Q4 2025 Merit Medical Systems Inc Earnings Call

February 24, 2026

Speaker #2: Thank you, Operator, 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.

Martha Aronson: Thank you, operator, and welcome everyone. I'm 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 please take us through the Safe Harbor statements, please?

Speaker #2: Brian, would you please take us through the Safe Harbor Statements, please?

Speaker #3: Thank you, Martha. 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.

Brian Lloyd: Thank you, Martha. 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. 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. Any forward-looking statements represent our views only as of today, 24 February 2026, and should not be relied upon as representing our views as of any other date. We specifically disclaim any obligation to update such statements, except as required by applicable law. Please refer to the section entitled "Cautionary Statement Regarding Forward-Looking Statements" in today's press release and presentation for important information regarding such statements.

Speaker #3: 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: Any forward-looking statements represent our views only as of today, 24 February 2026, and should not be relied upon as representing our views as of any other date. We specifically disclaim any obligation to update such statements, except as required by applicable law. Please refer to the section entitled "Cautionary Statement Regarding Forward-Looking Statements" in today's press release and presentation for important information regarding such statements.

Speaker #3: In addition, any forward-looking statements represent our views only as of today, February 24, 2026. And should not be relied upon as representing our views as of any other date.

Speaker #3: We specifically disclaim any obligation to update such statements, except as required by applicable law. Please refer to the section entitled 'Cautionary Statement Regarding Forward-Looking Statements' in today's press release and presentation for important information regarding such statements.

Speaker #3: For 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.

Brian Lloyd: 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. Our financial statements are prepared in accordance with accounting principles, which are generally accepted in the United States. However, we believe certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of our ongoing operations and can be useful for period-over-period comparisons of such operations. This presentation also contains certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to the most directly comparable US GAAP measures is included in today's press release and presentation furnished to the SEC under Form 8-K. 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 #3: Our financial statements are prepared in accordance with accounting principles which are generally accepted in the United States. However, we believe certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of our ongoing operations, and can be useful for period-over-period comparisons of such operations.

Speaker #3: This presentation also contains certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to the most directly comparable US GAAP measures is included in today's press release and presentation furnished to the SEC under Form 8K.

Brian Lloyd: This presentation also contains certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to the most directly comparable US GAAP measures is included in today's press release and presentation furnished to the SEC under Form 8-K. 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 #3: 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 #3: 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.

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 Martha.

Speaker #3: 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 Martha.

Speaker #2: Thank you, Brian. Let me start with a brief agenda of what we plan to cover during our prepared remarks. I will begin with a brief summary of the fourth quarter and full year 2025 financial results.

Martha Aronson: Thank you, Brian. Let me start with a brief agenda of what we plan to cover during our prepared remarks. I will begin with a brief summary of the Q4 and full year 2025 financial results. Rahul will provide a more in-depth review of the quarterly and full year financial results, as well as financial guidance for 2026, which we introduced in today's press release. I'll then provide some closing comments before opening the call for your questions. Beginning with a review of our Q4 results, we reported total revenue of $393.9 million, up 11% year-over-year on a GAAP basis and up 10% year-over-year on a constant currency basis.

Speaker #2: Then Raul will provide a more in-depth review of the quarterly and full-year financial results, as well as financial guidance for 2026, which we introduced in today's press release.

Speaker #2: I'll then provide some closing comments before opening the call for your questions. Beginning with a review of our fourth quarter results. We reported total revenue of $393.9 million, up 11% year over year on a GAAP basis and up 10% year over year on a constant currency basis.

Martha Aronson: I'll then provide some closing comments before opening the call for your questions. Beginning with a review of our Q4 results, we reported total revenue of $393.9 million, up 11% year-over-year on a GAAP basis and up 10% year-over-year on a constant currency basis.

Speaker #2: The constant currency revenue growth delivered in the fourth quarter exceeded the high end of the range of the growth expectations that we outlined on the Q3 2025 earnings call.

