Q1 2025 Merit Medical Systems Inc Earnings Call
Speaker Change: Welcome to the Merit Medical Systems First Quarter 2025 Ernie's 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 that the recording will be available on the company's website for replay purposes shortly. Please note that the recording will be available on the company's website for replay purposes.
Speaker Change: O'Neil, I'd like to call over to Mr. Fred Lampropoulos, Merit Medical Systems Founder, Chairman, and Chief Executive Officer. Please go ahead.
Speaker Change: Thank you and welcome everyone. I am joined on the call today by Raul Parra, our chief financial officer and treasurer, and Brian Lloyd, our chief legal officer and corporate secretary. Brian , would you mind taking us through the safe harbor statements please?
Speaker Change: Thank you, Fred. This presentation contains forward-looking statements that receive safe harbor protection under federal securities laws. Although we believe these forward-looking statements are based upon reasonable assumptions, they are subject to risks and uncertainties. This presentation contains forward-looking statements that receive safe harbor protection under federal securities laws.
Speaker Change: The realization of any of these risks or uncertainties as well as extraordinary events or transactions impacting our company could cause actually results to differ materially from the expectations and projections expressed or implied by or forward looking statements.
Speaker Change: In addition, any forward-looking statements represent our views only as of today, April 24, 2025, and should not be relied upon as representing our views as of any other date
Speaker Change: We specifically describe any obligation to update such statements except is required by applicable law.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: Our financial statements are prepared in accordance with the counting principles which are generally accepted in the United States.
Speaker Change: 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 a period over period comparisons of such operations.
This presentation also contains certain non-GAB financial measures.
Speaker Change: 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
Speaker Change: 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.
Speaker Change: readers should consider non-GAAP financial measures in addition to not as a substitute for financial reporting measures prepared in accordance with GAAP.
Speaker Change: Please note that these calculations may not be comparable with similarly titled measures of other companies.
Speaker Change: 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 [inaudible]
Fred Lampropoulos: Thank you, Brian , and let me start with a brief agenda of what we will cover during our prepared remarks. I will start with a summary of our first quarter 2025 results.
Fred Lampropoulos: Then Raul will provide a more in-depth review of our quarterly financial results and our financial guidance for 2025, which we updated in today's press release.
Then we will open the call for your questions [inaudible]
Fred Lampropoulos: Now, beginning with the review of our first quarter results, we reported total revenue of 355.4 million up 9.8% year-over-year on a gap
Fred Lampropoulos: Basis, and up 10.9% year-over-year on the constant currency basis.
Fred Lampropoulos: The constant currency revenue growth we delivered in the first quarter modestly exceeds the high end of the range of growth expectations that we outlined on our Q4 2024 earnings call.
Fred Lampropoulos: The better than expected constant currency revenue results were driven primarily by a 6% constant currency organic growth, roughly 100 basis points better than the 5% high end of the range we outlined in our first quarter guidance.
Fred Lampropoulos: With respect to our profitability, performance in the first quarter, we delivered financial results that significantly exceeded our expectations.
Fred Lampropoulos: We delivered another quarter of significant year-over-year improvement in our non-GAAP operating margin which increased nearly 230 basis points year-over-year to 19.3% representing a first quarter record
Fred Lampropoulos: We also delivered 15% growth in our non-GAAP EPS, which exceeded the high end of our expectations as well.
Fred Lampropoulos: This performance was a direct result of our team's continued hard work and commitment to our strategic objectives.
Fred Lampropoulos: We are very proud of the strong execution of our team delivered in the first quarter of 2025.
Fred Lampropoulos: We believe our first quarter results reflect the continued strong momentum in the business and we are confident in our team's ability to deliver the total revenue guidance for 2025. We reaffirmed in today's press release.
Fred Lampropoulos: We have also provided updated non-GAPIPS expectations for 2025, which Raul will review in detail later in the call.
Fred Lampropoulos: In the interim, the key takeaway is that our updated non-GAAP EPS expectations reflect the current estimated impact of tariffs, trade policies, and related actions recently implemented by the United States and other countries.
Fred Lampropoulos: Besides these trade-related impacts, we have made no material changes to the operating financial assumptions for the balance of fiscal year 2025 versus what our non-GAAP EPS guidance range previously assumed.
Fred Lampropoulos: Despite the continued challenges related to the dynamic and uncertain global macro environment, our team is executing well. We remain focused on delivering continued strong execution.
Fred Lampropoulos: Solid Concentre Currency Growth, and Strong Free Cash Road Generation 2025.
Fred Lampropoulos: as well as continued progress in our continued growth initiatives program and related financial targets for the three-year period and in December 31, 2026.
Fred Lampropoulos: Now with that said, let me turn the call over to Raul Parra, an in-depth review of our quarterly financial results and our updated financial guidance for 2025.
Raul
Raul Parra: Thank you Fred. I will start with a detailed review of our revenue results in the first quarter, beginning with the sales performance at each of our primary reportable product categories. Thank you very much.
Raul Parra: Note, unless otherwise stated, all growth rates are approximated and presented on both a year over a year and constant currency basis.
Raul Parra: First quarter, total revenue growth was driven by 9% growth in our cardiovascular segment and 64% growth in our endoscopy segment
Raul Parra: Cardiovascular Segment, Sales exceeded the high end of the expectations we outlined on our fourth quarter call [inaudible]
Raul Parra: Our total revenue results include approximately 9.2 million of revenue from our acquisitions of the lead management product portfolio from Cook Medical and approximately 6.6 million of revenue from our acquisition of the assets of endogastric solutions.
Raul Parra: Excluding sales of acquired products, segment revenue growth on an organic currency basis was 6.2% for a cardiovascular segment, while organic growth in our
Raul Parra: Turning to a review of our first quarter revenue results by Product Category.
Raul Parra: Cardiac Intervention Product Sales increased 12% and represented the largest driver of cardiovascular statement growth in the period.
Raul Parra: Gross was driven primarily by contributions from acquisition of cook medical products. Excluding the contributions from the sales of acquired products, cardiac intervention products sales increased approximately 2% on an organic constant currency basis. Within the range of organic growth expectations we assumed for Q1.
Raul Parra: Sales of our OEM products increase 21% in Q1. Well ahead of the mid-single digit growth our
Raul Parra: The stronger than expected OEM performance in Q1 was substantially driven by customer demand in the U.S., offset partially by sales to OEM customers outside the U.S., which continues to see demand trends impacted by the macro environment. [inaudible]
Raul Parra: Sales of our peripheral intervention or PI products increased 6.8% growth in the PI product category was groomed primarily by sales of our access, envelope therapy and delivery system products which increased in the mid-teens year over year.
Raul Parra: Sales of our custom procedure solutions or CPS products decreased 0.3 percent which was in line with our expectations
Thank you.
Raul Parra: Turning to a brief summary of our sales performance on a geographic basis. Our first quarter sales in the US increased 14 percent on a constant currency basis and 9 percent on an organic constant currency basis exceeding the high end of our expectations by 170 basis points. [inaudible]
Raul Parra: We were pleased to see continued strong demand from our U.S. customers in the first quarter.
