Q1 2024 Merit Medical Systems Inc Earnings Call

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Operator: Please send here an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would like now to turn the conference over to Fred Lampropoulos, Chairman and CEO. Please go ahead.

Now to turn the conference over to Fred Luddy, Propolis, Chairman and CEO. Please go ahead.

Fred P. Lampropoulos: Thank you and welcome everyone to Merit Medical Systems' first quarter of fiscal year 2024 earnings conference call. I am joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer, Joe Wright, our Chief Commercial Officer, and Brian Lloyd, our Chief Legal Officer and Corporate Secretary. Brian, would you mind taking us through the Safe Harbor Statements, please?

Fred Luddy: Thank you and welcome everyone to Merit medical systems first quarter of fiscal year 'twenty 'twenty four earnings conference call.

Fred Luddy: I am joined on the call today by Raul Parra, our Chief Financial Officer, and Treasurer, Joe Wright, Our Chief Commercial Officer, and Brian Lloyd, Our Chief Legal Officer, and corporate Secretary, Brian would you mind, taking us through the Safe Harbor statements. Please.

Brian G. Lloyd: Thank you Fred.

Brian G. Lloyd: I would like to remind everyone that this presentation contains forward-looking statements that receive Safe Harbor protection under federal securities laws. Although we believe these forward-looking statements are based upon 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 anticipated. In addition, any forward-looking statements represent our views only as of today, April 30, 2024, 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.

Brian G. Lloyd: I would like to remind everyone that this presentation contains forward looking statements that receive safe Harbor protection under federal Securities laws.

Brian G. Lloyd: Although we believe these forward looking statements are based upon 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 anticipated.

Brian G. Lloyd: In addition, any forward looking statements represent our views only as of today April 32024.

Brian G. Lloyd: And should not be relied upon as representing our views as of any other date.

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

Brian G. Lloyd: Please refer to the sections entitled Cautionary Statement regarding forward-looking statements in today's press release and presentation for important information regarding such statements. Please also refer to our most recent findings 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.

Brian G. Lloyd: Please refer to the sections entitled cautionary statement regarding regarding forward looking statements in today's press release and presentation for important information regarding such statements.

Brian G. Lloyd: 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.

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

Brian G. Lloyd: 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.

Brian G. Lloyd: This presentation also contains certain non-GAAP financial measures. A 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 FCC under Form 8K. Please refer to the sections of our press release and 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.

Brian G. Lloyd: This presentation also contains certain non-GAAP financial measures.

A 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 with the SEC under form 8-K.

Brian G. Lloyd: Please refer to the sections of our press release and presentation entitled non-GAAP financial measures for important information regarding non-GAAP financial measures discussed on this call.

Brian G. Lloyd: Readers should consider non-GAAP financial measures. In addition to not as a substitute for financial reporting measures prepared in accordance with GAAP.

Brian G. Lloyd: Please note that these calculations may not be comparable with similarly titled measures of other companies.

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

Brian G. Lloyd: Please note that these calculations may not be comparable with similarly tiled 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.

Brian G. Lloyd: I will now turn the call back to Fred.

Fred P. Lampropoulos: Thank you, Brian. Let me start with a brief agenda of what we will cover during our prepared remarks. I will start with an overview of our financial results and key operating progress areas during the quarter. After my opening remarks, Joe will provide a summary of our revenue results before turning the call over to Raul, who will provide you with a more in-depth review of our quarterly financial results. Then we will open the call for your questions.

Thank you, Brian let me start with a brief agenda of what we will cover during our prepared remarks, I will start with an overview of our financial results and key operating progress areas during the quarter.

After my opening remarks, Joe will provide a summary of our revenue results before turning the call over to Robert Ward, who will provide you with a more in depth review of our quarterly financial results.

Speaker Change: Then we will open the call for your questions.

Fred P. Lampropoulos: Now, beginning with a review of our first quarter results, we reported total revenue of $323.5 million in the first quarter, up 8.7% year-over-year on a gap basis and up 9.3% year-over-year on a constant currency basis. The cost and currency revenue growth we delivered in the first quarter was stronger than the high end of the range of growth expectations that we outlined on our fourth quarter earnings call. Specifically, we expected constant currency revenue growth for the first quarter in the range of 6.5% to 7.7% year over year.

Joe Wright: Now beginning with a review of our first quarter results. We reported total revenue of $323 5 million in the first quarter up eight 7% year over year on a GAAP basis and up <unk>.

Joe Wright: Nine 3% year over year on a constant currency basis.

Joe Wright: The constant currency revenue growth, we delivered in the first quarter was stronger than the high end of the range of growth expectations there.

Joe Wright: We outlined on our fourth quarter earnings call, specifically, we expected constant currency revenue growth for the first quarter in the range of six five to seven 7% year over year.

Fred P. Lampropoulos: Importantly, the better-than-expected constant currency revenue growth in the first quarter was primarily driven by strong organic growth as well as contributions from acquired products, which modestly exceeded our expectations as well. With respect to our profitability performance in the first quarter, we leveraged the solid revenue results to deliver non-GAAP gross profit and operating profit growth of 10% and 16%, respectively, which resulted in year-over-year margin expansion of approximately 80 basis points and 115 basis points, respectively, and we delivered 19% growth in our non-GAAP EPS, which exceeded the high end of our expectations as well. We are pleased with a solid start to the fiscal year and remain confident in our team's ability to deliver continued strong execution. Stable constant currency growth, improving profitability, and solid free cash flow generation in 2024.

Joe Wright: Importantly, the better than expected constant currency revenue growth in the first quarter was primarily driven by strong organic growth as well as contributions from acquired products, which modestly exceeded our expectations as well.

Joe Wright: With respect to our profitability performance in the first quarter.

Joe Wright: We leverage the solid revenue results to deliver non-GAAP gross profit and operating profit growth of 10% and 16% respectively.

Joe Wright: Which resulted in year over year margin expansion of approximately 80 basis points and 115 basis points respectively.

Joe Wright: And we delivered 19% growth in our non-GAAP, EPS, which exceeded the high end of our expectations as well.

Joe Wright: We are pleased with our solid start to the fiscal year and remain confident in our team's ability to deliver continued strong execution.

Joe Wright: Stable constant currency growth improving profitability and.

Joe Wright: And solid free cash flow generation in 2024.

Fred P. Lampropoulos: Now, before turning the call over to Joe, I would like to share a brief update on several areas of operational progress in recent months. First, with respect to new product introductions, we have had a solid start to 2024 with multiple regulatory clearances and commercial introductions, including In January, we announced FDA 510K clearance for the ScoutMD surgical guidance system. This new guidance system demonstrates Merit's ongoing leadership in oncology and marks a significant advancement in breast cancer care as it supports implantation of up to four different reflector configurations designed to pinpoint tumor location in multiple dimensions for a more precise excision. This targeted approach can help minimize damage to surrounding healthy tissue, decrease the likelihood of re-excision, and avoid the emotional and physical trauma associated with a second surgery.

Speaker Change: Now before turning the call over to Joe I would like to share a brief update on several areas of operational progress in recent months.

Joe Wright: First with respect to new product introductions, we have had a solid start to 2024 with multiple regulatory clearances and commercial introductions, including and.

Speaker Change: In January we announced FDA five 10-K clearance for the Scout M D surgical guidance system.

Joe Wright: This new guidance system demonstrates merit to ongoing leadership in oncology and marks a significant advancement in breast cancer care as it.

Joe Wright: It supports implantation of up to four different reflector configurations designed to pinpoint tumor location in multiple dimensions for a more perfect size excision.

Joe Wright: This targeted approach can help minimize damage to surrounding healthy tissue.

Joe Wright: Greece, the likelihood of Reacceleration and avoid the emotional and physical trauma associated with a second surgery.

Fred P. Lampropoulos: In March, we announced the commercial release of the MicroAce Advanced MicroAccess System, a complementary solution that expands our portfolio of percutaneous access and closure devices. The Micro-A system represents innovative technology to improve interventional access procedures as it balances stiffness and flexibility to offer twice the resistance to kink and compression over the leading competitor. It also is 9% stiffer than the leading standard microintroducer.

Joe Wright: In March we announced the commercial release of the micro Ace advanced micro access system, a complementary solution that expands our portfolio.

Joe Wright: Percutaneous access and closure devices.

Joe Wright: The microwave system represents innovative technology to improve interventional access procedures.

Joe Wright: Asset balances stiffness and flexibility to offer twice the resistance to kink and compression over the leading competitor.

Joe Wright: It also is 9% different than the leading standard micro introduce here in.

Fred P. Lampropoulos: In addition, a unique marker tip design allows for nine times greater visibility under fluoroscopy for accurate positioning needed at the start of a procedure. We developed this system based on feedback from our interventional physician customers and is another example of partnering with our customers to advance vascular access procedures, outcomes, and improve patient care. Second, with respect to our progress in the area of clinical validation in recent months, In January, we announced the successful enrollment of the first patient in our motion study.

Joe Wright: In addition, a unique market chip design allows for nine times greater visibility under fluoroscopy for accurate positioning needed at the start of appreciate here with.

Joe Wright: We developed this system based on feedback from our interventional physician customers and there is another example of partnering with our customers to advance vascular access procedures outcomes and improve patient care.

Joe Wright: Second with respect to our progress in the area of clinical validation in recent months.

Joe Wright: In January we announced the successful enrollment of the first patient in our motion study.

Fred P. Lampropoulos: This study is a multicenter, prospective, randomized, controlled trial comparing genicular artery embolization, or GAE, using Merit's embosphere microspheres to corticosteroid injections for the treatment of symptomatic knee osteoarthritis, a condition that impacts more than 650 million adults globally. GAE is a minimally invasive procedure that selectively reduces blood flow to areas of the knee where hyper The motion study is designed to enroll up to 264 adults with symptomatic knee osteoarthritis across medical centers in North America, Brazil, Europe, Australia, and New Zealand.

Joe Wright: This study is a multicenter prospective randomized controlled trial.

Joe Wright: Pairing janicki, our artery embolization or GAA using marriage Amdocs sphere microspheres.

Joe Wright: Corticosteroid injections for the treatment of symptomatic knee osteoarthritis, a condition that impacts more than $650 million of Dallas globally.

Joe Wright: G E is a minimally invasive procedure.

Joe Wright: Selectively reduces blood flow to areas of the knee, where hyper vascularity has been identified happened to alleviate pain and inflammation associated with knee osteoarthritis.

Joe Wright: The motion study is designed to enroll up to 264 adult with symptomatic knee osteoarthritis across medical centers in North America, Brazil, Europe, Australia, and New Zealand.

