Q2 2024 Merit Medical Systems Inc Earnings Call

August 1, 2024

Operator: Please enter your dial-in PIN and press pound when finished. ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??? ??? ??? ??? ??? ??? ??? ??? ??? ?? ?? ?? ?? ?? ?? ?? ?? ?? ?? ??? ??? ??? ??? ??? ??? ??? ??? ??? ??? Ladies and gentlemen, thank you for standing by. Welcome to the Merit Medical System's second quarter 2024 earnings conference call. At this time, all participants have been placed in a listen-only mode.

Operator: Please note that this conference call is being recorded, and the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Mr. Fred Lampropoulos, Merit Medical Systems, Founder, Chairman, and Chief Executive Officer. Please go ahead.

Fred Lampropoulos: Thank you and welcome everyone. I am joined on today's call by Raul Parra, our Chief Financial Officer and Treasurer, Joe Wright, our President, and Brian Lloyd, our Chief Legal Officer and Corporate Secretary. Brian, would you mind reading us through the Safe Harbor Statements, please?

Brian Lloyd: I would like to remind everyone that this presentation contains forward-looking statements that receive safe harbor protection under federal securities law. Although we believe these forward-looking statements are based upon reasonable assumptions, they are subject to 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 the expectations and projections expressed or implied by our forward-looking statements.

Brian Lloyd: In addition, any forward-looking statements represent our views only as of today, August 1st, 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 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. For discussion of factors that could cause actual results to differ from these forward-looking statements, please also refer to our most recent findings with the SEC, which are available on our website. Our financial statements are prepared in accordance with accounting principles that are generally accepted in the United States.

Brian 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. 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 SEC 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.

Brian Lloyd: Readers should consider non-GAAP financial measures in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP. Please note that these calculations may not be comparable with similarly titled 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.

Fred Lampropoulos: Thanks Brian, I appreciate it very much. Let me start with a brief agenda of what we will cover during our call and prepared remarks today. I will start with an overview of our financial results and key operating progress areas during the second quarter. After my opening remarks, Joe will provide a summary of our revenue results before turning the call over to Raul, who will provide a more in-depth review of our quarterly financial results and our financial guidance for 2024, which we updated in today's press release. Then we will open the call for your questions.

Fred Lampropoulos: Our second quarter results exceeded our expectations. We reported total revenue of $338 million in the second quarter, up 5.6% year-over-year on a gap basis and up 6.6% year-over-year on a constant currency basis. The constant currency revenue growth we delivered in the second quarter was stronger than the high end of the range of growth expectations that we outlined on our quarter one earnings call. Specifically, we expected constant currency revenue growth for the second quarter in the range of 4.7% to 5.8% year over year.

Fred Lampropoulos: Importantly, the better-than-expected constant currency revenue growth in the second quarter was primarily driven by strong organic growth and, to a lesser extent, contributions from acquired products, which modestly exceeded the high end of our growth expectations as well. With respect to our profitability performance in the second quarter, we leveraged the solid revenue results to deliver non-gap gross profit and operating profit growth of 6% and 11%, respectively, which resulted in year-over-year margin expansion by approximately 15 basis points and 92 basis points, respectively. And we delivered 17% growth in our non-GAAP earnings per share, which exceeded the high end of our expectations as well.

Fred Lampropoulos: Perhaps most notably, we generated nearly $58 million of free cash flow in the quarter, a record for Merit, and we have generated more than $82 million of free cash flow over the first half of 2024, representing a more than five-fold increase year over year. We believe our second quarter results reflect continued strong momentum in the business over the first half of 2024, and we are confident in our team's ability to deliver the updated financial guidance that Raul will review later on the call. While we are proud of the results achieved over the first half of the year, we are not resting on our laurels.

Fred Lampropoulos: We are focused on delivering continued strong execution, stable currency, constant currency growth, improving profitability, and solid free cash flow in 2024, as well as continued progress in our Continued Growth Initiative program-related financial targets for the three-year period ending December 31, 2026. I would now like to share a brief update on several areas of operational progress in recent months. With respect to new product introductions, we announced multiple regulatory clearances and commercial introductions in the second quarter, including, in May, we announced FDA 510K clearance for our seeds vascular plug and the commercial launch of our Bering NSPVA expressed prefilled syringes in the United States and Australia.

Fred Lampropoulos: These additions to Merit Symbolic's portfolio complement a comprehensive offering of microsphere, particle, and gelatin foam products, supported by a range of microcatheters, guide wires, and other enabling devices. We also announced the U.S. commercial release of the BASIC-SKY inflation device in May. BASIC-SKY is the latest addition to Merit's comprehensive inflation device portfolio, which includes both digital and analog devices.

Fred Lampropoulos: The Basic Sky is available as a stand-alone solution and in kits with Merit angioplasty packs configured to offer complementary Access Plus, Honor, and Ph. D. hemostasis valves. Second, with respect to our progress in the area of clinical validation in recent months, we are pleased with the progress achieved in recent months for our Rhapsody, Arterial Venous Access Efficiency, or WAVE Pivotal Study. We completed the clinical study report and filed the final module with the FDA for pre-market approval, or PMA, by the end of the second quarter of 2024, as expected.

Fred Lampropoulos: We look forward to engaging with the FDA as they review our PMA application for this innovative technology. The Rhapsody Cell and Permeable Endoprosthesis is built to combat the challenges dialysis patients can often experience due to stenosis and occlusions in the dialysis outflow circuit. We believe this technology can extend long-term vessel patency rates and reduce the complications associated with existing treatment options on the market today, including the need for repeated interventions, frequent trips to the hospital, and inadequate dialysis treatment.

Fred Lampropoulos: Importantly, we are excited to announce the clinical results from our Rhapsody studies will be featured in scientific sessions at key medical meetings this fall, including at the Cardiovascular and Interventional Radiology Society of Europe, or CIRSE, Annual Congress on September 14th in Lisbon, Portugal, and at the Controversies in Dialysis Access, or CIDA, meeting in Washington, D.C. on October 5th. Third, we announced important enhancements to both our executive leadership team and our board of directors. In May, we announced the appointment of Joe Wright as president.

Fred Lampropoulos: Joe now oversees Merit's global commercial, marketing, and operations teams. With more than 19 years of experience at Merit, serving in a variety of leadership roles in multiple geographic regions, I believe he is the ideal leader for this important position. Joe has been central to executing our strategic plan and positioning the company for continued success, including spearheading our commercialization efforts and overseeing significant international expansion, engineering the advanced capabilities of our renal therapies group, including the integration of the business assets we acquired from AngioDynamics in 2023, and directing the development of our commercial excellence initiatives globally.

Fred Lampropoulos: I look forward to continuing to work closely with Joe going forward. We also enhanced our board of directors with the selection of Sylvia M. Perez as a new director at Merit's annual meeting of shareholders on May 15, 2024. Sylvia is President of the Commercial Branding and Transportation Division at 3M Company.

Fred Lampropoulos: Her expertise and proven track record of leadership success will provide valuable industry and organizational perspective to both the board and our management team as we pursue our continued growth initiatives program. Now, before turning the call over to Joe, I would just like to take a few minutes to discuss the strategic acquisition we announced on July 1st. We announce the acquisition of assets for endogastric solutions incorporated for a total cash consideration of approximately $105 million and the assumption of certain liabilities. We believe this acquisition represents multiple strategic and financial positives, and importantly, this acquisition is consistent with and will not distract us from our continued growth initiatives program.

Fred Lampropoulos: Strategically, this acquisition enhances our endoscopy product portfolio and existing clinical specialties while expanding our global footprint in the gastrointestinal market. This acquisition adds an innovative solution for patients suffering from chronic gastroesophageal reflux disease, or GERD, which is a significant annual addressable market opportunity estimated at $2 billion annually. GERD is a digestive disorder that occurs when the lower esophageal sphincter doesn't tighten correctly, allowing acid from the stomach to enter the esophagus. When this occurs chronically, it can result in serious health conditions such as esophageal damage and cancer.

Fred Lampropoulos: The Esophage Z plus treats GERD by restoring the body's reflux barrier. By restoring the body's reflux barrier, the Esophix Z Plus device is designed to provide relief of GERD symptoms and reduce acid reflux that can cause long-term complications and risk. Now, this is accomplished under endoscopic visualization during a minimally invasive procedure called transoral incisionless fundoplication or TIF 2.0. Recently, the American Gastroenterology Association released a clinical practice update on the evaluation and management of GERD and listed TIFF 2.0 as an effective endoscopic option in carefully selected patients.

Fred Lampropoulos: We estimate that there are more than 5 million patients in the U.S. alone currently using pharma treatment options for refractory GERD that represent potential candidates for TIFF 2.0 with Esophix Z Plus procedure each year. The Esophix Z Plus device is supported by economically favorable reimbursement, level one clinical evidence, and strong advocacy from medical societies. We also believe this device is highly complementary to our existing portfolio and customer base while expanding access to interventional gastroenterologists and surgeons in the endoscopy unit and the operating room.

Fred Lampropoulos: In addition to the strong strategic rationale, we believe the financial profile of this acquisition is extremely compelling. Now, Raul will give you some additional color on the favorable financial profile of this acquisition later in the call. In the interim, I will share with you that we expect sales contribution in the range of $13 to $15 million over the second half of 2024, and we expect this acquisition to be accretive to our multi-year total program, excuse me, total company growth profile on an annualized basis going forward. Now, with that, let me turn the call over to Joe, who will review second quarter revenue performance. Joe

Joseph Wright: I'll provide a detailed review of our revenue results in the second 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.

Joseph Wright: Second quarter total revenue growth was driven by 6% growth in our cardiovascular segment and 16% growth in our endoscopy segment. The cardiovascular segment was the primary driver of the better-than-expected total 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 Q2. Sales of our Peripheral Intervention, or PI, products increased 11%, representing nearly 74% of total cardiovascular segment growth in the period. Excluding sales of acquired products, PI sales increased 7.6% on an organic, constant currency basis.

Joseph Wright: Organic growth in the PI product category was driven by sales of our access products and our delivery systems increased 22%, and sales of our radar localization products increased 9%, and together represented nearly three-quarters of our total PI organic sales growth in Q2. Sales of our custom procedural solutions, or CPS products, increased 3%, which was notably better than the low single-digit decline we expected in Q2. This performance was fueled by strong growth in sales of kit products, which more than offset the expected year-over-year declines in sales of trays, resulting from our ongoing SKU rationalization efforts discussed on prior calls.

Joseph Wright: Cardiac intervention product sales increased 1.5%, slightly above the high end of our growth expectations, driven primarily by strong sales of EPCRM products and, to a lesser extent, growth in sales of fluid management and intervention products. Sales of our OEM products increased 5% year over year in Q2.

Joseph Wright: While sales to OEM customers increased in the mid-teens on a sequential basis, 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 continue to believe the softer than expected sales trends of our OEM products are a result of order timing and fluctuations in demand as our customers work through efforts to optimize inventory levels. Demand trends from customers in both the U.S. and O.U.S. regions improved from Q1, as expected.

Joseph Wright: We saw solid growth in product sales to OEM customers outside the U.S., while demand from U.S. customers drove product sales growth of just 3% year-over-year in Q2. Importantly, we continue to expect low double-digit growth in OEM sales for the full year 2024. Lastly, sales in our endoscopy segment increased 16%, which exceeded the high end of our growth expectation. We continue to see a normalization of growth trends in this business, as expected, and our updated 2024 guidance now assumes low double-digit organic growth in our endoscopy business this year. Turning to a brief summary of our sales performance on a geographic basis,

Joseph Wright: Our second quarter sales in the U.S. increased 8.5% on a constant currency basis and 6% on an organic constant currency basis. However, similar to what we experienced in Q1, sales to U.S. customers came in roughly a point softer than what our guidance had assumed, driven by the softer-than-expected OEM sales, as previously mentioned. We continue to expect to deliver approximately 6% organic growth in the U.S. at the midpoint of our 2024 guidance range.

Joseph Wright: International sales increased 4% year over year and 3.8% on an organic constant currency basis, exceeding the high end of our growth expectations by more than 470 basis points in the quarter. The stronger-than-expected organic constant currency growth to customers outside the U.S. was driven primarily by 1 percent growth in APAC compared to our guidance range, which had assumed a decline in the range of 10 to 11 percent in Q2. With respect to China specifically, sales decreased 5% year over year, better than the low 20% decline our guidance had assumed.

Joseph Wright: We continue to see quarter-to-quarter variability in 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 now assumes our total international sales will increase 4.3% year over year, driven by 7 to 8% growth in EMEA and 11 to 12% growth in the rest of the world regions, partially offset by 0% growth in the APAC region versus the 4% decline assumed in our prior guidance range.

Joseph Wright: The lower headwind from APAC, assumed in our updated guidance, is driven by better-than-expected results in China over the first half of 2024. Note, regarding our China business in 2024, our guidance continues to assume that we will be able to increase sales of units on a year-over-year basis, but we expect total revenue to decline due to continued pricing headwinds related to volume-based purchases. With that, I will turn the call over to Raul, who will take you through a detailed review of our second quarter financial results, balance sheet, and financial condition as of June 30.

Raul Parra: Beginning with a 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 second quarter of fiscal year 2024. We have included reconciliations from our GAAP-reported results to the related non-GAAP item in our press release and presentation available on our website.

Raul Parra: Gross profit increased approximately 6% year-over-year in the second quarter. Our gross margin was 51.5%, 15 basis points year-over-year. The increase in gross margin year over year was driven by pricing uplifts, as well as favorable Product and Geography.

Raul Parra: Geography Revenue Mix and Improvements in Freight and Distribution Costs, offset partially by manufacturing variances compared to the prior year period. Operating expenses increased 3% from the second quarter of 2023. The year-over-year increase in operating expenses was driven by a 2% increase in SG&A expense and a 7% increase in R&D expense compared to the prior year period. Total operating income in the second quarter increased $6.5 million, or 11%, from the second quarter of 2023 to $67.8 million.

Raul Parra: Our operating margin was 20.1% compared to 19.1% in the prior year period. The 92-basis point increase in operating margin was driven by a 15-basis point increase in our non-GAAP gross margin and by a 76-basis point decrease in our non-GAAP OPEX margin compared to the prior period. The second quarter other expense net was a benefit of $1.4 million compared to an expense of $3.4 million last year. The change in other expense net was driven by an increase in interest income associated with our higher cash balances, partially offset by an increase in net interest expense associated with increased borrowing.

Raul Parra: As of June 30, 2024, we had cash and cash equivalents of $636.7 million, total debt obligations of $822.5 million, and available borrowing capacity of approximately $680 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 31, 2023. Our net leverage ratio as of June 30th was 2.4 times on an adjusted basis.

Raul Parra: We generated $57.9 million of free cash flow in the second quarter, compared to $11.5 million in the prior year period. The year-over-year improvement in free cash flow generation was primarily a result of significant improvements in cash used for working capital compared to the prior year period. We have generated more than $82 million of free cash flow over the first half of 2024. We expect strong free cash flow generation 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.

Raul Parra: For reference, we have included a table in our earnings press release that details each of our updated formal financial guidance items and how those ranges compared to prior ranges as of July 1st, 2024, when we updated our guidance to reflect the projected impact of our acquisition of the assets of endogastric solutions. Our updated guidance ranges now as soon as the following, gap net revenue growth of six to seven percent year over year, net revenue growth of approximately 5-6% in our cardiovascular segment, and net revenue growth of approximately 45 to 52 percent in our endoscopy segment, and a headwind from changes in foreign currency exchange rates of approximately 9.1 million or approximately 70 basis points to growth year over year.

Raul Parra: Excluding the impact of changes in foreign currency exchange rates, we expect total net revenue growth on a constant currency basis in a range of 6.9 to 7.7 percent in 2024. Finally, our total net revenue guidance for fiscal year 2024 now assumes inorganic revenue contributions from the acquisitions announced on June 8, 2023, and July 1, 2024, in the range of $24.6 to $26.6 million in the aggregate. For avoidance of doubt, this aggregate range consists of approximately $11.6 million of inorganic revenue related to our acquisitions of assets from angiodynamics in Q1 and Q2, plus the contributions from our acquisition of assets from endogastric solutions in Q3 and Q4.

Raul Parra: Excluding inorganic revenue, our updated guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately 4.9 to 5.6% year over year. As a result, we now expect non-GAAP diluted earnings per share in the range of $3.27 to $3.35, representing an increase of 15 to 17 percent year-over-year. Note, this range includes the expected dilution related to our acquisition of assets from Endogastric Solutions, which, as disclosed on July 1st, is expected to be in the range of $0.04 to $0.06.

Raul Parra: As Fred discussed earlier, we believe this acquisition offers a very attractive financial profile, while we believe this acquisition will be modestly dilutive to our full year 2024 non-GAAP profitability, given the partial year contribution and the impact of approximately $2.7 million of lower interest income on cash balances used for the total purchase consideration. We expect the acquisition to be accretive to our non-GAAP gross and operating margins, non-GAAP net income, and non-GAAP UPS in the first full year post-closing, for modeling purposes.

Raul Parra: Our updated fiscal year 2024 financial guidance now assumes non-GAAP operating margins in the range of approximately 18.4 to 18.7%, up 120 to 150 basis points year over year, non-GAAP interest and other expense net of approximately $1.5 million compared to $10.6 million last year, a non-GAAP tax rate of approximately 21.5%, and diluted shares outstanding of approximately 58.8 million. And we now expect CapEx in the range of $55 to $60 million and free cash flow of at least $130 million compared to at least $115 million previously.

Raul Parra: We would also like to provide additional transparency related to our growth and profitability expectations for the third quarter of 2024. Specifically, we expect our total revenue to increase in the range of approximately 5.7% to 7.1% year-over-year on a gap basis and approximately 6.4% to 7.8% year-over-year on a constant currency basis. The midpoint of our third quarter constant currency sales growth expectations assumes approximately 9% growth year-over-year in the U.S. and 5% growth year-over-year in international markets.

Raul Parra: Note the midpoint of our third quarter constant currency sales growth expectations also includes approximately 6.4 million of inorganic revenue. Excluding these inorganic contributions, our third quarter total revenue is expected to increase approximately 5% year-over-year on an organic, constant currency basis.