Martha Aronson: The constant currency revenue growth delivered in Q4 exceeded the high end of the range of the growth expectations that we outlined on the Q3 2025 earnings call. Our constant currency growth in Q4 was driven by 6.6% organic constant currency growth in Q4, which modestly exceeded the high end of the range assumed in our guidance, and contributions from our acquisitions, which also exceeded the high end of our expectations. With respect to the profitability performance in Q4, we delivered financial results that significantly exceeded expectations. Our non-GAAP operating margin increased 138 basis points year-over-year to 21%.

Speaker #2: Our constant currency growth in Q4 was driven by 6.6% organic constant currency growth in Q4, which modestly exceeded the high end of the range assumed in our guidance, and contributions from our acquisitions, which also exceeded the high end of our expectations.

Speaker #2: With respect to the profitability performance in the fourth quarter, we delivered financial results that significantly exceeded expectations. Our non-GAAP operating margin increased 138 basis points year over year to 21%.

Martha Aronson: With respect to the profitability performance in Q4, we delivered financial results that significantly exceeded expectations. Our non-GAAP operating margin increased 138 basis points year-over-year to 21%. The team delivered 12% growth in non-GAAP EPS, which exceeded the high end of expectations, and we generated $74 million of free cash flow, an increase of 13% year-over-year, and a quarterly record for the company.

Speaker #2: The team delivered 12% growth in non-GAAP EPS, which exceeded the high end of expectations. And we generated $74 million of free cash flow, an increase of 13% year over year and a quarterly record for the company.

Martha Aronson: The team delivered 12% growth in non-GAAP EPS, which exceeded the high end of expectations, and we generated $74 million of free cash flow, an increase of 13% year-over-year, and a quarterly record for the company. The Q4 results reflect continued strong momentum in the business this year. I want to thank our 7,500 employees around the world for their commitment to achieving our annual goals in the midst of a meaningful leadership change during the second half of the year. For the full year 2025, the team delivered total constant currency revenue growth of 11%, a non-GAAP operating margin of 20.3%, representing a 131 basis point increase year-over-year, and more than $215 million of free cash flow.

Martha Aronson: The Q4 results reflect continued strong momentum in the business this year. I want to thank our 7,500 employees around the world for their commitment to achieving our annual goals in the midst of a meaningful leadership change during the second half of the year. For the full year 2025, the team delivered total constant currency revenue growth of 11%, a non-GAAP operating margin of 20.3%, representing a 131 basis point increase year-over-year, and more than $215 million of free cash flow.

Speaker #2: The fourth quarter results reflect continued strong momentum in the business this year. I want to thank our 7,500 employees around the world for their commitment to achieving our annual goals in the midst of a meaningful leadership change during the second half of the year.

Speaker #2: For the full year 2025, the team delivered total constant currency revenue growth of 11%. A non-GAAP operating margin of 20.3%, representing a 131 basis point increase year over year.

Speaker #2: And more than $215 million of free cash flow. These are impressive financial results on their own to be sure. But more importantly, each of these exceeded the high end of the original guidance range for 2025 provided on the fourth quarter 2024 call last February.

Martha Aronson: These are impressive financial results on their own, to be sure. More importantly, each of these exceeded the high end of the original guidance range for 2025, provided on the Q4 2024 call last February, despite the continued challenges related to the dynamic and uncertain global macro environment. Specifically, the high end of the original 2025 guidance called for constant currency revenue growth of 10%, non-GAAP operating margin of 19.7%, and free cash flow of $150 million. This outstanding performance is a direct result of the team's strong execution and commitment to achieving the company's multiyear financial targets. We introduced financial guidance for 2026 in today's press release, which calls for solid constant currency growth, year-over-year non-GAAP operating margin expansion, and strong free cash flow generation.