Raul Parra: International Sales increased 6% year-over-year and increased 1.9% on an organic constant currency basis.
Raul Parra: Sales results in the APEC and the MIA ranges came in at the high end of our expectations while sales in the rest of the world region modestly exceeded our expectations
Raul Parra: With respect to China specifically, sales decreased 10% compared to a low single digit growth rate assumed in our guidance. We continue to see quarter to quarter of variability in growth trends related to volume base procurement programs as we have previously cautioned.
Raul Parra: In the first quarter, however, VBPU was essentially in line and we would attribute the software that expected revenue results to the broader macro environment. [inaudible]
Raul Parra: Turning to review of our P&L performance. For the avoidance of doubt, unless otherwise noted, my commentary will focus on the company's non-GAAP results during the first quarter of 2025, and all growth rates are approximated and presented on a year-over-year basis.
Raul Parra: We have included reconcilations from our GAP reported results to the related non-GAAP items in our press release and the presentation available on our website.
Raul Parra: Gross Profit increased to approximately 15% in the first quarter. Our gross margin was 53.4% up 251 basis points. The increase in gross margin your over-year was driven by favorable product, and geographic revenue mix, and improvement in pricing, freight, and distribution costs.
Raul Parra: Operating expenses increased 10.5% year-over-year. The increase in operating expenses was driven by a 11% increase in SGNA expense and an 8% increase in R&D expense compared to the prior period.
Raul Parra: Total Operating Income in the first quarter increased 13.5 million or 25% from the first quarter of 2024 to 68.4 million.
Raul Parra: Our operating margin was 19.3% compared to 17% in the prior period, an increase of 229 basis points year over year.
Raul Parra: First quarter, other expense net was 1.7 million compared to the expense of 0.1 million last year. The change in other expense net was driven by lower interest income associated with lower cash balances, offset partially by lower interest expense compared to the prior year period.
Raul Parra: First quarter net income was 52.9 million or 86 cents per share compared to 44.1 million or 75 cents per share in the prior year period
Raul Parra: We are pleased with our profitability performance in the first quarter where we leverage stronger than expected revenue results to drive significant expansion in operating margin and strong growth in non-GAAP diluted earnings per share, both of which exceeded the high end of our expectations.
Raul Parra: No. Our first quarter non-GAAP EPS results included incremental delusion related to our convertible debt that represented approximately two cents to Q1 EPS as expected.
Raul Parra: Turning to a review of our balance sheet and financial condition
Raul Parra: We generated 19.5 million of free cash in the first quarter of 2025, down 20% year-over-year.
Raul Parra: The year over year decrease in free cash flow generation was a result of increased capital expenditures compared to the first quarter of 2024, as expected, an investment in working capital, offset partially by growth and net income, and other non-cash items.
Raul Parra: As of March 31st, 2025, Merit had cash and cash equivalence of 395.5 million
Raul Parra: Total debt obligations of $747.5 million, an outstanding letter of credit guarantees of $2.9 million, with additional available borrowing capacity of approximately $697 million, compared to cash and cash equivalent of $376.7 million.
Raul Parra: Total Dead Obligations of 747.5 million, and now outstanding letter of credit guarantees of 2.9 million, which with additional available barring capacity of approximately 697 million as of December 31st, 2024.
Raul Parra: Our net leverage ratio, as of March 31, was 1.8 times on an adjusted basis. Our net leverage ratio was 1.8 times on an adjusted basis.
Raul Parra: Turning to a review of our Fiscal Year 2025 Financial Guidance, which we updated in today's press release
Raul Parra: For reference, we have included a table in our earnings press release which details each of our formal financial guidance ranges and how those ranges compared to our initial guidance ranges issued on our fourth quarter call in February .
are 2025 guidance as soon as the following.
Raul Parra: Gap Net Revenue Growth of 8-10% Your Rear, which we expect to result from. Net Revenue Growth of the Approximately 7-9% in our Cardiovascular Segment.
Raul Parra: and Net Revenue Growth of Approximately 34% to 37% in our endoscopy segment, and a headwind from changes in foreign currency exchange rates of approximately 4.9 million, or approximately 36 basis points to growth year-over-year.
Raul Parra: Among other factors to consider when evaluating our projected constant currency revenue growth range for 2025 are the following items.
Raul Parra: First, the midpoint of our total constant currency growth range now assumes 11% growth in the U.S. and 7% growth outside the U.S.
Raul Parra: The 7% constant currency growth, we expect outside the U.S. continues to assume low double digit growth in the EMEA high teens growth in Resta World region and approximately 1% growth in the APEC region. [inaudible]
Raul Parra: The modest growth we expect in APAC sales is substantially related to China, where we project growth in unit sales on a year-over-year basis, but we expect total revenue to face continued headwinds related to volume-based procurement policies we expect total revenue to face continued headwinds related to volume-based
Second.
Raul Parra: Our Total Net Revenue Guidance for Fiscal Year 2025 also assumes inorganic revenue contributions from the acquisitions of assets from endogastric solutions and cook medical for Fiscal Year 2021.
Raul Parra: which closed on July 1, 2024, and November 1, 2024, respectively, in the range of 45 to 46 million in the aggregate.
Raul Parra: Excluding this inorganic revenue, our guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately 5 to 7 percent year over year.
Third.
for the full year 2025. .
Raul Parra: Period. We continue to forecast U.S. Revenue from the South of Rhapsody CIE in the range of 7 million to 9 million. Our full year 2025 U.S. Rhapsody CIE Revenue range continues to assume a larger weighting of revenue in the second half of 2025 versus the first half and a larger weighting of revenue in the fourth quarter versus the third quarter. [inaudible]
Raul Parra: With respect to profitability guidance for 2025, we now expect non-GAAP deluded earnings per share in the range of $3.29 to $3.42 compared to our prior guidance range of $3.58 to $3.70 [inaudible]
Raul Parra: The change in our non-GAAP EPS expectations for 2025 is primarily a result of the projected impact of tariffs, trade policies and related actions recently implemented by the US and other countries which are expected to increase our cost of goods sold among other consequences. The change in our non-GAAP EPS expectations for the US and other countries which are expected to increase our cost of goods sold among other countries
Raul Parra: By the way of reminder, our initial 2025 guidance range introduced in February assumed that the 2025 tariff structure will remain substantially unchanged during 2025. While the tariff situation
Raul Parra: and potential retaliatory measures by other countries remains highly uncertain and dynamic. We elected to estimate the potential impact on our non-GAPEPS results this year in the interest of transparency.
Raul Parra: To that end, our updated non-GAAP EPS expectations now reflect an incremental 26.3 million of tariff-related manufacturing costs in our cost of reds line item.
Raul Parra: This figure includes tasks on countries from which we import raw materials and products as well as potential additional tasks on certain exports from the US.