Raul Parra: With respect to our profitability expectations for the third quarter of 2024, we expect non-GAAP operating margins in a range of approximately 18 to 18.7 percent, and we expect non-GAAP EPS in the range of 77 cents to 82 cents. Finally, I wanted to call out one item for consideration when comparing our updated non-GAAP operating margin assumptions versus our original guidance for 2024 we introduced on our Q4 call and subsequently reaffirmed on our Q1 earnings call on April 30th and again in our endogastric solutions press release on July 1st.

Raul Parra: As detailed in our earnings press release this afternoon, beginning in the second quarter of 2024, consulting expenses associated with initiatives conducted under our Foundations for Growth program are no longer adjusted as part of our non-GAAP measure. Non-GAAP financial measures detailed in the reconciliation tables in our earnings press release reflect the removal of these FFG consulting fees for the three and six-month periods ended June 30, 2023, and 2024. Specifically, $4.2 million in the first half of 2023 and $1 million in the first half of 2024.

Raul Parra: FFG consulting fees totaled approximately $12.3 million pre-tax for the 12 months ended December 31st, 2023, representing an approximately 100 basis point impact on the previously non-GAAP operating margin for that period. Accordingly, our updated non-GAAP operating margin assumptions for fiscal year 2024, excluding FFG consulting fees, now reflect expected year-over-year expansion in the range of 120 basis points to 150 basis points, compared to expected year-over-year expansion in the range of 45 basis points to 70 basis points previously.

Raul Parra: Importantly, when applying this new treatment for FFG consulting fees throughout the three-year FFG program, our non-GAAP operating margin expansion performance is still extremely strong. Our efforts to improve profitability over this period resulted in a non-GAAP operating margin of 17.2% in fiscal year 2023 compared to 13.2% in fiscal year 2020, an increase of approximately 400 bases. In addition, this new treatment does not impact the cumulative free cash flow we generated over the three years ending December 31st, 2023, which totaled nearly $300 million.

Raul Parra: And by way of reminder, we generated nearly $419 million of free cash flow since the beginning of 2020. Finally, this new treatment does not impact our 2024 guidance, nor are CGI's financial targets for the three-year period ending December 31st, 2020. That wraps up our prepared remarks. Operator, we would now like to open the line up for questions.

Operator: Thank you, sir. Ladies and gentlemen, if you'd like to ask a question, please signal by pressing star 1 1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Operator: We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again. One more purpose question. And our first question will come from the lineup. Jayson Bednar from Piper Center, your line is open.

Jayson Bednar: Hey, good afternoon guys. Congratulations on another solid quarter here. I wanted to start first with some guidance.

Jayson Bednar: Looks like you're flowing through mostly that 2Q overage here. Not much changing with the implied outlook for the second half of the year. I think this is within how you typically manage your guide or your outlook, but I wanted to check to see if there's any incremental caution you have with respect to pieces of your business that just has you thinking the momentum from the first half of the year doesn't continue into the back half.

Jayson Bednar: It doesn't sound like that, but I really wanted to check in on that and then, within that conversation, maybe discuss a little more specifically your China assumptions within your overall guidance range. It doesn't look as onerous, but I don't think I heard exactly what you're assuming now for China this year.

Fred Lampropoulos: Yeah, you're right, Jason. This is how we typically do it, right? So we're flowing through that first half increase. As you know, we beat by about $7 million on the high end of our guidance, and so we're flowing that through. Obviously, you have the dynamics of EGS that we've also included in that, which we did earlier this month when we did the acquisition.

Fred Lampropoulos: So, generally speaking, we're super optimistic about how the business is doing. U.S. growth was outstanding again. International growth has been great, so we're feeling pretty optimistic, and I think I'm sure we'll get some questions on China. China did better than anticipated, and we continue to see that. So, generally speaking, I think we're pretty excited about how the first half went and how the second half is looking. And I think, ultimately, we're putting in a pretty strong year together.

Jayson Bednar: Okay, thanks. And, you know, one follow-up question there and then a separate question: just if you could specify just what China is within your updated guide versus where it was previously.

Jayson Bednar: Again, it seems like it's not as onerous. And then, I wanted to ask as a follow-up, you know, I bring this up often here, but, you know, the gross margin line was pretty solid again this quarter, considering this was the toughest year-over-year comp on the gross margin line. So those margin comps get easier over the balance of the year. I'm just wondering how you think about, you know, the gross margin trend line from here. Maybe you should be thinking about a seasonal step down in the third quarter. But, you know, just going forward, is this 51% or so range more or less defendable as we look ahead?

Joseph Wright: Yeah, I'll let Joe kind of hit on the international piece here first in China, and then I'll answer the gross margin. Yeah. Hi Jason. This is Joe.

Joseph Wright: Our international sales were up 4% year-on-year and 3.8% on an organic constant currency basis. Hence, this exceeded the high end of our growth expectations by approximately 470 basis points in the quarter. So, those better than expected OUS results were driven primarily by only a 1% constant currency growth or decline in APAC in Q2. Our previous guidance range had assumed a decline in the range of 10% to 11% in Q2. So, regarding the APAC sales, China sales decreased 5% year over year, so that was better than the low 20% decline our guidance had assumed. You know, we continue to see quarter-to-quarter variability in the growth trends related to volume-based purchasing tenders, which is as we expected.

Joseph Wright: Yeah. Hi Jason. This is Joe.

Raul Parra: Yeah, so just, you know, on the gross margin. You know, Jason, as you know, we don't comment on the gross margin. You know, generally speaking, we did say at the beginning of the year, and I think this still holds true, that, you know, as far as the operating margin improvement is concerned, it would mostly come from gross margin, and to the extent that, you know, we would also, you know, on the high end, we would also leverage OPEX.

Raul Parra: So I'd say, generally speaking, we're really happy with the way gross margin is performing. We've been happy the last three years with the way it's done, and again, continue to be excited about what it's doing this year. And I would say it's kind of where we want it to be.

Jayson Bednar: Okay, fair enough. I'll let others hop in here. Thanks.

Operator: Thank you. And our next question, coming from the line of Mike Matson from Needham, Ireland, is open.

Michael Matson: Yeah, thanks for taking my questions. I guess just one on the endogastric deal, so...

Michael Matson: I imagine this is going into the endoscopy business.

Michael Matson: So, you know, are you going to be combining the...

Michael Matson: https://www.meritmedicalsystems.com

Fred Lampropoulos: Yeah, Mike, hey, thanks. This is Fred.

Fred Lampropoulos: Thanks for the question. Listen, we've been looking for assets in this GI business for a long time, but it's been very difficult.

Fred Lampropoulos: What we did with this product is we found something that we thought would be able to cross over so we could have the combined sales forces. So for the balance of the issue, there's training, and we did keep that sales team, and some of the, you know, the technical and clinical people will combine those together with the existing products we have in endotech. And then as other processes, you know, other products come out, because we have a very nice pipeline, we won't discuss it specifically.

Fred Lampropoulos: But we think that that's going to serve us well and will be more efficient. You know, we've had a good sales force, but I mean, they're still doing a good job. But the utilization wasn't what we needed it to be this way.

Fred Lampropoulos: There was a single product company that fit into our business very nicely. And we're going to combine those two. We've had them here, by the way, I should mention that all of those sales forces have been here to Salt Lake all getting together, we've all spent time together. And I'm actually very pleased with how that's coming along as well as the integration. Joe, do you want to add something to that?

Joseph Wright: Yeah, as you mentioned, Fred, we've been looking for something in this space for a long time. The great thing about this opportunity was just the financial profile. It's very rare that you find something that's going to be accretive to not just our growth profile but also our gross margin and overall profitability in the first full year.

Joseph Wright: So that was very attractive, and it's our existing call point. So we are basically able to increase our footprint in a very attractive market here. So, yeah, we're excited about the combination, and we expect to cross-train all of the... The EGS salespeople that we hired and also our current Endotech sales force, so both will be able to sell both product lines, so we do expect some cross-selling opportunities as we move forward.

Fred Lampropoulos: And Joe, if I could just add one more thing. Mike, the other thing is the territories and the smaller ones, our ability to focus more instead of having people traveling so far with these, you know, additional folks. We think we can get deeper into the accounts. And incidentally, just as a point of interest, every single account that Merit has happens to be exactly the same footprint as theirs. So it's not like these are new customers. You know, they're our existing customers, and they're all their existing customers, so they know who we are. You know, we're not having, you know, new people show up in the lab.

Fred Lampropoulos: This is something that has a lot of features that Joe mentioned and that I've alluded to that we think helps to make it a pretty dynamic team. And I guess the other part that goes with that is when you get, I don't know, I had probably 10 notes from the sales force after we were here and spent a couple days together about just how excited they were to have this opportunity, and every person that we made that offer to in that sales force accepted it.

Fred Lampropoulos: I think those are really interesting facts, you know, that they all came together, and that group will come together under the leadership of Nikki Kennedy, who's the leader of that Endotect division. So we're quite excited about this opportunity. There is a lot of work to be done, but nevertheless, we're very excited.

Michael Matson: Yeah, sounds great. And then just on the cardiac business, have you seen any kind of impact there, positive or negative, from the rapid uptake we're seeing of PFA ablation?

Fred Lampropoulos: Uh, nope. Um, we haven't seen that at all. We haven't seen anything that's been taken away. Joe, anything that you've seen? No.

Michael Matson: Yeah, sounds great. And then just on the cardiac business, have you seen any kind of impact there, positive or negative, from the rapid uptake we're seeing of PFA ablation?

Joseph Wright: We have devices that enable ablation procedures, so regardless of whether it's RF ablation or PFA, our tools are generally applicable to both procedures, so it hasn't been an impact for us. In fact, it's access.

Fred Lampropoulos: Uh, nope. Um, we haven't seen that at all. We haven't seen anything that's been taken away. Joe, anything that you've seen? No.

Fred Lampropoulos: And, in fact, it's access to get them there so they can deliver those products, you know, our HeartSpan, our stirruple sheets, our splitable, you know, it's those products that complement that they don't take away. Yeah, got it. Thanks. Okay. Thanks, Mike.

Operator: Our next question comes from the line of Larry Biegelsen from Wells Fargo. Your line is open.

Lawrence Biegelsen: Hey guys, it's Larry. Thanks for taking the question. Hey Fred, I wanted to ask you two questions on Rhapsody. First, a big picture one, and then a little bit more detailed one. And by the way, congrats on the nice quarter here, especially on the margins. You know, Fred, how do you expect to compete, you know, with Gore and BD in the stent craft space? We've heard that price is a key component when physicians choose a stent craft. What's your view? And I had one follow-up appointment.

Fred Lampropoulos: Yeah, I think that, first of all, as you know, Larry, we made a press release early to talk about the data being, you know, presented at the CIRSA meeting on, I think it's August 14th or September, whatever, it's coming up in the next couple of weeks. So, my general take is that we have superior technology, period. That's always been why we developed it. We think it's a great product. I think, you know, we've been out there selling it for a while, and the uptake on the product has been positive.

Fred Lampropoulos: So, we're very excited about the long term. We continue to do well in those markets. The commissions continue to be positive, and we're really looking forward to discussing more of the addressable market opportunities in the future. And at the right time in the very near future, we'll be talking about all of these things so that we can lay them out. And on this call, we're not intending to do that today, but we don't have, I can just tell you that I don't have, and I don't think the people in this room have any doubt about the viability of this technology and its performance capabilities. We'll talk more specifically in the very near future.

Lawrence Biegelsen: I wanted to push my lock and ask you one follow-up question. How are you thinking about the likelihood that you can obtain a transitional pass-through payment or TPT payment? And if you believe you can get a TPT because you have breakthrough status, does this mean you're going to have to price it at a significant premium when you come out, you know, of the gate so you can meet the TPT criteria? Thanks.

Fred Lampropoulos: Larry, we do have breakthrough status on this product that speaks to that. And at the appropriate time, as we talked about, all of this will be revealed. So in the very near future, we'll lay all of this out. Our primary focus today is the PMA has been filed, it's been accepted, let's get that done, and then we'll start hitting all these other things once we know and we get closer and understand what that is. It'll be there; I just have to be a little bit more patient, and I sure appreciate it.

Fred Lampropoulos: We're not good at being patient here, Fred, but thank you. Oh, I know. I know that. Okay, I'm going to teach you a lot of things like you taught me. You have. I mean, that is a compliment, Larry. You have. I know that. Over the years, you have, and I appreciate it. Thank you.

Operator: Thank you. And our next question comes from the line of Steve Lichtman from Oppenheimer in London, South Wales.

Steven Lichtman: Thank you. Evening, gentlemen, and congratulations on the quarter.

Steven Lichtman: Wanted to ask again about endogastric solutions. Can you talk a little bit more about what the revenue growth profile is of the products? I appreciate the base of revenue that's up.

Steven Lichtman: being built in here, and sort of, you know, do you see opportunities in the near term to accelerate that, you know, with some potential cross...

Fred Lampropoulos: Potential cross-sell from your current business. Yeah, great, great question, Steve.

Raul Parra: You know, as you're aware, we disclosed that, for this year, we're going to be in the 13 to $15 million range for the back half of the year. And we also announced that it would be accretive to revenue, gross margin, and operating margin in the first full year of integration. So other than that, I don't think we're going to get into the details of, you know, of it. We'll give you obviously our guidance for 2025 in February.

Raul Parra: But I can tell you that the endoscopy team and both teams are excited about the products that we have and the scale that we think we can get there with the cross selling. So we'll leave it at that. But we will continue to be excited about that asset.

Steven Lichtman: Okay, and then obviously you were acquisitive this quarter. Free cash flow coming in stronger though. How should we be thinking about, you know, sort of where your head's at in terms of...

Raul Parra: about sort of where your head's at in terms of the use of free cash, looking forward here in New York. Yeah, and look, I first of all, I just want to, you know, I'll give a little shout out to our operations group, you know, on managing the inventory growth. I mean, it's been a huge benefit to our free cash flow this year. And, and we're growing, you know, ahead of plan. So they've been able to keep up with our customer demands while also essentially keeping a growth of inventory flat, you know, to down.

Raul Parra: So, you know, we continue to expect strong free cash flow generation for the back half of the year, and we continue to believe that we'll be in a good position to hit our CGI, you know, program of a minimum of $400 million in free cash flow. And, and lastly, and more importantly, you know, we took our 150, a minimum of $115 million in free cash flow target for 2024, and we bumped that up to 130 million. So, you know, super strong generation for the quarter. Couldn't be more excited about that.

Steven Lichtman: It's good to be with you, Steve. Thank you.

Operator: Thank you. And our next question, coming from the lineup, David Rescott from Baird. Your line is open.

David Rescott: Oh, great. Thanks for taking the questions, and congrats on the strong border here. My first question is more around the WAVE results. I'm looking forward to seeing that. I don't think I've – I definitely haven't attended the CIDA or the CIRRC conference in the past, so I'm just wondering if you could give us a sense for maybe what to look for there, and then, at least in your view, maybe how data that's presented at these two conferences tends to kind of flow into some clinical practice.

Fred Lampropoulos: Yeah, well, first of all, this is going to be presented by physicians as part of the scientific sessions, you know, not by Merit. These are the six-month follow-up results on patients from the randomized arm of the study, what we call the AVF cohort, which includes target lesion primary patency, access circuit primary patency, and safety events. So this is the randomized part of the study. And that will be presented; it will be presented from the podium at the scientific session.

Fred Lampropoulos: In terms of the specific data, come to Lisbon or tune in because we can't speak to it until that date, and then we'll be happy to have the physicians, not Merit, the doctors talk about the results and how they view them. So I think we're excited to, we'll all be there. I can just tell you the people in this room will be at that meeting in Lisbon, Portugal.

David Rescott: Okay, thanks. I don't think I'll make it out to Lisbon this year.

David Rescott: But my second question, you know, is more on China and APEC. Obviously, that that was a strong, stronger growth driver than you expected. Heard the comments there.

David Rescott: I'm just wondering if you can help us think about some of the components of the way in which your business model operates in that market and the level of visibility, at least you have into the next several quarters of growth. I mean, it seems like in medtech that it's a weaker kind of macro market in general. Seems like you've held in there a little bit better than maybe expected. So just wondering if your business or the visibility you have into those markets is maybe any different than what some other kind of medtech competitors out there have. Thank you. Yeah,

Raul Parra: Yeah, Joe's going to take the China question, but David, just as a point here. I believe that the CIRCE will be able to webcast that information. So if you can't make it there, I think a PASS will get you a webcast. I don't know all the details yet. We're trying to find that out, but our understanding is that there will be a webcast available for that. So for those of you that can't make it.

Joseph Wright: Yeah, thanks, Raul. And on China, just as a reminder, we don't provide country-specific growth assumptions, but you know, we did have better-than-expected results from China in the first half of 2024. We, like all the other medtech companies, are affected by volume-based purchasing, and there is some variability to that, but we still look at China as a very strong demographic and strong growth market for us. The key for us is just getting through this year and perhaps next year, and then we will reset our growth based on a new baseline, and we still expect great things from China in the future. Yeah, and I think, you know, one thing to highlight too that we're excited about is that, you know

Joseph Wright: Yeah, and I think, you know, one thing to highlight, too, that we're excited about is that, you know, even though we did have a total revenue, you know, decline, we did see sales, you know, volume growth, you know, year over year. So, I think that's important because, as Joe mentioned, once we reset that, then I think we can get back to normalized levels of growth in China.

Operator: And our next question, coming from the line up: Jayson Bedford from Raymond James, Yolanda Saltman.

Jayson Bedford: Good afternoon, guys. Can you hear me okay? Yeah, we got you, Jayson. Alright, so a few questions. Following up on Rhapsody, I apologize if I missed this, but did you provide an update on the expected timing around FDA approval?

Jayson Bedford: No. It's not in there. It's in their hands. We'll go through all the steps. We're prepared for it. We're prepared for the various aspects of a PMA, but it's in their hands now. We completed the submission as we said we would on time, and now we just sit back and we respond, and when they're done, they're done. We haven't spoken to him yet because it's in their hands, Jason.

Fred Lampropoulos: Got it. Okay, that's fair. OEM, flat year to date, but I think I heard you say that you're still expecting double-digit growth for the year. I wonder if you could just kind of confirm that, and I don't mean to be overly obvious with the question, but do you have strong visibility? It does imply a pretty big ramp-up in the second half to get to double-digits if, indeed, that's the guy.

