products.

However, the stable demand trends in this area of our cardiovascular business matched by a nearly $9 million net headwind from sales about culture a year over year.

Excluding culture of sales of our Cps product category increased 3% year over year in quarter three.

Finally sales in our Endoscopy segment decreased 3% driven primarily by a decline in sales of our Endo Max line due to our supply chain interruption.

<unk> setting solid growth in other stent products and sales in our relation and Aero many product lines.

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

As I mentioned, our third quarter sales in the U S increased 7% year over year, and our international sales increased 11% year over year.

Both on a constant currency basis.

Sales to U S customers represented nearly half of our total company growth in quarter three.

Led by our U S direct business, which increased approximately 5% year over year.

Sales in our three primary global regions APAC.

And rest of the world.

Creased, approximately 912, and 27% respectively on a constant currency basis in the third quarter.

Similar to O O U S trends.

Trends, we outlined on our quarter two earnings call, we experienced overall improvement in trends during the third quarter. However, we continue to see notable variation in the pace of recovery across regions of the world, where we do business, including wide variation within certain geographic regions.

The E M E region was choppy in the quarter three as the region continued to see material impact from COVID-19, and is still in the early stages of recovery.

Restrictions and Lockdowns are changing.

Constantly across regions, causing limitation to sales contact and lower demand for electric procedures that said overall sales growth trends improved in the third quarter as compared to what we experienced in the second quarter.

And E M E. M E sales were the largest contributor to total international growth in the third quarter.

We experienced improving demand trends in the U K, and Italy, and continued softer demand trends in emerging markets.

APAC sales increased 9% in quarter three although this growth was impacted by two important items of note that mass true normalized performance in the region.

The first item is that sales in Australia were down 34% year over year and quarter 300 reported basis.

But excluding the impact of the Divesture of our I T. L business sales to Australian customers increased more than 57% on a constant currency basis in quarter three.

The second item is that sales in China increased 16% year over year and quarter three.

Representing more than a third of our total international growth in the period.

As mentioned earlier these results were far better than what was contemplated in our third quarter guidance as a result of a lack of tender related pricing pressure in the period.

The timing of tenders has been delayed in China, which means that our sales will roughly $4 million higher than expected in quarter three.

Excluding the benefit from not having the tender related pricing pressure this quarter sales in China increased in the low single digits year over year and quarter three.

Again, we are very pleased with our third quarter results. The operating environment has been challenging in recent months, everyone is trying to navigate the seemingly ever changing dynamics surrounding COVID-19.

And the impacts are certainly being felt in all areas of our business our customers hospitals clinicians patients.

And as Raul will detail to you later in the call.

Supply chain and logistics as well.

Youll recall that one of the statements I made during prepared remarks last quarter was that based on our performance in the second quarter and first half of 2021, we were confident in our expectations for a return to normalized year over year growth trend in the third quarter of 2021.

Despite the tougher than anticipated operating environment in the quarter.

We are proud that we were able to deliver results at the high end of our guidance range, excluding the China tender benefits.

Raul will review the details of our full year guidance, which will be reaffirm, which we reaffirmed in our press release this afternoon and a few moment.

For now I'll, just say that we remain confident in our plan for the year and look forward to continued strong execution from the team going forward.

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

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

Our non-GAAP gross profit in our non-GAAP net income reflects strong leverage in the period, increasing 14, and 26% respectively compared to the year ago period.

Our non-GAAP gross margin increased 210 basis points year over year as expected, we managed our operating expenses prudently, resulting in only a 1% increase in non-GAAP operating expenses compared to the second quarter and importantly, we generated $18 million of free cash.

So in the quarter.

We believe our financial results over the first nine months of 2021 represent early evidence that we're making progress towards our goal of enhancing mirror its long term growth and profitability profile.

We have expanded our non-GAAP gross margins 220 basis points year over year, despite considerable headwinds in our cost of goods.

<unk> compared to last year.

We have increased our non-GAAP operating margins 250 basis points year over year and most importantly.

We have generated nearly $82 million of free cash flow over the first nine months of 2021.

Second.

We are pleased with the progress during quarter three of our clinical study the wave study of the Rhapsody Endovascular stent graft an investigation device being studied for the treatment of stenosis or occlusion within dialysis outflow circuit.

We have more than 40 clinical sites identified 28 of which are actively enrolling patients.

This study has been designed to evaluate the safety and efficacy of the Rhapsody Endovascular stent graft for the treatment of venous approach circuits stenosis.

Our inclusion in hemodialysis patients and represents an important step of.

Our goal of establishing Rhapsody is the standard of care for more than 2 million patients suffering from kidney disease around the world.

With respect to expanding clinician awareness of the clinical efficacy of Rhapsody.

We were pleased to announce in September that the results from a prospective observational first in human study to evaluate the safety and effectiveness of the merit wrap to the Endo prosthesis were published in cardio vascular and interventional radiology.

This study reported anatomical clinical and procedural success in all cases.

According to the primary investigator.

Mr. James a gilbert transplant and vascular access surgeon fashion.

Vascular access leads at Oxford University hospitals quote.

Early first in human study show that the Merit Rhapsody Endo prosthesis can be safely used to treat two doses at key sites within a dialysis access circuit.

Even more encouraging.

Are the very promising primary one year target lesion patency rate of 84, 6% and access circuit patency rate of 65, 9%.

To my knowledge these are higher than any other published data and just that the novel features.

Rhapsody, Andrew Prosthesis may have a key role in preserving the longevity of precious dialysis access for our patients and quote.

Now we're very encouraged by the Rhapsody first study positive results and we look forward to assessing future steady results regarding the merit Rhapsody entered prosthesis and making a positive impact in the life of patients suffering from kidney disease.

Finally.

I wanted to provide a brief update on our foundations for growth programs. Specifically, we've made very nice progress over the first nine months of 2020, one including in the areas of SKU rationalization product line transfers and manufacturing initiatives.

The foundations.

Our growth program continues to focus on scrap reduction across manufacturing sites and we're seeing the early benefits of improving our manufacturing efficiency, which is helping to offset the inflationary cost pressures, we're seeing in certain raw materials and in shipping and freight expenses.

Overall, we continue to execute on our <unk> initiatives and we are excited about the progress and the results we're seeing across our business.

Well, that's a lot, but with that said, let me turn the time now over to Rob who will take you through a detailed review of our third quarter financial results and our 2021 financial guidance, which we reaffirmed in this afternoon's press release Raul you're on deck and now you're up to the plate.

Thank you Fred.

Given Fred's detailed review of our revenue results I will begin with a review of our financial performance across the rest of the P&L for the avoidance of doubt unless otherwise noted my commentary will focus on the Companys non-GAAP results during the third quarter and first nine months of 2021.

We have included reconciliations from our GAAP reported results to the related non-GAAP items in our press release this afternoon.

Gross profit increased approximately 14% year over year in the third quarter. Our gross margin was 49, 1% compared to 47% in the prior year period. The approximate 210 basis point increase in gross margin year over year was primarily due to change in product mix improvements.

Manufacturing efficiencies on higher volume.

Offset partially by inflationary headwinds, we are seeing in raw materials logistics and labor.

Third quarter operating expenses increased 18% year over year.

The year over year increase was driven by a 16% increase in SG&A expense and a 24% increase in R&D expense compared to the prior year period. The increase in SG&A expense was primarily due to higher selling expense, including commissions and bonus expense on the increase in sales year over year.

And lower Opex in Q3 of 2020 from cost cutting initiatives lower head count and lower discretionary spending as a result of reduced travel training and chosen conventions.

During the COVID-19 pandemic.

Our continued focus on managing expenses proved effective again this quarter as we were able to limit the growth in G&A only expenses to just 6% increase year over year the.

The increase in R&D expenses in Q3 was driven by the combination of lower spend in the prior year period related to Covid and the outside expenses for certain R&D projects in particular related to the <unk> clinical study and increased compensation expense related to our acquisition of <unk> medical.

And two other new projects.

Total operating income increased $2 8 million or 8% year over year to $39 5 million, our operating margin was 14, 8% compared to 15% in the prior year period.

Third quarter other expense net was $1 6 million compared to $2 7 million last year. The change in other expense and that was driven by lower interest expense as a result of a lower effective interest rate and a lower average debt balance.

Third quarter net income was $30 2 million or <unk> 52 per share compared to $24 million or <unk> 42 per share in the prior year period.

We are very pleased with the with our profitability performance in the third quarter, where we reported growth in net income and diluted earnings per share of 26% and 24% respectively year over year.

Turning to a brief review of our financial results over the first nine months of 2021.

Total revenue for the nine months ended September 30 was $796 3 million up $94 million or 13% year over year total revenue for the first nine months of 2021 increased 11% year over year on a constant currency basis.