Raul Parra: Roughly 94% of the total expected increase in our 2025 cost of goods is related to our business in China The majority of which is related to retaliatory tariffs are goods exported from the US into China
Raul Parra: The remaining 6% of the total expected increase in our 2025 cost of goods is coming from the 10% tariff rate on goods imported into the US from a number of countries around the world.
Importantly.
Raul Parra: The 26.3 million figures based on all available information as of April 24th, 2025.
and does not include any impact.
Raul Parra: from U and or additional tariffs or retaliatory actions or changes to currently announced tariffs which could change the anticipated impact to our non-GAAP EPS in 2025.
Raul Parra: The ultimate impact from new and or additional tariffs or retaliatory actions or changes to currently announced tariffs on our business will depend on the timing, amount, scope and nature of such tariffs, among other factors most most of which are currently unknown. [inaudible]
Raul Parra: Our team is working hard on potential mitigation strategies to offset the expected potential impact of these new tariffs We believe we have a pathway to offsetting up to 45% of the expected annualized tariffs Although the timing of implementation means these projected benefits
Raul Parra: are unlikely to be realized in our cost of goods until 2026.
Raul Parra: We are encouraged by the prospects of leveraging many of our CGI initiatives specifically in terms of reprioritizing planned efforts to help reduce the cost, improve productivity and optimize production and logistics [inaudible]
Raul Parra: We believe we are well positioned to navigate the anticipated headwinds related to these new tariffs given our multi-year focus on margin and profitability enhancing CGI initiatives.
Raul Parra: This is a rapidly changing situation which we are monitoring carefully.
Raul Parra: Given the frequency of recent changes in our tariff policy, we do not intend to provide interim updates in response to each news item or related rumor
Raul Parra: Rather, we will provide updates as we deem appropriate on our quarterly earnings calls or in other public formats as we gain further visibility and clarity regarding the situation.
Raul Parra: Returning to a discussion of our updated 2025 financial guidance assumptions. For modeling purposes, our fiscal year 2025 financial guidance now assumes [inaudible]
Raul Parra: non-GAAP operating margins in the range of approximately 17.6% to 18% compared to 19.4% to 19.7% previously.
Raul Parra: Note the change in our 2025 non-GAAP operating margin, expectations is directly attributable to the incremental $26.3 million of tariffs related to cost of goods.
Raul Parra: non-GAAP Interest and other expense net of approximately 4.8 million compared to a non-GAAP income of 1.1 million last year. non-GAAP tax rate of approximately 21% and diluted shares outstanding of approximately 61 million compared to approximately 62 million previously.
Raul Parra: Note, our weighted average share count assumption now reflects incremental dilution of a approximately 0.9 million shares related to our convertible debt facility compared to our prior guidance which assumed approximately 1.8 million shares.
Raul Parra: We now estimate incremental shared dilution related to our convertible debt facility represents an impact of approximately 5 cents to our non-GAAP EPS in 2025 compared to approximately 11 cents assumed in our prior guidance range.
Raul Parra: Finally, we continue to expect to generate free cashflow of at least 150 million in 2025.
Raul Parra: Inclusive of the expectation that we invest approximately $90 to $100 million in capital expenditures this year The step up on Capix investment this year is directly related to construction of a new distribution center in South Jordan, Utah [inaudible]
Raul Parra: We would also like to provide additional transparency related to our growth and profitability expectations for the second quarter of 2025. Specifically, we expect our total revenue to increase in the range of approximately 8.6% to 11.1% on a gap basis and up approximately 8.7% to 11.2% on a constant currency basis.
Raul Parra: The midpoint of our second quarter constant currency sales growth expectations assumes approximately 13% growth in the U.S. and 6% growth in international markets [inaudible]
Raul Parra: Note, our second quarter, constant currency sales growth, expectations include inorganic revenue in the range of 17 million to 18 million. Excluding inorganic contributions, our second quarter total revenue has expected to increase in the range of approximately 4 to 6 percent on an organic constant currency basis.
Raul Parra: With respect to our profitability expectations for the second quarter of 2025 we expect non-GAAP operating margins in the range of approximately 17 to 18.75% compared to 20.1% last year and non-GAAP EPS in the range of 80 to 90 cents compared to 92 cents last year.
Fred Lampropoulos: I will now turn the call back to Fred for closing comments [inaudible]
Fred Lampropoulos: Raul, well done, that's a lot of information.
Fred Lampropoulos: But before we open the call for questions, I just want to add that the U.S. Rhapsody CIE program is progressing well. We are pleased with the response following the presentation of 12-month AVF data from our Rhapsody Wave trial at the Society of Interventional Radiology on March 30th.
Fred Lampropoulos: Adoption and Utilization are trending positively and we continue to forecast U.S. revenue from the sales of the Rapps D.C.I.E. in the range of 7,000,000 to 9,000,000 in 2025.
Fred Lampropoulos: Our team continues to execute on our reimbursement strategy which is focused on securing add-on reimbursement payment for both the hospital and office space sites of care.
Fred Lampropoulos: With respect to recent progress and developments on our end-tap submission specifically, on April 11th, CMS released proposed fiscal year 26 payment rates [inaudible]
Fred Lampropoulos: for the Hospital Inpatient Perspective Payment System, which includes updates on our Rhapsody CIE
Fred Lampropoulos: We are pleased to see CMS confirm that the Rhapsody CIE meets the cost criterion and that CMS is proposing to approve the Rhapsody CIE for new technology add on payments in fiscal year 2026.
Fred Lampropoulos: for a case involving the use of the Merit Rhapsody CIE would be $3,770 for fiscal year 2026.
Fred Lampropoulos: which is if finalized as proposed, which support our anticipated costs to the hospital, inclusive all the components and accessories of $5,800.
Fred Lampropoulos: We continue to anticipate receiving final decisions with respect to end-tap and TPPT add-on reimbursement status in June 2025.
Fred Lampropoulos: Now that wraps up our prepared remarks. Operator, we would like to now open up the line for questions.
Speaker Change: Thank you. And to ask a question, you will need to press star 1-1 on your telephone and a wait for a name to be announced. To withdraw your question, please press star 1-1 again. Please send by or compile the Q&A roster.
One moment for our first question.
. . .
Speaker Change: Our first question will come flying up Jason Bednar from Piper Sandler. Your line is open.
Jason Bednar: Hey guys, good afternoon, congrats on another nice quarter here. Look a lot of investor focus and questions on the tariff topic. I'll start there.
Jason Bednar: Time to unpack some of the moving parts and thanks for all the color and quantification that prepared remarks .
Speaker Change: Can you give maybe a bit more color on maybe some of the mitigation efforts you have in mind are you able to talk about what some of those are? Have you already started down the path of those mitigation efforts? [inaudible]
Speaker Change: And then just so we can think about, you know, this appropriately on an annualized basis after mitigation. I hope I don't lose your numbers. But is that 26 million closer to 40 to 50 million on an annualized basis?