Jayson Bedford: Yeah, yeah, Jason, I mean, first of all, I'd like to highlight our US sales growth was just, you know, tremendous, and it continues to be so. And OEM did contribute in the second quarter, so they grew at about 5% on a constant currency basis. That's, you know, compared to Q1, where they were down, you know, approximately 5%. So we've seen a good rebound. We haven't changed the guidance for OEM because we do feel like we have the visibility to a better second half.

Jayson Bedford: And it does, obviously, the math would imply that it's a pretty strong second half of the year, and we feel good about what we've guided there. So again, I think we're really happy how things bounced back. And we're seeing some pretty strong demand there. As you know, there was also, you know, a deal announced, which we included in our guidance, but nevertheless, I'll highlight it with Medtronic on our spine business that our OEM division is, you know, helping with. So there is so much demand.

Raul Parra: for sure, and that pipeline's filling back up Jason, so we do probably have more visibility there of the stuff that's coming at us, and behaviors are going back to what we would see has been kind of the general after the ups and downs and the workouts of COVID, they're starting to come back to normal. Yeah, and we have.

Raul Parra: Yeah, and we have seen in the past 20% plus growth quarters from OEM. So while we're not necessarily saying when that will happen, it's not out of the ordinary for the sales division.

Jayson Bedford: Okay, yeah, the business obviously lends itself to some pretty good visibility. Just, and last one, I guess for me, just on the EGS deal and the improving growth profile there, is there an international angle to the strategy, or is it mostly U.S. driven? Well, it

Fred Lampropoulos: Well, it is mostly U.S.-driven, however. They do have it, and I think they just didn't have the bandwidth.

Fred Lampropoulos: We think that's one of the things we're exploring is they have sales coming out of Europe and the Middle East, and we think we can add to that, and we'll be pursuing those growth opportunities wisely and very methodically. Thank you.

Operator: And our next question comes from the line of Craig Bijou from Bank of America Securities. Your line is open.

Craig Bijou: Thanks, guys.

Craig Bijou: Thank you for taking the questions and congratulations on a strong quarter. I just had a couple of quick follow-ups on China and the better than expected results in Q2. I just wanted to, you know, ask you about the VBPs maybe not coming through on certain products you were expecting, or the impact, the pricing impact from the VBP wasn't as big as you expected, or maybe the underlying markets, you know, got a little bit better there. And then, similar questions for, you know, the rest of the year, and you know how conservative you guys think you are.

Craig Bijou: on the VBP side, and I think this was alluded to in a couple of other questions, but the growth of the underlying, you know, Chinese medical device market, any thoughts there? It sounds like you still expect volumes to grow.

Operator: And our next question comes from the line of Craig Bijou from Bank of America Securities. Your line is open.

Craig Bijou: Thanks, guys.

Joseph Wright: Yeah, I think the overall unit growth highlights the fact that procedural growth in China is still strong. So while we're dealing with the VBP headwinds, the first half VBP was largely in line with our expectations, so there's no real change. Even in our second half guidance, we still expect it to be in our plan right now.

Operator: Our next question, coming from the line-up, John Young from Canaccord. Your line is open.

John Young: Hey, good afternoon, and thanks for squeezing me in here. You know, first I just want to touch on Rhapsody, too. A lot of questions have been asked about it, but maybe just going back to you. What is the commercial infrastructure for the product today, Fred, and how do you think about building it up to the PMA approval so you're ready at launch?

Fred Lampropoulos: Well, you know, we put together a renal therapy group that we put together last year that has a number of products that are in it that that product will fall into. They include things like the Surfer Sur and our hemodialysis products because they call on the same physician and the same point of sale.

Fred Lampropoulos: So part of that has been under development and getting ready for this for some time. So do you want to comment any further on that? Yeah.

Joseph Wright: Yeah, as Fred mentioned, we established a renal therapy sales group, and we've been adding to that this year in preparation for Rhapsody. The good thing for us is, as Fred mentioned, we have other renal therapies products that were frankly under-focused previously. So when we broke out this team, they've been able to focus on these products that we already have, grow that business, while at the same time, we've been spending a lot of time training them up on Rhapsody, letting them hear physician experiences in other approved markets outside of the United States. So we feel like we're doing all we can. We expect to add to that team over time. But we're going to be judicious in how we do that.

Fred Lampropoulos: The other thing to add, you know, to John is that, you know, you can clearly see that, you know, that team is performing well, right? They have the Angio products, which are slightly ahead of where we anticipated they would be. And so, you know, you know, clearly they're, they're, they're doing a good job and, you know, and the integration part of things.

Fred Lampropoulos: Let me just maybe add one more thing to that, and that is that I think the ability for these guys to focus on six to eight products all at the point of sale is really significant. Again, as Joe pointed out, we've seen that performance, and we're being, I think, very cognizant of making sure we stay within our budgets, but at the same time, making sure that people are trained so when it comes in, we can go to the market without having either too much inventory, because that's another important part of this, the training, and the focus.

Fred Lampropoulos: Focus is a key because of Merit's broad product bag, and you can't, it's hard to do. With this, we think that it was the right call. It was developed some 18 months ago, and we're just working through it, and when we get approval, we'll be all set with people that know the product and have complementary products to sell with it.

John Young: Great. And maybe just to follow up on that approval, on the submission. I heard you that it's, you know, in the FDA's hands. Have you gotten any deficiency letters yet back, or has the 180 day clock stopped for questions at this point yet? We generally don't comment.

Fred Lampropoulos: We generally don't comment on the stuff that comes in because it could be misunderstood, misconstrued, whatever. They have it. The clock is ticking. I'll leave it at that.

Operator: And I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Fred Lampropoulos for any closing remarks. Ladies and gentlemen...

Fred Lampropoulos: We generally don't comment on the stuff that comes in because it could be misunderstood, misconstrued, whatever. They have it. The clock is ticking. I'll leave it at that.

Operator: And I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Fred Lampropoulos for any closing remarks. Ladies and gentlemen...

Operator: Our next question comes from the lineup: James Sidoti from Sidotian Company. Your line is open.

James Sidoti: Hi, good afternoon, and thanks for taking the question. Regarding Rhapsody, do you think that presenting the data in Spain will have any impact on your international sales of the product? And do you think that there is an international market for the product?

Fred Lampropoulos: Well, first of all, Jim, we're already selling it internationally, and, you know, data's the name of the game to physicians. That is the name of the game. We hear it over and over every day.

Fred Lampropoulos: Where's the data? Where's this? Where's that?

Fred Lampropoulos: On a lot of products, and if you don't have it, how do you prove that it's efficacious? So data's important. It will have an impact, and we're very excited to be able to deliver this at CSUN.

Fred Lampropoulos: Okay, and then can you just give us some sense of the impact of the acquisition on the sales team? How big was the endogastric sales team that you brought in compared to what you had with your existing sales?

Fred Lampropoulos: Ladies and gentlemen, it was a long call, so we appreciate your patience. There were a lot of things to talk about. Raul and I and Joe will be around for the next couple of hours to answer specific questions. We want to thank you for your interest. I thought the questions were great, so thank you very much for your interest. And all best wishes from 100 degrees of heat in the mountain land of Salt Lake City, Utah. Good evening. Best wishes.

Fred Lampropoulos: Yeah, so it was about 50% of the size of our endotech sales force. We could have taken more, but we decided to selectively hire those we thought were in strategic areas and where we had opportunities. So it will grow that overall force by about 50%.

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

Fred Lampropoulos: I'm sorry, was that 1-5 or 5-0? 5-0. Okay. And then also, you know, I'm sure that there was a lot of customer overlap, but are there new customers that you'll be calling on now for your core products?

Fred Lampropoulos: Well, the bottom line is that every customer of theirs is a customer of ours.

Fred Lampropoulos: There are maybe two new customers or something like that. Yeah, so one of the beauties of all this, Jim, is that they're not new people that we don't know or that they don't know us. So when we're calling a lab, they know who we are, and we know who they are. So I've never seen anything quite like this where every account that we have, they have as well, and they have something in there. But let me go the other way around.

Fred Lampropoulos: Every account that they have is an account that we're already calling on. All right, thank you. Yeah.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Merit Medical System's second quarter 2024 earnings conference call. At this time, all participants have been placed in a listen-only mode.

Operator: Ladies and gentlemen, thank you for standing by. Welcome to the Merit Medical Systems second quarter 2024 earnings conference call. At this time, all participants have been placed in a listen-only mode. Please note that this conference call is being recorded, and the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Mr. Fred Lampropoulos, Merit Medical Systems founder, Chairman, and Chief Executive Officer. Please go ahead, sir.

Ladies and gentlemen, thank you for standing by welcome to the Merit Medical systems second quarter 2024 earnings Conference call. At this time all participants have been.

In a listen only mode. Please note that this conference call is being recorded and the recording will be available on the company's website for replay shortly.

Operator: Please note that this conference call is being recorded, and the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Mr. Fred Lampropoulos, Merit Medical Systems Founder, Chairman, and Chief Executive Officer. Please go ahead.

Bradley Populist: I'd now like to turn the call over to Mr. Bradley Populist Merit medical systems, founder Chairman and Chief Executive Officer. Please go ahead Sir.

Bradley Populist: Thank you and welcome everyone.

Speaker Change: I am joined on today's call by Raul Parra, Our Chief Financial Officer, and Treasurer, Joe Wright, Our President and Brian Lloyd, Our Chief Legal Officer, and corporate Secretary Brian.

Speaker Change: Brian would you mind reading us through the Safe Harbor statements. Please.

Brian: Thanks Fred.

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

Brian Lloyd: Although we believe these forward looking statements are based upon reasonable assumptions they are subject to risks and uncertainties.

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

Bradley Populist: Cause actual results to differ materially from the expectations and projections expressed or implied by our forward looking statements.

Bradley Populist: In addition, any forward looking statements represent our views only as of today August one 2024 and should not be relied upon as representing our views as of any other date.

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

Bradley Populist: 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.

Bradley Populist: For a discussion of factors that could cause actual results to differ from these forward looking statements. Please also refer to our most recent filings with the SEC, which are available on our website.

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

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

Bradley Populist: 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.

Bradley Populist: This presentation also contains certain non-GAAP financial measures.

Bradley Populist: 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 SEC under form 8-K.

Bradley Populist: 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.

Fred Lampropoulos: Readers should consider non-GAAP financial measures in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP. Please note that these calculations may not be comparable with similarly titled 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. Thanks, Brian. I appreciate it very much.

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

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

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

Bradley Populist: I will now turn the call back to Fred.

Fred Lampropoulos: Let me start with a brief agenda of what we will cover during our call and prepared remarks today. I will start with an overview of our financial results and key operating progress areas during the second quarter. After my opening remarks, Joe will provide a summary of our revenue results before turning the call over to Raul, who will provide a more in-depth review of our quarterly financial results and our financial guidance for 2024, which we updated in today's press release. Then we will open the call to your questions.

Fred Lampropoulos: Thanks, Brian. I appreciate it very much. Let me start with a brief agenda of what we will cover during our call and prepared remarks today. I will start with an overview of our financial results and key operating progress areas during the second quarter. After my opening remarks, Joe will provide a summary of our revenue results before turning the call over to Raul, who will provide a more in-depth review of our quarterly financial results and our financial guidance for 2024, which we updated in today's press release. Then we will open the call to your questions.

Fred: Thanks, Brian I appreciate it very much let me start with a brief agenda of what we will cover during our call and prepared remarks today.

Fred: I will start with an overview of our financial results and key operating progress carriers during the second quarter.

Fred: After my opening remarks, Joe will provide a summary of our revenue results before turning the call over to Raul, who will provide a more in depth review of our quarterly financial results and our financial guidance for 2024, which we updated in today's press release than.

Fred: And then we will open the call for your questions.

Joe Wright: Our second quarter results exceeded our expectations, we reported total revenue of $338 million in the second quarter up five 6% year over year on a GAAP basis and up six 6% year over year on a concert.

Fred: And currency basis.

Fred: The constant currency revenue growth, we delivered in the second quarter was stronger than the high end of the range of growth expectations that we outlined on our quarter. One earnings call specifically, we expected constant currency revenue growth for the second quarter in the range of four 7%.

Fred: The five 8% year over year.

Fred: Importantly, the better than expected constant currency revenue growth in the second quarter was primarily driven by strong organic growth and to a lesser extent contributions from acquired products, which modestly exceeded the high end of our growth expectations as well.

Fred: With respect to our profitability performance in the second quarter, we leveraged the solid revenue results delivered non-GAAP gross profit and operating profit growth up, 6% and 11%, respectively, which resulted in year over year margin expansion by approximately 15 basis points.

Fred: And 92 basis points, respectively.

Fred: And we delivered 17% growth in our non-GAAP earnings per share.

Fred: Which exceeded the high end of our expectations as well.

Fred: Perhaps most notably we generated nearly $58 million of free cash flow in the quarter a record for merit and have generated more than $82 million of free cash flow over the first half of 2024, representing a more than fivefold increase year over year.

Fred: We believe our second quarter results reflect continued strong momentum in the business over the first half of 2024, and we are confident in our team's ability to deliver the updated financial guidance that Raul will review later on the call.

Raul Parra: While we are proud of the results achieved over the first half of the year. We are not resting on our laurels. We are focused on delivering continued strong execution stable currency constant currency growth improving profitability and solid free cash flow in 2024 as well as can.

Fred Lampropoulos: We are focused on delivering continued strong execution, stable currency, constant currency growth, improving profitability, and solid free cash flow in 2024, as well as continued progress in our Continued Growth Initiative program-related financial targets for the three-year period ending December 31, 2026. I would now like to share a brief update on several areas of operational progress in recent months. First, with respect to new product introductions, we announced multiple regulatory clearances and commercial introductions in the second quarter, including In May, we announced FDA 510K clearance for our seeds vascular plug and the commercial launch of our Bering NSPVA expressed prefilled syringes in the United States and Australia.

Fred Lampropoulos: We are focused on delivering continued strong execution, stable currency, constant currency growth, improving profitability, and solid free cash flow in 2024, as well as continued progress in our Continued Growth Initiative program-related financial targets for the three-year period ending December 31, 2026. I would now like to share a brief update on several areas of operational progress in recent months. First, with respect to new product introductions, we announced multiple regulatory clearances and commercial introductions in the second quarter, including, in May, we announced FDA 510K clearance for our seeds vascular plug and the commercial launch of our Bering NSPVA expressed prefilled syringes in the United States and Australia.

Raul Parra: <unk> progress and our continued growth initiative program.

Fred: Related financial targets for the three year period, ending December 31 2026.

Fred: I would now like to share a brief update on several areas of operational progress in recent months.

Fred Lampropoulos: The Basic Sky is available as a stand-alone solution and in kits with Merit angioplasty packs configured to offer complementary access plus, honor, and Ph. D. hemostasis valves. Second, with respect to our progress in the area of clinical validation in recent months, we are pleased with the progress achieved in recent months for our Rhapsody, Arterial Venous Access Efficiency, or WAVE Pivotal Study. We completed the clinical study report and filed the final module with the FDA for premarket approval, or PMA, by the end of the second quarter of 2024, as expected.

Fred: First with respect to new product introductions, we announced multiple regulatory clearances and commercial introductions in the second quarter, including.

Fred: In May we announced FDA five 10-K clearance for our <unk> vascular plug and the commercial launch of our bearing and S. PVA Express pre filled syringe in the United States and Australia.

Fred Lampropoulos: These additions to Merit Symbolic's portfolio complement a comprehensive offering of microsphere, particle, and gelatin foam products, supported by a range of micro-catheters, guide wires, and other enabling devices. We also announced the U.S. commercial release of the BASIC-SKY inflation device in May. BASIC-SKY is the latest addition to Merit's comprehensive inflation device portfolio, which includes both digital and analog devices.

Fred: These addition to merit symbolics portfolio compromise complement a comprehensive offering of micro sphere particle and voluntary foam products.

Fred: Supported by a range of micro catheters guide wires and other enabling devices.

Fred: We also announced the U S commercial release of the basic Sky inflation device in May basic Sky is the latest edition to marriage comprehensive embracing device portfolio, which includes both digital and analog devices.

Fred Lampropoulos: The Basic Sky is available as a stand-alone solution and in kits with Merit angioplasty packs configured to offer complementary access plus, honor, and PhD hemostasis valves. Second, with respect to our progress in the area of clinical validation in recent months, we are pleased with the progress achieved in recent months for our Rhapsody, Arterial Venous Access Efficiency, or WAVE Pivotal Study. We completed the clinical study report and filed the final module with the FDA for premarket approval, or PMA, by the end of the second quarter of 2024, as expected.

Fred: The basic Sky is available as a standalone solution and in kids with Merit angioplasty packs configured to offer complementary access plus honor and Phd hemostasis valves.

Fred: Second with respect to our progress in the area of clinical validation in recent months. We are pleased with the progress achieved in recent months for our Rhapsody arteriovenous access efficiency or wave pivotal study we.

Fred: We completed the clinical study report and filed the final module with the FDA for pre market approval or PMA by the end of the second quarter of 2024 as expected.

Fred: We look forward to engaging with the FDA as they review our PMA application for this innovative technology, the <unk> cell and Permian will Ando prostate <unk> is built to combat the challenges dialysis patients can often experience due to stenosis and inclusions in the dialysis outflow circuit.

Fred Lampropoulos: We believe this technology can extend long-term vessel patency rates and reduce the complications associated with existing treatment options on the market today, including the need for repeated interventions, frequent trips to the hospital, and inadequate dialysis treatments. Importantly, we are excited to announce the clinical results from our Rhapsody studies will be featured in scientific sessions at key medical meetings this fall, including at the Cardiovascular and Interventional Radiology Society of Europe, or CIRSE, annual congress on September 14th in Lisbon, Portugal, and at the Controversies in Dialysis Access, or CITA, meeting in Washington, D.C. on October 5th. Third, we announced important enhancements to both our executive leadership team and our board of directors. In May, we announced the appointment of Joe Wright as president.

Fred: We believe this technology can extend and long term vessel patency rates and reduce the complications associated with existing treatment options on the market today, including the need for repeated interventions frequent trips to the hospital and in adequate dialysis treatment.