Gross profit increased 18% year over year to approximately $390 million, representing 49% of sales compared to 46, 8% of sales in the prior year period, a 220 basis point increase year over year.

Operating profit increased 35% year over year to $124 million, representing 15, 6% of sales compared to 13% of sales in the prior year period, a 250 basis point increase year over year net.

Net income increased 53% year over year to $95 4 million or $1 67 per share compared to $62 5 million or $1 11 per share in the prior year period.

Turning to a review of our balance sheet and financial condition as of September 32021, our strong profitability performance in the third quarter of 2021 combined with our strong working capital efficiency resulted in strong free cash flow generation of $18 million in the third quarter, we have generated $81 eight.

On a free cash flow for the first nine months of 2021.

Our free cash flow generation over the first nine months of 2021 is that result of great execution from the team and importantly continued evidence that we are clearly focused on enhancing the profitability and cash flow profile of our company going forward. We continue to expect to generate approximately $100 million of free cash flow for the full year 2021.

Period, driven by continued improvements in our profitability and strong working capital efficiency offset partially by investments and capital expenditures of approximately $35 million this year.

We have used a portion of our strong free cash flow should we reduced our outstanding debt obligations over the first nine months of 2021.

Specifically, we paid down approximately $72 $6 million of debt on our line of credit facility, including $13 7 million, which we paid down in the third quarter.

As of September 32021, we had cash on hand of approximately $68 8 million long term debt obligations of approximately $279 million.

And $456 million of available borrowing capacity.

Compared to cash on hand of approximately $56 9 million long term debt obligations of approximately $352 million and available borrowing capacity of $389 million as of December 31, 2020.

Our net leverage ratio as of September 30 was one times on an adjusted basis.

Sure.

Turning to a review of our fiscal year 2021 financial guidance, which we reaffirmed in this afternoon's earnings release.

For the 12 months ended December 31, 2021. The company continues to expect GAAP net revenue in the range of $1 6 billion and $1 7 billion.

Representing an increase of approximately 10% to 11% year over year.

The GAAP net revenue range now assumes a benefit from changes in foreign currency exchange rates in the range of approximately $10 5 million to $11 5 million, representing a tailwind of approximately 110 to 120 basis points to our GAAP growth rate this year.

The GAAP net revenue guidance range also assumes net revenue from the cardiovascular segment of between one point or two 8 billion and one point <unk> three 8 billion, representing an increase of approximately 10% to 11% year over year.

Net revenue from the Endoscopy segment of between $32 5 million and $32 7 million, representing an increase of approximately nine 6% to 10, 2% year over year.

With respect to profitability guidance for 2021, we continue to expect.

GAAP net income in the range of $38 1 million to $46 4 million or <unk> 66 to 81 cents per diluted share.

Non-GAAP net income in the range of a $118 8 million to $127 1 million or $2 seven to $2 22 per diluted share.

For modeling purposes, our fiscal year 2021 financial guidance assumes non-GAAP gross margins in a range of approximately 48, 8% to 49, 1%.

Non-GAAP operating margin in a range of approximately 15% to 16% compared to 13, 7% in fiscal year 2020.

Other expense in a range of approximately 7 million to $7 5 million.

Our non-GAAP tax rate in the range of approximately 21% compared to prior guidance, which assumed a non-GAAP tax rate for full year 2021, and the range of 22% to 23% and diluted shares outstanding in the range of 57, 5% to $58 million compared to prior guidance, which assumed approximately 50.

Seven to 57 5 million shares for full year 2021.

With that I'll turn the call back to Fred.

So a lot of numbers Raul. Thank you very much I appreciate and I appreciate your efforts.

Well first I wanted to discuss developments subsequent to quarter end, specifically the company made an announcement via form 8-K filed on October 22nd.

Pursuant to an action taken by the independent members of our board of directors.

Austin land propolis.

His employment as our president of EMEA was terminated effective October 19th.

No change at this level of leadership is a sensitive issue for any company to manage.

And in this particular case as you can well imagine given the ingestion as my son.

Hi, crush many of you will appreciate that has been especially difficult situation for me.

For the avoidance of doubt the decision to terminate justin's employment.

It was made by our independent directors in a meeting, which I did not participate in accordance with our government.

Governance policy.

Action was taken in connection with an ongoing inquiry being conducted by an independent party.

Because that inquiries ongoing.

Not be appropriate for me to discuss that work at this point.

I would also like to note that other than our public disclosure obligations, which were satisfied with the filing of the form 8-K last week, we do not publicly discuss personnel matters regarding current or former employees.

I began my immediate lead the process of engaging with our team in the EMEA region to execute a plan to minimize potential disruption as a result of determination.

Importantly.

I have appointed.

As interim president of EMEA, Dr. Richard spec.

Richard originate vascular surgeon, who transitioned from practicing.

Medicine to a number of sales and marketing roles at convenient and Stryker over a span of more than 20 years before joining merit in 2015.

He has taken on roles of increasing responsibility on our sales and marketing team in EMEA over the last six years. Most recently serving in a leadership role as the vice president of strategy initiatives in EMEA.

Dr <unk> and our team in EMEA have been focused on engaging with customers and clinicians in the region and we believe we are well positioned to continue to deliver the growth objectives. We.

Established in the region coming into the year.

Last point on this subject. We appreciate the fact that initial mesh and imaging for the street was less than optimal.

And frustratingly, we believed that we missed an opportunity to be more transparent.

Despite the sensitivity of the issue at hand.

We are not able to share additional color on the circumstances that led to the board's decision.

The Street May have found the announcement easy to digest. If we had included the additional detail on the transition plan, we are already executing.

The strong interim leadership, we have named an overall confidence in our ability to avoid material disruption in the region.

Yeah.

Lesson learned.

In closing <unk>.

Despite the tougher than anticipating operating environment in quarter three.

We are proud that we were able to deliver revenue results that exceeded our guidance quarter. Three also represents another quarter of impressive profitability improvement.

Margin expansion and free cash flow generation.

We are confident in our 2021 guidance, which calls for total revenue growth on a constant currency basis of 9% to 10% year over year and importantly, excluding the impact of divestitures and product sales that uniquely benefit from pandemic related demand trends in 2020.

Our constant currency revenue guidance reflects growth of 12% to 13% year over year in 2021.

We also expect to report improving non-GAAP operating margins and strong free cash flow in 2021, driven by strong execution.

And contributions from our multi year strategic initiatives related to our foundation for growth program.

Now this wraps up our prepared remarks, and operator, we would like to now turn the time back to you and to open up the line for questions.

Thank you Sir.

Like to ask a question. Please signal by pressing star one on your telephone keypad, if anything a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow up.

If you would like to ask additional questions with Ikea and yourself from the queue by pressing star one.

And our first question will come from Mike Matson with Needham <unk> company.

Line is open.

Yes, thanks for taking my questions.

I guess I'll start with the <unk>.

Peripheral and cardiac businesses cardiac intervention business in the state.

They had really strong kind of mid teens growth.

That seems to be better than what we've seen from some other companies in that space.

Just wondering if you could maybe talk about what some of the growth drivers were there and whether or not you think youre taking share maybe in some categories.

Yes, so good pickup there.

Our scout.

Radar localization products.

Kris 27%.

Constant currency basis that was the largest contributor to our total pie growth.

In addition, our biopsy products increased approximately 19%.

And then drainage and embolic therapy products increased 18% so.

Together those represent about a third of our total <unk> business. So those three products.

<unk> been performing really well this year and continue that progress into Q3.

Okay. Thanks, and then.

I wanted to ask one on China.

So it sounds like the tenders haven't happened like you've thought but I just wondering what the outlook. There was for potential tenders do you still expect them at some point do you think that they are off the table for now or just that they've just been delayed and.

Do you still expect it to be in the same kind of categories that you were expecting before which I think was the balloon insulators primarily.

Yes, listen Michael we believe that the long term growth opportunity in China. Despite all of these.

Situations that may or may not be developing remain so we are continuing to invest.

With new customers as I think I've mentioned in previous calls that we know we're moving into the Midlands.

We will discuss what we learn we don't expect any impact on this year.

But we will discuss.

All of this as we gather more information during this.

Quarter, and then we'll be prepared to discuss this as we forecast in 2022 roll yes.

I think.

Maybe stepping back a little bit China, we were expecting low single digits not the beginning of the year.

We now expect kind of a 10% constant currency growth.

For the full 2021.

While the pricing headwinds arent going to impact us.

Thank you.

This year as we had originally thought.

We are going to.

We are experiencing.

Some buying patterns, some small changes in buying patterns from some customers as they anticipate those price reductions.

So as of now we now expect the tenders and the pricing related headwinds too to really impact us in the first half of 2022.

But.

I guess, the best way to say it is.

In light of the delayed postponed tenders.

We really are kind of expect China for the fourth quarter is kind of flattish.

Okay got it thank you.