Speaker Change: But you expect to offset 45% of that through mitigation and that those efforts would be felt that those mitigation efforts are felt at some point in 26 but probably starting at the beginning of the year, I'm just trying to figure out really how to baseline ourselves when we look at kind of a full year fully mitigated basis. Thank you very much.
Speaker Change: Yeah, I know it's a lot of impact there, Jason, I'll try and hit on everything [inaudible]
Speaker Change: Yeah, look, our mitigation efforts are really centered around, you know, some of the CGI initiatives that we had ongoing, you know, product line efficiencies, you know, moving items to lower cost areas. A lot of what we've already been doing. I think we're really lucky.
Speaker Change: that we had CGI, that was in place, similar to what happened with, you know, when COVID happened. I mean, I think we just put our heads down, we kept, you know, doing what we, we knew we had to do from an execution standpoint. That's exactly how we're treating this terrorist situation here. We've got a punch list of things that we already had on...
Speaker Change: on the board that we needed to do. And so we're just going to continue to do those items and just stay focused on that.
Speaker Change: Pat on the board. We're going to continue to do those.
Speaker Change: and focus on those. There's things we've already started to do that were quick wins that our operations group did initially. You can redirect shipments, you know, from, you know, a country of origin into the specific country avoiding some of the tariffs. [inaudible]
Speaker Change: So those things like that, or building up of inventory from our Mexican facility, you saw some of that build up in
Speaker Change: in the first quarter, a little bit in the, you probably didn't notice it as much in the fourth quarter because...
Speaker Change: We did decrease inventory but there was things we were already working on in the background . . . .
and again...
Speaker Change: I won't get too much into it, I think the math that you did on the annualized amount, I mean I can't argue against that, right? I mean it's the math but again those mitigating control
Speaker Change: or cost control items that have already started. Some of them just take effort, and again, some of them were already on our punch list for CDI initiatives.
Speaker Change: Alright, that's really helpful. Thanks for all that. Yeah, I appreciate that it's pretty messy right now and not just for Merit, so I totally get it. I want to come back and follow up here on the China market specifically. Thank you very much.
Speaker Change: The demand situation there seemed to be a bit weaker than what was originally forecasted. It might be hard to tell, but from where you said Fred and Raul, do you think this was all macro related? Was there any demand impact tied to the trade tensions with the US?
Speaker Change: And then given where everything stands today, I guess how are you internally thinking about the demand for Merit products in China over the balance of this year?
Speaker Change: Yeah, so volume based purchasing, which is one of the ones that we kind of have to deal with from a quarter to quarter variability was essentially in line with our expectations.
Speaker Change: You know, the softer than expected kind of revenue results were really more related just to the overall broader macro environment. Nothing to call out specifically. Nothing that really, you know, would concern us, you know, I would say that that really, you know. [inaudible]
Speaker Change: I'd say they finished the quarter pretty strong, you know, and I would add nothing to it. And we haven't changed the full year outlook for China.
Speaker Change: You know, I think we continue to be excited about the market. You know, clearly we're paying attention to what the tariff situation is, but we're not making any long term decisions based on what's going on with these tariffs [inaudible]
We are a global company with a long-term strategy.
Speaker Change: We've been through whether it be COVID or financial crisis and whatever the issues have come in the past and we'll look at all the issues and measure them as they come along and continue on to do what I think has brought us to this point and you saw that result in the first quarter. So I mean it's strong and a lot of areas. Thank you very much.
Speaker Change: and I think we're hitting the right things, but we're paying a lot of attention to this. But as you know, it changes, I mean, you know, our biggest concern was just overnight what changes in terms of what we worked on versus what happens, you know, when we talk right now and it's a moving target.
and but the strategy is what's important, what's important.
Thanks for watching. Thanks, guys.
Thank you. One moment for our next question.
Speaker Change: Our next washroom cuffline of Larry Biegelsen from Wells Fargo, Atlanta is open.
Speaker Change: Hey guys, this is some run on for Larry, thanks for taking the questions.
Speaker Change: maybe just to follow up on Jason's second question around China.
Speaker Change: What are some of the items that I guess are underlying the softer demand that you're seeing in China?
Speaker Change: And do you think that can get worse given sort of the escalating geopolitical pensions that you're seeing in the region and how should we think about
sort of the recovery of China throughout the year.
Speaker Change: Yeah, well, you know, we don't get them to kind of, you know, but-
Speaker Change: Just in general, OEM was a little bit soft. Again, we see variability in OEM from time to time. As you saw, OEM was really strong overall, like over 20% growth. So there was a little bit of softness in China related to it, nothing that again we would specifically call out. And again, I'll just highlight that we haven't changed our guidance for China for the full year.
Thank you.
Speaker Change: Got it, that's helpful, and maybe just to follow up on the tariff color.
Speaker Change: in the U.S. and maybe just more broadly speaking, which manufacturing plants service China and how have you guys shifted manufacturing in the interim to sort of help mitigate some of that impact.
Speaker Change: Again, I think we provided a lot of information already, so I don't know that we're going to provide anything else other than to say of the 26.3 million that's impacting this year related to the terrorists.
Speaker Change: You know, roughly 94% of that is China, right? And the majority of that...
Speaker Change: is inventory that were importing into China, right? So again, I think that really gives you kind of what you need. And yeah, that's all we have.
Okay, great, thanks. Yeah, thank you.
Speaker Change: One moment for next question, the freshman conflign of Steve Lichtman from Oppenheimer, United
Steve Lichtman: Thanks. Hi guys. I guess first question just on the quarter, you know, last couple of quarters, including this one, you've gross margin coming in well ahead. So, you know, obviously great to see heading into, you know, this tariff period. Can you talk a little bit more about what you're seeing is the underlying driver there?
Raul Parra: Steve, I think I owe you lunch for that question. You know, dinner. Yeah, dinner.
Speaker Change: No, look, thank you for the question. Honestly, we're super excited about the performance of the company and I'll call it kind of pre-terrish, right? I mean, the business is doing really well as you saw. Q1 was an outstanding quarter
Speaker Change: I thought it was a great start to the year and set us up well for the rest of the year, the underlying business is doing great [inaudible]
Speaker Change: Gross Margin, as you mentioned, came in very strong, and it's really...
Speaker Change: A combination of everything we're doing, whether it's our sales force . . .
Speaker Change: focusing on the acquisitions that we have, you know, that we've integrated, the product mix, the focus on higher gross, you know, higher gross margin products and pricing.
Speaker Change: And then our operations group, trying to fight through all the different battles that they have to fight through from an operational kind of efficiency standpoint in product line movement So
Speaker Change: All parts of things that we've done in our punch list of CGI items that we have.
So again, it's a group effort.
Speaker Change: It requires everybody to be marching to the same target and we've been doing that now for quite a bit of time and it's really nice to see that gross margin be where it's at. We're super excited about how it came out.
Speaker Change: As you guys know, we were expecting a lower gross margin for the quarter and the way came in I thought was a really good start to the year.