Fred Lampropoulos: Importantly, we are excited to announce the clinical results from our Rhapsody studies will be featured in scientific sessions at key medical meetings this fall, including at the Cardiovascular and Interventional Radiology Society of Europe, or CIRSE, Annual Congress on September 14 in Lisbon, Portugal, and at the Controversies in Dialysis Access, or CITA, meeting on October 5 in Washington, D.C. Third, we announced important enhancements to both our executive leadership team and our board of directors. In May, we announced the appointment of Joe Wright as president.

Speaker Change: Partly we are excited.

Speaker Change: <unk> announced the clinical results from our rapid city studies will.

Speaker Change: We will be featured in scientific sessions at key medical meetings, this fall, including at the cardiovascular and Interventional Radiology Society of Europe, Our CSA annual Congress on September 14th in Lisbon, Portugal, and the controversies in dialysis access or <unk> meeting.

Speaker Change: In Washington D C on October 5th.

Speaker Change: Third we announced important enhancements enhancements to both our executive leadership team and our board of directors in May we announced the appointment of Joe Wright as President.

Speaker Change: Now oversees marriage global commercial marketing and operations teams with more than 19 years of experience with merit, serving a variety of leadership roles in multiple geographic regions. I believe he is the ideal leader for this important position.

Speaker Change: Joe has been central to executing our strategic plan and positioning the company for continued success, including spearheading our commercialization efforts and overseeing significant international expansion engineering, the advanced capabilities of our renal therapies group, including the integration of the business ASP.

Speaker Change: We acquired from Angio dynamics in 2023, and directing the development of our commercial excellence initiatives globally I look forward to continuing to work closely with Joe going forward.

Speaker Change: We also enhanced our board of directors with a selection of silver in it.

Speaker Change: M Perez as a new director at <unk> annual meeting of shareholders on May 15, 2020 for Sylvia as president of the commercial branding and transportation Division at three Am company <unk>.

Fred Lampropoulos: Her expertise and proven track record of leadership success will provide valuable industry and organizational perspective to both the board and our management team as we pursue our continued growth initiatives program. Now, before turning the call over to Joe, I would just like to take a few minutes to discuss the strategic acquisition we announced on July 1st. We announce the acquisition of assets for endogastric solutions incorporated for a total cash consideration of approximately $105 million and the assumption of a certain liability. We believe this acquisition represents multiple strategic and financial positives, and, importantly, this acquisition is consistent with and will not distract us from our continued growth initiatives program.

Fred Lampropoulos: Her expertise and proven track record of leadership success will provide valuable industry and organizational perspective to both the Board and our management team as we pursue our Continued Growth Initiatives Program. Now, before turning the call over to Joe, I would just like to take a few minutes to discuss the strategic acquisition we announced on July 1st. We announce the acquisition of assets for endogastric solutions incorporated for a total cash consideration of approximately $105 million and the assumption of certain liabilities.

Speaker Change: Her expertise and proven track record of leadership success will provide valuable industry and organizational perspective to both the board and our management team as we pursue our continued growth initiatives program.

Fred Lampropoulos: We believe this acquisition represents multiple strategic and financial positives, and importantly, this acquisition is consistent with and will not distract us from our continued growth initiatives program. Strategically, this acquisition enhances our endoscopy product portfolio and existing clinical specialties while expanding our global footprint in the gastrointestinal market. This acquisition adds an innovative solution for patients suffering from chronic gastroesophageal reflux disease, or GERD, which is a significant annual addressable market opportunity estimated at $2 billion annually.

Speaker Change: Now before turning the call over to Joe I would just like to take a few minutes to discuss this strategic acquisition, we announced on July one.

Speaker Change: We announced.

Speaker Change: Acquisition of assets for Endogastric solutions, and corporate for total cash consideration of approximately $105 million and the assumption of certain liabilities. We believe this acquisition represents multiple strategic and financial positives and importantly, this acquisition is.

Joe Wright: <unk> with and will not distract us from our continued growth initiatives program strategic.

Speaker Change: Strategically this acquisition enhances our <unk> product portfolio in existing clinical specialties, while expanding our global footprint and the gastrointestinal market. This acquisition adds an innovative solution for patients suffering from chronic gastro esophageal reflux disease.

Speaker Change: Or GERD.

Speaker Change: Which is a significant annual addressable market opportunity estimated at $2 billion annually.

Fred Lampropoulos: GERD is a digestive disorder that occurs when the lower esophageal sphincter doesn't tighten correctly, allowing acid from the stomach to enter the esophagus. When this occurs chronically, it can result in serious health conditions such as esophageal damage and cancer. The Esophage Z plus treats GERD by restoring the body's reflux barrier. By restoring the body's reflux barrier, the Esophix Z Plus device is designed to provide relief of GERD symptoms and reduce acid reflux that can cause long-term complications and risk. Now, this is accomplished under endoscopic visualization during a minimally invasive procedure called transoral incisionless fundoplication or TIF 2.0.

Speaker Change: Good as a digestive disorder that occurs when the lower esophageal sphincter.

Speaker Change: <unk> tightened correctly, allowing asset from the stomach to enter the esophagus.

Speaker Change: When this occurs chronically it can result in serious health conditions, such as esophageal damage and cancer.

Fred Lampropoulos: The Esophage Z plus treats GERD by restoring the body's reflux barrier. By restoring the body's reflux barrier, the Esophix Z Plus device is designed to provide relief of GERD symptoms and reduce acid reflux that can cause long-term complications and risks. Now, this is accomplished under endoscopic visualization during a minimally invasive procedure called transoral incisionless fundoplication or TIF 2.0. Recently, the American Gastroenterology Association released a clinical practice update on the evaluation and management of GERD and listed TIFF 2.0 as an effective endoscopic option in carefully selected patients.

Speaker Change: The <unk>, the esophagus Z plush treat GERD by restoring the body's reflux barrier.

Speaker Change: By restoring the body's reflux barrier DSR fix Z plus device is designed to provide relief of GERD symptoms and reduce acid reflux. They can cause long term complications and risk.

Speaker Change: Now this is accomplished under endoscopic visualization during a minimally a minimally invasive procedure called transfer of incision length from the bundled application or tef to point al.

Fred Lampropoulos: Recently, the American Gastroenterology Association released a clinical practice update on the evaluation and management of GERD and listed TIFF 2.0 as an effective endoscopic option in carefully selected patients. We estimate that there are more than 5 million patients in the U.S. alone currently using pharma treatment options for refractory GERD that represent potential candidates for TIFF 2.0 with Esophix Z Plus procedure each year. The Esophix Z Plus device is supported by economically favorable reimbursement, level one clinical evidence, and strong advocacy from the medical society.

Speaker Change: Recently, the American Gastroenterology Association released to clinical practice update on the evaluation and management of good unless you test to point out as an effective endoscopic option in carefully selected patients. We estimate that there are more than 5 million patients in the U S alone.

Fred Lampropoulos: We estimate that there are more than 5 million patients in the U.S. alone currently using pharma treatment options for a refractory GERD that represent potential candidates for TIFF 2.0 with a Sophoxy plus procedure each year. The Esophix Z Plus device is supported by economically favorable reimbursement, level one clinical evidence, and strong advocacy from medical societies. We also believe this device is highly complementary to our existing portfolio and customer base while expanding access to interventional gastroenterologists and surgeons in the endoscopy unit and the operating room.

Speaker Change: Currently using pharma treatment options for refractory GERD that represent potential candidates for <unk>, two point of where the <unk> procedure each year.

Speaker Change: Suffix Z plus devices supported by economically favorable reimbursement level, one clinical evidence and strong advocacy from medical societies.

Fred Lampropoulos: We also believe this device is highly complementary to our existing portfolio and customer base while expanding access to interventional gastroenterologists and surgeons in the endoscopy unit and the operating room. In addition to the strong strategic rationale, we believe the financial profile of this acquisition is extremely compelling. Raul will give you some additional color on the favorable financial profile of this acquisition later on in the call. In the interim, I will share with you that we expect sales contribution in the range of $13 to $15 million over the second half of 2024, and we expect this acquisition to be accretive to our multi-year total program, excuse me, total company growth profile on an annualized basis going forward. Now with that, let me turn the call over to Joe, who will review second quarter revenue performance. Joe.

Speaker Change: We also believe this device is highly complementary with our existing portfolio and customer base, while expanding access into interventional gastroenterologists and surgeons in the endoscopy unit in the operating room.

Fred Lampropoulos: In addition to the strong strategic rationale, we believe the financial profile of this acquisition is extremely compelling. Raul will give you some additional color on the favorable financial profile of this acquisition later in the call. In the interim, I will share with you that we expect sales contribution in the range of $13 to $15 million over the second half of 2024, and we expect this acquisition to be accretive to our multi-year total program, excuse me, total company growth profile on an annualized basis going forward. Now, with that, let me turn the call over to Joe, who will review second quarter revenue performance. Joe

Speaker Change: In addition to the strong strategic rationale when we believe the financial profile of this acquisition is extremely compelling now Raul was there.

Raul Parra: Give you some additional color on the favorable financial profile of this acquisition later on the call in the interim I will share with you that we expect sales contribution in the range of $13 million to $15 million over the second half of 2024, and we expect this acquisition to be accretive to our multiyear total.

Graham: Graham excuse me total company growth profile on an annualized basis going forward.

Speaker Change: Now with that let me turn the call over to Joe who will review second quarter revenue performance.

Joe Wright: Joe Thank.

Joe Wright: Thank you, Fred. I'll provide a detailed review of our revenue results for the second 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. Second quarter total revenue growth was driven by 6% growth in our cardiovascular segment and 16% growth in our endoscopy segment.

Joe Wright: Thank you Fred.

Joe Wright: I'll provide a detailed review of our revenue results in the second 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.

Speaker Change: 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.

Speaker Change: Second quarter total revenue growth was driven by 6% growth in our cardiovascular segment and 16% growth in our endoscopy segment.

Speaker Change: Our cardiovascular segment was the primary driver of the better than expected total 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 Q2.

Joe Wright: Our cardiovascular segment was the primary driver of the better than expected total 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 Q2. Sales of our Peripheral Intervention, or PI, products increased 11%, representing nearly 74% of total cardiovascular segment growth in the period. Excluding sales of acquired products, PI sales increased 7.6% on an organic, constant currency basis.

Speaker Change: Sales of our peripheral intervention or Pi products increased 11%.

Speaker Change: Representing nearly 74% of total cardiovascular segment growth in the period.

Speaker Change: Excluding sales of acquired products.

Speaker Change: Sales increased seven 6% on an organic constant currency basis.

Joe Wright: Organic growth in the PI product category was driven by sales of our access products and our delivery systems increased 22%, and sales of our radar localization products increased 9% and together represented nearly three quarters of our total PI organic sales growth in Q2. Sales of our Custom Procedural Solutions, or CPS, products increased 3%, which was notably better than the low single-digit decline we expected in Q2. This performance was fueled by strong growth in sales of kit products, which more than offset the expected year-over-year declines in sales of trays, resulting from our ongoing SKU rationalization efforts discussed on prior calls.

Joseph Wright: Organic growth in the PI product category was driven by sales of our access products and our delivery systems increased 22%, and sales of our radar localization products increased 9% and together represented nearly three quarters of our total PI organic sales growth in Q2. Sales of our custom procedural solutions, or CPS products, increased 3%, which was notably better than the low single-digit decline we expected in Q2. This performance was fueled by strong growth in sales of kit products, which more than offset the expected year-over-year declines in sales of trays, resulting from our ongoing SKU rationalization efforts discussed on prior calls.

Speaker Change: Organic growth in the Pi cap product category was driven by sales of our access products and our delivery systems increased 22% and sales of our radar localization products increased 9% and together represented nearly three quarters of our total PCI organic sales growth in Q2.

Speaker Change: Sales of our custom procedural solutions or Cps products increased 3%, which was notably better than the low single digit decline we expected in Q2.

Speaker Change: This performance was fueled by strong growth in sales of kit products, which more than offset the expected year over year declines in sales of trades, resulting from our ongoing SKU rationalization efforts discussed on prior calls.

Joe Wright: Cardiac intervention product sales increased by 1.5, slightly above the high end of our growth expectations, driven primarily by strong sales of EPCRM products and, to a lesser extent, growth in sales of fluid management and intervention products. Sales of our OEM products increased 5% year over year in Q2.

Speaker Change: Cardiac intervention product sales increased one 5% slightly above the high end of our growth expectations, driven primarily by strong sales of EP CRM products and to a lesser extent growth in sales of fluid management and intervention products.

Speaker Change: Sales of our OEM products increased 5% year over year in Q2.

Joe Wright: While sales to OEM customers increased in the mid-teens on a sequential basis, 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 continue to believe the softer-than-expected sales trends of our OEM products are a result of order timing and fluctuations in demand as our customers work through efforts to optimize inventory levels. Demand trends from customers in both the U.S. and O.U.S. regions improved from Q1, as expected. We saw solid growth in product sales to OEM customers outside the U.S., while demand from U.S. customers drove product sales growth of just 3% year-over-year in Q2.

Joseph Wright: While sales to OEM customers increased in the mid-teens on a sequential basis, 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 continue to believe the softer-than-expected sales trends of our OEM products are a result of order timing and fluctuations in demand as our customers work through efforts to optimize inventory levels. Demand trends from customers in both the U.S. and O.U.S. regions improved from Q1, as expected.

Speaker Change: While sales to OEM customers increased in the mid teens on a sequential basis.

Speaker Change: Sales of our OEM products for the only area of our cardio business that came in softer than our growth expectations heading into the quarter.

Speaker Change: We continue to believe the softer than expected sales trends of our OEM products are a result of order timing and fluctuations in demand as our customers worked through efforts to optimize inventory levels.

Speaker Change: <unk> trends from customers in both the U S and O U S regions improved from Q1 as expected.

Speaker Change: We saw solid growth in product sales to OEM customers outside the U S.

Speaker Change: While demand from U S customers drove product sales growth of just 3% year over year in Q2 importantly.

Joe Wright: Importantly, we continue to expect low double-digit growth in OEM sales for the full year 2024. Lastly, sales in our endoscopy segment increased 16%, which exceeded the high end of our growth expectation. We continue to see a normalization of growth trends in this business, as expected, and our updated 2024 guidance now assumes low double-digit organic growth in our endoscopy business this year. Turning to a brief summary of our sales performance by geography, our second quarter sales in the U.S. increased 8.5% on a constant currency basis and 6% on an organic constant currency basis.

Speaker Change: Importantly, we continue to expect low double digit growth in OEM sales for the full year 2024.

Speaker Change: Lastly, sales in our endoscopy segment increased 16%, which exceeded the high end of our growth expectations.

Speaker Change: We continued to see a normalization of growth trends in this business as expected and our updated 2024 guidance now assumes low double digit organic growth in our endoscopy business. This year.

Speaker Change: Turning to a brief summary of our sales performance on a geographic basis, our second quarter sales in the U S increased eight 5% on a constant currency basis, and 6% on an organic constant currency basis.

Joe Wright: Similar to what we experienced in Q1, sales to U.S. customers came in roughly a point softer than what our guidance had assumed, driven by the softer-than-expected OEM sales, as previously mentioned. We continue to expect to deliver approximately 6% organic growth in the U.S. at the midpoint of our 2024 guidance range. International sales increased 4% year over year and 3.8% on an organic constant currency basis, exceeding the high end of our growth expectations by more than 470 basis points in the quarter.

Speaker Change: Similar to what we experienced in Q1 sales to U S customers came in roughly a point softer than what our guidance had assumed driven by the softer than expected OEM sales as previously mentioned.

Speaker Change: We continue to expect to deliver approximately 6% organic growth in the U S. At the midpoint of our 2024 guidance range.

Speaker Change: International sales increased 4% year over year, and three 8% on an organic constant currency basis exceeding the high end of our growth expectations by more than 470 basis points in the quarter the.

Joe Wright: The stronger-than-expected organic, constant-currency growth to customers outside the U.S. was driven primarily by 1 percent growth in APAC compared to our guidance range, which had assumed a decline in the range of 10 to 11 percent in Q2. With respect to China specifically, sales decreased 5% year-over-year, better than the low 20% decline our guidance had assumed.

Speaker Change: Our stronger than expected organic constant currency growth to customers outside the U S was driven primarily by 1% growth in APAC compared to our guidance range, which had assumed a decline in the range of 10% to 11% in Q2.

Speaker Change: With respect to China, specifically sales decreased 5% year over year better than the low 20% decline our guidance had assumed.

Joe Wright: We continue to see quarter-to-quarter variability in 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 now assumes our total international sales will increase 4.3% year-over-year, driven by 7-8% growth in EMEA and 11-12% growth in the rest-of-world region, partially offset by 0% growth in the APAC region versus the 4% decline assumed in our prior guidance range.

Joseph Wright: We continue to see quarter-to-quarter variability in 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 now assumes our total international sales will increase 4.3% year-over-year, driven by 7-8% growth in EMEA and 11-12% growth in the rest-of-world region, partially offset by 0% growth in the APAC region versus the 4% decline assumed in our prior guidance range.

Speaker Change: We continue to see quarter to quarter variability and growth trends related to volume based purchasing tenders as expected.

Speaker Change: By way of reminder, while we are not providing country specific growth assumptions and our guidance messaging. The mid point of our 2020 for constant currency growth guidance range now assumes our total international sales will increase four 3% year over year, driven by 7% to 8%.

Speaker Change: Growth in EMEA.

Speaker Change: And 11% to 12% growth in the rest of World region.

Speaker Change: Partially offset by a zero percent growth in the APAC region versus the 4% decline assumed in our prior guidance range.

Joe Wright: The lower headwind from APAC, assumed in our updated guidance, is driven by better-than-expected results in China over the first half of 2024. Note, regarding our China business in 2024, our guidance continues to assume that we will be able to increase sales of units on a year-over-year basis, but we expect total revenue to decline due to continued pricing headwinds related to volume-based purchases. With that said,

Joseph Wright: The lower headwind from APAC, assumed in our updated guidance, is driven by better-than-expected results in China over the first half of 2024. Note, regarding our China business in 2024, our guidance continues to assume that we will be able to increase sales of units on a year-over-year basis, but we expect total revenue to decline due to continued pricing headwinds related to volume-based purchases. With that, let me turn the call over to Raul, who will take you through a detailed review of our second quarter financial results, balance sheet, and financial condition as of June 30th.