Yes.

Our next question comes from Jason Bedford with Raymond James Your line is open.

Hi, Good afternoon, I guess, just maybe too.

Follow on the last line of commentary.

Are you still in <unk>.

Products into China, and I'm just wondering.

Is that still an opportunity for growth is just expanding the bag in China.

Yeah, we believe that there is a lot of opportunity in China, and we're not backing away. We've received approvals this year of the ASR we have embolic.

We have a lot of new products have been approved including the Ninja.

We recently were approved for the snap so we're continuing to invest in China. Our ground strategy has changed and again I won't go into a lot I mean, I think we addressed that we're moving inland.

We're moving into what I think I mentioned last time, we call we have.

30 cities with over 5 million people, so theres plenty of market there and I think our strategy is to move towards our peripheral products, where there is not much let's say attention is best way for me to answer it Jason.

Yes, I think we remain pretty confident in the long term growth expectations for China overall.

Yes.

Okay.

And then you mentioned supply chain dynamic with Endo, Max I believe that weighed on endoscopy growth.

Where are you.

Cleaning up that supply chain dynamic and is that going to be a drag here in the fourth quarter or into 'twenty two.

So the answer is that we have.

I'm not going to say solve it because solves means a conclusion, but we expect that by the end of the year that we will have that resolved.

And.

Back on track so we're managing it I.

I think we're doing a very good job. It wasn't asked but as you know Jason a lot of people a lot of companies that you've talked to today and during the week of AD supply chain. This is one of them I would just say overall, though.

That we have we've been affected.

We've seen more of it in the last six months than we did in the previous 18 months, but the good thing about being vertically integrating and being agile and nimble as many of those things we've been able to solve internally.

Or then tapping our second source so.

I think this one will be.

Fine.

It was also offset by solid growth in the other stent products and of course as we continue our relation.

Dilatation balloon in our Aero mini which is really the pulmonary product line. So I think we will have it solved.

And in argon.

I mean, I've got my COO sitting here and.

And they've done a nice job, but it did affect us in that quarter.

And it will be taken care of and we will be back on track.

By the end of the year.

Again, it'll improve monthly as.

As we go along.

Okay. Thanks, Fred I'll keep it at that.

Two.

Okay, Alright, thanks, Jason good to hear your voice.

Our next question comes from William Plant plan It with Canaccord. Your line is open.

Hey, great. Thanks, Good evening and thanks for taking my question.

The.

Your revenue was down 4% sequentially four 7% from Q3 from Q2 and Thats more in line with historical trends.

I'm just trying to understand what are you seeing in the field relative to hospital staffing and procedure trends.

And more importantly, kind of what is contemplated in your guidance for the fourth quarter.

Of this year and then how do you see that playing out in 2021.

It's a good question is the question that everybody has been asking I mean, we have followed all of the other companies in.

The different challenges.

That the industry is seeing.

<unk> lines generally we have not.

Better yet let me restate that we continue to see better access and more interest and maybe more importantly than that.

I almost reluctant to say this but.

Lot of our ability to be able to deliver products that our competitors can't so one of the things that I think that will continue to see is gaining of market share. So anyway. Now if you were referring to fatigue in staff and those sorts of things.

We can read the headlines it's going on every day and everybody is concerned about at Intermountain healthcare here in Salt Lake.

Everybody is I think everybody is tired.

I mean, all of that is going on but the beat goes on and patients have to be treated so it is a problem.

It is a challenge.

But generally I would say that our business has been.

<unk>.

Yeah.

Well I don't want to say I don't want to say, we're doing better than others, because that would be disingenuous, but I think we've been doing just fine and I think our product mix is very very broad and that helps Rob do you want to comment yes, no I think if you look at the updated guidance that we gave it after the second quarter, we had the benefit we waited.

<unk> to update our guidance. Unlike other companies, where they came out of Q1 and so we have better visibility I think to what we saw.

And quite frankly.

When we looked at the back half of the year. We it was in line with our expectations of a choppy recovery.

Covid flare ups in certain areas and geographies.

I think thats still in play, but now you've also got kind of the law.

Logistics issues, you've got to worry about you've got the.

Employee shortfall.

You mentioned in the previous question. So we're seeing all those dynamics I think.

<unk>.

When you look at our the low end of our guidance.

For the year.

Our $1 billion 60, which is a 10% increase year over year.

As you do the math for the fourth quarter.

We're really.

Essentially kind of feel like we've covered all of the kind of it we've got a I guess I'll see a wide.

GAAP over the fourth quarter right.

Our guidance for the fourth quarter is pretty wide and it's really trying to cover everything that we're seeing the choppiness.

<unk>.

And the recovery.

And really what I want you guys to kind of focus on is the.

The drivers in our Q4 expectations.

First of all I think the U S.

Probably the most stable and our growth I think as we model.

The Q4 is very consistent with Q3.

R O U S assumptions.

Now reflect some some.

Essentially.

Prolonged COVID-19 recovery.

The softer trends related to spikes in the Delta related cases in recent months.

Also the China tenders tenders, although we're not expecting the tender impact we are seeing some some delayed purchases by some distributors as they anticipate some of those price reductions so I think.

Overall, if you look at kind of plug in the numbers of what's left for the fourth quarter I think our Q4 represents constant currency growth of 3% to 5% excluding the divestitures.

5% to 9%, excluding divestitures and culture. So again I think it's in line with what Fred and I have been saying most of the year, which is kind of getting back to normal growth rates on the back half.

I think.

Sure.

I think we've called this pretty well.

We haven't been overly aggressive we've kind of calls them as we see some yes.

And I think it has served us well the way we've structured and the way we look at the business. So.

Yes.

We know some people criticize us others say keep doing what youre doing we're just looking at the numbers and just want to make sure that we can fairly represent what we see and if we have upside that would be wonderful, but I think we've been I think what we have tried to do has worked for us.

And work for our shareholders. So we're just going to continue what we've been doing.

Yes, Okay, and if I could ask a second question. Thank you very much and congratulations on a really good year.

It's.

You're generating a lot of free cash flow I think you're well ahead of plan at this point if I go back and look and just curious how youre thinking about the cap structure today.

More in terms of his continued paydown of debt the best use of cash is it acquisitions is it stock buybacks.

How do you think about that today versus what it was.

Little while ago, you laid out foundations for growth, there's been a lot of changes and especially since you are generating cash faster.

So first of all I think I think the team has done a very good job and this really came from input from shareholders. So when you guys were concerned about this you ought to look at it and it was one of the things that was very important and foundations for growth.

One of the things, we've talked about the logistical issues and freight and all those sorts of things supply chain.

But labor is going to continue to be a problem.

And even though supply issues in the marketplace may take care of those disruptions and eventually equivocate. Some we don't see that and labor. So one of the things that we'll be looking at is automation projects.

And spending our money on those projects that helped to reduce the reliance and just become more efficient that way so.

That's a big focus now to select those that will give us the best returns and be able to support the growth that we see going forward.

Want to add to that.

No.

Thank you.

I think for now we continue to pay down debt, obviously acquisitions you never know when those are going to come along I don't know that were avoiding though.

I think we're just.

The hurdle rate I think internally is just much hiring can't frustrate our foundations for growth program, which we're really focused on.

So again, it's not that we haven't been looking but.

As Fred mentioned things are expensive.

Again, we're really focused on our foundation for growth and we don't want to frustrate that program.

So we are looking.

<unk>.

And.

Anyway, I think again just to make a point that we are not.

Avoiding things we've looked at several things, but they are expensive and they have to fit into our plan.

And if they don't then we just have to move on or just be patient in the meantime run our business and spend our capital where it will give us the best return trouble and just as a reminder, just a point of clarification, we're still targeting $100 million in free cash flow.

For the year.

And Capex.

Approximately $35 million.

The big ramp from where we're at right now, but again, we want to make sure that we have the flexibility to make some of the investments for foundations for growth and product line transfers.

For operation group, along with automation, if they need it. So that's why we've left the budget and I wish you could see the grin on our COO face right now.

Right.

Thanks for taking my questions you bet. Thank you Sir.

Okay.

And our next question comes from Steven Lichtman with Oppenheimer <unk> Company. Your line is open.

Hi, everyone and thanks for taking my question. This is a mere in for Steve and I guess, you guys did sort of touch upon it earlier, but I just.

Are there any other thoughts you guys would have in terms of our comments I guess on just the overall inflationary pressure within your business and any other plans that you guys may have.

In terms of mitigating that pressure going forward. Thank you.

Yeah listen, it's a big part of our daily conversations we're seeing price increases coming from vendors. Fortunately for US we had a head start on all of us whether it be covered all of these inflationary things marriage started our procurement our freight our negotiations.

Core get I mean, you name it and we've been involved in these negotiations not for six months or three or whatever this year. We've been involved in for a year or two as part of our program going clear back to the summer of 2019.