Speaker Change: Thanks, Raul. I wanted to ask on the cadence of tariff impact, because this goes to the annualization. I've been doing the numbers policies if I got this wrong, but it seems like the second quarter impact is not too far off from 3Q and 4Q. Am I right on that? If that's the case, then that annualization number would be...
Speaker Change: which I should be lower than sort of a plus significant number because I think that's a fair question to kind of I think you should kind of think about it, obviously in the way our inventory turns right and obviously you're not going to know that but our inventory turns over five months.
Speaker Change: and so that 26 million, as you can expect, has been turned through those inventories. As far as the 2025 total impact, roughly 83% of it would be in the second half, assuming things stay as they are today, right? And then about 17% of that would be in Q2.
Okay, that helps. Thanks, Role.
Thank you. One moment for our next question.
Speaker Change: Our next question will come for Lina Robby Marcus from J.P. Morgan. Your line is open.
Robby Marcus: and expensive assumptions alone in the rest of the guide. And I wonder how much opportunity is there to pull back on planned spending or non-invest in certain projects to help minimize the deepest impact this year, and then I will follow up.
Robby Marcus: Yeah, I think that's a great question, Robbie. Look, you know, I'll just say that we, you know, we were off to a really good start in Q1, right? Perform really well. We left our guidance unchanged, you know, that underlying guidance as of now. Again, I think, you know, we've got
Robby Marcus: A lot of things that we're throwing at, you know, kind of the tariff situation. Obviously, we had a really good game plan that started, you know, essentially a...
Robby Marcus: I'd say you're in a quarter ago, but it's really...
Robby Marcus: There's things we can do, I don't want to get into kind of the whole [inaudible]
Robby Marcus: You know, detailing out of what we're going to do or not do. But I can tell you that we do have a game plan of, you know, and CGI is a big component of that. You know, happy that we had that program in place. [inaudible]
Raul Parra: and again, we're just going to keep our heads down and just keep marching. You know, and Raul, I think you said something earlier on, but we had a planned all-round place and much like foundations for Grove Robbie. We kind of hit the road running. We were already running when this started. [inaudible]
Raul Parra: with a plan that when you have situations like this it fits perfectly because we get a little bit of a jump on it and all the things that you need to do we're working on in one way or the other as we speak.
Great, and maybe as a follower.
Speaker Change: You reiterated your pre-cash flow guidance of at least 150 million in 2025, which to me is kind of impressive given the EPS headwind from tariffs. Maybe speak to that how you're able to do that where it's coming from and how you're able to offset the tariff impact on pre-cash flow. Thanks.
Speaker Change: to offset some of the headwinds. You know, some of the things that we're going to... [inaudible]
Speaker Change: Robby, there's things that we can do from a manufacturing standpoint where China has a certain amount of inventory that we can kind of burn through so we don't have to build all of it.
Speaker Change: You know, certain amounts of inventory, there's all sorts of little things that we can do to help mitigate, you know, some of the working capital issues that, you know, that the chairs spring on, which we think are, again, completely manageable. That's why we held the $150 million. $150 million.
Speaker Change: Great. Thanks a lot. Yeah, thank you. Good to have you on the calls.
for a moment for our next question.
Craig Beeju: The next question will come from Brian of Craig Bijou from Bank of America Securities. Your line is open.
Craig Beeju: Good afternoon, guys. Thanks for taking the questions. Let me start with a follow-up on China.
I guess.
Craig Beeju: Maybe just what's your confidence that it was either you know something that specifically happened in Q1 and you can recover some of those sales in the subsequent quarters?
Craig Beeju: Or is it a market issue that may get better throughout the year, just maybe a little bit more color or understanding on what happened there?
Craig Beeju: Yeah, no, again, I'll just kind of repeat what I said, right? I mean, the underlying fundamentals of the demand in China.
Craig Beeju: were great, right? I mean, they were as expected, I guess I should say. The only item that stood out was the OEM dynamic.
And again, we see variability in OEM.
Craig Beeju: From time to time, that's country, region specific. It's nothing new to us. We've been in the OEM business for
The greater part of, you know, merit history. [inaudible]
Craig Beeju: and so we're used to it. So for us it's really nothing to see and probably the most important thing is we haven't changed our full year outlook for China.
Raul Parra: Well, and you know, Raul, if you look at last year and look at the OEM business, minus five, plus five, plus ten, plus twenty, and we can go through history and you'll see the same type. It's all about timing. Yeah, not about demands.
Got it at the top, Paul, and actually...
Speaker Change: Pretty good segue way into my second question, which is on the OEM business and the strength that I think you called out in the US particularly, but 20 plus percent growth the last two quarters.
I guess, what's driving that growth? [inaudible]
Speaker Change: Maybe more specifically in that question, have you seen some inventory pull forward or build out from some customers ahead of some of the tariffs? Is that something that may be driving some of that underlying growth? Yes, I do.
Speaker Change: You know, I don't think so, but the reason I say that, we did see some of that maybe in certain areas, but on the OEM side
Speaker Change: Remember, it's going to get into inventory by time we send something OEM, it's going to have to go through their system, and probably going to get hit with it anyway. So as a practical matter, it's new accounts. [inaudible]
Speaker Change: It's accounts again building on what we've been doing for years and years and that's the quality, the reliability, that's always what drives marriage business in OEM and the breadth of market.
Speaker Change: It's the same story and fair pricing. It's a good business, but it's again we don't want to make
Small of this
Speaker Change: But it's what we've been doing for a long time and in you'll see these variations from time to time [inaudible]
Speaker Change: But I don't think that there's envy out there building inventory now so they can pay a tear upon it. I don't see that at all. Fact just the opposite. I don't think being responsible in the purchasing. Yeah, and remember, I mean, we said it and find that, you know, that our Katie Adele, you know with
Speaker Change: with the metronome class here, and we're seeing some of that demand, too. So again, OEM has always been a high single-digit grower for us. That's the expectation this year. Nothing's changed.
Thanks, guys.
Thank you, all moment for next question.
Speaker Change: Our next question will come flying out of David Rescott from Baird, Atlanta is open.
Oh great, thanks. Can I, can I be heard? Good.
Yeah, we've got you, Craig.
David, I'm sorry. David?
Speaker Change: You know, estimate that you could be able to offset with some shifting around or some investment. So you have a two part question. One I guess is the 45% you know related to whatever that 23.6 million dollar annualized number looks like.
Speaker Change: is the majority of that, again, coming from China, or there's some pieces in Mexico and elsewhere. And when you think about the internal decisions around how you make those investments, I mean, you can come in tomorrow when the expected tariffs could be half of what they are today, so how do you internally make the decisions?
Speaker Change: on what the go forward timing is and when those investments are made to attempt to offset some of these, you know, tariff had wins.
Speaker Change: I think that's where we're really lucky, David, to be honest with you. Again, we had a punch list of items that we were going to do
That's part of continued growth initiatives, and so for us...