Speaker Change: The lower headwind from APAC assumed in our updated guidance is driven by better than expected results in China over the first half of 2024.

Speaker Change: Now regarding our China business in 2024, our guidance continues to assume that we will be able to increase sales of units on a year over year basis, but we expect total revenue to decline due to continued pricing headwinds related to volume based purchasing.

Raul Parra: Let me turn the call over to Raul, who will take you through a detailed review of our second quarter financial results, balance sheet, and financial condition at June 30. Thank you, Joe. For the avoidance of doubt, unless otherwise noted, my commentary will focus on the company's non-GAAP results during the second quarter of fiscal year 2020. 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. Gross profit increased approximately 6% year-over-year in the second quarter.

Speaker Change: With that let me turn the call over to Ralph who will take you through a detailed review of our second quarter financial results balance sheet and financial condition at June 30.

Ralph: Thank you Joe.

Raul Parra: Beginning with a 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 second quarter of fiscal year 2024. 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.

Ralph: Beginning with the 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 second quarter of fiscal year 2024.

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

Raul Parra: Gross profit increased approximately 6% year-over-year in the second quarter. Our gross margin was 51.5%, 15 basis points year-over-year. The increase in gross margin year-over-year was driven by pricing uplifts, as well as favorable Product and Geography.

Ralph: Gross profit increased approximately 6% year over year in the second quarter.

Raul Parra: Our gross margin was 51.5%, 15 basis points year-over-year. The increase in gross margin year-over-year was driven by pricing up... Favorable Product and Geography, Geography Revenue Mix, and Improvements in Freight and Distribution, offset partially by manufacturing variances compared to the prior year. Operating expenses increased 3% from the second quarter of 2023.

Ralph: Our gross margin was 51, 5% up 15 basis points year over year.

Speaker Change: The increase in gross margin year over year was driven by pricing uplift.

Speaker Change: Favorable product and geographic.

Speaker Change: Geography revenue mix and improvements in freight and distribution costs.

Speaker Change: Offset partially by manufacturing variances compared to the prior year period.

Speaker Change: Operating expenses increased 3% from the second quarter of 2023.

Raul Parra: The year-over-year increase in operating expenses was driven by a 2% increase in SG&A expense and a 7% increase in R&D expenses. The second quarter other expense net was a benefit of $1.4 million compared to an expense of $3.4 million last year. The change in other expense net was driven by an increase in interest income associated with our higher cash balance, partially offset by an increase in net interest expense associated with increased borrowing.

Speaker Change: The year over year increase in operating expenses was driven by a 2% increase in SG&A expense and a 7% increase in R&D expense compared to the prior year period.

Speaker Change: Total operating income in the second quarter increased $6 5 million or 11% from the second quarter of 2023% to $67 8 million.

Speaker Change: Our operating margin was 21% compared to 19, 1% in the prior year period.

Speaker Change: The 92 basis point increase in operating margin was driven by a 15 basis point increase in our non-GAAP gross margin and by a 76 basis point decrease in our non-GAAP opex margin compared to the prior year period.

Speaker Change: Second quarter other expense net was a benefit of $1 4 million compared to expense of $3 4 million last year. The change in other expense net was driven by an increase in interest income associated with our higher cash balances, partially offset by an increase in net interest expense associated with increased borrowings.

Raul Parra: Second quarter net income was $53.8 million, or $0.92 per share, compared to $45.9 million, or $0.78 per share, in the prior year period. We are pleased with our profitability performance in the second quarter, where we leveraged stronger-than-expected revenue results to drive both expansion and operating margins, and non-gap-diluted earnings per share that exceeded the high end of our expectations. Turning to a review of our balance sheet and financial conditions, as of June 30, 2024, we had cash and cash equivalents of $636.7 million, total debt obligations of $822.5 million, and available borrowing capacity of approximately $680 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, 2023. Our net leverage ratio as of June 30th was 2.4 times on an adjusted basis.

Raul Parra: Second quarter net income was $53.8 million, or $0.92 per share, compared to $45.9 million, or $0.78 per share, in the prior year. We are pleased with our profitability performance in the second quarter, where we leveraged stronger than expected revenue results to drive both expansion and operating margins and non-gap diluted earnings per share that exceeded the high end of our expectations, compared to $11.5 million in the prior year. The year-over-year improvement in free cash flow generation was primarily a result of significant improvements in cash used for working capital compared to the prior year period.

Speaker Change: Second quarter net income was $53 8 million or <unk> 92 per share compared to $45 9 million or <unk> 78 per share in the prior year period.

Speaker Change: We are pleased with our profitability performance in the second 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.

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

Speaker Change: As of June 32024, we had cash and cash equivalents of $636 7 million total debt obligations of $822 5 million in available borrowing capacity of approximately $680 million.

Speaker Change: Compared to cash and cash equivalents of 587 million total debt obligations of $846 6 million in available borrowing capacity of approximately $626 million as of December 31 2023.

Speaker Change: Our net leverage ratio as of June 30 was two four times on an adjusted basis.

Speaker Change: We generated $57 9 million of free cash flow in the second quarter.

Speaker Change: Compared to $11 5 million in the prior year period.

Speaker Change: Year over year improvement in free cash flow generation was primarily a result of significant improvement in cash used in working capital compared to the prior year period.

Raul Parra: We have generated more than $82 million of free cash flow over the first half of 2024. We expect strong free cash flow generation 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 updated formal financial guidance items and how those ranges compared to prior ranges as of July 1st, 2024, when we updated our guidance to reflect the projected impact of our acquisition of the assets of endogastric solutions.

Speaker Change: We have generated more than $82 million of free cash flow over the first half of 2020 for expect for strong free cash flow generation in 2024 and continue to believe our CGI program will generate more than 400 million free our free cash flow in the three year period, ending December 31 2026.

Raul Parra: For reference, we have included a table in our earnings press release that details each of our updated formal financial guidance items and how those ranges compared to prior ranges as of July 1st, 2024, when we updated our guidance to reflect the projected impact of our acquisition of the assets of endogastric solutions. Our updated guidance ranges now as soon as the following, gap net revenue growth of six to seven percent year over year, net revenue growth of approximately 5-6% in our cardiovascular segment, and net revenue growth of approximately 45% to 52% in our endoscopy segment, and a headwind from changes in foreign currency exchange rates of approximately 9.1 million, or approximately 70 basis points to growth year-over-year.

Speaker Change: For reference we have included a table in our earnings press release, which details each of our updated formal financial guidance items and how those ranges compared to prior ranges as of July one 2024, when we updated our guidance to reflect the projected impact of our acquisition of the assets of Endogastric solutions.

Raul Parra: Our updated guidance ranges now as soon as the following and net revenue growth of approximately 45 to 52 percent in our endoscopy segment and a headwind from changes in foreign currency exchange rates of approximately 9.1 million, or approximately 70 basis points to growth year-over-year. Finally, our total net revenue guidance for fiscal year 2024 now assumes inorganic revenue contributions from the acquisitions announced on June 8, 2023 and July 1, 2024 in the range of $24.6 to $26.6 million in the aggregate.

Speaker Change: Our updated guidance range now assumes the following.

Speaker Change: GAAP net revenue growth of 6% to 7% year over year.

Speaker Change: Net revenue growth of approximately 5% to 6% in our cardiovascular segment.

Speaker Change: And net revenue growth of approximately 45% to 52% in our endoscopy segment and a headwind from changes in foreign currency exchange rates of approximately $9 1 million or approximately 70 basis points to growth year over year.

Raul Parra: Excluding the impact of changes in foreign currency exchange rates, we expect total net revenue growth on a constant currency basis in a range of 6.9 to 7.7 percent in 2024. Finally, our Total Net Revenue Guidance for Fiscal Year 2024 now assumes inorganic revenue contributions from the acquisitions announced on June 8, 2023 and July 1, 2024 in the range of $24.6 to $26.6 million in the aggregate. For avoidance of doubt, this aggregate range consists of approximately $11.6 million of inorganic revenue related to our acquisitions of assets from angiodynamics in Q1 and Q2, plus the contributions from our acquisition of assets from endogastric solutions in Q3 and Q4.

Speaker Change: Excluding the impact of changes in foreign currency exchange rates, we expect total net revenue growth on a constant currency basis in a range of $6 nine to seven 7% in 2024.

Speaker Change: Finally, our total net revenue guidance for fiscal year 2024, now assumes inorganic revenue contributions from the acquisitions announced on June eight 2023 and July one 2024 in the range of $24 six.

Speaker Change: $226 $6 million in the aggregate for avoidance of doubt. This aggregate range consists of approximately $11 $6 million of inorganic revenue related to our acquisitions of assets from annual dynamics in Q1, and Q2, plus the contributions from our acquisition of assets from Endogastric solutions in Q3 and Q4.

Raul Parra: For avoidance of doubt, this aggregate range consists of approximately $11.6 million of inorganic revenue related to our acquisitions of assets from Androdynamics in Q1 and Q2, plus the contributions from our acquisition of assets from Endogastric Solutions in Q3 and Q4. Excluding inorganic revenue, our updated guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately 4.9 to 5.6 percent year over year, with respect to our updated profitability guidance for 2024. We now expect non-GAAP diluted earnings per share in the range of $3.27 to $3.35, representing an increase of 15 to 17 percent year-over-year.

Raul Parra: Excluding inorganic revenue, our updated guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately 4.9 to 5.6 percent year over year. With respect to our updated profitability guidance for 2024, we now expect non-GAAP diluted earnings per share in the range of $3.27 to $3.35, representing an increase of 15% to 17% year-over-year. Note, this range includes the expected dilution related to our acquisition of assets from Endogastric Solutions, which, as disclosed on July 1st, is expected to be in the range of $0.04 to $0.06.

Speaker Change: Excluding inorganic revenue our updated guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately $4 nine to five 6% year over year.

Speaker Change: With respect to our updated profitability guidance for 2024.

Speaker Change: We now expect non-GAAP diluted earnings per share in the range of $3 27.

Speaker Change: $3 35, representing.

Speaker Change: And an increase of 15% to 17% year over year.

Raul Parra: Note, this range includes the expected dilution related to our acquisition of assets from Endogastric Solutions, which, as disclosed on July 1st, is expected to be in the range of four to six. As Fred discussed earlier, we believe this acquisition offers a very attractive financial profile, while we believe this acquisition will be modestly dilutive to our full year 2024 non-GAAP profitability, given the partial year contribution and the impact of approximately $2.7 million We expect the acquisition to be accretive to our non-GAAP gross and operating margins, non-GAAP net income, and non-GAAP UPS in the first full year post-closure, for modeling purposes.

Speaker Change: Note. This range includes the expected dilution related to our acquisition of assets from Endogastric solutions, which as disclosed on July one is expected to be in the range of four to six.

Raul Parra: As Fred discussed earlier, we believe this acquisition offers a very attractive financial profile, while we believe this acquisition will be modestly dilutive to our full year 2024 non-GAAP profitability, given the partial year contribution and the impact of approximately $2.7 million of lower interest income on cash balances used for the total purchase consideration. For modeling purposes, we expect the acquisition to be accretive to our non-GAAP gross and operating margins, non-GAAP net income, and non-GAAP UPS in the first full year post-closing.

Speaker Change: As Fred discussed earlier, we believe this acquisition offers a very attractive financial profile. While we believe this acquisition will be modestly dilutive to our full year 2024, non-GAAP profitability given the partial year contribution and the impact of approximately $2 7 million of lower interest income on cash balances.

Speaker Change: Used for the total purchase consideration.

Speaker Change: We expect the acquisition to be accretive to our non-GAAP gross gross and operating margins non-GAAP net income and non-GAAP EPS in the first full year post closing.

Speaker Change: For modeling purposes, our updated fiscal year 2024 financial guidance now assumes <unk>.

Raul Parra: Our updated fiscal year 2024 financial guidance now assumes non-GAAP operating margins in the range of approximately 18.4 to 18.7%, up 120 to 150 basis points year over year, non-GAAP interest and other expense net of approximately $1.5 million compared to $10.6 million last year, a non-GAAP tax rate of approximately 21.5 percent, and diluted shares outstanding of approximately 58.8 million. And we now expect CAPEX in the range of $55 to $60 million and free cash flow of at least $130 million compared to at least $115 million previously.

Raul Parra: Our updated fiscal year 2024 financial guidance now assumes non-GAAP operating margins in the range of approximately 18.4 to 18.7 percent, up 120 to 150 basis points year over year, non-GAAP interest and other expense net of approximately $1.5 million compared to $10.6 million less, a non-GAAP tax rate of approximately 21.5%, and diluted shares outstanding of approximately 58.8 million. And we now expect CAPEX in the range of $55 million to $60 million and free cash flow of at least $130 million compared to at least $115 million previously.

Speaker Change: non-GAAP operating margins in the range of approximately $18 four to 18, 7% up 120 to 150 basis points year over year.

Speaker Change: non-GAAP interest and other expense net of approximately $1 5 million compared to $10 6 million last year.

Speaker Change: non-GAAP tax rate of approximately 21, 5%.

Speaker Change: Diluted shares outstanding of approximately $58 8 million.

Speaker Change: And we now expect Capex in the range of $55 million to $60 million and free cash flow of at least $130 million compared to at least $115 million previously.

Raul Parra: We would also like to provide additional transparency related to our growth and profitability expectations for the third quarter of 2024. Specifically, we expect our total revenue to increase in the range of approximately 5.7 to 7.1 percent year-over-year on a gap basis and approximately 6.4 to 7.8 percent year-over-year on a constant currency basis. The midpoint of our third quarter constant currency sales growth expectations assumes approximately 9% growth year-over-year in the U.S. and 5% growth year-over-year in the international market.

Speaker Change: We will also like to provide additional transparency related to our growth and profitability expectations for the third quarter of 2024.

Speaker Change: Specifically, we expect our total revenue to increase in the range of approximately five 7% to seven 1% year over year on a GAAP basis and approximately six four to seven 8% year over year on a constant currency basis.

Speaker Change: The midpoint of our third quarter constant currency sales growth expectations assumes approximately 9% growth year over year in the U S and 5% growth year over year in international markets.

Speaker Change: Note the mid point of our third quarter constant currency sales growth expectations also includes approximately $6 $4 million of inorganic revenue.

Speaker Change: Excluding these inorganic contributions our third quarter total revenue is expected to increase approximately 5% year over year on an organic constant currency basis.

Raul Parra: With respect to our profitability expectations for the third quarter of 2024, we expect non-GAAP operating margins in a range of approximately 18 to 18.7%, and we expect non-GAAP EPS in the range of 77 cents to 82 cents. Finally, I wanted to call out one item for consideration when comparing our updated non-GAAP operating margin assumptions versus our original guidance for 2024 we introduced on our Q4 call and subsequently reaffirmed on our Q1 earnings call on April 30 and again in our endogastric solutions press release on July 1.

Raul Parra: With respect to our profitability expectations for the third quarter of 2024, we expect non-GAAP operating margins in a range of approximately 18 to 18.7%, and we expect non-GAAP EPS in the range of 77 cents to 82. Finally, I wanted to call out one item for consideration when comparing our updated non-GAAP operating margin assumptions versus our original guidance for 2024 we introduced on our Q4 call and subsequently reaffirmed on our Q1 earnings call on April 30th and again in our endogastric solutions press release on July 1st.

Speaker Change: With respect to our profitability expectations for the third quarter of 2024, we expect.

Speaker Change: non-GAAP operating margins in a range of approximately 18 to 18, 7% and we expect non-GAAP EPS in the range of 77 to 82.

Speaker Change: Finally, I wanted to call out one item for consideration when comparing our updated non-GAAP operating margin assumptions.

Speaker Change: Our original guidance for 2024, we introduced on our Q4 call and subsequently reaffirmed on our Q1 earnings call on April 30, and again in our <unk>.

Speaker Change: Endogastric solutions press release of July one.

Raul Parra: As detailed in our earnings press release this afternoon, beginning in the second quarter of 2024, consulting expenses associated with initiatives conducted under our Foundations for Growth program will no longer be adjusted as part of our non-GAAP measure. Non-GAAP financial measures detailed in the reconciliation tables in our earnings press release reflect the removal of these FFG consulting fees for the three- and six-month periods ended June 30, 2023, and 2024, specifically $4.2 million in the first half of 2023 and $1 million in the first half of 2024. FFG consulting fees totaled approximately $12.3 million pre-tax for the 12 months ended December 31st, 2023, representing an approximately 100 basis point impact on the previously non-GAAP operating margin for that period.

Speaker Change: As detailed in our earnings press release. This afternoon, beginning in the second quarter of 2024 consulting expenses associated with initiatives conducted under our foundations for growth program are no longer adjusted as part of our non-GAAP measures non.

Speaker Change: non-GAAP financial measures detailed in the reconciliation tables in our earnings press release reflect the removal of these FFG consulting fees for the three and six month periods ended June 32023, and 2024, specifically $4 2 million in the first half of 2023 and $1 million in the first half of 2024.

Speaker Change: FFG consulting fees totaled approximately $12 $3 million pre tax for the 12 months ended December 31 2023.

Speaker Change: Representing approximately 100 basis point impact to the previously non-GAAP operating margin for that period Accordingly, our updated non-GAAP operating margin assumptions for fiscal year 2024, excluding <unk> consulting fees now reflect expected year over year expansion in the range of 120 basis points to 150 basis points compared to <unk>.

Raul Parra: Accordingly, our updated non-GAAP operating margin assumptions for fiscal year 2024, excluding FFG consulting fees, now reflect expected year-over-year expansion in the range of 120 basis points to 150 basis points. Importantly, when applying this new treatment for FFG consulting fees throughout the three-year FFG program, our non-GAAP operating margin expansion performance is still extremely strong. Our efforts to improve profitability over this period resulted in a non-GAAP operating margin of 17.2% in fiscal year 2023 compared to 13.2% in fiscal year 2020. Additionally, this new accounting treatment does not impact the cumulative free cash flow we generated over the three years ending December 31, 2023, which totaled nearly $300 million.

Speaker Change: <unk> year over year expansion in the range of 45 basis points to 70 basis points previously.