I think we are looking.

And continue to.

Pass on.

Creases.

With a number of products and a number of areas and a number of divisions. So I won't go into the specifics because someone might take that and said all of that was on the call and they said this our guests what but I will just tell you that it has our attention.

And we are exercising it as we speak.

And a lot of areas. So roll no I would say we are facing the same thing that everybody else is facing.

Labor freight raw materials.

Despite those headwinds.

And inflationary pressures are full year low end guidance still represents a 48, 8% gross margin so up about 180 basis points. So we're able to absorb as Fred mentioned.

Second ago, some of those expenses, because we had our foundations for growth program in place and again as we look forward into our 2023 plan we continue to.

Feel that you are confident that our <unk> initiatives.

Drive us to our continued operating margin expansion that we set that goal.

Portion of its gross margin and I think that's really important role because again.

This is what we're focused on this is what we've been working on this is what's giving US the result, and yes, we're being hit by his roles like everybody else's.

But there are a couple of other internal things. So we've been able to do and that's part of what I think is one of the things that merit does well and that is the vertical integration. Given example of one.

Silicon, we have our own foundry.

But we're able to raise prices to our customers and offset those costs and we have control of the supply chain. So I just have to think with our moulding extrusion.

Breaking our wafer fab, but things that we do and have been doing for a long time.

And then things that are helping us because we can control those expenses a lot better than just take it in and getting the full brunt of what someone might pass on to you.

There's a lot of things that we're doing.

One last thing and I'm going on before long run I shouldn't but.

We had a couple of shortages from people and we looked at our own capabilities and we were able to deliver the products that we needed to meet product demand in house wide.

Saving a quarter of a million dollars.

Yeah.

Quarter $1 million in the big picture doesn't seem like a lot, but it seems like a lot to me I'm, just saying we are as well prepared as anybody in my view.

To meet the challenges that we see in the marketplace.

Period.

Thank you. Thank you. Thank you.

Sure.

Our next question comes from Jim Sidoti with Sidoti <unk> Company. Your line is open.

Hi, good afternoon, and thank you for taking the question. So just two.

To keep on the cost side.

Do you think because of the steps you've taken a vertical integrate youll be able to continue to grow margins even as.

Cost increase over the next few quarters.

Jim I'm not going to move beyond what we've talked about I think.

One of the things that you have hopefully I think you understand this we've really stick to the knitting.

And say, we're going to talk about the periods and then we'll prognosticate and forecast when it is time to do so.

Vertical integration is not something new it's been something we've done from the beginning so I'll leave it with that statement. It will continue to be a benefit to merit, but I'll leave the other stuff until we get into February and then we'll talk more about where we're going from there.

We're still confident in our strategy goals and I think Thats important thing I think if you listen to the what we put out on FFG on cash flow on operating margins and an earnings per share.

If you look at all of that stuff those are the things that we're committed to.

And Thats, what you should pay attention to it and our view.

And do you have any pricing power.

If it gets to the point, where you're not going to be able to absorb these these cost increases.

Yes, I think we do have some pricing power.

And as again.

Barry.

Conscientious about how we do things we don't gouge, we don't take advantage. We look at cost we look at markets. We look at those sorts of things. So I do think we have some pricing power.

Maybe that we haven't had in the past to be very honest with you. So yes, I think there is some roll.

Okay Alright.

Thank you alright, good to hear voice Jamie Thank you.

Our next question comes from Jason Bednar with Piper Sandler Your line is open.

Hey, good afternoon, thanks for taking the questions here just a couple from our side.

First not to Hamburger and the cost questions, but just one more follow up just related to the inflationary pressures you called out.

Would you be able to quantify what those headwinds were that you were able to offset in the quarter.

Well I'll tell you there are things that we all.

Everybody has but we'll go from there is labor there is.

Freight theirs.

<unk>.

Every every line item on costs, yes.

Line item I mean raw materials, yes, I mean, everything everybody else is doing.

If you do the math when you get to the kind of.

As you start to kind of calculate the.

The fourth quarter range right. I mean, there is we have a pretty broad range for the fourth quarter.

About 110 basis points from low end to high end.

Obviously, one of the largest drivers as we also have a wide range.

On the revenue side and again I think what we're trying to do is.

We don't want to be in a situation, where we want to get ahead of our skis and two we're having to revise guidance. So we're trying to account for everything and if you look at the kind of the fourth quarter gross margin.

Part of that is the revenue kind of the wider range on the revenue and that how it flows through obviously in whether its U S. R O U S mix or which product categories. So youll have a mixed component there.

The launch.

Fourth quarter gross margin also does reflect a 70 basis point.

Decline.

Quarter over quarter, driven by incremental inflationary pressures compared to Q3.

As Fred mentioned labor freight and raw materials.

But again Howard despite those pressures I want to point you to our full year low end guidance, which is $48 eight.

On the gross margin of 180 basis point improvement.

And then again I want to kind of.

Reaffirm our foundations for growth targets and our confidence in that 2023 target.

Again, if there are maybe one message that came out today is our focus on our initiatives. It's a three year plan. We're 10 months into a 36 month plan and despite all of the other things we have a plan to execute and that's what we're focused on.

Across the board so theres a lot of factors that go into that we've talked about.

Automation, we've talked about this that and the other.

But we're focused on delivering what we said we would deliver that's the message of the day.

I think to be clear and I've said this over and over again, but I'll repeat it just to make it clear we have a wide range of revenue and EPS.

In the fourth quarter and to hit our fiscal year 'twenty, one guidance, but it reflects that we are confident in our ability to deliver the low end of our guidance range, but also remain cautiously optimistic given the level of COVID-19 related uncertainties.

And all the other noise that you're hearing out there with a wide range of outcomes that are in Q4. So I think we've tried to anticipate everything that could.

That could hit US I guess is the best way to say it.

Yes, absolutely and you've all been executing very well against that plan. So congrats on that.

Hum.

Rob will just maybe to follow up on one other earlier question I think Mike Mikes question on China.

As your point on China that customers are running more lean on inventory I think you mentioned you had distributors buying less.

I guess, maybe any additional color you can you can add on just that altered buying patterns altered buying pattern that you alluded to I guess, just really trying to figure out if we end up having maybe a combination of price declines, but then maybe also.

Inventory normalization within your customer base in 'twenty two.

Thanks.

Yes, I mean, I don't want to get into 2022.

Guidance or any color around there obviously, we did mentioned that we now expect that pricing component to hit us.

In the first half of 2022.

But again I think what we're seeing.

At least for the fourth quarter.

Kind of planned on is just the lower ordering from our customers.

Just I guess in light of the delayed or postponed tenders right. So they are anticipating a little bit of that but again, we've tried to.

<unk>.

Included in our guidance and.

Once we get to 2022, I think we'll give you more color there.

I would say dial in February 2022.

But again, despite all of those issues I hope you didn't miss that we're expanding into other areas with products that we have that are that are not in focus on very pricing issues. We have a strategy is what I'm trying to say, it's not that we're just having it come at us.

We're flying King so to speak and delivering our products and new opportunities there as well and our long term forecast continues to be positive.

In China, So thats I don't want you to forget that it's not I mean, what I heard was just one side, but you've got to hear the other side and why we remain confident.

Okay great.

Very helpful. Thanks, So much you bet. Thank you.

Our next question comes from Ron Kempen. Your line is open.

Hi, Fred around great quarter. Thank.

Thank you Sir is really great.

We should have put you up first I mean, I don't know why we waited but thank you for your patience with us.

That's alright.

Great quarter.

2022.

I'd say first of all yes, so as you've heard us in this entire call. We're not commenting on that I would say this if we were doing that we would all have to take medications and other things because it changes every day, who knows right.

Exercise in futility, So I think we'll wait and see what happens and then we'll report that out in our forecasting. So I mean, we're as frustrated as you are in terms of just trying to understand where anything is going.

But as we gather that information, we'll put it into our models, we will deliver it.

In our forecast and our views for next year.

Very good continued success guys I appreciate thank you Sir I appreciate the call and I Hope you'll call next time, we'll put you right up on top.

Alright, Thank you Sir.

There are no further questions at this time. Please proceed with any closing remarks.

Thank you Michelle and listen we appreciate all of you had a very very busy earnings season, we took a full hour here I hope we were able to do.

Answer to your questions that Raul and I will be around for the next two and a half three hours and we will we will speak further now not anything that we haven't talked about but just try to give maybe detail on certain things should you asked we don't know what your question chart, but we're here. Thank you very much.

Listen there were no questions regarding the 8-K and.

And then that's fine.

Sure.

We look forward to taking your questions and our private meetings that are coming out in the next hour, thanks, everybody and best wishes for.

For now and for.

Holiday season, we have the holidays upon us enjoy the fall God bless you all and thank you Goodnight.