Speaker Change: It's just keep our heads down, let's not react to all the tweets and news headlines that are happening on an hourly basis [inaudible]
Speaker Change: We've got our punch list. Let's just stay focused on that. Let's make sure we're focused.
on the performance of the business which you know about.
Speaker Change: I hope you guys are appreciating what we did in Q1. Thank you very much for your time.
Speaker Change: But, you know, we've got things that we were already working on, we'll continue to work on those. We're not making any long-term decisions based on this [inaudible]
Speaker Change: on these tariffs. I think it's just way too volatile to try and, you know, change the direction of the company or try and do something that's, you know...
that's going to be-
Fred Lampropoulos: essentially, you know, wrong in 24 hours, you know, something changes. So Fred, do you have anything? Yeah, little lesson. I think we're confident in our plan. We've been through this before. Everybody remember our compensation is aligned. Everything is aligned. And they're not new to us.
Fred Lampropoulos: I mean, we are battle-worn troops. I mean, I can't speak to others. I can just tell you this is a fighting group that goes and gets refreshed and comes back and continues the mission.
Fred Lampropoulos: So that's where we are. We're confident in our targets. We're confident in the long-term plan.
Fred Lampropoulos: and we look at the day to day does this change anything should we consider this? [inaudible]
Fred Lampropoulos: We meet almost every day to talk about this, not almost every day. Is there anything here that we need to think about or adjust and adapt? And we go through those things every day, but it's the long term.
Fred Lampropoulos: Plan that really essentially covers all this stuff anyway, that you would do in your planning. So it's, I hate to say this, but I know I don't actually. It's business as usual, it's what we're used to.
Fred Lampropoulos: It's what you've been seeing for a number of years now, and it's why we're confident when we throw out a number, we meet it. And I think hopefully we've built enough confidence amongst the investment community and our analysts that if we say it, that's what we're gonna do.
Speaker Change: Okay, great. Maybe on ungrossed margins, again, I know it's already been called out, but the gross margin.
Fred Lampropoulos: Disquarter, where obviously significantly ahead of what, you know, our street expectations, where I think maybe this is the second quarter where you've had really a pretty significant benefit. Well, I think you said you through the kitchen sink at it last quarter, and that was what drove the upside. So, you know, curious for the second part of this year, how you're thinking about that underlying. Thank you, Brian .
Fred Lampropoulos: Service Quarter Performance Translating to what the otherwise unaffected, you know, gross margins by tariffs that could have been, meaning that is what you saw are the trendy songs you dreamed you want of just this pretty significant gross margin upside, kind of where the business was tracking to ahead of this tariff headwind. Thank you.
Fred Lampropoulos: Yeah, look, I'm going to keep talking about CGI, so hopefully you guys are getting the hint here, that
Fred Lampropoulos: We're focused on CGI and the initiatives that we drew up last year and
It's just a compounding effect of what we're doing.
We're working hard at it and
Fred Lampropoulos: I think, you know, we keep throwing the kitchen sink at the gross margin, that's our approach. I mean, if you want to know what we're doing, we're doing everything we can.
Fred Lampropoulos: You know, we just need to find more things to throw in the kitchen sink, I guess, but we're doing everything we can.
Fred Lampropoulos: It's working. I think it's very motivating to us because I don't think people understand how hard it is to move that gross margin and we've been we've been fighting that fight for
Fred Lampropoulos: You know, as long as I've been here, I've been here 15 years in the last seven years You know, it's it's been really fun to see that gross margin, you know Start to start to get where where we think it should be and when and you know there's a lot more to be had there [inaudible]
All right, thank you. One moment for next question.
Speaker Change: Our next question will come from Michael Petusky from Barrettin Research. Your line is open.
Good evening, guys [inaudible]
Speaker Change: So I guess I would have expected, and I'm not going to pretend I know more about sign-of-ordering patterns than I do, but I guess I would have expected some stocking type orders either late in the quarter or possibly right after the quarter ended in very early April . Did you guys see any evidence of that kind of ordering out of any of the customers in China?
Speaker Change: Well, I think Fred hinted at it a little bit right and is in one of his comments saying that we did see a little bit of that in certain markets and I think
Speaker Change: That was pretty standard, I would say, for most. I mean, we did something similar. We built up inventory in Mexico in anticipation.
Speaker Change: Brought it over to the US. So yeah, I wouldn't say that it was anything material that I would call out or that we were concerned that all of a sudden fall off the cliff.
Speaker Change: Did it hit Q1 or was it more or very early Q2? Yeah, I mean I'm not going to get into Q2 I'll just say that it was you know towards the tail end of the first quarter
Mike: I'm really good at dancing, Mike. You're the boxing footwork. Okay.
So, uh...
Speaker Change: I did want to also ask about endoscopy. I'm just curious, you know sometimes you do M&A, meaning the generic, you do M&A and there's some customer loss for whatever reason. I'm just curious, the guy down is that associated with customer attrition or what's going on there if you can.
Speaker Change: Yeah, I don't think so. I think the plan was is we'd start integrating the sales forces at the end of the year and then it would come over then again with all the things that we're going on. I don't think it's a significant issue at all.
Speaker Change: in terms of the two groups now selling the same product.
Speaker Change: is moving along better, because we had planned it that way. We didn't want to stuff it down to somebody's throat, for the last half we wanted to stabilize it. All of the product is being built here. We wanted to make sure we could respond to that. [inaudible]
Speaker Change: in terms of making sure that we had any employees and we were producing at which we are. So I think it's just, yeah, it's just part of what the plan. Yeah, I mean, and you're not privy to obviously our quarterly cadence, you know, Mike, but we anticipated, you know, that the second half of the year would be stronger. Yeah.
Speaker Change: then the first half, and that's just again as Fred mentioned.
Speaker Change: You've got two sales forces that are coming together. They've got to kind of even though they've been training on the products, you know, for, you know, half of the year last year, you know, they just takes a little bit time and we've been through this before. We understand that there's always a little bit of disruption and it's just one of those lessons learned and, you know, I think we we planned it that way. It wasn't a surprise to us. [inaudible]
Speaker Change: Okay, then let me sneak one last one in terms of OEM and I know you're sort of downplaying it and hey, this is...
Speaker Change: This is sort of what we do, and there is some lumping us to it, but at the same time, it's really positive lumping us here the last couple to three quarters, and I'm just curious, is there sort of with the new accounts you guys?
Speaker Change: sort of alluded to maybe a new normal for the, you know, nearer term in terms of, you know, sort of growth expectations around that business. I mean is mid single digit growth no longer really the right way to model that, at least over the next several quarters. [inaudible]
Speaker Change: I mean, we're expecting high single-digit growth, you know, for the year. So, I guess, yeah, that would be the wrong way to model it. Well, I mean, it's 21% in Q1, though, if you're saying high single-digit growth, you probably are assuming roughly mid single-digit growth the rest of the way.