Speaker #2: Despite the continued challenges related to the dynamic and uncertain global macro environment, specifically, the high end of the original 2025 guidance called for constant currency revenue growth of 10%, non-GAAP operating margin of 19.7%, and free cash flow of $150 million.

Martha Aronson: This outstanding performance is a direct result of the team's strong execution and commitment to achieving the company's multiyear financial targets. We introduced financial guidance for 2026 in today's press release, which calls for solid constant currency growth, year-over-year non-GAAP operating margin expansion, and strong free cash flow generation.

Speaker #2: This outstanding performance is a direct result of the team's strong execution and commitment to achieving the company's multi-year financial targets. We introduced financial guidance for 2026 in today's press release, which calls for solid constant currency growth year over year, non-GAAP operating margin expansion, and strong free cash flow generation.

Speaker #2: The organization is aligned around our priorities—specifically, to drive strong execution around the globe and to successfully complete our continued growth initiatives program, which includes our previously disclosed financial targets for the three-year period ending December 31, 2026.

Martha Aronson: The organization is aligned around our priorities for 2026, specifically to drive strong execution around the globe and to successfully complete our continued growth initiatives program, which includes our previously disclosed financial targets for the three-year period ending 31 December 2026. With that, I'll turn the call over to Raul for an in-depth review of our quarterly financial results and our financial guidance for 2026. Raul?

Speaker #2: With that, I'll turn the call over to Raul for an in-depth review of our quarterly financial results and our financial guidance for 2026. Raul?

Speaker #3: Thank you, Martha. I will start with a detailed review of our revenue results in the fourth quarter, beginning with the sales performance in each of our primary reportable product categories.

Raul Parra: Thank you, Martha. I will start with a detailed review of our revenue results in Q4, 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 year-over-year and constant currency basis. Q4 total revenue growth of 10% was driven primarily by 9% growth in our cardiovascular segment, to a lesser extent, by 15% growth in our endoscopy segment. Cardiovascular segment sales exceeded the high end of the expectations we outlined on our Q3 call, endoscopy sales came in at the midpoint of our expectations. Q4 total revenue results included approximately $10.8 million of inorganic revenue from our acquisitions of lead management products from Cook Medical, BioLife Delaware, L.L.C., and C2 CryoBalloon device from Pentax of America, Inc.

Speaker #3: Note, unless otherwise stated, all growth rates are approximated and presented on both year-over-year and constant currency basis. Fourth quarter total revenue growth of 10% was driven primarily by 9% growth in our cardiovascular segment and, to a lesser extent, by 15% growth in our endoscopy segment.

Speaker #3: Cardiovascular segment sales exceeded the high end of the expectations we outlined on our third quarter call, and endoscopy sales came in at the midpoint of our expectations.

Raul Parra: Cardiovascular segment sales exceeded the high end of the expectations we outlined on our Q3 call, endoscopy sales came in at the midpoint of our expectations. Q4 total revenue results included approximately $10.8 million of inorganic revenue from our acquisitions of lead management products from Cook Medical, BioLife Delaware, L.L.C., and C2 CryoBalloon device from Pentax of America, Inc.

Speaker #3: Q4 total revenue results included approximately $10.8 million of inorganic revenue from our acquisitions of lead management products from Cook Medical, Biolife Delaware LLC, and the C2 Cryoballoon device from Pentax of America.

Raul Parra: Excluding sales of acquired products, our total revenue growth on an organic constant currency basis was 6.6%, slightly better than the high end of our expectations in the Q4. Turning to a review of our Q4 revenue results by product category, cardiac intervention product sales increased 21%, representing the largest driver of cardiovascular segment growth in the period. CI sales increased 12%, excluding the contributions from the sale of acquired products. This performance was well above the high-end organic growth expectations we assumed for Q4. Organic growth in our CI business was driven primarily by strong sales in our EP, CRM, angiography, and access products, which together represented more than 60% of our total CI organic growth year-over-year. Demand for our PreludeSNAP in our Ventrax Delivery System were the largest contributors to EP CRM organic growth in Q4.