Fred P. Lampropoulos: The study is structured to evaluate primary safety and effectiveness of the embospheres at six months, with continued patient follow-up for 24 months. Finally, we are pleased with the progress achieved in recent months for our Rhapsody Arteriovenous Access Efficacy, or WAE, PIT model study. We completed collection of safety and efficacy outcomes throughout the study follow-up period and received primary endpoint data for the last enrolled patient during the first quarter. The team has recently completed the monitoring, data cleaning, and analysis phase, and we remain on track to complete the clinical study report and continue to expect to file primary outcomes with the FDA for premarket approval, or PMA, by the end of the second quarter of 2024. Now with that, let me turn the call over to Joe, who will review the first quarter revenue performance. Joe?

Joe Wright: <unk> is structured to evaluate primary safety and effectiveness at the embassy fears at six months with continued patient follow up for 24 months.

Joe Wright: Finally, we are pleased with the progress achieved in recent months for a rep city arterial venous access efficacy or wave pivotal study, we completed collection of safety and efficacy outcomes throughout the study follow up period and receive primary endpoint data for the.

Joe Wright: The last enrolled patient during the first quarter.

Joe Wright: The team has recently completed the monitoring data cleaning and analysis phase and we remain on track.

Joe Wright: To complete the clinical study report and continue to expect to be in a position to file primary outcomes with the FDA for pre market approval or PMA by the end of the second quarter of 2024.

Joe Wright: Now with that let me turn the call over to Joe who will review the first quarter revenue performance Joe.

Joe Wright: Thank you, Fred. I'll start with a detailed review of our revenue results for the first quarter, beginning with the sales performance in each of our primary reportable product categories. Note, unless otherwise stated, all growth rates are approximated and presented on both a year-over-year and constant currency basis. We have included reconciliations from our GAAP reported results to the related non-GAAP item in our earnings release and presentation available on our website. First quarter total revenue growth was driven by 9% growth in our cardiovascular segment and 6% growth in our endoscopy segment.

Joe Wright: Thank you Fred I'll start with a detailed review of our revenue results in the first quarter beginning with the sales performance in each of our primary reportable product categories.

Joe Wright: Unless otherwise stated all growth rates are approximated and presented on both a year over year and constant currency basis.

Joe Wright: We have included reconciliations from our GAAP reported results to the related non-GAAP items in our earnings release and presentation available on our website.

Joe Wright: First quarter total revenue growth was driven by 9% growth in our cardiovascular segment and 6% growth in our endoscopy segment.

Joe Wright: Our cardiovascular segment was the primary driver of the better-than-expected revenue results versus the high end of constant currency growth expectations again this quarter. However, our endoscopy segment sales did exceed the high end of our expectations as well in Q1.

Joe Wright: Our cardiovascular segment was the primary driver of the better than expected revenue results versus the high end of constant currency growth expectations again. This quarter. However, our endoscopy segment sales did exceed the high end of our expectations as well in Q1.

Joe Wright: Sales of the Peripheral Intervention, or PI, products increased 19%, representing nearly 80% of total cardiovascular segment growth in the period. Excluding sales of acquired products, PI sales increased 13% on an organic, constant-currency-based basis. Organic growth in the PI product category was driven by sales of our delivery systems and embolotherapy products, which increased 41% and 16%, respectively, and together represented more than a And sales of our drainage and radar localization products were strong contributors to our total PI growth in Q1, increasing in the low double digits year over year.

Joe Wright: Sales of the peripheral intervention or Pi products increased 19%, representing nearly 80% of total cardiovascular segment growth in the period.

Joe Wright: Excluding sales of acquired products.

Joe Wright: <unk> sales increased 13% on an organic constant currency basis.

Joe Wright: Organic growth in the Pi product category was driven by <unk>.

Joe Wright: Sales of our delivery systems and in below therapy products increased 41% and 16%, respectively and together represented more than a third of our total sales growth.

Joe Wright: And sales of our drainage and radar localization products were strong contributors to our total growth in Q1, increasing in the low double digits year over year.

Joe Wright: Sales in both our cardiac intervention and CPS product categories were also key contributors to our organic growth in the cardiovascular segment this quarter, each exceeding the high end of our growth expectations in Q1. Cardiac intervention product sales increased 7%, driven primarily by strong sales of intervention products and balanced contributions to growth from access, angiography, EPCRM, and hemostasis products during the period. Sales of our Custom Procedural Solutions, or CPS, products increased 3%, which was notably better than the low single-digit decline we expected in Q1, fueled by 8% growth in sales of critical care and kit products, which more than offset year-over-year declines in sales of trays. By way of reminder, the decline in trades is due to the ongoing skew rationalization effort we specifically noted in our Q3 earnings call last year

Joe Wright: Sales in both our cardiac intervention and Cps product categories were also key contributors to our organic growth in the cardiovascular segment this quarter each exceeding the high end of our growth expectations in Q1.

Joe Wright: Cardiac intervention product sales increased 7% driven primarily by strong sales of intervention products and balanced contributions to growth from access and geography, EP CRM and hemostasis products in the period.

Joe Wright: Sales of our custom procedural solutions or Cps products increased 3%, which was notably better than the low single digit decline we expected in Q1 fueled.

Joe Wright: <unk> fueled by 8% growth in sales of critical care kit products, which more than offset year over year declines in sales of trays by way of reminder, the decline in trades is due to the ongoing SKU rationalization effort. We specifically noted Inc. Q3 earnings call last year.

Joe Wright: Sales of our OEM products were the only area of our cardio business that came in softer than our growth expectations heading into the quarter. We attribute the mid-single-digit decline in sales to be a result of order timing and fluctuations in demand trends as our customers work through efforts to optimize inventory levels. OEM product sales to US customers were flat in Q1, with demand from our OUS customers declining year over year.

Joe Wright: Sales of our OEM products were the only area of our cardio business that came in softer than our growth expectations heading into the quarter.

Joe Wright: We attribute the mid single digit decline in sales to be result of order timing and fluctuations in demand trends as our customers work through efforts to optimize inventory levels.

Joe Wright: OEM product sales to U S customers were flat in Q1 with demand from our U S customers declining year over year importantly, we continue to expect solid growth in OEM sales.

Joe Wright: Importantly, we continue to expect solid growth in OEM sales. Lastly, sales in our endoscopy segment increased 6%, which exceeded the high end of our growth expectations. We are pleased to see continued normalization of growth trends in this business, and our 2024 guidance continues to assume high single-digit growth in our endoscopy segment this year. Now, a brief summary of our sales performance on a geographic basis. Our first quarter sales in the U.S. increased 9% on a constant currency basis and 5.5% on an organic constant currency basis.

Joe Wright: Lastly, sales in our endoscopy segment increased 6%, which exceeded the high end of our growth expectations. We.

Joe Wright: We are pleased to see continued normalization of growth trends in this business and our 2024 guidance continues to assume high single digit growth in our endoscopy segment. This year.

Joe Wright: Turning to a brief summary of our sales performance on a geographic basis, our fourth first quarter sales in the U S increased 9% on a constant currency basis, and five 5% on an organic constant currency basis.

Joe Wright: Sales to U.S. customers came in roughly a point softer than what our guidance had assumed, driven primarily by the softer-than-expected OEM sales, as previously mentioned. Despite a modestly softer-than-expected growth in Q1, our U.S. growth trends accelerated on both a two-year and three-year basis in the first quarter, and we continue to expect to deliver the 7.6 percent growth assumed at the midpoint of International sales increased 9.5% year over year and 9% on an organic constant currency basis, exceeding the high end of our growth expectations by more than 600 basis points in the quarter.

Joe Wright: Sales to U S customers came in roughly a point softer than what our guidance had assumed driven primarily by the softer than expected OEM sales as previously mentioned.

Joe Wright: Despite a modestly softer than expected growth in Q1, our U S growth trends accelerated on both the two year and three year basis in the first quarter and we continue to expect to deliver the seven 6% growth assumed at the midpoint of our 2024 guidance range.

Joe Wright: International sales increased nine 5% year over year, and 9% on an organic constant currency basis exceeding the high end of our growth expectations by more than 600 basis points in the quarter.

Joe Wright: The stronger-than-expected organic constant currency growth to customers outside the U.S. was driven primarily by mid-teens growth in APAC. With respect to China specifically, sales increased 22% year over year against the software comp in the prior year period. We continue to see quarter to quarter variability and growth trends related to volume-based purchasing tenders, as expected. By way of reminder, while we are not providing country-specific growth assumptions in our guidance messaging, the midpoint of our 2024 constant currency growth guidance range continues to assume our total international sales increased 2.3% year on year driven by high single-digit growth in EMEA and ROW regions, partially offset by a 4% decline in the APAC region.

Joe Wright: The stronger than expected organic constant currency growth to customers outside the U S was driven primarily by mid teens growth in APAC.

Joe Wright: With respect to China, specifically sales increased 22% year over year against a softer comp in the prior year period.

Joe Wright: We continue to see quarter to quarter variability in growth trends related to volume based purchasing tenders as expected.

Joe Wright: By way of reminder, while we are not providing country specific growth assumptions in our guidance messaging the midpoint of our 2020 for constant currency growth guidance range continues to assume our total international sales increased two 3% year on year driven by high single.

Joe Wright: Growth in EMEA and <unk> regions.

Joe Wright: Partially offset by a 4% decline in the APAC region.

Joe Wright: The year-over-year decline in APAC is entirely related to China, where we expect to grow sales of units on a year-over-year basis, but we expect total revenue to decline due to continued headwinds related to volume-based purchasing. With that said, I will turn the call over to Raul, who will take you through a detailed review of our first quarter financial results, balance sheet, and financial condition as of March 31st.

Joe Wright: The year over year decline in APAC is entirely related to China, where we expect to grow sales of units on a year over year basis, but we expect total revenue to decline due to continued headwinds related to volume based purchasing.

Joe Wright: With that.

Joe Wright: Let me turn the call over to Rob <unk>, who will take you through a detailed review of our first quarter financial results balance sheet and financial condition as of March 31.

Raul Parra: Thank you, Joe. Beginning with the review of our P&L performance... For the avoidance of doubt, unless otherwise noted, my commentary will focus on the company's non-GAAP results during the first quarter of fiscal year 2024. We have included reconciliations from our GAP-reported results to the related non-GAP items in our press release and presentation, available on our website. Gross profit increased approximately 10% year-over-year in the first quarter. Our gross margin was 50.9%, 79 basis points year-over-year.

Rob: Thank you Joe.

Rob: Beginning with a review of our P&L performance for the avoidance of doubt unless otherwise noted my commentary will focus on the Companys non-GAAP results during the first quarter of fiscal year 2024.

Rob: We have included reconciliations from our GAAP reported results to the related non-GAAP items in our press release and presentation available on our website.

Rob: Gross profit increased approximately 10% year over year in the first quarter. Our gross margin was 59% up 79 basis points year over year. The increase in gross margin year over year was driven by favorable revenue mix pricing uplift and improvement in freight and distribution costs.