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

Okay.

[music].

Good afternoon, ladies and gentlemen, and welcome to the third quarter 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.

Recording will be available on the company's website.

Shortly.

I would now like to turn the call over to Mr. Fred unpopular.

Medical system, founder Chairman and Chief Executive Officer.

Go ahead Sir.

Thank you and welcome everyone to Merit Medical systems third quarter 2021 earnings Conference call.

I am joined on the call today without Raul Parra, our Chief Financial Officer, and Treasurer, and Brian Lloyd, Our Chief legal officer and corporate Secretary.

Brian would you mind, taking us through the safe Harbor statements place.

Thank you Fran.

Before we get started I would now.

Like to remind everyone that this presentation contains forward looking statements to receive safe Harbor protection under Federal Securities laws.

Although we believe these forward looking statements are based on reasonable assumptions they are subject to unknown risks and uncertainties.

The realization of any of these risks or uncertainties as well as extraordinary events or transactions impacting our company.

Could cause actual results to differ materially from those currently expected.

In addition, any forward looking statements represent our views only as of today October 28 2021.

And should not be relied upon as representing our views as of any other date.

We specifically disclaim any obligation to update such statements, except as required by applicable law.

Please refer to the section entitled cautionary statement regarding regarding forward looking statements in today's presentation for.

For important information regarding such statements.

Please also refer to our most recent filings with the SEC for a discussion of factors that could cause actual results to differ from these forward looking statements.

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

This presentation also contains certain non-GAAP financial measures.

Reconciliation of non-GAAP financial measures to the most directly comparable U S. GAAP measures is included in today's press release and presentation furnished to the SEC under form 8-K.

Please refer to the section of our presentation entitled non-GAAP financial measures for important information regarding non-GAAP financial measures discussed on this call.

Readers should consider non-GAAP financial measures in addition to.

Not as a substitute for financial reporting measures prepared in accordance with GAAP.

Please note that these calculations may not be comparable with similarly titled proceed measures of other companies.

Both today's press release and our presentation are available on the investors page of our website.

I'll now turn the call back to Fred.

Thank you, Brian and let me start with a brief agenda of what we will cover during our prepared remarks.

I will start with an overview of our better than expected revenue and financial results for the third quarter.

We will then discuss some recent corporate developments.

Before opening the call for your questions.

Now beginning with a review of our third quarter revenue performance.

We reported GAAP revenue of $267 million in the third quarter up nine 4% year over year.

Our total GAAP revenue was driven by a five 9% growth in U S sales and a 14, 5% growth in international sales.

Our total constant currency growth was driven primarily by a 7% increase in U S sales.

And then 11, 4% increase in international sales.

The strong revenue results in quarter, three were driven by strong execution from our team.

And more favorable sales trends in China versus what our guidance range had assumed.

Excluding the benefit to our revenue results this quarter from the lack of tender related pricing headwinds. Our total revenue increased approximately 8% year over year on a reported basis and a little more than 7% year over year on a constant currency basis.

Importantly, these growth rates would have been at the high end of our guidance range, which reflects the strong execution of our team during the third quarter.

Okay.

Now turning to review of our quarter results in quarter three.

Otherwise stated all growth rates are on a year over year and constant currency basis.

In terms of our sales performance by our primary reportable product categories.

Sales of our peripheral interventional products increased 16% year over year.

Representing almost two thirds of the total cardiovascular segment year over year.

Sales of our scout radar localization products increased 27% 20.

27% year over year and quarter, three and represented the largest contributor to total <unk> growth in the quarter.

Sales of our biopsy products increased 19% year over year.

And greener and envelope therapy products, which together represent roughly one third of our total PAE business increased 18% year over year and quarter three.

Sales of our cardiac intervention.

Products increased 15% year over year, representing the second largest contributor to local cardiovascular segment growth year over year.

We saw balanced contribution to total Ci product categories in quarter three from strong sales of our intervention products and geography products and sales of our fluid management products, which increased 923, and 34% respectively year over year.

On the intervention side, our basics and map lines posted mid teens growth.

On the fluid management side, our medallion products more than doubled as they continued to benefit from higher demand as a result of COVID-19 vaccination programs.

On the angiography side, we had strong demand for our diagnostic guide wires cardiology diagnostic catheters and controls to range products.

Sales of our OEM products increased 22% year over year in quarter, three driven by improving demand from larger customers.

<unk> inventory levels.

Our total cardiovascular sales.

It was partially offset by a 13% decrease year over year and our Cps products.

However, the stable demand trends in this area of our cardiovascular business matched by a nearly $9 million net headwind from sales about culture a year over year.

Excluding culture sales of our Cps product category increased 3% year over year and quarter three.

Finally sales in our Endoscopy segment decreased 3% driven primarily by a decline in sales of our <unk> line due to our supply chain interruption.

<unk> solid growth in other stent products and sales in our relation and Aero many product lines.

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

As I mentioned, our third quarter sales in the U S increased 7% year over year, and our international sales increased 11% year over year.

Both on a constant currency basis.

Sales to U S customers represented nearly half of our total company growth in quarter three.

Led by our U S direct business, which increased approximately 5% year over year.

Sales in our three primary global regions APAC.

And rest of the world.

Creased, approximately 912, and 27% respectively on a constant currency basis in the third quarter.

Similar to all U S.

The EM EMEA region was choppy in the quarter three as the region continued to see material impacts from COVID-19, and is still in the early stages of recovery.

Restrictions and Lockdowns are changing.

<unk> sales were the largest contributor to total international growth in the third quarter.

We experienced improving demand trends in the U K, and Italy, and continued softer demand trends in emerging markets.

APAC sales increased 9% in quarter three although this growth was impacted by two important items of note that mass true normalized performance in the region.

The first item is that sales in Australia were down 34% year over year and quarter 300 reported basis.

But excluding the impact of the Divesture of our <unk> business sales to Australia and customers increased more than 57% on a constant currency basis in quarter three.

The second item is that sales in China increased 16% year over year and quarter three.

Representing more than a third of our total international growth in the period.

As mentioned earlier these results were far better than what was contemplated in our third quarter guidance as a result of a lack of tender related pricing pressure in the period.

The timing of tenders has been delayed in China, which means that our sales were roughly $4 million higher than expected in quarter three.

Excluding the benefit from not having the tender related pricing pressure this quarter sales in China increased in the low single digits year over year and quarter three.

And the impacts are certainly being felt in all areas of our business our customers hospitals clinicians patients.

And as Raul will detail to you later in the call and our supply chain and logistics as well.

Despite the tougher than anticipated operating environment in the quarter.

We are proud that we were able to deliver results at the high end of our guidance range, excluding the China tender benefit.

Raul will review the details of our full year guidance, which will be reaffirm, which we reaffirmed in our press release this afternoon and a few moments.

Now I'll, just say that we remain confident in our plan for the year and look forward to continued strong execution from the team going forward.

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

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

Our non-GAAP gross profit in our non-GAAP net income reflects strong leverage in the period, increasing 14, and 26% respectively compared to the year ago period.

Non-GAAP gross margin increased 210 basis points year over year as expected, we managed our operating expenses prudently, resulting in only a 1% increase in non-GAAP operating expenses compared to the second quarter and importantly, we generated $18 million.

A free cash flow in the quarter.

We have expanded our non-GAAP gross margins 220 basis points year over year, despite considerable headwinds in our cost of goods line compared to last year.

We have increased our non-GAAP operating margins 250 basis points year over year and most importantly.

We have generated nearly $82 million of free cash flow over the first nine months of 2021.

Second.

We are pleased with our progress during quarter three of our clinical study the wave study of the rapid city Endovascular stent graft an investigation device being studied for the treatment of stenosis or inclusion within dialysis outflow circuit we.

We have more than 40 clinical sites identified 28 of which are actively enrolling patients.

This study has been designed to evaluate the safety and efficacy of the Rhapsody Endovascular stent graft for the treatment of venous approach circuit stenosis.

Our inclusion in hemodialysis patients and represents an important step of our goal.

All of establishing <unk> as the standard of care for more than 2 million patients suffering from kidney disease around the world.

With respect to expanding clinician awareness of the clinical efficacy of Rhapsody.

This study reported anatomical clinical and procedural success in all cases.

According to the primary investigator.

Mr. James H, Gilbert transplant, and vascular access surgeon fashion.

Vascular access slate at Oxford University hospitals quote.

Early first in human study showed that the merit reps for the enterprise stages can be safely used to treat notices at key sites within a dialysis access circuit.

Even more encouraging.

Are the very promising primary one year target lesion patency rate of 84, 6% and access circuit patency rate of 65, 9%.

To my knowledge these are higher than any other published data and suggest that the novel features.

Rhapsody, Andrew Prosthesis may have a key role in preserving the longevity of pressures dialysis access for our patients and quote.