Speaker #3: Excluding sales of acquired products, our total revenue growth on an organic constant currency basis was 6.6%. Slightly better than the high end of our expectations in the fourth quarter.

Speaker #3: Turning to a review of our fourth quarter revenue results by product category, cardiac intervention product sales increased 21%, representing the largest driver of cardiovascular segment growth in the period.

Speaker #3: CI sales increased 12%, excluding the contributions from the sale of acquired products. This performance was well above the high-end organic growth expectations we assumed for Q4.

Raul Parra: This performance was well above the high-end organic growth expectations we assumed for Q4. Organic growth in our CI business was driven primarily by strong sales in our EP, CRM, angiography, and access products, which together represented more than 60% of our total CI organic growth year-over-year. Demand for our PreludeSNAP in our Ventrax Delivery System were the largest contributors to EP CRM organic growth in Q4.

Speaker #3: Organic growth in our CI business was driven primarily by strong sales in our EP, CRM, and geography and access products, which together represented more than 60% of our total CI organic growth year over year.

Speaker #3: Demand for our Prelude SNAP in our Ventrax delivery system was the largest contributor to EP, CRM, organic growth in Q4. High-teens growth in sales of wires, Field Iron, geography product sales results, and demand for our Prelude Radial Sheath and our Prelude Wave hydrophilic sheath introducer with SNAP fixed technology were the largest drivers of our access products organic growth in Q4.

Raul Parra: High teens growth in sales of wires fueled our angiography product sales results, and demand for our Prelude radial sheath and our Prelude Wave hydrophilic sheath introducer with SnapFix Technology were the largest drivers of our access products' organic growth in Q4. Peripheral intervention products sales increased 13% and represented the largest driver of organic cardiovascular segment growth in the period. PI sales exceeded the high end of our growth expectations in Q4. Growth in our PI business was driven primarily by strong sales in our radar localization and delivery systems categories, which together increased more than 25% year-over-year, representing 45% of our total PI growth year-over-year.

Speaker #3: Peripheral intervention products sales increased 13% and represented the largest driver of organic cardiovascular segment growth in the period. PI sales exceeded the high end of our growth expectations in Q4.

Raul Parra: PI sales exceeded the high end of our growth expectations in Q4. Growth in our PI business was driven primarily by strong sales in our radar localization and delivery systems categories, which together increased more than 25% year-over-year, representing 45% of our total PI growth year-over-year.

Speaker #3: Growth in our PI business was driven primarily by strong sales in our radar localization and delivery systems categories, which together increased more than 25% year over year.

Speaker #3: Representing 45% of our total PI growth year over year. Importantly, fourth quarter PI growth was driven primarily by broad-based strengths across multiple categories, including embolus therapy, drainage, and geography and access products, which together represent more than half of our total PI business and posted 10% growth in Q4.

Raul Parra: Importantly, Q4 PI growth was driven primarily by broad-based strengths across multiple categories, including embolic therapy, drainage, angiography, and access products, which together represent more than half of our total PI business and posted 10% growth in Q4. Rounding out the Q4 performance across the rest of our cardio segment, sales of our custom procedural solutions products increased 4% above the high end of our expectations, driven primarily by high teens growth in kit sales, offset partially by high single-digit declines in sales of critical care products. CPS growth in Q4 was impacted in part due to the planned divestiture of our DualCap line, which I'll discuss in further detail shortly. Sales of our OEM products decreased 15%, significantly lower than the low single-digit growth assumed in our guidance.

Speaker #3: Rounding out the Q4 performance across the rest of our cardio segment, sales of our custom procedural solutions products increased 4% above the high end of our expectations.