Raul Parra: The increase in gross margin year-over-year was driven by favorable revenue mix, pricing uplift, and improvements in freight and distribution costs, offset partially by manufacturing variances compared to the prior years. Operating expenses increased 8% from the first quarter of 2023.

Rob: Partially by manufacturing variances compared to the prior year period.

Rob: Operating expenses increased 8% from the first quarter of 2023, the year over year increase in operating expenses was driven by a 7% increase in SG&A expense and a 9% increase in R&D expense compared to the prior year period.

Raul Parra: The year-over-year increase in operating expenses was driven by a 7% increase in SG&A expense and a 9% increase in R&D expense compared to the prior year. Total operating income in the first quarter increased $7.9 million, or 16%, from the first quarter of 2023 to $56 million. Our operating margin was 17.3% compared to 16.1% in the prior year period. The 115 basis point increase in operating margin was driven by a 79 basis point increase in our non-GAAP gross margin and by a 36 basis point decrease in our non-GAAP OPEX margin compared to the prior year period. In the first quarter, other expense was $0.1 million, compared to $0.7 million last year.

Rob: Total operating income in the first quarter increased $7 9 million.

Rob: Or 16% from the first quarter of 2000 $23 million to $56 million.

Rob: Our operating margin was 17, 3% compared to 16, 1% in the prior year period. The 115 basis point increase in operating margin was driven by a 79 basis point increase in our non-GAAP gross margin and by 36 basis point decrease in our non-GAAP opex margin compared to the pre.

Rob: Our year period.

Rob: First quarter other expense net was <unk>.

Rob: $1 million.

Rob: Compared to <unk> $7 million last year the change in other expense net was driven by an increase in net interest expense associated with increased borrowings and rising interest rates, partially offset by an increase in interest income associated with our higher cash balances.

Raul Parra: The change in other expense net was driven by an increase in net interest expense associated with increased borrowings and rising interest rates, partially offset by an increase in interest income associated with our higher cash balance. First quarter net income was $44.8 million or $0.77 per share compared to $37.5 million or $0.64 per share in the prior year period. We are pleased with our profitability performance in the first quarter, where we leveraged stronger-than-expected revenue results to drive both expansion in operating margins and non-gap diluted earnings per share that exceeded the high end of our expectations.

Rob: First quarter net income was $44 8 million or <unk> 77.

Rob: Per share compared to $37 5 million or <unk> 64 per share in the prior year period.

Rob: We are pleased with our profitability performance in the first quarter, where we leveraged stronger than expected revenue results to drive both expansion in operating margins and non-GAAP diluted earnings per share that exceeded the high end of our expectations.

Raul Parra: Turning to a review of our balance sheet and financial conditions, as of March 31st, 2024, we had cash and cash equivalents of $581.9 million, total debt obligations of $822.5 million, and available borrowing capacity of approximately $657 million, compared to cash and cash equivalents of $587 million, total debt obligations of $846.6 million, and available borrowing capacity of approximately $626 million as of December 31st, 2020. Our net leverage ratio as of March 31st was 2.4 times on an adjusted basis.

Rob: Turning to a review of our balance sheet and financial condition as of March 31, 2024, we had cash and cash equivalents of $581 9 million.

Rob: Total debt obligations of $822 5 million and.

Rob: And available borrowing capacity of approximately $657 million compared.

Rob: Compared to cash and cash equivalents of $587 million.

Rob: Total debt obligations of $846 6 million in available borrowing capacity of approximately $626 million as of December 31, 2023 or.

Rob: Our net leverage ratio as of March 31 was two four times on an adjusted basis.

Raul Parra: We generated $24.5 million of free cash flow in the first quarter, compared to $1.8 million last year. The year-over-year improvement in free cash flow generation was primarily a result of significant improvements in cash used for working capital, specifically in the reduction of dollars invested in inventory compared to the prior year period.

Rob: We generated $24 5 million of free cash flow in the first quarter compared to $1 8 million last year.

Rob: Year over year improvement in free cash flow generation was primarily a result of significant improvements in cash used in working capital.

Rob: Specifically in the reduction of $1 invested in inventory compared to the prior year period.

Raul Parra: We expect strong free cash flow generation again in 2024 and continue to believe our CGI program will generate more than $400 million of free cash flow in the three-year period ending December 31, 2026. For reference, we have included a table in our earnings press release that details each of our formal financial guidance items and how those ranges compared to the prior year period. However, it is important to highlight that all guidance expectations remain unchanged versus what we introduced in our fourth quarter earnings pressure. Further, we have not changed the underlying assumptions discussed in our prepared remarks last quarter as well.

Rob: We expect strong free cash flow generation again in 2024 and continue to believe our CGI program will generate more than $400 million of free cash flow in the three year period, ending December 31 2026.

Rob: For reference we have included a table in our earnings press release, which details each of our formal financial guidance items and how those ranges compared to the prior year period.

Rob: However, it is important to highlight that all guidance expectations remain unchanged versus what we introduced in our fourth quarter earnings press release.

Rob: Whether we have not changed the underlying assumptions discussed in our prepared remarks last quarter as well.

Raul Parra: Lastly, we would like to provide additional transparency related to our growth and profitability expectations for the second quarter of 2024. Specifically, we expect our total revenue to increase in the range of approximately 4-5% year-over-year on a gap basis and up approximately 4.7% to 5.8% year-over-year on a constant currency basis. The midpoint of our second quarter constant currency sales growth expectations assumes approximately 10% growth year-over-year in the U.S. and a 1% decline year-over-year in international markets.

Rob: Lastly, we would like to provide additional transparency related to our growth and profitability expectations for the second quarter of 2024.

Rob: Specifically, we expect our total revenue to increase in the range of approximately 4% to 5% year over year on a GAAP basis and up approximately four 7% to five 8% year over year on a constant currency basis, the midpoint of our second quarter constant currency sales growth expectations assumes approximately 10% growth year over year in the U S.

Rob: And a 1% decline year over year in international markets.

Raul Parra: Note, the midpoint of our second quarter constant currency sales growth expectations also includes approximately $4.5 million of inorganic revenue. Excluding these inorganic contributions, our second quarter total revenue is expected to increase approximately 3.8% year-over-year on a constant currency basis. With respect to our profitability expectations for the second quarter of 2024, we expect non-GAAP operating margins in the range of approximately 19.6% to 19.9%, and we expect non-GAAP EPS in the range of $0.87 to $0.90.

Rob: Note the mid point of our second quarter constant currency sales growth expectations also includes approximately $4 $5 million of inorganic revenue. Excluding these inorganic contributions our second quarter total revenue is expected to increase approximately three 8% year over year on a constant currency basis.

Rob: With respect to our profitability expectations for the second quarter of 2024, we expect non-GAAP operating margins in a range of approximately 19, 6% to 19, 9% and we expect non-GAAP EPS in the range of 87 to 90.

Operator: That wraps up our prepared remarks. Operator, we would now like to open up the line for questions. Thank you.

Speaker Change: That wraps up our prepared remarks, operator, we would now like to open up the line for questions.

Operator: Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A list. The first question comes from Larry Biegelsen with Wells Fargo. Your line is open.

Speaker Change: Thank you as a reminder to ask a question. Please press star one one on your telephone and wait for your name to be announced.

Speaker Change: Your question. Please press star one again.

Speaker Change: Please standby, while we compile the Q&A roster.

Speaker Change: The first question comes from Larry <unk> with Wells Fargo. Your line is open.

Simran: Hi, good afternoon. This is Simran on behalf of Larry.

Larry: Hi, good afternoon.

Speaker Change: Simona on for Larry Thanks for taking the question.

Speaker Change: And just to start off.

Simona: And maybe just to start off on the Q2 guidance.

Speaker Change: Can you just walk me through some of the assumptions that get you to the low end and the high end of the range.

Simran: Thanks for taking the questions. Maybe just to start off on the Q2 guidance, you know, can you just walk me through some of the assumptions that get you to the low end and the high end of the range? You know, it seems like the EPS guide is ahead of what we're modeling, so maybe just what are some of the key leverage points in the quarter that you're kind of assuming, and should we consider the phasing of revenues for the remainder of the year to be steady through Q3 and Q4, or more so Q4 weighted? And then I have a follow-up question.

Speaker Change: It seems like.

Speaker Change: The EPS guidance.

Speaker Change: Ahead of what we're modeling so maybe just.

Speaker Change: What are some of the key leverage points and in the quarter that you're kind of assuming again.

Speaker Change: Should we consider the phasing of revenues for the remainder of the year it could be steady through Q3 and Q4 more so Q4 weighted.

Raul Parra: Long question. I'm going to let Raul pick that one. Right, Raul?

Speaker Change: And then I have a follow up.

Speaker Change: Long question and I'm going to let Rob will pick that one role.

Raul Parra: Yeah, so, and this is specific to the second quarter, right, so I'll start there and just say, you know, as far as revenue, four to five percent, you know, year over year on a gap basis, approximately four to, you know, 4.7 to 5.8 year over year on a constant currency basis. The midpoint for the second quarter on currency growth expectation also includes approximately $4.3 million in organic revenue related to the acquisition of the annual product. Excluding those inorganic items, our growth is around 3.8%.

Speaker Change: So.

Rob: This is specific to the second quarter right. So I'll start there and just say.

Rob: As far as the.

Rob: The revenue.

Rob: 4% to 5% year over year on a GAAP basis.

Rob: Approximately 404 seven to five eight year over year on a constant currency basis, the midpoint for the second quarter. Our constant currency growth expectation also includes approximately $4 3 million in organic revenue related to the acquisition for the annual products.

Rob: Excluding those inorganic items.

Rob: Our growth is around three 8%.

Raul Parra: And as far as the EPS, I'll actually talk about the revenue kind of cadence for the rest of the year since we're there. You can kind of think about this as more of a kind of regular seasonality. So we're getting back to normalized seasonality levels where our, you know, Q1 and Q3 are softer quarters, and Q2 and Q4 are stronger ones. So I think we feel pretty comfortable that it's kind of back to that historical kind of cadence.

Rob: And as far as the EPS.

Speaker Change: Actually maybe I'll talk about the revenue.

Speaker Change: Kind of cadence for the rest of the year since we're there.

Speaker Change: You can kind of think about this as more of kind of regular seasonality. So we're getting back to that normalized seasonality levels, where our Q1 and Q through Q3, sorry, our softer quarters in Q2, and Q4 are stronger ones. So I think.

Speaker Change: I think we feel pretty comfortable that it's kind of back to that historical kind of cadence.

Raul Parra: With the exception that you have to think about the skew rationalization items that we've talked about that will impact us. And then also the Chinese impact, which we expect kind of in the back half of the year. So a couple of things to consider, but essentially, normalizing, and then.

Speaker Change: With the exception that you have to think about.

Speaker Change: The SKU rationalization items that we've talked about.

Speaker Change: That will impact US and then also the China impact, which we expect to kind of in the back half of the year.

Speaker Change: Couple of things to consider but essentially normalized.