Now we're very encouraged by the Rhapsody first study positive results and we look forward to assessing future steady results regarding the merit rapidly enter prosthesis and making a positive impact in the lives of patients suffering from kidney disease.

Finally.

I wanted to provide a brief update on our foundations for growth programs. Specifically, we've made very nice progress over the first nine months of 2021, including in the areas of SKU rationalization product line transfers and manufacturing initiatives.

The foundations for growth program continues to focus on scrap reduction across manufacturing sites and we're seeing the early benefits of improving our manufacturing efficiency, which is helping to offset the inflationary cost pressures, we're seeing in certain raw materials and in shipping and freight expenses.

Overall, we continue to execute on our <unk> initiatives and we're excited about the progress and the results we're seeing across our business.

Thank you Fred.

We have included reconciliations from our GAAP reported results to the related non-GAAP items in our press release this afternoon.

Manufacturing efficiencies on higher volume.

Offset partially by inflationary headwinds, we are seeing in raw materials logistics and labor.

Third quarter operating expenses increased 18% year over year.

And lower Opex in Q3 of 2020 from cost cutting initiatives lower head count and lower discretionary spending as a result of reduced travel training and chosen conventions.

During the COVID-19 pandemic.

Our continued focus on managing expenses proved effective again this quarter as we were able to limit the growth in G&A only expenses to just 6% increase year over year the.

The increase in R&D expenses in Q3 was driven by the combination of lower spend in the prior year period related to Covid and outside expenses for certain R&D projects in particular related to the Rhapsody clinical study and increased compensation expense related to our acquisition of <unk> medical.

And two other new projects.

Total operating income increased $2 8 million or 8% year over year to $39 5 million, our operating margin was 14, 8% compared to 15% in the prior year period.

Third quarter net income was $30 2 million or <unk> 52 per share compared to $24 million or <unk> 42 per share in the prior year period.

We are very pleased with the with our profitability performance in the third quarter, where we reported growth in net income and diluted earnings per share of 26% and 24% respectively year over year.

Turning to a brief review of our financial results over the first nine months of 2021.

Gross profit increased 18% year over year to approximately $390 million, representing 49% of sales compared to 46, 8% of sales in the prior year period, a 220 basis point increase year over year.

Operating profit increased 35% year over year to $124 million, representing 15, 6% of sales compared to 13% of sales in the prior year period, a 250 basis point increase year over year net.

Net income increased 53% year over year to $95 4 million or $1 67 per share compared to $62 5 million or $1 11 per share in the prior year period.

Free cash flow for the first nine months of 2021.

Our free cash flow generation over the first nine months of 2021 as a result of great execution from the team and importantly continued evidence that we are clearly focused on enhancing the profitability and cash flow profile of our company going forward. We continue to expect to generate approximately $100 million of free cash flow for the full year 2021.

Period, driven by continued improvements in our profitability and strong working capital efficiency offset partially by investments and capital expenditures of approximately $35 million this year.

We have used a portion of our strong free cash flow to reduce our outstanding debt obligations over the first nine months of 2021.

Specifically, we paid down approximately $72 $6 million of debt on our line of credit facility, including $13 7 million, which we paid down in the third quarter.

As of September 32021, we had cash on hand of approximately $68 9 million long term debt obligations of approximately $279 million.

And $456 million of available borrowing capacity.

Compared to cash on hand of approximately $56 9 million long term debt obligations of approximately $352 million and available borrowing capacity of $389 million as of December 31, 2020.

Our net leverage ratio as of September 30 was one times on an adjusted basis.

Sure.

Turning to a review of our fiscal year 2021 financial guidance, which we reaffirmed in this afternoon's earnings release.

For the 12 months ended December 31, 2021. The company continues to expect GAAP net revenue in the range of $1 6 billion and $1 7 billion, representing an increase of approximately 10% to 11% year over year.

The GAAP net revenue guidance range also assumes net revenue from the cardiovascular segment of between one point or two 8 billion and one <unk> three 8 billion represented an increase of approximately 10% to 11% year over year net revenue from the endoscopy segment of between $32 5 million and $32 7 million.

Representing an increase of approximately nine 6% to 10, 2% year over year.

With respect to profitability guidance for 2021, we continue to expect.

GAAP net income in the range of $38 1 million to $46 4 million or <unk> 66 to <unk> 81.

Per diluted share.

Non-GAAP net income in the range of $118 8 million to $127 1 million or $2 seven to $2 22 per diluted share.

For modeling purposes, our fiscal year 2021 financial guidance assumes non-GAAP gross margins in a range of approximately 48, 8% to 49, 1% non.

Non-GAAP operating margin in a range of approximately 15% to 16% compared to 13, 7% in fiscal year 2020.

Other expense in a range of approximately 7 million to $7 5 million.

Non-GAAP tax rate in the range of approximately 21% compared to prior guidance, which assumed a non-GAAP tax rate for full year 2021, and the range of 22% to 23% and diluted shares outstanding in the range of 57, 5% to $58 million compared to prior guidance, which assumed approximately 50 <unk>.

<unk> to 57 5 million shares for full year 2021.

With that I'll turn the call back to Fred.

So a lot of numbers Raul. Thank you very much I appreciate it and I appreciate your efforts.

Well first I wanted to discuss the development subsequent to quarter end specifically the company made an announcement via form 8-K filed on October 22nd at pursuant to an action taken by the independent members of our board of Directors Justin land Propolis.

His employment as our president of EMEA was terminated effective October 19th.

No change at this level of leadership is a sensitive issue for any company to manage.

And in this particular case as you can well imagine given the digestion as my son.

Hi, crush many of you will appreciate that has been especially difficult situation for me.

For the avoidance of doubt the decision to terminate justin's employment.

It was made by our independent directors in a meeting, which I did not participate in accordance with our government.

Governance policy.

The action was taken in connection with an ongoing inquiry being conducted by an independent party.

Because that inquiries ongoing.

Would not be appropriate for me to discuss that work at this point.

I would also like to note that other than our public disclosure obligations, which were satisfied with the filing of the form 8-K last week.

We do not publicly discuss personnel matters regarding current or former employees.

So I began immediately the process of engaging with our team in the EMEA region to execute a plan to minimize potential risk disruption as a result of determination.

Importantly.

I have appointed.

As interim president of EMEA, Dr. Richard spec.

Richard originate vascular surgeon, who transitioned from practicing.

Medicine to a number of sales and marketing roles at convenient and Stryker over a span of more than 20 years before joining merit in 2015.

Dr <unk> and our team in EMEA have been focused on engaging with customers and clinicians in the region and we believe we are well positioned to continue to deliver the growth objectives. We.

Established in the region coming into the year.

Last point on this subject. We appreciate the fact that initial mesh and aging for the street was less than optimal and.

And frustratingly, we believed that we missed an opportunity to be more transparent.

Despite the sensitivity of the issue at hand.

We are not able to share additional color on the circumstances that led to the board's decision.

The Street May have found the announcement easy to digest. If we had included the additional detail on the transition plan, we are already executing.

The strong interim leadership, we have named an overall confidence in our ability to avoid material disruption in the region.

Lesson learned.

In closing <unk>.

Despite the tougher than anticipating operating environment in quarter three.

We are proud that we were able to deliver revenue results exceeded our guidance quarter. Three also represents another quarter of impressive profitability improvement.

Margin expansion and free cash flow generation.

We are confident in our 2021 guidance, which calls for total revenue growth on a current constant currency basis of 9% to 10% year over year and importantly, excluding the impact of divestitures and product sales that uniquely benefit from pandemic related demand trends in 2020.

Our constant currency revenue guidance reflects growth of 12%, 13% year over year in 2021.

We also expect to report improving non-GAAP operating margins and strong free cash flow in 2021, driven by strong execution.

And contributions from our multi year strategic initiatives related to our foundation for growth program.

Now this wraps up our prepared remarks, and operator, we would like to now turn the time back to you and open up the line for questions.

Thank you, Sir if you'd like to ask a question. Please signal.

Star one on your telephone keypad, if anything a speaker phone. Please make sure. Your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow up.

If you would like to ask additional questions. Mike just left in the queue by pressing star one.

And our first question will come from Mike Matson with Needham <unk> company.

Line is open.

Yes, thanks for taking my questions.

I guess I'll start with the.

Peripheral and cardiac businesses cardiac intervention business in the state.

They had really strong kind of mid teens growth.

That seems to be better than what we've seen from some other companies in that space.

Just wondering if you could maybe talk about what some of the growth drivers were there and whether or not you think youre taking share maybe in some categories.

Yes, so good pickup there.

Our scout.

Our localization products Inc.

Kris 27%.

Constant currency basis that was the largest contributor to our total <unk> growth.

In addition, the biopsy products increased approximately 19%.

And then drainage and embolic therapy products increased 18% so.