Speaker Change: Yeah, I mean, the figures unchanged, you know, from prior guys. So again, we continue to be excited about the opportunity that, you know,
Speaker Change: that OEM has. It's one of those things that maybe we don't talk enough about, but…
Speaker Change: Every time we launch a product, that as long as that product is not competing directly with our Salesforce, our OEM group has an opportunity to go out and get new business And I think we're vertically integrated and everything we do, we build high quality products [inaudible]
Speaker Change: and I think you know that word gets out and you know there's certain things that other people don't want to do and more than willing to do them [inaudible]
Speaker Change: Last part of that. Have the brand new accounts that you guys have signed? Have they had an outsized impact on the recent success in that business?
Speaker Change: I'm not going to get into the customer, but I'll just say we're excited about all the businesses coming our way.
Fair enough, thanks
One moment for our next question.
Speaker Change: The next question cuffline of James Sidoti from Sidoti & Company, your line is open.
Alright good afternoon and thanks for taking the questions
Speaker Change: So, you know, a part of your growth strategy has always been the inorganic growth requisitions. And, you know, your targets are just like you. They're subject to these terrors.
Speaker Change: The number of targets increased, or are people more willing to make deals as a result of this?
Jim Lusson, Um, um,
Speaker Change: There's a lot of activity in the marketplace. I know that if you talk to the bigger firms, and I've heard you know the M&A activity is down, there's a lot of stuff out there and we're engaged in looking as we always have been, but we're busy looking at things. There's a lot of stuff out there.
Speaker Change: People remodeling their portfolios in this and that, so we're busy looking at things.
Speaker Change: And with regard to the two deals you did in the second half of last year, do you think that integration is? [inaudible]
Speaker Change: Complete at this point, are you happy with the way things are working out there? Or do you think there's still more work to do? But there's always more work to do, you know, part of it is remember the TSA on the cook deal is going to take more time, but that was all planned so it's not a surprise.
and you just integrated the sales force.
Speaker Change: where they're all now selling the same bag on the EGS.
Speaker Change: and then you had all the sales meetings and things like that. So I think we are on plan and executing that plan as we've been talking to this entire meeting as Merit is focused.
Speaker Change: We're on plan. We, you know, we, in terms of our CGI, we've reconfirmed, you know, our numbers for the CGI program through its life. And it's actually in many ways, Jim.
Speaker Change: Chaos and all this other stuff that's going on in the marketplace, Place to Merit Advantage because we're kind of steady eddy. I mean people can roll eye on us and I think that's important. So I think you can, I hope you can sense the enthusiasm for the business. Thank you very much.
Speaker Change: and what we're working on. We have plans. We are not a ship that's adrift.
Got it. Thank you.
One moment for the next question.
Speaker Change: Our next question will come for a line of John Young from Canacord. Your line is open.
Speaker Change: Hey Fred, I want to touch on CGI. I know a pillar that has been the skew rationalization and also the raising prices. So how should we think about your ability to raise prices in this macro environment? And how much of that is factored into the guidance? And also, could you talk about what percentage the US business is sold to GPOs? And are those contracts generally made on a January 1st annual basis? Thanks.
Thank you. Thank you.
Speaker Change: Great question, John . Look, I think CGI obviously does include pricing. As you guys know, under foundations for growth, we've made a significant investment in a pricing department. And I think they continue to do an excellent job at helping our sales team and the management team with a visibility in contract management and contract compliance.
Speaker Change: Contracts are a big part of our business. I'm not going to get into the percentages or details of those. I think, you know, probably the underlying question you're trying to get at is, hey, can you raise prices to cover the tariffs?
Speaker Change: And I'm not going to get into that either, other than to say pricing is one of the levers that we have in our bag as part of continued growth initiatives in the future days.
Again, we're not going to do anything that
Speaker Change: that is going to be a detriment to our customers when there's very little visibility. [inaudible]
as to the wave or amount.
Speaker Change: or a lack of them, I guess, on these tariffs, right? So we're not going to upset our customers.
Speaker Change: when this thing is changing, you know, every day. Well, and Raul, you hit a very good point. If you go ahead and then jerk your customers around, you're going to break up everything we spent all these years building and confidence. So you have to be wise, you have to be measured.
Speaker Change: But at the same time, you have to be able to pass on what you can and be wise about how you approach it. And I think that's what we've done. And it's not just the pricing part, but the contract management that Raul will mention. There's a lot to this. I think it's one of the things that's been a big factor in both foundations for growth and CGI. [inaudible]
Speaker Change: Okay, great. And then if I could speak just one more in here too, just any comments area on U.S. Perhaps the performance of this quarter, I understand that. We're waiting for the reimbursement, but the device that is strong is showing at SIR. I know it is commercially available, so just any commentary on performance.
Speaker Change: We continue to be excited about this product and rhapsody where it's also I think very pleasing to see it come in the cadence and the various things that have happened like
Speaker Change: The add-ons and the trials and the information, the one-year data. I think we're hitting on all the cylinders. So the best way to say this, we continue to be very impused and excited about that product and what it means for the future of the company. [inaudible]
Great things again.
Speaker Change: One moment for next question. Next question, I'll come fly to Mike Matson from Needham, your line is open.
Mike Mattson: Yeah, thanks. So, just one more on China to their situation. So...
Speaker Change: I think, yeah, I don't know if you've broken out the percent of yourselves from China lately, but I think it's sort of around 10% and it looks like you're taking your EPS guidance down by about 80% and that's probably fully for the kind of a 3-quarter impact.
Speaker Change: I mean, is it safe to assume at least with as long as these characters are in place that you're kind of not really profitable in China or break even maybe with your Chinese business?
Mike Mattson: Again, we're not going to get into all those details. Again, the 26.3 is a gross number. We think we can impact that with some of our CGI initiatives.
Speaker Change: and roughly, you know, 26, of that 26 million 94% that was related to China, and...
Speaker Change: A big chunk of that is the import's going into there. So other than those details, we're paying attention to what's happening and we'll make adjustments as we be necessary, but we've got a good game plan as you can see by the results of the first quarter.
Speaker Change: Okay, all right, and then just one on Rhapsody, so you could hear the news on the end tab, but on the TPP, so with that, should there be something on the TPP and the OPPS outpatient proposal when that is published later this year? Okay.
Speaker Change: Our best estimate of timing and everything is that we'll have all this information hopefully by June .
Speaker Change: It's kind of what our general thinking is. It's out for comment now that the recommendation has been made. We satisfy the criteria that we have.
Speaker Change: I think that's the challenge. The data speaks for itself. And, you know, there weren't that many countries about these things. And Merit is one of its breakthrough, as you know, the data has been outstanding.
Speaker Change: and I think will benefit both the physician and the patient. So, as I mentioned previously, Mike, it's on schedule and meeting all of our expectations.
Mike Mattson: Okay, and then just the inpatient versus outpatient mix for Rhapsody, do you have any feel for that? Is it skew one way or the other?