Speaker Change: And then.

Raul Parra: I was just going to say, to clarify on the SKU rationalization, what was the impact in Q1 and how do we think about the impact of the new SKU throughout the remainder of the year?

Speaker Change: Go ahead.

Speaker Change: I was just going to say to clarify on the SKU rationalization.

Speaker Change: Was the impact in Q1 and.

Speaker Change: How do we think about the impact of the SKU like throughout the remainder of the year.

Raul Parra: So we talked about it being about $15 million for the year, and I'd say the substantial part of the impact will be essentially kind of evenly weighted for the most part, with the exception that it'll taper off towards the fourth quarter as we start to decelerate from those products. So Q1, Q2, and Q3 will be a little bit heavier than the fourth.

Speaker Change: So we talked about it being about $15 million for the year.

Speaker Change: And.

Speaker Change: I would say substantial part of the impact will be essentially kind of evenly weighted for the most part with the exception that.

Speaker Change: It will taper off towards the fourth quarter as we started to decelerate from those products.

Speaker Change: So Q1, Q2, and Q3 will be a little bit heavier than the fourth quarter.

Simran: Okay, and sorry, just one more follow-up on Rhapsody. Just to put a finer point on timing, I think on the last call you said you expected to submit the final module of the PMA in April or May. I think if I heard correctly, you're saying end of Q2 now. So should we interpret any wiggle in timing? And more importantly, are you still tracking to a fourth quarter approval and launch? Or should we think of this as more of a 2025 event?

Speaker Change: Okay.

Speaker Change: And sorry, just one more follow up on Rob City, just to put a finer point on timing.

Speaker Change: I think the last call you said you expected to submit the final module of the PMA and all of May.

Speaker Change: I think if I heard correctly youre, saying end of Q2 now so should we interpret interpret any wiggle the timing and more importantly are you.

Speaker Change: While tracking to a fourth quarter approval and launch or should we think of this as more of a 2025 of that.

Fred P. Lampropoulos: Well, I think nothing has changed with respect to timing. So everything is right on schedule, per hour, and representations. I mean, everything is gone.

Speaker Change: Well I think.

Speaker Change: Nothing has changed with respect to timing so everything is right on schedule per hour.

Speaker Change: <unk>.

Speaker Change: Representation.

Fred P. Lampropoulos: We expect in the second quarter we'll file that, and then it's up, and it's into the hands of the FDA. So I don't know. I don't believe that we said that we would have this in the fourth quarter. It's up to the FDA at that point and their regulatory process, but we will have submitted all the modules, and all the data will be in their hands by the end of this quarter. Yeah, I think our messaging has been pretty clear.

Speaker Change: I mean everything is gone we expect in the second quarter, we will file that and then its up and its into the hands of the FDA.

Speaker Change: So I don't know I don't believe that we have said that we would have this in the fourth quarter, it's up to the FDA at that point and their regulatory process, but we will have submitted all the modules and all of the data will be in their hands by the end of this quarter.

Fred P. Lampropoulos: Yeah, I think our messaging has been pretty clear, you know, that we would expect it to be submitted by the end of the second quarter. And then the FDA obviously has 180 days, but it's FDA days, so we'll be at their mercy, but we're ready to answer any questions and make sure we address any other questions.

Speaker Change: I think our messaging has been pretty clear.

Speaker Change: We would expect it to be submitted by the end of the second quarter and then the FDA, obviously has 180 days, but its FDA days so.

Speaker Change: We'll be at their mercy, but we're ready to answer any questions and make sure we address any other questions.

Speaker Change: Perfect. Thank you.

Operator: One moment for the next question. The next question comes from Craig Bejew with Bank of America Securities. Your line is open.

Speaker Change: Thank you.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Craig Bijou with Banc of America Securities. Your line is open.

Craig Bejew: Good afternoon, guys. Thanks for taking the questions. I wanted to follow up on the Q2 guidance. And Raul, I appreciate the color that you gave.

Craig Bijou: Good afternoon, guys. Thanks, Thanks for taking the questions.

Craig Bijou: I wanted to follow up on the Q2 guidance and.

Craig Bijou: Raul I appreciate the color that you gave.

Craig Bejew: But you guys obviously had a strong start to the year, and you're looking for a little bit of a step down. So I wanted to kind of dig into maybe some of the other factors and how to think about growth through the rest of the year. And I guess one segment that I'm looking at is kind of the OEM that you guys said came in a little bit softer. So maybe just how to think about OEM for the rest of the year and anything else that kind of impacts growth that looks like it's slowing a little bit throughout the year.

Craig Bijou: You guys, obviously had a strong start to the year strong growth.

Craig Bijou: And Youre looking for a little bit of a step down so wanted to kind of dig into maybe some of the other factors in how to think about the growth through the rest of the year and I guess, one one segment that I'm looking at is kind of the OEM that you guys. So it came in a little bit softer.

Craig Bijou: So maybe just how do you think about OEM for the rest of the year.

Craig Bijou: Anything else that kind of impacts.

Craig Bijou: The growth that looks like it's slowing a little bit throughout the year.

Raul Parra: Yeah, Craig, you know, thanks for the question. First of all, I think we're super excited about our results for Q1, but that's all, right? It's Q1. There are three quarters left. It's, you know, it's not our practice to raise guidance after the first quarter. I think we'll review things after the second quarter, see how things look. It'll also give us a little bit better visibility on some of the things, you know, surrounding China and volume-based purchasing, so it'll give us a little bit more clarity there.

Speaker Change: Yes, Greg.

Greg: Thanks for the question first of all I think we're super excited about how we our results for Q1.

Speaker Change: But it's just that it's Q1, there's three quarters left.

Speaker Change: It's not our practice to raise guidance.

Speaker Change: After the first quarter I think we'll review things after the second quarter see how things look it also gives us a little bit better visibility on some of the things in our surrounding kind of China and the volume based purchasing so it gives us a little bit more clarity there.

Raul Parra: And so, again, I think we're really excited about how the business did, but, you know, we did leave our guidance unchanged just because it is the first quarter of the year, but, you know, we do see the business doing well. As far as OEM, I think we've talked, you know, we continue to expect solid growth in our OEM business. The reality is we did start talking about kind of, you know, people kind of managing their inventory levels, I think in the fourth quarter last year, and then obviously, you know, if you met with me during any investor conferences, I've talked about it pretty openly.

Speaker Change: And so again I think we're really excited about how the business did.

Speaker Change: But we did leave our guidance unchanged just because it is the first quarter of the year.

Speaker Change: But we do see.

Speaker Change: The business doing well as far as OEM I think we've talked.

Speaker Change: We continue to expect solid growth OEM business.

Speaker Change: <unk>.

Speaker Change: The reality is we did start talking about about the kind of.

Speaker Change: People kind of managing their inventory levels I think in the fourth quarter last year and then obviously if you met with me during any investor conferences.

Raul Parra: We're seeing the same thing that all other OEM companies are dealing with, and that's, you know, people holding back on their inventory purchases. And it's not just, you know, it's essentially, I think most of the industry is doing it. I know we're doing it.

Speaker Change: I've talked about pretty openly we're seeing the same thing there.

Speaker Change: Other OEM.

Speaker Change: Companies are dealing with and that's <unk>.

Speaker Change: We're holding back on their inventory purchases and it's not just essentially I think most of the industry is doing it I know we're doing it.

Speaker Change: I will say I think that would be better I'm not going to surmise, what everybody else is doing but we are managing our inventory levels. I think you saw our free cash flow number.

Raul Parra: I'll say that I think that'd be better. You know, I'm not going to guess what everybody else is doing, but we are managing our inventory levels. I think you saw our free cash flow number. You know, our inventory for this quarter, our T1 was essentially flat. That's why we were able to deliver about $24 million of free cash flow compared to $1.8 million last year. And all of that was really just managing our inventory. So, again, we continue to expect strong growth out of our OEM business.

Speaker Change: Our inventory for this quarter or Q1 was essentially flat. That's why we were able to deliver about $24 million of free cash flow compared to the $1 8 million from last year.

Speaker Change: All of that was really just managing their inventory. So again, we continue to expect strong growth out of out of our OEM business.

Craig Bejew: Got it. Thanks.

Speaker Change: Got it. Thanks, that's helpful and maybe just a couple of quick follow ups on Rhapsody, So we'd love to hear Fred If you guys have had any more conversations in between.

Craig Bejew: That's helpful, Raul. And maybe just a couple quick follow-ups on Rhapsody. So, we would love to hear, Fred, if you guys have had any more conversations in between, you know, getting the data on the last patient with the FDA as you're working to submit the filing. And I'll throw this in, too. I'm not optimistic about you giving me a good answer, Fred, but, you know, any color on how to think about the potential opportunity for Rhapsody yet? I know you wanted to wait, but I figured I'd throw the question out there.

Speaker Change: Getting the data on the last patient with the FDA is as Youre working to submit the.

Speaker Change: Submit the filing and.

Speaker Change: And I'll throw this to.

Speaker Change: I'm not optimistic on you're giving me a good answer Fred but any any color on how to think about the potential opportunity for Rhapsody, yet I know you wanted to wait but.

Speaker Change: Figured I would throw the question out there.

Fred P. Lampropoulos: Well, listen, we've completed the collection of these safety and efficacy outcomes throughout the study in the follow-up period. We have received primary endpoint data for the last enrolled patient.

Fred Luddy: Well Allison we've completed the collection of the safety and the efficacy outcomes throughout the study and the follow up period, we received primary endpoint data for the last enrolled patient.

Fred P. Lampropoulos: We recently completed the monitoring, the data cleaning, and analysis phase, and we remain on track to complete the clinical study and report, and we continue to expect to be in a position to file primary outcomes, as I've said, by the end of the quarter. So we've made a lot of progress, and we've done exactly what we said we would do. And I think after that, then, as we move down the road, we'll see where we are. And when appropriate, we will then take a look at the opportunities in the U.S. commercial strategy, but this is at a time when it's appropriate to do so.

Fred Luddy: We recently completed the monitoring the data cleaning and analysis phase and we remain on track to complete the clinical study and report and we continue to expect to be in a position to file primary outcomes as I've said.

Fred Luddy: By the end of the quarter the second quarter. So we've made a lot of progress and we've done exactly what we said we're going to do and I think after that then as we move down the road, we'll see where we are and when appropriate we will then.

Fred Luddy: Take a look at the opportunities in the U S commercial strategy, but these are at a time when it's appropriate to do so.

Fred P. Lampropoulos: You know, it's really important that we do this correctly, and then we do it in a manner that's befitting for all of you, for our customers, for the FDA. I could go on and on, but this is really... has to be this, and that's what we are.

Fred Luddy: It's really important that we do this correctly.

Fred Luddy: And then we do it in a manner that's be fitting.

Fred Luddy: For all of you for our customers for the FDA I mean I could go on an odd but this is really.