Speaker Change: Importantly, when applying this new treatment for FSD consulting fees throughout the three year FFG program. Our non-GAAP operating margin expansion performance is still extremely strong our efforts to improve profitability over this period resulted in a non-GAAP operating margin of 17, 2% in fiscal year 2023 compared to 13.

Speaker Change: 2% in fiscal year 2020.

Speaker Change: An increase of approximately 400 basis points.

Speaker Change: Further this new treatment does not impact the cumulative free cash flow, we generate over the three years ending December 31, 2023, which totaled nearly $300 million.

Raul Parra: And by way of reminder, we have generated nearly $419 million of free cash flow since the beginning of 2020. Finally, this new treatment does not impact our 2024 guidance, nor are CGI's financial targets for the three-year period ending December 31, 2020. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Raul Parra: And by way of reminder, we generated nearly $419 million of free cash flow since the beginning of 2020. Finally, this new treatment does not impact our 2024 guidance, nor are CGI's financial targets for the three-year period ending December 31, 2020. That wraps up our prepared remarks. Operator, we would now like to open the line up for questions.

Speaker Change: And by way of <unk> and <unk>.

Speaker Change: By way of reminder, we generated nearly $419 million of free cash flow since the beginning of 2020.

Speaker Change: Finally, this new treatment does not impact our 2024 guidance.

Speaker Change: Nor are CGI financial targets for the three year period, ending December 31 2026.

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

Operator: Thank you, sir. Ladies and gentlemen, if you'd like to ask a question, please signal by pressing star 11 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Speaker Change: Thank you, Sir ladies and gentlemen, if you'd like to ask a question. Please signal by pressing star one on your telephone keypad.

Operator: We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again. One more purpose question. And our first question will come from the line of Jason Bednar from Pipo Center. Your line is open.

Speaker Change: Using a speaker phone. Please make sure your mute function is all your signal to reach our equipment we do.

Speaker Change: Asking you limit yourself to one question and one follow up if you would like to ask additional questions. We invite you to add yourself into the queue again.

Speaker Change: One more question.

Speaker Change: And our first question will come from the line of Jason Butler from Piper Sandler Your line is now open.

Jason Bednar: Hey, good afternoon, guys. Congratulations on another solid quarter here. I wanted to start first with some guidance.

Jason Butler: Hey, good afternoon, guys congrats on another solid quarter here.

Jason Butler: Wanted to start first with guidance.

Speaker Change: It looks like Youre flowing flowing through mostly that <unk> overage here.

Speaker Change: Not much changing here with the implied outlook for the second half of the year.

Speaker Change: This is within how you typically manage your guide or your outlook.

Speaker Change: Wanted to check to see if there's any incremental caution you add with respect to pieces of your business that just as you think of the momentum from the first half of the year doesn't continue into the back half it doesn't sound like that but we really wanted to check in on that and then.

Speaker Change: Within that conversation maybe discuss.

Speaker Change: More auto more specifically your your China assumptions within your overall guidance range. It doesn't look as onerous, but I don't think I heard exactly what youre assuming now for.

Speaker Change: For China this year.

Fred Lampropoulos: Looks like you're flowing through mostly that 2Q overage here. Not much changing with the implied outlook for the second half of the year. I think this is within how you typically manage your guide or your outlook, but I wanted to check to see if there's any incremental caution you have with respect to pieces of your business that just has you thinking the momentum from the first half of the year doesn't continue into the back half.

Fred Lampropoulos: This is how we typically do it, right? So we're flowing through that first half increase. As you know, we beat by about $7 million on the high end of our guidance, and so we're flowing that through. Obviously, you have the dynamics of EGS that we've also included in that, which we did earlier this month when we did the acquisition. I think, generally speaking, we're super optimistic about how the business is doing. U.S. growth was outstanding again.

Speaker Change: Yes, so yes, you're right. Jason This is how we typically do at rates that were flowing through that first half.

Speaker Change: Increase as you know we beat by about $7 million on the high end of our guidance and so we're flowing that through obviously you have the dynamics of Etfs that were also that we are also included in that which which we did that earlier. This month. When we did the acquisition. So I think generally speaking we're super optimistic about how the business is doing.

Fred Lampropoulos: International growth has been great, so we're feeling pretty optimistic, and I think I'm sure we'll get some questions on China. China did better than anticipated, and we continue to see that. So, generally speaking, I think we're pretty excited about how the first half went and how the back half is looking, and I think, ultimately, we're putting in a pretty strong year together. Thank you. And our next question, coming from the line of Mike Matson from Needham, Ireland, is open.

Speaker Change: The U S growth was outstanding again international growth was great.

Speaker Change: So we're feeling pretty optimistic and I think I'm sure, we'll get some questions on China.

Speaker Change: China did better than anticipated and we continue to see that so generally speaking I think we're pretty excited about how how the first half when and how the back half is looking and I think ultimately we're putting in a pretty strong year together.

Speaker Change: Okay. Thanks.

Fred Lampropoulos: It doesn't sound like that, but I really wanted to check in on that and then, within that conversation, maybe discuss a little more specifically your China assumptions within your overall guidance range. It doesn't look as onerous, but I don't think I heard exactly what you're assuming now for China this year.

Speaker Change: And.

Speaker Change: One follow up there and then a separate question just if you could specify just what China is within your within your updated guide versus where it was previously.

Speaker Change: It seems like.

Speaker Change: Not as onerous, but and then I did want to ask as a follow up I bring it up often here, but the gross margin line was pretty solid again this quarter and considering this was the toughest year over year comp on the margin gross margin line.

Speaker Change: So those margin comps get easier over the balance of the year I'm just wondering how youre thinking about the gross margin trend line from here and maybe should we be thinking about a seasonal step down in the third quarter.

Speaker Change: But just going forward is this 51% or so range and more or less defendable as we look ahead.

Speaker Change: Yes, I'll let.

Joe Wright: Joe kind of hit on the international piece here first in China, and then I'll answer the gross margin, Yes, Hi, Jason This is Joe.

Fred Lampropoulos: I think, generally speaking, we're super optimistic about how the business is doing. U.S. growth was outstanding again. International growth has been great, so we're feeling pretty optimistic, and I think I'm sure we'll get some questions on China. China did better than anticipated, and we continue to see that. So, generally speaking, I think we're pretty excited about how the first half went and how the back half is looking, and I think, ultimately, we're putting in a pretty strong year together.

Fred Lampropoulos: Thank you. And, you know, one follow-up question there and then a separate question just if you could specify just what China is within your updated guide versus where it was previously.

Joe Wright: Our international sales were up 4% year on year, and three 8% on an organic constant currency basis. So this exceeded the high end of our growth expectations by approximately 470 basis points in the quarter.

Speaker Change: So those better than expected <unk> results were driven primarily by only a 1% constant currency growth or.

Speaker Change: The decline in APAC in Q2, our previous guidance range had assumed a decline in the range of 10% to 11% in Q2.

Speaker Change:

Speaker Change: So regarding the APAC sales, so China sales decreased 5% year over year, so that was better than the low 20% decline our guidance had assumed.

Speaker Change: We continue to see quarter to quarter variability in the growth trends related to volume based purchasing tenders, which is as we expected.

Fred Lampropoulos: Again, it seems like it's not as onerous. And then, I wanted to ask as a follow-up, you know, I bring this up often here, but, you know, the gross margin line was pretty solid again this quarter, considering this was the toughest year-over-year comp on the gross margin line. So those margin comps get easier over the balance of the year. I'm just wondering how you think about, you know, the gross margin trend line from here. Maybe you should be thinking about a seasonal step down in the third quarter. But, you know, just going forward, is this 51% or so range more or less defendable as we look ahead?

Speaker Change: Yes so.

Speaker Change: Just on the gross margin Jason as you know we don't comment on the gross margin generally speaking we did say at the beginning of the year and I think Theres still holds true that.

Joseph Wright: Yeah, I'll let Joe kind of hit on the international piece here first in China, and then I'll answer the gross margin. Yeah. Hi Jason. This is Joe.

Joseph Wright: Yeah. Hi Jason. This is Joe.

Speaker Change: As far as the operating margin improvement I would mostly come from gross margin.

Speaker Change: And to the extent that.

Speaker Change: We would also on the high end, we would also leverage opex. So I'd say generally speaking, we're really happy with the way gross margin is performing.

Speaker Change: We've been happy to last three years the way it is.

Speaker Change: What it's done and again continue to be excited about what it's doing this year.

Speaker Change: I'd say, it's kind of where we want it to be.

Jason Bednar: Okay, fair enough. I'll let others hop in here. Thanks.

Speaker Change: Okay fair enough I'll, let others hop in here.

Operator: Thank you. And our next question, coming from the line of Mike Matson from Needham, Ireland, is open.

Speaker Change: Thank you.

Speaker Change: Our next question coming from the line of Mike Matson from Needham. Your line is now open.

Michael Matson: Yeah, thanks for taking my questions. Um, I guess just one on the endogastric deal. So, uh,

Mike Matson: Yes, thanks, Thanks for taking my questions.

Mike Matson: Just one on the gastric deal so.

Mike Matson: I imagine this is going into the <unk> business. So.

Michael Matson: ,...

Speaker Change: Are you going to be combining the sales teams that have a kind of both groups of people selling all of our endoscopy products or will you maintain our specialist sales force to solve their sources of <unk> plus product.

Fred Lampropoulos: Yeah, Mike, hey, thanks. This is Fred.

Speaker Change: Yes, Mike I think this is Fred thanks for the question.

Speaker Change: Listen we've been looking for assets in this Gi business for a long time and it's been very difficult.

Speaker Change: Good with this product as we found something that we thought.

Speaker Change: Be able to cross over that we could have the combined sales forces. So for the balance of this year there is training and.

Speaker Change: It'll be the we did keep that sales team and some of the technical and clinical people will combine those together with the existing products. We have in Endo Tech and then as other products other products come out because we have a very nice pipeline, we won't discuss it specifically, but we think that thats going to serve well and we'll be more efficient.

Speaker Change: We've had a.

Speaker Change: A good sales force, but I mean, they are still doing a good job, but the utilization wasn't what we needed it to be this way there was a single product company that fit into our business very nicely and we're going to combine those two we've had them here by the way I should mention they've all of those sales forces.

Joe Wright: Been here to sell like all getting together, we've all spent time together and I'm actually very pleased with how that's coming along as well as the integration Joe you want to add something to that yes. As you mentioned Fred we've been looking for something in this space for a long time.

Fred Lampropoulos: Thanks for the question. Listen, we've been looking for assets in this GI business for a long time, but it's been very difficult.

Joe Wright: The great thing about this opportunity was just the financial profile, it's very rare that you find something thats going to be accretive to not just our growth profile, but also our gross margin and overall profitability in the first full year. So that was very attractive and it's our existing call point.

Joe Wright: So we are basically able to increase our footprint in a very attractive market here.

Fred Lampropoulos: What we did with this product is we found something that we thought would be able to cross over so we could have the combined sales forces. So for the balance of this year, there's training, and we did keep that sales team, and some of the, you know, the technical and clinical people will put those together with the existing products we have in endotech. And then as other processes, you know, other products come out, because we have a very nice pipeline, we won't discuss it specifically.

Speaker Change: So yes, we're excited about the combination and we expect to train cross trained all of the.

Fred Lampropoulos: The EGS salespeople that we hired and also our current endotech sales force, so both will be able to sell both product lines, so we do expect some cross-selling opportunities as we move forward. Joe, I could just add one more thing.

Joe Wright: The EGF salespeople that we hired and also our current <unk> sales force. So both will be able to sell both product lines. So we do expect expect some.

Joe Wright: Cross selling opportunities as we move forward and Joe if I could just add one more thing Mike. The other thing is the territories and the smaller our ability to focus more instead of having people traveling so far where these additional folks. We think we can get deeper into the account and incidentally just as a point of interest.

Fred Lampropoulos: Mike, the other thing is the territories and the smaller companies, our ability to focus more instead of having people travel so far with these, you know, additional folks. We think we can get deeper into the accounts, and incidentally, just as a point of interest, every single account that Merit has happens to be exactly the same footprint as they have. So it's not like these are new customers. You know, they're our existing customers, and they're all their existing customers, so they know who we are. You know, we're not having new people show up in the lab.

Joseph Wright: There was a single product company that fit into our business very nicely. And we're going to combine those two. We've had them here, by the way, I should mention that all of those sales forces have been here to Salt Lake all getting together, we've all spent time together. And I'm actually very pleased with how that's coming along as well as the integration. Joe, do you want to add something to that?

Joe Wright: Every single account that merit has happens to be exactly the same footprint as they have so it's not like these are new customers.

Joe Wright: There are existing customers and theyre all of their existing customers. So they know who we are we're not having new people show up in the lab.

Fred Lampropoulos: This is something that has a lot of features that Joe mentioned and that I've alluded to that we think helps to make it a pretty dynamic team. And I guess the other part that goes with that is when you get, I don't know, I had probably 10 notes from the sales force after we were here and spent a couple days together, just how excited they were to have this opportunity. And every person that we made that offer to in that sales force accepted. I think those are really interesting facts, you know, that they all came together, and that group will come together under the leadership of Nikki Kennedy, who's the leader of that Indertech division.

Joe Wright: This is something that there is a lot of features that Joe mentioned and that I have alluded to that we think helps to make it a pretty dynamic team and I guess the other part that goes with that is when you get I don't know that I'd, probably 10 notes from the sales force.

Fred Lampropoulos: And Joe, if I could just add one more thing. Mike, the other thing is the territories and the smaller ones, our ability to focus more instead of having people traveling so far with these, you know, additional folks. We think we can get deeper into the accounts. And incidentally, just as a point of interest, every single account that Merit has happens to be exactly the same footprint as theirs. So it's not like these are new customers. You know, there are existing customers, and they're all their existing customers, so they know who we are. You know, we're not having, you know, new people show up in the lab.

Speaker Change: After we were here and spend a couple of days together just how excited they were to have this opportunity and every person that we made that offer tune that salesforce accepted I think those are really interesting facts.

Nicky Kennedy: They all came together that that group will come together under the leadership of Nicky Kennedy, who is who is the leader of that and our Tech Division. So we are quite excited about this opportunity a lot of work to be done but nevertheless.

Fred Lampropoulos: So we're quite excited about this opportunity. There is a lot of work to be done, but nevertheless, we're very excited about it. Yeah, I got it.

Fred Lampropoulos: I think those are really interesting facts, you know, that they all came together, and that group will come together under the leadership of Nicky Kennedy, who's the leader of that Endotect division. So we're quite excited about this opportunity. There is a lot of work to be done, but nevertheless, we're very excited about it.

Michael Matson: Yeah, it sounds great. And then on the cardiac business, have you...

Joe Wright: We're very excited about it.

Speaker Change: Yes, it sounds great.

Speaker Change: And then just on the cardiac business have you seen any kind of impact they are positive or negative from the rapid uptake we're seeing.

Michael Matson: Have you seen any kind of impact there, positive or negative, from the rapid uptake we're seeing of PFA?

Michael Matson: of PFA Appalachian.

Fred Lampropoulos: No, we have not seen that at all. We haven't seen anything that's been taken away. Joe, anything that you've seen?

Speaker Change: PSA ablation.

Joe Wright: No.

Joe Wright: We have not seen that at all we haven't seen him as takeaway Joe anything that you've seen no.

Speaker Change: Have devices that enable ablation procedures, so regardless if.

Joe Wright: It's RF ablation or PFA.

Speaker Change: Our tools are generally applicable to both procedures. So it hasnt been an impact for us and in fact, it to access to get them. There. So they can deliver those products would be our part spanned our stairwell shades.

Joseph Wright: And in fact, it's access to get in there so they can deliver those products. You know, that would be our HeartSpan, our Stableable Sheets, our Splitable. You know, it's those products that complement each other that they don't take away.

Joe Wright: Spreadable, it's those products that complement that they don't take away.

Fred Lampropoulos: Yeah, I got it. Thanks. Okay. Thanks, Mike.

Speaker Change: Yeah got it thanks.

Mike Matson: Thanks, Mike.

Operator: Our next question comes from the line of Larry Biegelsen from Wells Fargo. Your line is open.

Operator: Thanks. Now, next question coming from the line of Larry Biggleson from Wells Fargo, your line is open. We're not good at being patient here, Fred, but thank you. I know, I know that. It's okay.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line of.

Joe Wright: Larry Nicholson from Wells Fargo. Your line is now open.

Lawrence Biegelsen: Hey guys, it's Larry. Thanks for taking the question. Hey Fred, I wanted to ask you two about Rhapsody. First, a big picture one, and then a little bit more detailed one.

Larry Nicholson: Hey, guys, it's Larry Thanks for taking the question.

Larry Nicholson: Fred I wanted to ask you too on Rhapsody first a big picture one.

Fred Lampropoulos: And by the way, congrats on the nice quarter here, especially on the margins. You know, Fred, how do you expect to compete, you know, with Gore and BD and the StenCraft space? We've heard that price is a key component when physicians choose a StenCraft. What's your view? And I had one follow-up.

Speaker Change: And then a little bit more detailed one and by the way congrats on the nice quarter here, especially on the margins.

Larry Nicholson: Fred how do you expect to compete with core mbd in the stent graft space. We've heard that price is a key component when physicians choose a stent graft whats your view and I had one follow up.

Larry Nicholson: I think that first of all as you know Larry we made a press release too early to talk about that.

Speaker Change: The data being.

Speaker Change: <unk> presented at the <unk> meeting I think it's August 14th September whenever it hits coming up in the next couple of weeks.

Speaker Change: So we just my general take is that we have superior technology period.

Speaker Change: That's always been why we developed that we think it's a great product I think we've been out there selling it for a while and the uptake on the product has been positive.

Speaker Change: So we're we're very excited about the long term, we continue to track well in those markets.

Larry Nicholson: Clinicians are continue to be positive.

Speaker Change: And we're really looking forward in the future discuss more of the addressable market opportunities and at the right time in the very near future, we'll be talking about all of these things. So that we can lay it out on this call. It's we're not intending to do that today, but we don't have I can just tell you that I don't have and I don't think that people in this from having any.

Larry Nicholson: About the viability of this technology and its performance capabilities will talk more specifically in the very near future.