Those represent about a third of our total PAE business. So those three products.

<unk> been performing really well this year and continue that progress into Q3.

Okay. Thanks, and then.

I wanted to ask one on China.

So it sounds like the tenders haven't happened like you thought, but I just wondered what the outlook. There was for potential tenders do you still expect them at some point do you think that they are off the table for now or just that they've just been delayed and.

Do you still expect it to be in the same kind of categories that you were expecting before which I think was the balloon insulators primarily.

Yes, listen Michael we believe that the long term growth opportunity in China. Despite all of these.

Situations that may or may not be developing remain so we are continuing to invest.

With new customers and as I think I've mentioned in previous calls that we know we're moving into the Midlands.

We will discuss what we learned we don't expect any impact on this year.

But we will discuss.

All of this as we gather more information during this.

Quarter, and then we'll be prepared to discuss this as we forecast in 2022 roll yes.

I think.

Maybe stepping back a little bit China, we were expecting low single digits in the beginning of the year.

We now expect kind of a 10% constant currency growth.

For the full 2021.

While the pricing headwinds arent going to impact us.

Thank you.

This year as we had originally thought.

We are going to.

We are experiencing.

Some buying patterns, some small changes in buying patterns from some customers as they anticipate those price reductions.

So as of now we now expect the tenders and the pricing related headwinds too to really impact us in the first half of 2022.

But.

I guess, the best way to say it is.

In light of the delayed postponed tenders.

We really are kind of expect China for the fourth quarter is kind of flattish.

Okay got it thank you.

Yes.

Our next question comes from Jayson Bedford with Raymond James Your line is open.

Hi, Good afternoon, I guess, just maybe too.

Follow on the last line of commentary.

Are you still in <unk>.

<unk> products into China, and I'm just wondering.

Is that still an opportunity for growth is just expanding the bag in China.

Yeah, we believe that there is a lot of opportunity in China, and we're not backing away. We've received approvals this year of the SaaS we have embolic.

We have a lot of new products that are approved.

Including the Ninja.

We recently were approved for the snap so we're continuing to invest in China. Our ground strategy has changed and again I won't go into a lot I mean, I think we addressed that we're moving inland.

We're moving into what I think I mentioned last time, we call we have <unk>.

<unk> 30 cities with over 5 million people, so theres plenty of market there and I think our strategy is to move towards our peripheral products, where there is not much let's say attention is best way for me to answer it Jason.

Yes, I think we remain pretty confident in the long term growth expectations for China overall.

Yes.

Okay.

And then you mentioned supply chain dynamic with <unk> and believe that weighed on endoscopy growth.

Where are you with.

Cleaning up that supply chain dynamic and is that going to be a drag here in the fourth quarter or into 'twenty two.

So the answer is that we have.

I'm not going to say solve this because solves meaningful conclusion, but we expect that by the end of the year that we will have that resolved.

And.

Back on track so we're managing it.

I think we're doing a very good job and it wasn't asked but as you know Jason a lot of people a lot of companies that you've talked to you today and during the week of AD supply chain. This is one of them I would just say overall, though.

We have.

Been affected.

Or then tapping our second source so.

I think this one will be.

But it was also offset by solid growth in the other <unk> products and of course as we continue our relation.

Dilatation balloon in our Aero mini which is really the pulmonary product line. So I think we will have it solved.

And.

I mean, I've got my COO sitting here and.

And they've done a nice job, but it did affect us in that quarter.

And it will be taken care of and we will be back on track.

By the end of the year.

Again, it'll improve monthly as.

As we go along.

Okay. Thanks, Fred I'll keep it up.

Two.

Okay, Alright, thanks, Jason good to hear your voice.

Our next question comes from William plant Plasmonic with Canaccord. Your line is open.

Hey, great. Thanks, Good evening and thanks for taking my question.

You.

Your revenue was down 4% sequentially four 7% from Q3 from Q2 and Thats more in line with the historical trends.

I'm just trying to understand what are you seeing in the field relative to hospital staffing and procedure trends.

And more importantly, kind of what is contemplated in your guidance for the fourth quarter.

Of this year and then how do you see that playing out in 2021.

Yes.

Good question is the question that everybody has been asking I mean, we have followed all of the other companies in the.

The different challenges.

That the industry is seeing.

<unk> lines generally we have not.

Better yet let me restate that we continue to see better access and more interest and maybe more importantly than that.

I almost reluctant to say this but a lot of our ability to be able to deliver products that our competitors can't.

One of the things that I think that will continue to see is gaining of market share. So anyway. Now if you were referring to fatigue in staff and those sorts of things.

We can read the headlines it's going on everyday and everybody is concerned about at Intermountain healthcare here in Salt Lake.

I think everybody is tired.

I mean, all of that is going on but the beat goes on and patients have to be treated so it is a problem.

It is a challenge.

But generally I would say that our business has been.

<unk>.

No I think if you look at the updated guidance that we gave after the second quarter. We had the benefit we waited to update our guidance. Unlike other companies, where they came out of Q1 and so we have better visibility I think to what we saw.

And quite frankly.

When we looked at the back half of the year. We it was in line with our expectations of a choppy recovery.

Covid flare ups in certain areas and geographies.

I think thats still in play, but now you've also got kind of the logistics issues, you've got to worry about you've got the.

Employee shortfall somebody mentioned on the previous question. So we're seeing all those dynamics I think.

Sure.

When you look at our the low end of our guidance.

For the year.

$1 billion, 60, which is a 10% increase year over year.

And as you do the math for the fourth quarter.

We're really.

Essentially kind of feel like we've covered all of the kind of the.

I guess I'll see a wide.

GAAP over the fourth quarter right.

Our guidance for the fourth quarter is pretty wide and it's really trying to cover everything that we're seeing the choppiness.

<unk>.

And the recovery.

And really what I want you guys to kind of focus on is the.

The drivers in our Q4 expectations.

First of all I think the U S.

Probably the most stable and our growth I think as we model.

The Q4 is very consistent with Q3.

Are all U S assumptions.

Now reflect some some.

Essentially.

Prolonged COVID-19 recovery.

The softer trends related to spikes in the Delta related cases in recent months.

Also the China tenders tenders, although we're not expecting the tender impact we are seeing some some delay purchases by some distributors as they anticipate some of those price reductions so I think.

Overall, if you look at kind of plug in the numbers of what's left for the fourth quarter I think our Q4 represents constant currency growth of 3% to 5% excluding the divestitures.

I think.

Sure.

I think we've called this pretty well.

We haven't been overly aggressive we've kind of calls them as we see them.

And I think that has served us well the way we've structured in the way we look at the business. So.

Yes.

And work for our shareholders. So we're just going to continue what we've been doing.

Yes, Okay, and if I could ask a second question. Thank you very much and congratulations on a really good year.

It's <unk>.

You're generating a lot of free cash flow I think you're well ahead of plan at this point if I go back and look and just curious how youre thinking about the cap structure today.

More in terms of his continued paydown of debt the best use of cash is it acquisitions is it stock buybacks.

How do you think about that today versus what it was.

Little while ago, you laid out foundations for growth, there's been a lot of changes and especially since you are generating cash faster.

So first of all I think that I think the team has done a very good job and this really came from input from shareholders. So when you guys were concerned about this you ought to look at it and it was one of the things that was very important and foundations for growth.

One of the things we've talked about the logistical issues and.

And freight and all those sorts of things supply chain.

But labor is going to continue to be a problem.

And even though supply issues in the marketplace may take care of those disruptions and eventually equivocate. Some we don't see that in labor. So one of the things that we'll be looking at is automation projects and spending our money on those projects that helped to reduce the reliance on <unk>.

Become more efficient that way.

So that's a big focus now to select those that will give us the best returns and be able to support the growth that we see going forward.

Do you want to add to that no.

I think.

I think for now we continue to pay down debt, obviously acquisitions you never know when those are going to come along I don't know that were avoiding those.

I think we're just.

The hurdle rate I think internally is just much higher cap frustrate our foundations for growth programs, we're really focused on.

So again, it's not that we haven't been looking but.

As Fred mentioned things are expensive.

Again, we're really focused on our foundation for growth and we don't want to frustrate that program.

So we are looking.

And.

Anyway, I think again just to make a point that we are not.

Avoiding things we've looked at several things, but they are expensive and they have to fit into our plan.

And if they don't then we just have to move on or just be patient in the meantime run our business and spend our capital where it will give us the best returns roll and just as a reminder, just a point of clarification, we're still targeting $100 million in free cash flow.

For the year.

Capex.

Approximately $35 million.

The big ramp from where we're at right now, but again, we want to make sure that we have the flexibility to make some of the investments we're foundations for growth and product line transfers.

Our operation group, along with automation, if they need it. So that's why we've left the budget and I wish you could see the grin on our COO face right now.

So anyway.