Fred P. Lampropoulos: So that's the best way I can answer it because that's what we're doing. Okay, thanks. That's a really good answer, by the way. I agree, Fred. I had to try. Okay. All right.

Fred Luddy: Has to be disciplined and that's what we are so that's the best way I can answer it because that's what we're doing.

Fred Luddy: So.

Speaker Change: Okay. Thanks, very good answers by the way.

Fred Luddy: Okay.

Fred Luddy: I agree Fred.

Fred Luddy: Good try.

Operator: One moment for the next question. The next question comes from Jayson Bednar with Piper Sandler. Your line is open.

Fred Luddy: Alright.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Jason Bednar with Piper Sandler Your line is open.

Jason M. Bednar: Hey there, good afternoon. Can you hear me okay?

Jason M. Bednar: Hey, there good afternoon can you hear me okay.

Jason M. Bednar: Yes, we got to Jason.

Jason M. Bednar: Great. Thanks for the questions and a nice start to the year here, guys. If I could maybe start on gross margin strength, the trend line here has been pretty darn solid. I think it is probably an underappreciated part of the story right now. I know gross margin improvements are a key element of the new CGI plan you spoke about in the last call, but can you talk about the confidence you have in sustaining year-over-year improvements in gross margin over the balance of the year?

Jason M. Bednar: Great. Thanks for the questions and a nice start to the year here guys.

Jason M. Bednar: If I could maybe start on gross margin strength.

Jason M. Bednar: Trend line here has been pretty darn solid.

Jason M. Bednar: I think probably an underappreciated part of the story right now.

Speaker Change: I know gross margin improvements are a key element of new CGI plan you spoke to in the last call, but can you talk about the confidence you have in sustaining year over year improvements in gross margin over the balance of the year, where to additional improvements come from and maybe remind us how much of a contributor here you can bucket it are allocated.

Jason M. Bednar: Where do additional improvements come from and maybe remind us how much of a contributor they are, if you can bucket them or allocate them, on things such as price and mix versus actions you're taking like transfers to Mexico and the SKU rationalization?

Speaker Change: Such as price and mix versus <unk>.

Speaker Change: The actions, you're taking like transfers to Mexico, and the SKU rationalization.

Raul Parra: Yeah, look, I think it's, you know, Jayson, as you know, we've worked really hard to make improvements in the business, you know, specifically around gross margin. And I think the improvement in Q1 kind of amplifies what we've been working on for the last years. And I think it'll be more of the same, right?

Speaker Change: Yes look I think it's.

Speaker Change: Jason as you know we've worked really hard to make improvements in the business.

Speaker Change: Specifically, our ground gross margin and I think.

Speaker Change: The improvement in Q1 kind of amplifies what we've been working on for the last years and I think it will be more of that more of the same right. So favor.

Raul Parra: So favorable revenue mix, pricing uplift. You know, we're talking about, you know, efficiencies within our product lines and product lines. And so I think when you look at our 2024 guidance, we didn't really guide on gross margin. We guided on operating margin, roughly 18.7 to 18.9, so up 50 to 75 basis points for the year. And we said the majority or the primary driver would be gross margin with some OPEX leverage.

Speaker Change: <unk> favorable revenue mix.

Speaker Change: <unk> uplift.

Speaker Change: We're talking about.

Speaker Change: Efficiencies within our product lines and product line transfers and so.

Speaker Change: When you look at our 2020 for guidance.

Speaker Change: We didn't really guide on gross margin, we guided on operating margin.

Speaker Change: $18 six survive or 18 point, roughly 18, 7% to $18 nine so up 50 to 75 basis points for the year.

Speaker Change: We said the majority of the primary driver of that would be gross margin with also some opex leverage and I think if you look at what we did this year.

Raul Parra: And I think if you look at what we did this year for Q1 in the P&L, it's exactly that. We grew the top line almost 9%, gross margin expanded by about 80 basis points, and our OPEX margin expanded by about 40 basis points, which led to an operating margin expansion of 115 basis points. In my eyes, that's the perfect way to leverage the P&L, strong progression from every line item. So I'll just say that our guidance still kind of holds. We continue to expect our operating margin expansion to be primarily driven by gross margin with some leverage from OPEX. So hopefully, that helps. Yeah,

Speaker Change: Sorry for Q1, and the P&L, it's exactly that we grew the top line.

Speaker Change: Almost 9% gross margin expanded by about 80 basis points, our opex margin expanded by about 40 basis points, which led to an operating margin expansion of 115 basis points I mean thats in my eyes, that's a perfect way to leverage the P&L.

Speaker Change: <unk> progression from every line item so.

Speaker Change: I'll just I'll, just say that our guidance still kind of holds we continue to expect.

Speaker Change: Our operating margin expansion to be primarily driven from gross margin with some leverage from opex. So hopefully that helps.

Jason M. Bednar: Yeah, no, it does. Yeah, no, couldn't agree more either. I know all the levers you got going there. Maybe two others. I'll ask them. They're unrelated here, though.

Speaker Change: Yeah No Doug.

Speaker Change: Greene Morgan there on all the levers we've got going there.

Speaker Change: Maybe two others I'll ask them they are unrelated here, though.

Jason M. Bednar: First, just on, I guess, how do we reconcile the expectation of sales, still the decline in China, even though you posted 20% growth here in the first quarter? I guess, outside of VBP, is there anything else we should be considering for our models that you're factoring in there that would reverse or work against that nice performance here we had in the first quarter? And then the unrelated item, I'll take a swing at a Rhapsody question, but I guess, are there any investments or pre-launch costs, educational efforts, things like that, that we should be thinking about later this year? Or is that also going to be more of a 2025 thing?

Speaker Change: First just on.

Speaker Change: I guess, how do we reconcile the.

Speaker Change: The expectation of sales still the decline in China, even though you posted 20% growth during the first quarter I guess outside of EDT is there anything else, we should be considering for our models you're factoring in there.

Speaker Change: You can reverse or work against that nice performance here, we had in the first quarter and then the unrelated item I'll take a swing on <unk> question, but I guess are there any investments or prelaunch costs educational efforts things like that that we should be thinking about later this year or is that also going to be more of a 2025 items.

Joe Wright: Yeah, this is Joe. Thanks for the question. I'll take the one on China. So our international sales were up 9.5% year on year. So that definitely exceeded the high end of our growth expectations by, as I said, more than 600 basis points. That was primarily driven by strength in APAC, as you point out, and China was particularly strong with a 22% year over year. We did have a softer comp, just so you know where it is.

Speaker Change: Yes. This is Joe thanks for the question I'll take them one on China. So.

Joe Wright: Our international sales were up nine 5% year on year, so that definitely exceeded the high end of our growth expectations by as I said more than 600 basis points.

Joe Wright: That was primarily driven by strength in APAC as you pointed out and in China was particularly strong with a 22% year over year, we did have a softer comp just seeing out there.

Joe Wright: But as far as VBP is concerned, we continue to see quarter to quarter variability and growth trends related to that, which we expected. But we feel good about the guidance we've given on APAC in particular. So no update there, and no other real factors we're dealing with presently.

Joe Wright: But as far as <unk>, we continue to see quarter to quarter variability in growth trends related to that which we expected.

Joe Wright: But.

Joe Wright: We feel good about the guidance, we've given on APAC in particular.

Joe Wright: So no update there and no other real factors, we are dealing with presently.

Joe Wright: And if you want to repeat the second half of your question, Jayson, because I.

Speaker Change: And if you want to repeat the second half of your question, Jason because I.

Jason M. Bednar: Yeah, sure, Raul. Yeah, this just on RAPCITY is, if there's any investments or pre-launch costs or educational efforts that we should be thinking about as we, you know, work some of those investments or costs into our model later this year, or is that more of a 2025 item?

Jason M. Bednar: Yes, sure Rahul yes.

Jason M. Bednar: On Rhapsody is if there is any.

Jason M. Bednar: Investments or prelaunch costs or educational efforts that we should be thinking about as we.

Jason M. Bednar: Some of those investments or costs into our model later this year or is that more of a 2025 items.

Raul Parra: Now, Jayson, whatever investments we think we need to make are included in our guidance already. So, there aren't, you know, any surprises, you know, coming your way from an investment standpoint.

Jason M. Bednar: No Jason so whatever investments, we think we need a needed to make are included in our in our guidance already so there isn't any any surprises coming your way from an investment standpoint.

Raul Parra: I think the biggest investment that we needed to make, you know, outside of, you know, kind of the normal clinical studies and things like that, were the salespeople that we brought on. But as you guys, I think you guys, most of you guys know, part of the reason we did the ANU acquisition last year was to cover the expenses for those additional heads. And so, again, we hired those people. You know, we continue to be excited about how the ANGEL products are doing. And, you know, any expenses are already included in our guidance. So, you shouldn't expect anything outside of that.

Jason M. Bednar: The biggest investment that we needed to make outside of kind of the normal clinical studies and things like that where the salespeople that we brought on but as you guys. I think you guys. Most of you guys know part of the reason we did the <unk> acquisition last year was to cover the expenses for those additional heads and so again, we've hired those people.

Jason M. Bednar: We continue to be excited about how the annual products R. R.

Jason M. Bednar: Are doing and.

Jason M. Bednar: Any expenses.

Jason M. Bednar: There are already included in our guidance. So you shouldn't expect anything outside of that.

Jason M. Bednar: Okay, perfect. Thanks so much.

Speaker Change: Okay perfect. Thanks, so much.

Operator: One moment for the next question. The next question comes from Jayson. Bedford with Raymond James. Your line is open.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Jason.

Jayson Tyler Bedford: Bedford with Raymond James Your line is open.

Jayson Tyler Bedford: Hi, good afternoon. Maybe just a couple follow-ups here. Just on gross margin, clearly a nice step up quarter over quarter, year over year. You covered the drivers. I guess my question is... Revenue is expected to trend higher throughout the year. Is 1Q kind of the low point for gross margin for the year?

Jayson Tyler Bedford: Hi, Good afternoon, maybe just a couple follow ups here just on the gross margin clearly a nice step up quarter over quarter year over year, you covered the drivers I guess my question is.

Jayson Tyler Bedford: Revenue is expected to trend higher throughout the year as <unk> kind of a low point for gross margin for the year.

Raul Parra: Yeah, Jayson, that's a great question. I don't know that we're going to get into the nitty-gritty of that. I mean, I think we gave our guidance on operating margin. We talked about the primary drivers of what that operating margin expansion would be, and I think we'll leave it at that. I think we're happy with the results for Q1, but our guidance still stands, and, you know, I don't know that I have any additional color for you.

Speaker Change: Yes, Jason Thats, a great question I don't know that we're going to get into the cadence of that I mean, I think we gave our guidance on operating margin.

Speaker Change: We talked about the primary drivers of what that operating margin expansion would be and I think we'll leave it at that I think we're we're happy with the results for Q1.