Lawrence Biegelsen: I wanted to push my lock and ask you one follow-up question. How do you think about the likelihood that you can obtain a transitional pass-through payment or TPT payment? And if you believe you can get a TPT because you have breakthrough status, does this mean you're going to have to price it at a significant premium when you come out, you know, of the gate so you can meet the TPT criteria? Thanks. Yeah. Larry, we do have breakthrough status on this product that speaks to that, and at the appropriate time, as we talked about, all of this will be revealed.

Speaker Change: Well I wanted to push my luck I can ask you one follow up.

Speaker Change: How are you thinking about the likelihood you can obtain a transitional pass through payment or <unk> payment and if you believe you can get at DPT, because you have breakthrough status.

Speaker Change: Does this mean, you're going to have to price it at a significant premium when you come out of the gate. So you can meet the <unk> criteria.

Joe Wright: Larry we do have breakthrough.

Larry Nicholson: Status on this product that speaks to that.

Larry Nicholson: And at the appropriate time as we talked about all of this will be revealed so.

Fred Lampropoulos: So we're in the very near future; we'll lay all of this out. Our primary focus today is the PMA has been filed, it's been accepted, let's get that done, and then we'll start hitting all these other things once we know and we get closer and understand what that is. So it'll be there; it's gonna have to be a little bit more patience, and I sure appreciate you pressing your luck. I'm not, we're not good at being patient here, Fred, but thank you.

Larry Nicholson: We're in the very near future, we'll lay all of this out our primary focus today is the PMA has been filed its been accepted let's get that done and then we'll start hitting all these other things once we know when we get closer and understanding that there. So it'll be there just going to have to be a little bit more patient.

Speaker Change: I sure appreciate your oppression your luck.

Speaker Change: So I'm not we're not good at being patient here, but thank you I know that.

Fred Lampropoulos: Oh, I know, I know that. Okay, you're just, I'm going to teach you a lot of things like you've taught me. You have, I meant that as a compliment Larry, you have. I know that. Over the years, you have, and I appreciate it.

Fred Lampropoulos: I'm going to teach you a lot of things like you taught me. You have. I meant that as a compliment, Larry.

Speaker Change: I'm going to teach a lot of things like you've taught me.

Larry Nicholson: Thanks, Larry you have.

Larry Nicholson: Over the years, you have and I appreciate it thank you Sir.

Fred Lampropoulos: Thank you. And our next question comes from the line of Steve Lichtman from Oppenheimer, New London, South Wales.

Fred Lampropoulos: I know that. Over the years, you have, and I appreciate it. Thank you, sir. And our next question comes from the line of Steve Lichtman from Oppenheimer, and your line is open. Thank you. Evening, gentlemen, and congratulations on the quarter. I wanted to ask again about endogastric solutions.

Larry Nicholson: Thank you.

Speaker Change: Our next question coming from the line of Steve Mcmahon from Oppenheimer. Your line is now open.

Operator: Thank you, evening gentlemen, and congratulations on the quarter. I wanted to ask again about endogastric solutions. Can you talk a little bit more about what the revenue growth profile is of the products? Appreciate the base of revenue that's up, being built in here, and sort of...

Steve Mcmahon: Thank you evening, gentlemen, and congrats on the quarter.

Steve Lichtman: Wanted to ask again about the Endogastric solutions can you talk a little bit more about.

Operator: Can you talk a little bit more about what the revenue growth profile is of the products? I appreciate the base of revenue that's up. Yeah, great, great question, Steve.

Steve Mcmahon: The.

Speaker Change: Revenue growth profile is of the products I appreciate the base of revenue that is.

Steven Lichtman: You know, do you see opportunities in the near term?

Speaker Change: Being built in here and sort of.

Steven Lichtman: in the near term to accelerate that with some potential cross-sell from your current business. Yeah, great, great question, Steve.

Speaker Change: Do you see opportunities in the near term to accelerate that with some potential cross sell.

Speaker Change: From your from your current business.

Fred Lampropoulos: You know, as you're aware, we disclosed that, for this year, we're going to be in the 13 to $15 million range for the back half of the year. And we also announced that it would be accretive to revenue, gross margin, and operating margin in the first full year of integration. So other than that, I don't think we're going to get into the details of, you know, of it. We'll give you obviously our guidance for 2025 in February.

Speaker Change: Yes, great Great question Steve.

Speaker Change: You are aware, we disclosed that for this year, we're going to be in the $13 million to $15 million range for the back half of the year and.

Raul Parra: And we also announced that it would be accretive to revenue gross margin and operating margin in the first full year of integration. So other than that I don't think were going to get into the details of.

Larry Nicholson: <unk>.

Larry Nicholson: We will give you obviously our guidance for 2025.

Larry Nicholson: In February.

Fred Lampropoulos: But I can tell you that the endoscopy team and both teams are excited about the products that we have and the scale that we think we can get there with the cross selling. So we'll leave it at that. But we will continue to be excited about that asset.

Raul Parra: But I can tell you that, you know, the endoscopy team and the, you know, both teams are excited about the products that we have and the scale that we think we can get there with cross selling. So we'll leave it at that.

Larry Nicholson: But I can tell you that the endoscopy team.

Larry Nicholson: And.

Raul Parra: Both teams are excited about the products that we have and.

Larry Nicholson: And the scale that we think we can get there with the cross selling so well.

Larry Nicholson: We'll leave it at that but continue to be excited about that asset.

Steven Lichtman: Okay, and then obviously you were acquisitive, you know, this quarter. Free cash flow coming in stronger, though. How should we be thinking about, you know, sort of where your head's at?

Speaker Change: Okay, and then obviously you were acquisitive.

Speaker Change: This quarter.

Speaker Change: Free cash flow coming in stronger though.

Fred Lampropoulos: Thank you for joining us. Thank you. Thank you. Thank you. Thank you.

Speaker Change: How should we be thinking about sort of where your head's at in terms of use of free cash.

Speaker Change: Looking forward here in the near term yes.

Raul Parra: Yeah, and look, first of all, I just want to, you know, I'll give a little shout out to our operations group on managing the inventory growth. I mean, it's been a huge benefit to our free cash flow this year. And, and we're growing, you know, ahead of plan. So they've been able to keep up with our customer demands while also essentially keeping a growth of inventory flat, you know, to down.

Speaker Change: Yes look I first of all I just wanted I will give a little shout out to our operations group on managing the inventory growth I mean, it's been a it's been a huge benefit to our free cash flow this year.

Speaker Change: And we are growing ahead of plan, so they've been able to manage keeping up with our customer demands while also.

Speaker Change: Essentially keeping.

Speaker Change: Inventory flat.

Speaker Change: Flat to down so.

Larry Nicholson: We continue to expect strong free cash flow generation for the back half of the year and we continue to believe that.

Larry Nicholson: We were in a good position to hit our CGI.

Larry Nicholson: Program.

Larry Nicholson: Minimum of $400 million in free cash flow and and lastly, and more importantly, we took our 150 a minimum of $150 million in free cash flow target for 2024, and we bumped that up to $130 million. So.

Larry Nicholson: Super strong generation for the quarter couldn't be more excited about that.

Speaker Change: Great. Thanks, guys.

Fred Lampropoulos: It's good to be with you, Steve. Thank you.

Speaker Change: Good to be ready to say thank you.

Operator: Thank you. And our next question, coming from the line-up, David Rescott from Bayer. Your line is open.

Speaker Change: Thank you and our next question coming from the line of David Driscoll from Baird. Your line is now open.

David Driscoll: Oh, great. Thanks for taking the questions and congrats on the strong quarter here.

David Driscoll: My first question.

David Driscoll: Is it more around the wave results looking forward to seeing that I don't think I definitely haven't attended the Chita are the GRS ESG conference in the past. So I'm just wondering if you could give us a sense for maybe what look for there and then at least in your view, maybe how data that's presented at these two conferences tends to kind of.

Larry Nicholson: Flow into some of the clinical practice.

Fred Lampropoulos: Yeah, well, first of all, this is going to be presented by physicians as part of the scientific sessions, you know, not by Merit. These are the six-month follow-up results on patients from the randomized arm of the study, what we call the AVF cohort, which includes target lesion primary patency, access circuit primary patency, and safety events. So this is the randomized part of the study, and that will be presented from the podium at the scientific session.

Raul Parra: But you know, continue to be excited about that asset. Yeah, well, first of all, this is going to be presented by physicians as part of the scientific sessions, not by Merit. This is the six-month follow-up results on patients from the randomized arm of the study, what we call the AVF cohort, which includes target lesion primary patency, access circuit primary patency, and safety events. So this is the randomized part of the study, and that will be presented at the podium in the scientific session. Okay, thanks. I don't think I'll make it out to Lisbon this year.

Speaker Change: Well first of all this is going to be presented.

Raul Parra: By physicians as part of the scientific sessions not by Merit.

Raul Parra: This is the six month follow up results.

Speaker Change: Our results on patients from the randomized arm of the study.

Larry Nicholson: The what we call the Avs ABF cohort, which includes target lesion primary patency access circuit primary patency and safety events. So this is the randomized part of the study and that will be presented it'll be presented from the podium in a scientific session.

Fred Lampropoulos: In terms of the specific data, come to Lisbon or tune in because we can't speak to it until that date, and then we'll be happy to have the physicians, not Merit, the doctors talk about the results and how they view them. So we're excited to, we'll all be there. I can just tell you the people in this room will be at that meeting in Lisbon, Portugal.

Raul Parra: <unk>.

Larry Nicholson: In terms of the specific data.

Speaker Change: Come to the Lisburn or tune in because we can't speak to it until that date and then we'll be happy to have that physicians.

Speaker Change: The doctors to talk about the results and how they view it so I think where we're excited too.

Speaker Change: We'll all be there I can just tell you that people in this room will be at that that meeting in Lisbon, Portugal.

David Rescott: Okay, thanks. I don't think I'll make it out to Lisbon this year.

Joe Wright: But my second question, you know, is more on China Aid. Like, obviously, that that was a strong, stronger growth driver than you expected. Heard the comments there.

Speaker Change: Okay. Thanks, I don't think I'll make it out to what it's been this year, but my second question.

Speaker Change: It was more on China, APAC, obviously that that was a strong stronger growth driver than you expected or the comments. There I'm. Just wondering if you can help us think about.

Joe Wright: I'm just wondering if you can help us think about some of the components of the way in which your business model operates in that market and the level of visibility, at least you have into the next several quarters of growth. I mean, it seems like in medtech that it's a weaker kind of macro market in general, but it seems like you've held in there a little bit better than maybe expected. So just wondering if your business or the visibility you have into those markets is maybe any different than what some other kind of medtech competitors out there have. Thank you. Yeah, Joe's gonna take the China question. But David, just as a, you know, a point here.

Joe Wright: Some of the components of the way in which your business model operates in that market.

Joe Wright: The level of visibility at least you have into the next several quarters of growth I mean, it seems like in med Tech, it's a weaker macro market in general it seems like you would hold on their own but better than maybe expected. So just wondering if your business or the visibility you have into those markets and maybe any different than what some.

Joe Wright: Other kind of med tech competitors out there have thank you.

Joe Wright: Yes.

Speaker Change: Joe is going to take the China question, but David just as a.

Fred Lampropoulos: I believe that CIRCE will be able to webcast that information, so if you can't make it there, I think a PASS will get you the webcast. I don't know all the details yet. We're trying to find that out, but our understanding is that there will be a webcast available for that, so for those of you that can't make it. You know, we did have better-than-expected results from China in the first half of 2024.

Speaker Change: A point here.

Fred Lampropoulos: I believe that the.

Fred Lampropoulos: <unk> will be able to webcast that information. So if you can make it there I think a pass we will get you a webcast I don't know all the details yet we're trying to find that out but our understanding is that there is a webcast available for that so for those of you that can't make it.

David Rescott: But my second question, you know, is more on China and APEC. Obviously, that that was a strong, stronger growth driver than you expected. Heard the comments there.

Rob: Yes, Thanks, Rob one on China.

Larry Nicholson: Just.

Speaker Change: Way of reminder, we don't provide country specific growth assumptions, but.

Fred Lampropoulos: We did have.

Fred Lampropoulos: Better than expected results from China in the first half of 2024, we like all the other med tech companies are affected by volume based purchasing.

Fred Lampropoulos: We, like all the other medtech companies, are affected by volume-based purchasing, and there is some variability to that, but we still look at China as a very strong demographic and strong growth market for us. The key for us is just getting through this year and perhaps next year, and then we will reset our growth based on a new baseline, and we still expect great things from China in the future. Yeah, and I think, you know, one thing to highlight, too, that we're excited about is that, you know, even though we did have a total revenue, you know, decline, we did see sales, you know, of volume growth, you know, year over year. So I think that's important because, as Joe mentioned, once we reset that, then I think we can get back to normalized levels of growth in China.

Fred Lampropoulos: <unk>.

Fred Lampropoulos: And there is some variability to that but we still look at China as a very strong demographic strong growth market for us the key for US is just getting through this year and perhaps next year and then we reset our growth based on a new baseline and we still expect great things.

Fred Lampropoulos: From China in the future, Yes, I think one thing to highlight too that we're excited about is that.

Fred Lampropoulos: Even though we did have a total revenue decline.

Larry Nicholson: We did see sales.

Fred Lampropoulos: Volume growth.

Fred Lampropoulos: Year over year, So I think that's important because as Joe mentioned once we reset that and I think we can get back to normalized levels of growth in China.

Larry Nicholson: Okay.

Fred Lampropoulos: Thank you.

Speaker Change: And our next question coming from the line of.

Fred Lampropoulos: Jayson Bedford from Raymond James Your line is now open.

David Rescott: I'm just wondering if you can help us think about some of the components of the way in which your business model operates in that market and the level of visibility, at least you have into the next several quarters of growth. I mean, it seems like in medtech that it's a weaker kind of macro market in general, but it seems like you've held in there a little bit better than maybe expected. So just wondering if your business or the visibility you have into those markets is maybe any different than what some other kind of medtech competitors out there have. Thank you.

Speaker Change: Good afternoon, guys can you hear me okay, yes.

Raul Parra: Yeah, Joe's going to take the China question, but David, just as a reminder, you know...

Jason: Yeah, we got Jason.

Raul Parra: a point here. I believe that the CIRCE will be able to webcast that information, so if you can't make it there, I think a PASS will get you a webcast. I don't know all the details yet. We're trying to find that out, but our understanding is that there will be a webcast available for that, so for those of you that can't make it.

Jayson Bedford: Alright, so a few questions following up on Rhapsody I apologize if I missed this but did you provide an update on expected timing around FDA approval.

Fred Lampropoulos: No.

Speaker Change: It's in there it's in their hands.

Speaker Change: We will go through all the steps we're prepared for it we're prepared for the various aspects of a PMA, but it's in their hands now.

Fred Lampropoulos: We've.

Speaker Change: Completed the submission as we said we would on time and now we just sit back and we respond in and when they are done they're done so.

Fred Lampropoulos: We haven't spoken to it because it's in their hands Jason.

Speaker Change: Got it Okay. That's fair.

Fred Lampropoulos: OEM.

Speaker Change: Year to date, but I think I heard you say that you are still expecting double digit growth for the year.

Speaker Change: I Wonder if you could just kind of confirm that and I don't mean to be overly obvious with the question, but do you have strong visibility to it does imply a pretty big ramp in the second half to get to double digit. It's indeed, that's the guidance.

Fred Lampropoulos: Yeah, yeah, Jason, I mean, first of all, I'd like to highlight, you know, our US sales growth was just, you know, tremendous, and it continues to be so. And OEM did contribute in the second quarter, so they grew at about 5% on a constant currency basis. That's, you know, compared to Q1, where they were down, you know, approximately 5%.

Fred Lampropoulos: Yes, Jason I mean first of all I'd like to highlight our U S sales growth was just tremendous and it continues to be so.

Fred Lampropoulos: And OEM did contribute in the second quarter. So they grew at about 5% on a constant currency basis compared to Q1, where were they were down approximately 5%. So we've seen a good rebound.

Raul Parra: So we've seen a good rebound. We haven't changed the guidance for OEM because we do feel like we have the visibility to a better second half. And it does, obviously, the math would imply that it's a pretty strong back half of the year.

Raul Parra: We haven't changed the guidance for OEM, because we do feel like we have the visibility to a better second half than it does obviously the math would imply that it's a pretty strong back half of the year.

Raul Parra: And we feel good about what we've guided them to do there. So again, I think we're really happy how things have bounced back. And we're seeing some pretty strong demand there. As you know, there was also a deal announced which we included in our guidance. But nevertheless, I'll highlight it with Medtronic on our spine business, which our OEM division is, you know, helping with. So, you bet. Thank you. Hey, good afternoon.

Raul Parra: We feel good about what we have guided there. So again I think we're really happy how things bounce back and we're seeing some pretty strong demand there.

Raul Parra: As you know there was also.

Raul Parra: A deal announced which we included in our guidance, but nevertheless, I'll highlight with with Medtronic on our spine business that our OEM Division.

Raul Parra: Helping with so.

Raul Parra: Strong demand.

Speaker Change: For sure yes.

Speaker Change: Okay Pine spelling backup so we do have probably more visibility there of the stuff that's coming at those orders are coming and behaviors are going back to what we would see and it's been kind of a general after the ups and downs in the workouts of cohort that's starting to come back to normalization, yes, and we have had we have seen in the past 20%.

Raul Parra: Plus growth quarters from OEM.

Speaker Change: So while we're not necessarily saying when that will happen, it's not out of the ordinary for this sales division.

Speaker Change: Okay. The business, obviously lends itself to some pretty good visibility.

Raul Parra: Just last one I guess for me just on the <unk> deal.

Speaker Change: The improving growth profile. There is there in the international angle to the strategy or is it mostly us driven well.

Raul Parra: Well it is mostly U S driven however.

Speaker Change: They do have and I think they just didn't have the bandwidth we think thats one of the things we're exploring is.

Speaker Change: They have sales coming out of Europe, and the Middle East and we think we can add to that and we'll be pursuing those growth opportunities wisely and very methodically.

Speaker Change: Okay. Thank you.

Speaker Change: Thank you.

Speaker Change: And our next question coming from the line of Craig <unk> from.

Speaker Change: Bank of America Securities. Your line is now open.

Speaker Change: Thanks, guys for taking the questions and congrats on a strong quarter.