Mike Mattson: I mean, we do have a, you know, but we're not going to disclose it. I think we continue to be happy. We're not going to provide, you know, interim revenue updates on Rhapsody. We continue to expect the $7 and $9 million and they're excited about the...
Speaker Change: You know, the news that we got. Yeah, I understand. I guess what I was getting at is just the, you know, which setting is it used more in or I mean, I guess you're not going to understand but. [inaudible]
Speaker Change: We'll wait until the data, not the data, but until we get this thing done, and get the word from CMS, and then we'll pass that on as passed. All right, got it, thanks. Okay, thank you.
Thank you. One moment for our next question.
. . . . .
Jason Bedford: The next question on conflion of Jason Bedford from Raymond James, Illinois is open.
Jason Bedford: Good afternoon, I thanks for squeezing me in just a few, just to be clear on the mitigation.
Jason Bedford: Are there new initiatives that you're putting in place or just accelerating existing efforts?
I don't know that we're accelerating anything, we had initiatives that were on the list and we're just...
We're just, you know, we're...
Jason Bedford: We're just attacking that list. I mean, that's what we've been doing for the last-
Jason Bedford: 6 plus years, and we're just going to continue that.
Jason Bedford: There's things that we did, you know, change that were, you know, short nature, as I mentioned earlier, redirecting shipments, you know, and that was helpful, holding off on sending more inventory to specific locations.
since they had plenty of finished goods.
Jason Bedford: So there's things that we acted on that were very quick but all the other stuff at the time that the things that kind of take time those are just on the on the list Jason and again as we've mentioned before plenty of times
Jason Bedford: We throw the kitchen sink at these things, and so it's just part of the process [inaudible]
Jason Bedford: And can I just add Jason, that another part of this is [inaudible]
Jason Bedford: is our counterpart from China. I mean, we listen to where our management team on the ground are fighting the fight.
Jason Bedford: I mean, we have our view here, but we also, I think, you know, keep people engaged and don't-
and well-versed in experience.
Jason Bedford: We get them involved in all these conversations as well to develop a mutual strategy that becomes a single strategy for a company [inaudible]
Yeah, I mean, we're a team, right? I mean, you know, whatever the political fight that's gone going, we have a team in China that we...
Jason Bedford: Hold in high regards, and they're doing everything they can to make sure that we can pull through this They may have a suggestion or an idea and we welcome all of those and talk about them quite often
Jason Bedford: Okay, just on the underlying gross margin, you know, two straight quarters of 53% plus gross margin makes it a trend until terrorist, I guess, but the improvement is notable.
Speaker Change: Is there anything that kind of hit or inflected here in the last couple quarters to drive that, what is legitimately a step up in underline gross margin?
Speaker Change: No, I mean, look, again, I think it's just a compounding efforts of everything we've done.
Speaker Change: You know, whether it's the acquisitions, it's the efficiencies in operations, it's the sales, you know, focus on mix and pricing.
Speaker Change: Again, it just feels really good to see that gross margin come out. And you know, Jason, I've got my chief operating officer and my head sales and marketing guy sitting in the room. I mean, a lot of the credit goes to them.
Speaker Change: and the things that they're doing and their execution and our plans. This is not a surprise.
Speaker Change: to us. We had hoped that you know it has to come along and execution is the key.
Speaker Change: And that's what we've been doing and there's as I think Raul said, there's more to come Yeah, and again, I can't emphasize enough that you know the core business we've left guidance essentially you know essentially the same right?
Speaker Change: Other than the tariffs, but that underlying business is doing great and we're super excited about how we started the Q1. So,
Thank you.
Try more to come just
Just last one, I realize we're getting on here, Rhapsody, [inaudible]
Speaker Change: Are you with the US launch? Are you seeing any impact internationally, meaning a bit of a halo or anything like that?
Speaker Change: Well, I'll just simply say that having the data out there and having one year data is always helpful, so that helps to overcome either objections or compares you with other people who have been on the market before, so having data out there affects every location. Yes.
Okay. Thank you.
Thank you, one moment for our next question.
Speaker Change: The next question comes line up, Jason Bednar from Piper Sandler. The line is open.
Speaker Change: Again, thanks for taking the thought up and again, sorry for making this even longer. Just, Raul, real quick on...
Speaker Change: maybe helping us out with the EPS bridge here for the Folier Guide. So I feel like I'm missing something so you had the tariff impact was about 33-34 cents of the headwind.
Speaker Change: You took the guy down 28, 29 cents, something like that. You know, it seems like that six-cent Delta is you're picking up and the convert illusion is being like a less, less now and versus where it was three months ago . . .
Speaker Change: But you just beat by 12 cents, and I guess I'm wondering where that's coming, where that's shaking out and then also I feel like currency is probably a tailwind as well, so it's helped me out. What am I missing in the guide?
Speaker Change: You're not missing anything, again Jason, you know how we guide, Q1, regardless, let's just ignore the tariffs here for a minute.
Speaker Change: Coming out of Q1, we wouldn't have changed anything. That's just our standard practice. [inaudible]
We've never really changed guidance.
You know, coming out of the first quarter. [inaudible]
Speaker Change: Typically we give it some thought in the second quarter and we'll see how things are shaking out but typically we will adjust our guidance in the third quarter sometimes in the second but not very frequently and hardly ever in the first quarter [inaudible]
Speaker Change: So, I think your math is right, we've got the five to six cents related to the dilution.
Speaker Change: or the Convert, I should call it. And then you've got 34 cents for the tariffs. And then everything else, again
Speaker Change: We left our guidance as is so anything that you're missing this is probably just related to that.
Speaker Change: Okay, so operational and currency are both upside from where we're we're we're sitting here today Okay, that's correct
Okay, perfect. Thanks guys. Yeah
Fred Lampropoulos: Thank you. I'm not sure any further questions. I would not like to turn it back over to Fred for closure marks.
Fred Lampropoulos: Well, listen, thank you very much for your comments. Actually, Raul, I've got to go to a, I won't be at these meetings falling because I have to go to a business dinner. So I've had to go to play. Yeah. Yeah. And then I've got to jump on a plane, head down to the heart rhythm show down in San Diego at 11 o'clock tonight. So, but all that being said.
I want to congratulate this team.
Fred Lampropoulos: They've worked hard. We have a killer of effective and compounding, if you will, of the efforts of these programs.
Fred Lampropoulos: We are R&D, our efforts, our pricing, our inventories, our bills, I could go on and on. There are all the things that you would be working on with various adjustments and things. We're excited about the business. We're continued to be excited about...
Fred Lampropoulos: Both the marketplace and the opportunities there as well as our internal efforts [inaudible]
Fred Lampropoulos: in R&D and other projects, which we won't talk about, other than let me know, we're just excited about it. So, it's been a long day.
We appreciate you taking the time and your interest [inaudible]
Fred Lampropoulos: and we'll look forward to hearing from you again soon. Best wishes and signing off from Salt Lake City. Have a very good evening. Thank you.
Fred Lampropoulos: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect. Everyone have a great day.