Speaker Change: But our guidance still stands and I don't know that I have additional color for you.

Jayson Tyler Bedford: Okay, just following up on the 2Q revenue guide, are there any changes in the environment that you're expecting? And Raul, it sounded like China VBP is more of a second half impact, if I understood that right.

Speaker Change: Okay. Okay.

Speaker Change: Just following up on the <unk> revenue guide are there any changes in the environment that you're expecting and roll it sounded like China <unk> is more of a second half impact if I have that right.

Raul Parra: Yeah, I think that's the way we've described it. You know, I think... Again, we're excited about how the business is doing, Jayson, and we've given our growth expectations for the second quarter. OEM, I think, is the one item that I think was a little bit softer in Q1, but I think, hopefully, the reflection of our guidance in Q2 gives people some comfort there, and the fact that we continue to remain confident that OEM growth will be strong for the rest of the year. But, you know, we'll evaluate things after the second quarter and see where we are.

Speaker Change: Yes, I think that's the way we've described it.

Speaker Change: I think.

Speaker Change: Again, we're excited about how the business is doing Jason and we've given our growth expectations for the second quarter.

Speaker Change: <unk>.

Speaker Change: OEM I think.

Speaker Change: We are.

Speaker Change: Is the one item that I think there was a little bit softer in Q1.

Speaker Change: I think.

Speaker Change: The reflection of our guidance in the Q2 kind of gives people some comfort there and the fact that we continue to remain.

Speaker Change: Confident that OEM growth will be will be strong for the rest of the year, but.

Speaker Change: We'll evaluate things after the second quarter and see where we're at.

Jayson Tyler Bedford: Okay, just on the OEM timing dynamic, did it... Do these orders slip into 2Q, or do these orders slip into the second half? Do you have visibility on that?

Speaker Change: Okay and just on the OEM.

Speaker Change: OEM timing dynamic did it.

Speaker Change: Slip into <unk> or are these orders slipped into the second half do you have visibility on that.

Raul Parra: You know, we've given our guidance for Q2, and I don't want to get into that. I'll just say that, you know, it's all included, and we believe that OEM, you know, for the full year will have strong revenue growth.

Speaker Change: We've we've given our guidance for Q2, and I don't want to get into that.

Speaker Change: I will just say that.

Speaker Change: We've.

Speaker Change: It's all included and we believe that OEM.

Speaker Change: For the full year will be will be a strong revenue growth.

Jayson Tyler Bedford: Okay, fair enough. Thank you.

Speaker Change: Okay fair enough. Thank you.

Operator: One moment for the next question. The next question comes from Steve Lichtman with Oppenheimer. Your line is open.

Speaker Change: One moment for the next question.

Speaker Change: Okay.

Speaker Change: The next question comes from Steve Lichtman with Oppenheimer. Your line is open.

Steven Michael Lichtman: Thank you. Hi guys. Fred, I think I noted that you talked about more sort of specific products on this call than I think you talked about in a lot of previous calls, obviously, in addition to Rhapsody. Can you talk from a high level about how you're feeling about your R&D pipeline? It looks like even, again, this quarter, you invested a little bit more than we expected. Talk a little bit about what's going on internally there in terms of focus on new product flow. I know you like to talk a lot about singles and doubles, but you highlighted some new products here.

Steven Michael Lichtman: Thank you hi, guys.

Steven Michael Lichtman: So and I think I know today, you talked about more.

Steven Michael Lichtman: <unk> products on this call them and I think you've talked a lot of previous calls FC. In addition to Rhapsody can you talk from a high level, how you're feeling about your.

Steven Michael Lichtman: Our R&D pipeline and it looks like even again this quarter you invested a little bit more than we expected.

Steven Michael Lichtman: Yes, a little bit about your maybe what's going on internally there in terms of focus on our new product flow I know you'd like to talk a lot about some singles and doubles, but you highlighted several new products here.

Fred P. Lampropoulos: Listen, we continue to expect innovation in our business. We have a track record of what we do every year.

Steven Michael Lichtman: Yes.

Steven Michael Lichtman: Continuing to expect innovation and.

Steven Michael Lichtman: In our business, we have a track record.

Steven Michael Lichtman: Of what we do every year, we have new product introductions, Steve I hate to say, it's business as usual, but that that really is.

Fred P. Lampropoulos: We have new product introductions. Steve, I hate to say it's business as usual, but that really is what Merit is doing. We are announcing more product introductions than we have in the past to answer these questions about the pipeline. In other words, we're not sacrificing our earnings for the investments we need to make for the future. So we continue to do that, and we think it helps you guys to better understand the cadence. When I say cadence, it's like this:

Steven Michael Lichtman: What merit.

Steven Michael Lichtman: Is doing we are announcing more product introductions that we have in the past because to answer these questions about the pipeline.

Steven Michael Lichtman: In other words, we're not sacrificing our earnings for the investments we need to make for the future. So we continue to do that.

Steven Michael Lichtman: And we think it helps you guys to better understand the cadence when I say cadence.

Fred P. Lampropoulos: It's still the same Merit in some ways and a different Merit in other ways if you look at the Foundations for Growth and CGI. But one thing that hasn't changed is that we know, understand, innovate, and deliver. Those are the three key words that we use at Merit, and that continues to be what we do every single day. In fact, I'm looking at my desk. I wish you could see the products and the various things that are sitting here. You can't see that, but, you know, we continue to do what brought us this far and which will take us into the future, and that is investment, research, and development.

Steven Michael Lichtman: <unk>.

Steven Michael Lichtman: It's still the same merit in some ways in a different merit in other ways. If you look at that.

Steven Michael Lichtman: The foundations for growth in our CGI, but one thing that hasn't changed is the.

Steven Michael Lichtman: Understand.

Steven Michael Lichtman: Innovate and deliver those are the three key words that we use at merit and that continues to be what we do every single day in fact I'm looking at my desk I wish you could see the products and the various things that are sitting here you can't see that but we continue to do what brought us this far and which will take us into the.

Steven Michael Lichtman: Future net of investment in research and development.

Steven Michael Lichtman: Great, thanks, Fred. And then I apologize if I missed this, but if someone says something like that,

Speaker Change: Great. Thanks, Fred and then I apologize if I missed this but.

Speaker Change: Someone else asked but on the inorganic side can you talk about your latest views on M&A, what you're seeing out there.

Steven Michael Lichtman: Can you talk about your latest views on M&A, what you're seeing out there, your appetite, etc.?

Fred P. Lampropoulos: Yeah, listen, I think it's well known that we have a good cash position. We're in a position where we could do things.

Speaker Change: Your appetite et cetera.

Speaker Change: Yes.

Speaker Change: It's well known that we have a good cash position. We're in a position we could do things I think we have to be selective we continue to work, but it has to be consistent with the investments and the things that we've told you that we've committed to investors. So we're not just doing or would we do anything just for the sake of doing something.

Fred P. Lampropoulos: I think we have to be selective. We continue to look, but it has to be consistent with the investments and the things that we've told you and that we've committed to investing in. So we're not just doing, or would we do anything just for the sake of doing something? It has to fit with the business, it has to align with our sales forces, and our long-term objectives. And it continues to be the same in those aspects.

Speaker Change: Has to fit with the business it has to align with our sales forces and our long term objectives and it continues to be the same in those aspects.

Steven Michael Lichtman: Great. Thanks so much, Fred.

Speaker Change: Great. Thanks, so much Greg.

Operator: One moment for the next question. The next question comes from Michael Petusky with Barrington Research. Your line is open.

Greg: You bet.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from Michael Pitofsky with Barrington Research. Your line is open.

Michael John Petusky: Good evening, guys. Raul, I'm wondering if there was any thought to sort of making an adjustment in the guide on APAC for the year given the strong Q1 organic constant currency growth? I mean, to me, it just seems like that's an awfully conservative guide for a full year when you start off with maybe 13%, 14%, 15% growth.

Michael Pitofsky: Good evening guys.

Michael Pitofsky: I'm wondering was there any thought to sort of making an adjustment in the guide on APAC for the year given the.

Michael Pitofsky: The strong Q1 organic constant currency growth I mean to me. It just seems like an awfully Conservative guide for full year. Two when you start off maybe 13, 14 and 15% growth in Q1.

Raul Parra: Yeah, look, Mike, I mean, when we look at the business, we're super excited about how we did again. I, you know, going to repeat what we did. I mean, you know, you know, over 9% organic constant currency growth during the year. Sorry, constant currency. You know, when you when you look at it, you know, really strong start, but it's just not in our nature to, you know, go out and update guidance, you know, after q1.

Speaker Change: Yes look I'm, Mike I mean, I think when we look at the business. We're Super excited how we did again going to repeat.

Speaker Change: What we did.

Speaker Change: Over 9% organic constant currency.

Speaker Change: Currency growth during the year of constant currency sorry.

Speaker Change: When you look at it really strong start, but it's just not in our nature.

Speaker Change: To go out and update guidance after Q1.

Raul Parra: And so I, you know, I think we're looking at everything. I think we're really happy with how q1 came out. And, you know, we'll look at things after the second quarter and evaluate there, but excited how the business is off to a really good start.

Speaker Change: And so.

Speaker Change: Thank you.

Speaker Change: Looking at everything I think were.

Speaker Change: Really happy how Q1 came out.

Speaker Change: And we'll look at things after the second quarter and evaluate their but excited how the business is off to a really good start.

Michael John Petusky: So, I'm just curious if you have any... So much of the free cash came in in the second half. Obviously, I would suspect, based on how you did in this quarter, it's going to be much more balanced. I mean, is there anything you can say about that? Like, is it 40 percent of free cash in the first half, 60 percent? I mean, is that a decent guess?

Speaker Change: So the.

Speaker Change: I was just curious if you have any.

Speaker Change: I think you can share on the cadence of free cash obviously last year was an unusual year in that so much of the free cash came in in the second half and particularly in the fourth quarter.

Speaker Change: Obviously I would suspect based on how you came in this quarter, it's going to be a much more balanced I mean is there anything you can say about that like is it 40% to 40% of free cash in the first half 60%.

Raul Parra: You know, I think on this one, you know, when we talk about revenue and the cadence, you know, seasonality with our, you know, I feel a little more comfortable with that one. I think on free cash flow, there's just so many timing-related things that sometimes are just outside of our control. And so I don't feel comfortable giving a cadence there, other than to say that I'm, you know, really happy with the way we started.

Speaker Change: Decent gas can you just speak to that.

Speaker Change: Mike I think on this one when we talk about revenue and the cadence of seasonality with our I feel a little more comfortable with that one I think on free cash flow. There's just so many timing related things that sometimes are just outside of our control and so I don't feel comfortable giving cadence there.

Speaker Change: Other than to say that.

Speaker Change: Really happy with.