Joseph Wright: Yeah, thanks, Raul. And on China, just as a reminder, we don't provide country-specific growth assumptions, but you know, we did have better than expected results from China in the first half of 2024. We, like all the other medtech companies, are affected by volume-based purchasing. And there is some variability to that, but we still look at China as a very strong demographic and strong growth market for us. The key for us is just getting through this year and perhaps next year, and then we will reset our growth based on a new baseline. And we still expect great things from China in the future. Yeah, and I think, you know, one thing to highlight too that we're excited about is that, you know

Speaker Change: Just had a couple of quick follow ups on China.

Raul Parra: The better than expected results in Q2.

Raul Parra: Wanted.

Raul Parra: Was that.

Speaker Change: <unk>, maybe not coming through on certain products, you were expecting or the impact the pricing impact from the VP.

Speaker Change: <unk> wasn't as.

Speaker Change: Big as you expected.

Raul Parra: Or maybe the underlying markets got a little bit better there and then similar question for <unk>.

Raul Parra: The rest of the year.

Raul Parra: And.

Speaker Change: How conservative do you guys think you are on the GBP side and I think this was alluded to in a couple of other questions but.

Speaker Change: The growth of the underlying.

Raul Parra: China medical device market.

Speaker Change: Any thoughts there it sounds like you still expect volumes to grow so that's positive, but any broader thoughts on the.

Speaker Change: The underlying market there thanks guys.

Raul Parra: So.

Raul Parra: I'll, let Joe kind of tackle the market.

Speaker Change: What he sees there, but first of all we haven't changed our.

Raul Parra: Our second half.

Speaker Change: Pvp headwind assumptions those kind of stay I will say that during the first half of the year, obviously, we've done better than expected clearly as we talked about and I think the one thing that I do want to highlight which I think is really important is that we continue to grow sales of units on a year over year basis, which I think is really important because.

Raul Parra: We're able to overcome some of that volume based purchasing impacts so we're definitely seeing it in our.

Raul Parra: Our P&L, we're definitely getting hit with BP, but our team is doing an excellent job of continuing to growing.

Raul Parra: Units, which is which has given us a little bit of upside so.

Raul Parra: Optimistic about China, Joe what do you what do you think yes.

Speaker Change: Yes, I think the overall unit growth highlights the fact that procedural growth in China is still strong.

Speaker Change: So while we're dealing with the VP headwinds the first half <unk> was largely in line with our expectations. So there's no real change.

Raul Parra: Even in our second half guidance, we still expect.

Speaker Change: It's in our plan right now.

Speaker Change: Great. Thanks, guys.

Speaker Change: Thank you.

Operator: And our next question, coming from the line up: Jayson Bedford from Raymond James, Yolanda Selpin.

Speaker Change: And our next question coming from the line of John Young from Canaccord. Your line is open.

Jayson Bedford: Good afternoon, guys. Can you hear me okay? Yeah, we got you, Jason. Alright, so a few questions. Following up on Rhapsody, I apologize if I missed this, but did you provide an update on the expected timing around FDA approval?

Operator: And thanks for squeezing in here. You know, first, I just want to touch on Rhapsody and a lot of questions I've been asked about it, but maybe just going back to, you know, what is the commercial infrastructure for the product today, Fred, and, and how do you think about building it up to the PMA approval so you're ready at launch?

Speaker Change: Hey, good afternoon.

Fred Lampropoulos: Thanks for squeezing me in here first I just want to touch on <unk>.

Operator: Last question, that's been asked on it but maybe just going back to what is the commercial infrastructure for the product.

Operator: Hey, Brad and and how you think about building it up to the PMA approval and ready at launch.

Fred Lampropoulos: Well, you know, we put together a renal therapy group that we put together last year that has a number of products that are in it that that product will fall into. They include things like the Surfer Sur and our hemodialysis product because they call on the same physician and the same point of sale. So part of that has been under development and getting ready for this for some time. So do you want to comment any further on that?

Fred Lampropoulos: Well, we put together a.

Speaker Change: Renal therapy group.

Fred Lampropoulos: We put together last year that a number of products that are in there that that product will fall into <unk>.

Fred Lampropoulos: They include things like the serve for sure in our hemodialysis products because they call on the same position.

Speaker Change: At the same point of sale. So part of that has been under development getting ready for this for some time. So do you want to comment any further on that yeah. As Fred mentioned, we established a renal therapy sales group.

Joe Wright: Yeah, as Fred mentioned, we established a renal therapy sales group, and we've been adding to that this year in preparation for Rhapsody. The good thing for us is, as Fred mentioned, we have other renal therapy products that were, frankly, under-focused previously. So when we broke out this team, they've been able to focus on these products that we already have, grow that business, while at the same time, we've been spending a lot of time training them up on Rhapsody, letting them hear physician experiences in other approved markets outside of the United States. So we feel like we're doing all we can. We expect to add to that team over time, but we're going to be judicious in how we do that.

Joe Wright: We've been adding to that this year in preparation for Rhapsody. The good thing for US is as Fred mentioned, we have other renal therapies products that were frankly under focused previously so when we broke out this team they've been able to focus on these products that we already have grow that bid.

Joe Wright: This while at the same time, we've been spending a lot of time training them up on Rhapsody letting them here physician experiences in other approved markets outside of the United States.

Joe Wright: So we feel like we're doing all we can we expect to add to that team over time, but we're going to be judicious in how we do that.

Joe Wright: The other thing to add, you know, to John is that, you know, you can clearly see that that, you know, team is performing well, right? They have the Angio products, which are slightly ahead of where we anticipated they would be. And so, you know, you know, clearly, they're, they're, they're doing a good job. And, you know, and the integration part of things. Let me just maybe add something to that last thing.

Joe Wright: The other thing to add too John is that you can clearly see that that team is performing well right. They have the angio products, which are slightly ahead of where we anticipated they would be.

Joe Wright: So clearly they're doing a good job in.

Fred Lampropoulos: And that is, I think the ability for these guys to focus on six to eight products, all at the point of sale, is really significant. Again, as Joe pointed out, we've seen that performance, and we're being, I think, very cognizant of making sure we stay within our budgets, at the same time, making sure that people are trained. So when it comes in, we can go to the market without having either too much inventory or too little training and focus. Focus is key because of Merit's broad product bag, but you can't; it's hard to do.

Joe Wright: And the integration part of things.

Joe Wright: Just maybe add one last thing.

Fred Lampropoulos: And that is I think the ability for these guys to focus on six to eight products all at the point of sale.

Fred Lampropoulos: Is really significant and again as Joe pointed out we've seen that performance and we're being I think very.

Fred Lampropoulos: Cognizant of making sure we stay within our budget at the same time, making sure that people are trained so when it comes in we can go to the market without having either too much inventory because that's another important part of this.

Speaker Change: Training and the focus focus is a key because of marriage broad product bag and you can't it's hard to do so with this we think that it was the right call. It was developed some 18 months ago, and we're just working through it and when we're.

Joe Wright: When we get approval, we'll be all set with people that know the product and they have complementary products to sell with it so great and.

Fred Lampropoulos: No. It's not in there. It's in their hands. We'll go through all the steps. We're prepared for it. We're prepared for the various aspects of a PMA, but it's in their hands now. We completed the submission as we said we would on time, and now we just sit back and we respond, and when they're done, they're done. We haven't spoken to him yet because it's in their hands, Jayson.

Speaker Change: And maybe just a follow up on that approval on the submission I heard you.

Speaker Change: And the FDA and have you gotten any deficiency letter yet back or has the 180 day clock stops for questions at this point yet.

Joe Wright: We generally don't comment, but I was on the stuff that comes in because there could be misunderstood misconstrued and whatever.

Speaker Change: They have at the clock is ticking.

Speaker Change: I'll leave it at that.

Fred Lampropoulos: So with this, we think that it was the right call. It was developed some 18 months ago, and we're just working through it. And when we're, you know, when we get approval, we'll be all set with people that know the product and have complementary products to sell with it. Great, thank you. Hi, good afternoon, and thanks for taking the question. Regarding Rhapsody, do you think that presenting the data in Spain will have any impact on your international sales of the product? And, you know, do you think that there is an international market for the product? How do you prove that it's efficacious?

Speaker Change: Great. Thank you.

Speaker Change: Thank you.

Jayson Bedford: Got it. Okay, that's fair. OEM, flat year to date, but I think I heard you say that you're still expecting double-digit growth for the year. I wonder if you could just kind of confirm that, and I don't mean to be overly obvious with the question, but do you have strong visibility? Because it does imply a pretty big ramp-up in the second half to get to double-digits if, indeed, that's the guy.

Speaker Change: And our next question coming from the line of Jim Sidoti from Sidoti <unk> Company. Your line is now open.

Raul Parra: Yeah, you know, Jason, I mean, first of all, I'd like to highlight our US sales growth was just, you know, tremendous, and it continues to be so. And OEM did contribute in the second quarter, so they grew at about 5% on a constant currency basis. That's, you know, compared to Q1, where they were down, you know, approximately 5%. So we've seen a good rebound. We haven't changed the guidance for OEM because we do feel like we have the visibility to a better second half.

Raul Parra: And it does, obviously, the math would imply that it's a pretty strong second half of the year, and we feel good about what we've guided there. So again, I think we're really happy how things bounce back. And we're seeing some pretty strong demand there. As you know, there was also a deal announced, which we included in our guidance, but nevertheless, I'll highlight it with Medtronic on our spine business that our OEM division is, you know, helping with. So there is so much demand.

Speaker Change: Hi, good afternoon, and thanks for taking the question on the on Rhapsody do you think that presenting the data in Spain will have any impact on your international sales of the product.

Speaker Change: Do you think that there is an international market for the product.

Raul Parra: Yeah, and we have seen in the past 20% plus growth quarters from OEM. So while we're not necessarily saying when that will happen, it's not out of the ordinary for the sales division.

Jayson Bedford: Okay. Yeah, the business obviously lends itself to some pretty good visibility. Just, and last one, I guess for me, just on the EGS deal and the improving growth profile there, is there an international angle to the strategy, or is it mostly U.S. driven? Well, yeah.

Fred Lampropoulos: Well, it is mostly U.S.-driven, however. They do have, and I think they just didn't have the bandwidth. We think that's one of the things we're exploring is that they have sales coming out of Europe and the Middle East, and we think we can add to that. And we'll be pursuing those growth opportunities wisely and very methodically.

Fred Lampropoulos: Well first of all Jim we're already selling in international and <unk>.

Jayson Bedford: Okay, thank you. You bet. Thank you.

Operator: And our next question comes from the line of Craig Bijou from Bank of America Securities. Your line is open.

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

Speaker Change: Data is the name of the game to physicians that is the name of the game, we hear it over and over every day, whereas the data, whereas this where is that on a lot of products and if you don't have it.

Speaker Change: Do you approve that is efficacious. So data is important it will have an impact and we're very excited to be able to deliver this in <unk>.

Fred Lampropoulos: So data is important. It will have an impact, and we're very excited to be able to deliver this in EPSIRS. Ladies and gentlemen, this is a long call, so we appreciate your patience. There were a lot of things to talk about. Raul and I and Joe will be around for the next couple of hours to answer specific questions.

Craig Bijou: and congrats on a strong quarter. I just had a couple of quick follow-ups on China and the better-than-expected results in Q2. Just wanted to, you know, was VBP maybe not coming through on certain products you were expecting, or the impact, the pricing impact from the VBP wasn't as big as you expected, or maybe the underlying markets, you know, got a little bit better there. And then similar question for, you know, the rest of the year, and, you know, how conservative you guys think you are on the VBP side.

Raul Parra: And I think this was alluded to in a couple of other questions, but the growth of the underlying, you know, Chinese medical device market, just, you know, any thoughts there? It sounds like you still expect volumes to grow, so that's positive, but any broader thoughts on the underlying market there? Thanks, yeah, and I'll let Joe kind of tackle the market, you know, and what, you know, he sees there, but, first of all, you know, we haven't changed our second half VBP headwind assumptions. You know, those kind of stay.

Raul Parra: I will say that, obviously, during the first half of the year, obviously, we've done better than expected, you know, clearly, as we talked about, and I think the one thing that I do want to highlight, which I think is really important, is that we continue to grow sales of units on a year-over-year basis, which I think is really important because we're able to overcome some of that volume-based purchasing impact. So, we're definitely seeing it in our, you know, in our P&L; we're definitely getting hit with VBP, but our team is doing an excellent job of continuing to grow units, which is giving us a little bit of upside. So I am optimistic about China. Joe, what do you think? Yeah, I think the overall unit growth is good.

Speaker Change: Okay, and then can you just give us some sense on the impact of the acquisition on the sales team how big was the Endogastric sales team that you brought in compare to what you had with your sales existing sales force.

Joseph Wright: Yeah, I think the overall unit growth highlights the fact that procedural growth in China is still strong. So while we're dealing with the VBP headwinds, the first half VBP was largely in line with our expectations. So there's no real change even in our second half guidance. We still expect it to be in our plan right now.

Operator: Our next question, coming from the line-up, John Young from Canaccord. Your line is open.

Fred Lampropoulos: Well, you know, we put together a renal therapy group that we put together last year that has a number of products that are in it that that product will fall into. They include things like the Surfacer and our hemodialysis product because they call on the same physician and the same point of sale.

Fred Lampropoulos: So part of that has been under development and getting ready for this for some time. So do you want to comment any further on that? Yeah.

Joseph Wright: Yeah, as Fred mentioned, we established a renal therapy sales group, and we've been adding to that this year in preparation for Rhapsody. The good thing for us is, as Fred mentioned, we have other renal therapy products that were, frankly, under-focused previously. So when we broke out this team, they've been able to focus on these products that we already have, grow that business, while at the same time, we've been spending a lot of time training them up on Rhapsody, letting them hear physician experiences in other approved markets outside of the United States. So we feel like we're doing all we can. We expect to add to that team over time, but we're going to be judicious in how we do that.

Fred Lampropoulos: The other thing to add, you know, to John is that, you know, you can clearly see that that, you know, team is performing well, right? They have the Angio products, which are slightly ahead of where we anticipated they would be. And so, you know, you know, clearly they're doing a good job, and, you know, in the integration part of things.

Fred Lampropoulos: And let me just maybe add one more thing to that, and that is that I think the ability for these guys to focus on six to eight products all at the point of sale is really significant. Again, as Joe pointed out, we've seen that performance, and we're being, I think, very cognizant of making sure we stay within our budgets, at the same time making sure that people are trained so when it comes in, we can go to the market without having either too much inventory, because that's another important part of this, the training, and the focus. Focus is key because of Merit's broad product bag. And you can't; it's hard to do.

Raul Parra: Yes, so it was about 50% of the size of our Endo Tech sales force. So we.

Fred Lampropoulos: We generally don't comment, but I will on, you know, the stuff that comes in because it could be misunderstood, misconstrued, and whatever. They have it. The clock is ticking. That's all I'll say.

Fred Lampropoulos: <unk>.

Fred Lampropoulos: Could have taken more but we decided to selectively hire those we thought were in strategic areas and where we had the opportunity.

Operator: Our next question comes from the lineup: James Sidoti from Sidotian Company. Your line is open.

James Sidoti: Hi, good afternoon, and thanks for taking the question. Regarding Rhapsody, do you think that presenting the data in Spain will have any impact on your international sales of the product? And, you know, do you think that there is an international market for the product?

Fred Lampropoulos: Where's the data? Where's this? Where's that?

Fred Lampropoulos: So it will grow that to overall forced by about 50%.

Speaker Change: I'm, sorry, what was that one five or fiber fiber.

Fred Lampropoulos: I'm sorry, was that 1-5 or 5-0? 5-0.

Fred Lampropoulos: Okay, and then also, you know. I'm sure that there was a lot of customer overlap, but are there new customers that you'll be calling on now for your core product?

Speaker Change: Okay and then also.

Speaker Change: I am sure that there was a lot of customer overlap with other new customers that you will be calling on now for your core products.

Fred Lampropoulos: Well, the bottom line is that every customer of theirs is a customer of ours already. There are maybe two new customers, something like that. Yeah, so one of the beauties of all this, Jim, is that they're not new people that we don't know or that they don't know us. So when we're calling on a lab, they know who we are, and we know who they are. So I've never seen anything quite like this where every account that we have, they have as well, and they have something in there. But let me go the other way around.

Speaker Change: Well I'll take the Bottomline is is every customer there is a customer of ours already maybe two customer new customer set.

Speaker Change: So that was one of the beauties of all that is Jim is that theyre not new people, but that we don't know or that they don't and so when we're calling on lab.

Speaker Change: They know who we are and we know they are.

Speaker Change: Never seen anything quite like this where every account that we have they have as well and they have something in there. So let me go the other way around.

Fred Lampropoulos: Every account that they have is an account that we're already calling on. Alright, thank you. Yeah.

Speaker Change: Account that they have is an account that we're already calling on okay.

Speaker Change: To make great. Thank you.

Jamie: Yes, thanks, Jamie.

Fred Lampropoulos: And I'm showing no further questions in the queue at this time. I will now turn the call back over to Mr. Fred Lampropoulos for any closing remarks.

Fred Lampropoulos: Thank you.

Speaker Change: And I'm showing no further questions in the queue. At this time I will now turn the call back over to Mr. <unk> for any closing remarks.

Fred Lampropoulos: Ladies and gentlemen, it was a long call, so we appreciate your patience. There were a lot of things to talk about. Raul and I and Joe will be around for the next couple of hours to answer specific questions. We want to thank you for your interest, and I thought the questions were great, so thank you very much.

Fred Lampropoulos: Ladies and gentlemen, it's a long call. So we appreciate your patience there was a lot of things to talk about.

Fred Lampropoulos: Ron and I and Joe will be around for the next couple of hours to answer specific questions.

Fred Lampropoulos: We want to thank you for your interest, and I thought the questions were great, so thank you very much for your interest. And all best wishes from 100 degrees of heat in the mountain land of Salt Lake City, Utah. Good evening. Best wishes. This concludes our conference call for today. Thank you all for your participation. You may now disconnect.

Speaker Change: We want to thank you for your interest and for I thought the questions were great. So thank you very much for your interest and all best wishes from 100 degrees of heat in the mountain land of Salt Lake City, Utah, Good evening best wishes.

Fred Lampropoulos: This concludes our conference call for today. Thank you all for your participation you may now disconnect.

Fred Lampropoulos: Okay.