Thanks for taking my questions you bet. Thank you Sir.

Our next question comes from Steven Lichtman with Oppenheimer <unk> Company. Your line is open.

Hi, everyone. Thanks for taking my question. This is a mere in for Steve and I guess, you guys did sort of touch upon it earlier, but I guess is there any other thoughts you guys would have in terms of our comments I guess on just the overall inflationary pressure within your business and any other plans that you guys may.

In terms of mitigating that pressure going forward.

<unk>.

Corrugate I mean, you name it and we've been involved in these negotiations not for six months or three or whatever this year. We've been involved in for a year or two as part of our program going clear back to the summer of 2019, I think we are looking.

And continue to.

Pass on.

Creases.

And we are exercising it as we speak.

A lot of areas. So roll no I would say we are facing the same thing as everybody else is facing.

Labor freight raw materials.

Despite those headwinds.

And inflationary pressures are full year low end guidance still represents a 48, 8% gross margin so up about 180 basis points. So we're able to absorb as Fred mentioned.

Second ago, some of those expenses, because we had our foundations for growth program in place and again as we look forward into our 2023 plan we continue to.

Feel that you are confident that our <unk> initiatives.

Drive us to our continued operating margin expansion that we set that goal and I think a big portion of its gross margin and I think that's really important role because again.

This is what we're focused on this is what we've been working on this is what's giving US the result, and yes, we're being hit by his roles like everybody else's.

But there are a couple of other internal things that we've been able to do and that's part of what I think is one of the things that merit does well and that is the vertical integration. Given example of one.

Silicon, we have our own foundry.

But we're able to raise prices to our customers and offset those costs and we have control of the supply chain. So I just have to think with our moulding extrusion.

Abrading, our wafer fab the things that we do and have been doing for a long time.

And then things that are helping us because we can control those expenses a lot better than just take it in and getting the full brunt of what someone might pass on to you. So.

There's a lot of things that we're doing.

One last thing and I'm going on before long run I shouldn't but.

We had a couple of shortages from people and we looked at our own capabilities and we were able to deliver the products that we needed to meet product demand in house, while saving a quarter of a million dollars.

Yeah.

Quarter $1 million in the big picture doesn't seem like a lot, but it seems like a lot to me I'm, just saying we are as well prepared as anybody in my view.

To meet the challenges that we see in the marketplace.

Period.

Thank you. Thank you guys. Thank.

Thank you Sir.

Our next question comes from Jim Sidoti with Sidoti <unk> Company. Your line is open.

Hi, good afternoon, and thank you for taking the question so.

Just to keep on the cost side.

Do you think because of the <unk>.

Steps, you've taken a vertical integrate youll be able to continue to grow margins.

And as COO.

Cost increase over the next few quarters.

Jim I'm not going to move beyond what we've talked about I think.

One of the things that you have hopefully I think you understand this we've really stick to the knitting.

I would say, we're going to talk about the periods and then we'll prognosticate and forecast when it is time to do so.

We're still confident in our strategy goals and I think Thats important thing I think if you listen to the what we put out on FFG on cash flow on operating margins and an earnings per share.

If you look at all of that stuff those are the things that we're committed to.

And Thats, what you should pay attention to it and our view.

And do you have any pricing power.

If it gets to the point, where youre not going to be able to absorb these cost increases.

Yes, I think we do have some pricing power.

And as again.

Barry.

Conscientious about how we do things we don't gouge, we don't take advantage. We look at cost we look at markets. We look at those sorts of things. So I do think we have some pricing power.

Maybe that we haven't had in the past to be very honest with you. So yes, I think there is some roll.

Okay Alright.

Thank you alright.

Alright, good to hear voice, Jamie Thank you.

Our next question comes from Jason Bednar with Piper Sandler Your line is open.

Hey, good afternoon, thanks for taking the questions here just a couple from our side.

First not to Hamburger and the cost questions, but just one more follow up just related to the inflationary pressures you called out.

Would you be able to quantify what those headwinds were that you were able to offset in the quarter.

Well I'll tell you there are things that we all.

Everybody has but we'll go from there is labor there is.

Freight theirs.

<unk>.

Every every line item on costs, yes.

Line item Rama.

Raw materials, yes.

<unk> is doing.

If you do the math when you get to the kind of.

As you start to kind of calculate the.

Fourth quarter range right. I mean, there is we have a pretty broad range for the fourth quarter.

110 basis points from low end to high end.

Obviously, one of the largest drivers as we also have a wide range on the revenue side and again I think what we're trying to do is.

Part of that is the revenue kind of the wider range on the revenue and that how it flows through.

Obviously in whether its U S. R O U S mix or which product categories. So you'll have a mix component there.

The launch.

Fourth quarter gross margin also does reflect a 70 basis point.

Decline.

Quarter over quarter, driven by incremental inflationary pressures compared to Q3.

As Fred mentioned labor freight and raw materials.

But again Howard despite those pressures I want to point you to our full year low end guidance, which is $48 eight on the gross margin of 180 basis point improvement.

And then again I want to kind of.

Reaffirm our foundations for growth targets and our confidence in that 2023 target.

And again, if there are maybe one message that came out today is our focus on our initiatives. It's a three year plan. We're 10 months into a 36 month plan and despite all of the other things we have a plan to execute and that's what we're focused on.

Across the board so theres a lot of factors that go into that we've talked about.

Automation, we've talked about this that and the other.

But we're focused on delivering what we said we would deliver that's the message of the day, yes, I mean, I think to be clear and I've said this over and over again, but I'll repeat it just to make it clear we have a wide range of revenue and EPS.

And all the other noise that you're hearing out there with a wide range of outcomes in Q4. So I think we've tried to anticipate everything that could.

That could hit US I guess is the best way to say.

Yes, absolutely and you've all been executing very well against that plan. So congrats on that.

Sure.

Rob will just maybe to follow up on one other earlier question I think it was Mike Mikes question on China.

As your point on China that customers are running more lean on inventory I think you mentioned, maybe distributors buying less.

I guess, maybe any additional color you can you can add on just that altered buying patterns altered.

Buying pattern that you alluded to.

Just really trying to figure out if we end up having maybe a combination of price declines, but then maybe also some inventory normalization within your customer base in 'twenty two.

Thanks.

Yes, I mean, I don't want to get into 2022.

Guidance or any color around there obviously, we did mentioned that we now expect that pricing component to hit us.

In the first half of 2022.

But again I think what we're seeing.

At least for the fourth quarter or what we've kind of planned on is just the lower ordering from our customers.

Just I guess in light of the delayed or postponed tenders right. So they are anticipating a little bit of that but again, we've tried to.

<unk>.

Included in our guidance.

Once we get to 2022, I think we'll give you more color there.

I would say dial in February 2000.

'twenty two but again, despite all of those issues I hope you didn't miss that we're expanding into other areas with products that we have that are there.

That are not in focus on very pricing issues. We have a strategy is what I'm trying to say, it's not that we're just having it come at us.

Our flanking so to speak.

And delivering our products and new opportunities there as well and our long term forecast continues to be positive.

In China, So thats I don't want you to forget that it's not I mean, what I heard was just one side, but you've got to hear the other side and why we remain confident.

Okay. Okay.

Very helpful. Thanks, so much.

Thank you.

Our next question comes from Ron Kempen. Your line is open.

Hi, Fred around great quarter. Thank.

Thank you, Sir really great and we should have put you up first I mean, I don't know why we waited but thank you for your patience with us.

Alright that was it.

Great quarter.

The only question I have is I was thinking about this tax increase that biden is proposing which of course is off the wall, but in any event have you done any modeling to see what effect that might have.

2022.

I would say first of all yes, so as you've heard us in this entire call. We're not commenting on that I would say this if we were doing that we would all have to take medications and other things because it changes every day, who knows right.

But as we gather that information, we'll put it into our models will deliver it.

In our forecast and our views for next year.

Good.

<unk> success guys I appreciate thank you Sir I appreciate the call Ultra call next time, we'll put you right up on top.

Alright, Thank you Sir.

There are no further questions at this time. Please proceed with any closing remarks.

Thank you Michelle and listen we appreciate all of you had a very very busy earnings season, we took.

Full hour here I hope, we were able to.

Answer your questions that Raul and I will be around for the next two and a half three hours and we will we will speak further now not anything that we haven't talked about but.

<unk> tried to give maybe detail on certain things should you asked we don't know what your question Charlie but we're here. Thank you very much.

Listen there were no questions regarding the 8-K.

Sure.

And then that's fine.

Yeah.

We look forward to taking your questions and our private meetings that are coming out in the next hour, thanks, everybody and best wishes.

For now and for <unk>.

Holiday season, we have the holidays upon us enjoy the fall God bless you all and thank you Goodnight.

Yes.

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

Q3 2021 Merit Medical Systems Inc Earnings Call

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