Raul Parra: You know, $24 million, and really, you know, just kind of a thanks to our operations group because it's really hard to manage inventory, especially when we have a global footprint with global distribution and with the amount of products that we have. And for them to keep it flat, you know, they have a good plan this year to manage inventory, so they're off to a really good start. We still have confidence in delivering at least $115 million of free cash flow this year, and we still have confidence that we'll deliver at least $400 million, you know, through the end of 2026.

Speaker Change: The way we started.

Speaker Change: $24 million and really.

Speaker Change: Just kind of think silver to our operations group, because it's really hard to manage inventory, especially when we have a global footprint with global distribution and with the amount of products that we have and for them to keep it flat.

Speaker Change: They have a good plan this year to manage inventory so they're off to a really good start.

Speaker Change: We still have confidence in delivering at least $115 million of free cash flow. This year, and we still have confidence that will deliver at least $400 million through the end of 2026.

Raul Parra: So, you know, other than that, I, you know, feel good about how we did in Q1. Fred, so let me, let me just ask you a question: have you brought a lot of products, based on your experience, based on? I mean, do, and Raul's comments, which I think were important, 180 days for FDA approval is sort of like watching the last four minutes of a football game. That's not really for me. I'm just curious, do you think there's going to be a lot of stops and starts, sort of Q&A back and forth on a product like this? Do you have any sort of expectation around that?

Speaker Change: So.

Speaker Change: Other than that.

Speaker Change: Feel good about how we did in Q1, yes, I think Mike is as Fred I think the important thing is the focus that we have on this.

Speaker Change: Out there we've made the commitment we kept our past commitments and.

Speaker Change: And I think that's really the headlines if it were me. It's just this is a big deal and very candidly. We're all compensated the entire company is aligned on this.

Speaker Change: It's not a small deal it's a big deal to merit.

Speaker Change: So.

Speaker Change: Fred So let me let me just ask a last one to you.

Fred Luddy: You've brought a lot of the last several decades brought a lot of.

Fred Luddy: Products from development.

Fred Luddy: Into commercialization based on your experience based on your.

Fred Luddy: Your sense of.

Speaker Change: <unk> I mean.

Speaker Change: And Robert's comments I think were important 180 days for FDA is sort of like watching last four minutes of a football game.

Speaker Change: Four minutes.

Speaker Change: I'm just curious do you think theres going be a lot of stops and starts sort of Q&A back and forth on a product like this do you have any any sort of expectation around that based on your experience. Thanks, yes listen only from the standpoint that we're focused on what we need to do we will respond appropriately and this is important to the company.

Fred P. Lampropoulos: Yeah, listen, only from the standpoint that we're focused on what we need to do; we'll respond appropriately, and this is important to the company. So, you know, we can't control the FDA. We can control ourselves, and we can direct our resources to answer the questions as they come. So it's really just, we'll do our part, Mike.

Speaker Change: So we can't control the FDA, we can control Austin and we can direct our resources to answer the questions as they come. So it's really just we will do our part Mike Okay Fair enough. Thanks, guys I appreciate it.

Michael John Petusky: Okay, fair enough, thanks guys, I appreciate it.

Operator: One moment for the next question. The next question comes from Jim Sidoti with Sidoti and Company. Your line's open. Hi, Gideon.

Speaker Change: One moment for the next question.

Speaker Change: Next question comes from Jim Sidoti with Sidoti <unk> Company. Your line is open.

James Philip Sidoti: Hi, good afternoon. Thanks for taking the time to ask the question. You know, I know you're probably sick of questions on China, but it's, I think it's difficult for all of us to get our arms around it. You know, when you had such a strong quarter, up 20% this quarter, why do you expect a 4% decline? And I know in previous years, you've been concerned about Volume Price Discounts, and then as the year ended, it wasn't quite as significant as you thought. I mean, how confident are you this year that things are going to kick in in the second half of the year?

James Philip Sidoti: Hi, good afternoon, thanks for taking the question.

James Philip Sidoti: I know, you're probably sick of questions on China, but it's <unk>.

Fred Luddy: Yes.

James Philip Sidoti: For all of us to get our arms around it.

James Philip Sidoti: Had such a strong quarter up 20%.

James Philip Sidoti: This quarter, while you expect a 4% decline.

James Philip Sidoti: And I know in past years, you've been concerned about the.

James Philip Sidoti: The volume price discounts and.

James Philip Sidoti: And then as the year ended up it wasn't quite as significant as you thought I mean, how confident are you. This year that those those are going to kick in in the second half of the year.

Joe Wright: Hi Jim. This is Joe. I can take that one.

James Philip Sidoti: Hi, Jim This is Joe I can take that one.

Joe Wright: As you know there is a lot of quarter to quarter variability with Pvp in China. So you're right in a sense that it's been difficult to project really when that impact will come we are.

Joe Wright: As you know, there's a lot of quarter-to-quarter variability with BVP in China. So you're right in the sense that it's been difficult to project really when that impact will come. We are continually updating our models and trying to determine when that impact will come, but we feel pretty good about the full-year guidance. And keep in mind, APAC encompasses more than just China. There's Japan, which is a significant revenue driver for us, and Southeast Asia, including Korea. So yeah, all I can say is we're confident with the number we projected for the year, fully realizing that there will be some variability along the way.

Joe Wright: Our continually updating our.

Joe Wright: Our models.

Joe Wright: Trying to determine.

Joe Wright: Term and when that impact will come but we feel pretty good about the full year guidance and keep in mind APAC incorporates more than just China. There is Japan, which is a significant revenue driver for us and Southeast Asia Korea. So.

Joe Wright: Yes, all I can say is we're confident with the number we've projected for the year fully realizing that there will be some.

Joe Wright: Some variability along the way.

Joe Wright: So, I mean, potentially, you could see more of an impact maybe in the last quarter, maybe into the first quarter of 2025.

Joe Wright: So.

Joe Wright: Potentially you could see more of an impact maybe in the last quarter, maybe into the first quarter of 2025.

Joe Wright: Yeah, I don't think we'll get to that point there, Jim. But look, we're trying to be as transparent as possible on this. We've detailed the headwinds out in advance in our guidance, and I know it can be frustrating to investors. Quite frankly, it's frustrating to us, too. But there is variability. I think we've managed it accordingly. We haven't given you any surprises when it comes to China, I should say.

Speaker Change: Yes, I don't think we'll get to that point, there, Jim but look.

Joe Wright: We're trying to be as transparent as possible on this.

Joe Wright: We've detailed kind of the headwinds out in advance in our in our.

Joe Wright: In our guidance.

Joe Wright: I know it can be frustrating to investors quite frankly.

Joe Wright: Frustrating to us too.

Joe Wright: But there is variability I think.

Joe Wright: I think we've managed it accordingly, we haven't given you any surprises.

Joe Wright: Negatively I should say when it comes to China.

Raul Parra: And we are seeing the impacts. And I know that's hard to see because of the results that we're delivering. But Joe and I looked at a report the other day, and we are seeing pressure on some of our products. And so this isn't something that's made up, that we're just kind of making up. It's real, and it's impacting the business, but I think we've tried to manage it appropriately. But Jim, this...

Joe Wright: And.

Joe Wright: We are seeing the impacts and I know that's hard to see because of the results that we're delivering but we know Joe and I looked at a report the other day and we.

Joe Wright: We are seeing price pressure on some of our products.

Joe Wright: And so this isn't something that's made up that were just kind of.

Joe Wright: Making up its real and its impacting the business, but I think we've tried to manage it appropriately but Jim this spread look we remain confident in our long term plan in China and I think that's critical merit is hitting for the long run.

Fred P. Lampropoulos: This is Fred. Look, we remain confident in our own long-term plan in China, and I think that's critical. You know, Merit is in for the long run, and we're confident about the future for Japan and all of APAC. We think it's a big opportunity for the company.

Joe Wright: And we're confident about the future for Japan, and all of APAC, We think it's a big opportunity for the company and just as a reminder, I think the whole goal was to kind of de risked the China component from our guidance right. I think we were pretty pretty clear on our call that a portion of it was actual tangible things that we knew are happening in the.

Raul Parra: And just as a reminder, I think the whole goal was to kind of de-risk the China component from our guidance, right? I think we were pretty clear on our call that a portion of it was actual, you know, tangible things that are happening in the business that's in our guidance, and a portion was things that we think could be coming on in the third and fourth quarter that our group, you know, thinks that we're going to have an impact.

Joe Wright: Business, that's in our guidance and a portion was things that we think.

Joe Wright: It could be coming on in the third and fourth quarter that we.

Joe Wright: That our group.

Joe Wright: I think that we're going to have an impact now whether those come to fruition.

Raul Parra: Now, whether those come to, you know, fruition or not, we'll wait and see. But, you know, we'll have better visibility as we exit, you know, kind of the second quarter, and then hopefully, we can provide you guys with an update. Okay.

Joe Wright: Fruition or not we'll wait and see but we will have better visibility as we exit the second quarter and then hopefully we can provide you guys an update then.

James Philip Sidoti: Okay. All right. And then the last one for me, it looks like you paid down about $24 million of debt in the quarter. I assume that was on the line. Can you just remind me what the interest rate is on that debt that you paid down?

Speaker Change: Okay, Alright, and then my last one for me.

Speaker Change: Pay down about $24 million of debt in the quarter Alright soon those on the line can you just.

Speaker Change: What's the interest rate on that debt that you paid down.

Raul Parra: It's about well, yeah, I mean, I think so when you're looking at the, I guess there are a couple components, and I'll try and break it down. Sorry, but we have a term loan that we have. That debt is at about 1.6 or something like that. We're paying that down, and we'll have that paid off this year. Then there's obviously the convert that has a rate of around, you know, three percent. And so, you know, there's a little bit of variability there. But, you know, for the most part, you know, that's what we're paying down is the term loan right now, Jim.

Speaker Change: It's about.

Speaker Change: Yes, I mean I think.

Speaker Change: So when youre looking at the I guess.

Speaker Change: Theres, a couple of components and I'll try and break it down sorry, So we haven't.

Speaker Change: A term loan.

Speaker Change: We have that debt is at about one six or something like that we're paying that down and we will have that paid off this year.

Speaker Change: Then there is obviously the convert.

Speaker Change: That has a rate of around 3%.

Speaker Change: And so the.

Speaker Change: There is a little bit of variability there but.

Speaker Change: For the most part.

Speaker Change: That's what we're paying down as is the term loan right now Jim.

Speaker Change: Okay.

Speaker Change: Alright, thank you.

Speaker Change: One moment for the next question.

Operator: One moment for the next question. The next question comes from Mike Matson with Needleman Company. Your line is open. Yeah, thanks. So just wanted to start with the one on Rhapsody. So do you have any plans to apply for new technology add-on payment and transitional pass-through to get some additional reimbursement given that it's a breakthrough device?

Speaker Change: The next question comes from Mike Matson with Needham <unk> Company. Your line is open.

Michael Stephen Matson: Yes. Thanks.

Michael Stephen Matson: So just wanted to start with one on <unk>. So.

Michael Stephen Matson: Do you have any plans to apply for new technology add on payment and or.

Michael Stephen Matson: Transitional pass through to get some additional reimbursement given that it's a breakthrough device.

Michael Stephen Matson: Yeah, I think... Mike, as we pointed out, as we get through this first six months, then we're planning on a lot of different things, the right time for the release of data, the right time for release to the public. All of these things are things that are all being worked on. And at the appropriate time, we've been involved in this and this strategy for a long time. So I will just tell you simply, to capitalize on it all, we're prepared, we've been working on it, none of these are new to us, and at the right time, we will do all these things that are most beneficial to our shareholders and the company.

Speaker Change: Yes, I think.

Michael Stephen Matson: Mike.

Michael Stephen Matson: As we pointed out as we get through this first six months then that's really we're planning on a lot of different things, but right time for release of data the right time.

Michael Stephen Matson: <unk> released to the public all of these things are all things that are all being worked on and at the appropriate time.

Michael Stephen Matson: We've been involved in this and this strategy for a long time. So I will just tell you simply to capitalize at all we're prepared we've been working on it none of these are new to us and at the right time, we will do all of these things that we're most beneficial to our shareholders in the company.

Fred P. Lampropoulos: Okay, thanks. And then, you know, there was some news earlier this week that Hologic was buying Endo Magnetics. I believe that product competes with your Scout product. So, you know, I assume you've already been competing with them in the marketplace, but, you know, Hologic's kind of a well-known brand in the breast area. So, you know, is there any reason to be concerned about this, and can you maybe just remind us how big the TAM is here? I assume there's probably enough room for multiple players, but...

Michael Stephen Matson: Okay. Thanks, and then there was some news earlier this week that Hologic spying Endo Magnetics I believe yes.

Michael Stephen Matson: That product competes with your scout product so.

Michael Stephen Matson: I assume you've already been competing with them in the marketplace, but <unk> kind of a well known brand in the breast area. So.

Michael Stephen Matson: Is there any reason to be concerned about the spin can you maybe just remind us what how big the Tam is here I assume theres, probably enough room for multiple players but.

Joe Wright: Yeah. Hi, Mike. This is Joe. I think I can take that one.

Michael Stephen Matson: Okay.

Michael Stephen Matson: Yes, Hi, Mike. This is Joe I think I can take that one you are right. We have been competing against the <unk> product for many years now in the market.

Joe Wright: You're right. We have been competing against the Endomag product for many years now in the market. As you probably know, we remain the market leader in this space, and we're very excited about the prospects for growth here. We continue to invest in market-leading innovations. We mentioned ScoutMD, which was recently approved. So our goal is simply to continue to focus on maintaining that market lead and delivering innovation to the market. I won't get into the total addressable market, but I think our expectation is and what our belief is that the market will, over time, go completely wire-free, and that's what we're working to achieve.

Joe Wright: As you probably know we remain the market leader in this space.

Joe Wright: We're very excited about the prospects for growth here, we continue to invest in market leading innovations.

Joe Wright: Mentioned, the Scout MD, which recently was approved.

Joe Wright: Our goal is simply to continue to focus on maintaining that market lead and delivering innovation to the market.

Joe Wright: I won't get into the.

Joe Wright: Total addressable market, but.

Joe Wright: I think our expectation is and what our belief is that the market will.

Joe Wright: Over time go completely wire free and that's what we're working to achieve.

Joe Wright: Again, we've competed against magnetic technologies in the past, including endomag, and we're confident in our ability to compete favorably against all the technologies out there, especially from a technological point of view. We won't get into that, but I think our technology is not just that we're the market leader, Mike, but we're the technological leader.

Joe Wright: Again, we've competed against magnetic technologies in the past, including endometrial and we're confident in our ability to.

Joe Wright: Compete favorably against all the technologies out there, especially from a technology point of view, we won't get into that but I think our technology is not just that we're the market leader, Mike, but we're the technology leader.

Michael Stephen Matson: Yeah, I got it. Thank you.

Speaker Change: Yeah got it thank you.

Operator: One moment for the next question. The next question comes from John Young with Canaccord. Your line is open.

Speaker Change: One moment for the next question.

Speaker Change: The next question comes from John Young with Canaccord. Your line is open.

John Edward Young: Good evening. Thanks for taking the questions and congrats on the quarter. I just want to, it sounds like you won't give this, but on RASC-IT, are there any estimates of when we could see the data and where, you know, any medical meaning that you're looking at to release this to the scientific community?

John Edward Young: Good evening, thanks for taking the questions and congrats on the quarter.

John Edward Young: I just wanted to it sounds like you won't give this but but on Ryan from Rhapsody is there any estimate of when we could see the data and where any medical meeting that youre looking at released scientific.

John Edward Young: Scientific community.

Fred P. Lampropoulos: Fred?

Right.

Speaker Change: Yeah. So the general answer is no.

Speaker Change: Now maybe a little more specific let us get it filed there are a lot of factors here John that.

Fred P. Lampropoulos: Yeah, so the general answer is no. Now, maybe a little more specific; let us get this filed. There are a lot of factors here, John, that talk about the value that's being created. Issues like when the right time is, what, there's a lot of factors that go into this. We just want to do it correctly to maximize the opportunity. So we could get in a hurry, we could get pushed, but if we do, and first of all, we won't, but it doesn't help the value of our shareholders.

Speaker Change: That talk about the value that's been created issues like when the right timing is what what.

Speaker Change: There's a lot of factors that go into this we just wanted to do it correctly to maximize the opportunity. So we could get in a hurry, we could get pushed but if we do and first of all we want but it doesn't help the value to our shareholders. So I think that's important for you to understand that we're doing things in a disciplined manner.

Fred P. Lampropoulos: So I think that it's important for you to understand that we're doing things in a disciplined manner and that we believe, and have been counseled, that in looking at these things, this is what maximizes value for shareholders and, equally important, the physician community. And that's what we have to remember. This is serious stuff we're talking about. These are important issues. And at the appropriate time, we will release all of this information for the assessment of the public and physicians at the appropriate time.

Speaker Change: <unk> that we believe and have been counseled that and looking at these things. This is what maximizes value for shareholders.

Speaker Change: And equally important.

Speaker Change: The physician community.

Speaker Change: And that's what we have to remember this is serious stuff. We're talking about these are important issues and at the appropriate time, we will release all of this information for the assessment of the public and physicians at the appropriate time.

John Edward Young: Okay, thanks. And then just me moving to SIR. You guys, you know, had a very large showing there, too. Now, how much of the new Bluegrass and Angio products helped grab attention from the interventional radiology call point? And how large is that sales force now? I remember you previously said about six to eight reps for the renal care call point. Are you continuing to scale that as those revenues grow?

Speaker Change: Okay. Thanks, and then just moving to <unk>.

Speaker Change: You guys had.

A very large showing their know how.

Speaker Change: Much of that.

<unk> NGL products out to grab attention from interventional radiology call point and how how large is that sales force now I remember you previous six to eight perhaps through the renal care call point.

Speaker Change: We continue to scale that as those revenues grow thanks again.

Fred P. Lampropoulos: Look, we think first of all, as you know because you've heard, Merit had a very good showing not only there but here at our facility with over 150 positions. It's part of our renal therapy group.

Speaker Change: Look we think first of all as you know because you've heard.

Speaker Change: <unk> had a very good showing not only there but here at our facility with over 150 positions. It's part of our renal therapy group I think that strategy is sound and we're seeing it.

Fred P. Lampropoulos: I think that strategy is sound. We're seeing it execute the way we had anticipated, and we are scaling. We don't give out specific numbers, but it is a successful program, and we continue to believe it will be. Joe, do you want to comment on it, though?

Speaker Change: Execute the way we had anticipated and we are scaling we don't give out specific numbers, but it is a successful program.

Speaker Change: Can you believe it will be.

Speaker Change: Joe do you want to comment on that though.

Joe Wright: It's your program, so yeah, we decided we had enough scale in that product portfolio to break out a dedicated sales group. So, to your point, that's what we did. And we're fully confident in our ability to scale that over time and be fully prepared for the launch of Rhapsody whenever that may come.

Joe Wright: Program. So yes, we decided we have enough scale in that product portfolio to breakout a dedicated sales group. So to your point, that's what we've done and we're fully confident in our ability to scale that over time and be fully prepared for.

Joe Wright: The launch of Rhapsody whenever that May come.

John Edward Young: Okay, great. And maybe just a quick follow-up. What scale do you think is needed to support Rhapsody at launch?

Speaker Change: Okay, Great and then a quick follow up what scale do you think is needed to support Rhapsody at launch.

Fred P. Lampropoulos: You know, we don't talk about those things because we don't want to give that information to our competitors and it's not generally what we talk about. We will, at the appropriate time, release data and information on TAM and all the numbers, all these things. You'll have all of these answered in due time.

Speaker Change: You know, we don't talk about those things because we don't want to give that information to our competitors and it's not generally what we talk about we will at the appropriate time released data and information on Tam.

Speaker Change: And all the numbers all of these things you'll have all of these answered in due time.

John Edward Young: Yeah, John, I mean, obviously, she's going to be excited about the product, but, you know, we'll talk about the U.S. commercial strategy, reimbursement strategy, all those things, you know, as Fred mentioned. And let me just say one other thing. We are extraordinarily excited about this project coming down the road. Very excited. So, just for the record.

Yes, John I mean, obviously continue to be excited about the product, but we will.

Operator: I have no further questions at this time. I would like to turn the call back to Fred for closing remarks.

Speaker Change: We will talk about the U S commercial strategy reimbursement strategy all those things.

Speaker Change: As Fred mentioned.

Speaker Change #100: When appropriate and let me just say one other thing we are.

Speaker Change #100: Jordan are really excited about this project coming down the road, yes, very excited so just for the record.

Speaker Change #101: Got it thanks again.

I show no further questions at this time I would like to turn the call back to Fred for closing remarks.

Fred P. Lampropoulos: Ladies and gentlemen, it's the top of the hour. We got everything done in one hour.

Speaker Change #101: Okay.

Fred Luddy: Ladies and gentlemen, it's the top of the hour, we got everything done in one hour. We appreciate we know there are a lot of other calls going on Robert and Joe will be available to discuss with you.

Fred P. Lampropoulos: We appreciate it. We know there are a lot of other calls going on. Raul and I and Joe will be available to discuss with you one-on-one. And we thank you very much for your consideration and your time. We wish you all the very best. Signing off from Salt Lake City. Good evening.

Fred Luddy: One on ones and we thank you very much for your consideration your time, we wish you all the very best signing off from Salt Lake City. Good evening.

Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.

Speaker Change #102: This concludes today's conference call. Thank you for your participation you may now disconnect.

Speaker Change #102: Okay.

Speaker Change #102: [music].