Raul Parra: Rounding out the Q4 performance across the rest of our cardio segment, sales of our custom procedural solutions products increased 4% above the high end of our expectations, driven primarily by high teens growth in kit sales, offset partially by high single-digit declines in sales of critical care products. CPS growth in Q4 was impacted in part due to the planned divestiture of our DualCap line, which I'll discuss in further detail shortly. Sales of our OEM products decreased 15%, significantly lower than the low single-digit growth assumed in our guidance.

Speaker #3: Driven primarily by high teens growth in kit sales offset partially by high single-digit declines in sales of critical care products. CPS growth in Q4 was impacted in part due to the planned divestiture of our dual cap line which I'll discuss in further detail shortly.

Speaker #3: Finally, sales of our OEM products decreased 15%, significantly lower than the low single-digit growth assumed in our guidance. The largest contributor to the softer-than-expected OEM performance in Q4 was sales to OEM customers outside the US.

Raul Parra: The largest contributor to the softer-than-expected OEM performance in Q4 was sales to OEM customers outside the US, which continued to see demand trends impacted by macro environment. Sales to OEM customers in the US decreased in the high single digits year-over-year, compared to low single digit growth we had expected. We attribute the softer-than-expected US OEM performance substantially to customer inventory destocking. While we were disappointed with where OEM sales landed in Q4, our OEM business increased 2% year-over-year on a constant currency basis in 2025. This performance is slightly better than what our original guidance assumed coming into 2025. Our OEM business remains healthy despite the quarter-to-quarter fluctuations in growth rates, and we continue to believe the appropriate normalized growth profile for our OEM business is in the mid to high single digits annually.

Speaker #3: We continued to see demand trends impacted by the macro environment. Sales to OEM customers in the US decreased in the high single digits year over year, compared to low single-digit growth we had expected.

Speaker #3: We attribute the softer-than-expected US OEM performance substantially to customer inventory destocking. While we were disappointed with where OEM sales landed in Q4, our OEM business increased 2% year over year on a constant currency basis in 2025.

Raul Parra: We attribute the softer-than-expected US OEM performance substantially to customer inventory destocking. While we were disappointed with where OEM sales landed in Q4, our OEM business increased 2% year-over-year on a constant currency basis in 2025. This performance is slightly better than what our original guidance assumed coming into 2025. Our OEM business remains healthy despite the quarter-to-quarter fluctuations in growth rates, and we continue to believe the appropriate normalized growth profile for our OEM business is in the mid to high single digits annually.

Speaker #3: This performance is slightly better than what our original guidance assumed coming into 2025. Our OEM business remains healthy despite the quarter-to-quarter fluctuations in growth rates.

Speaker #3: And we continue to believe the appropriate normalized growth profile for our OEM business is in the mid to high single-digits annually. Turning to a brief summary of our sales performance on a geographic basis, our fourth quarter sales in the US increased 12% year over year and 8% on an organic constant currency basis.

Raul Parra: Turning to a brief summary of our sales performance on a geographic basis. Our Q4 sales in the US increased 12% year-over-year, and 8% on an organic constant currency basis. International sales increased 6% year-over-year, and 4% on an organic constant currency basis. Q4 US and international sales results were both at the high end of our organic growth expectations. Turning to 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 Q4 2025. All growth rates are approximated and presented on a year-over-year basis. We have included reconciliations from our GAAP reported results to the most directly comparable non-GAAP item in our press release and presentation available on our website. Gross profit increased approximately 13% in Q4.

Speaker #3: International sales increased 6% year over year and 4% on an organic constant currency basis. Q4 US and international sales results were both at the high end of our organic growth expectations.

Raul Parra: Turning to 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 Q4 2025. All growth rates are approximated and presented on a year-over-year basis. We have included reconciliations from our GAAP reported results to the most directly comparable non-GAAP item in our press release and presentation available on our website. Gross profit increased approximately 13% in Q4.

Speaker #3: Turning to a review of our P&L performance for the avoidance of doubt unless otherwise noted, my commentary will focus on the company's non-gap results during the fourth quarter of 2025.

Speaker #3: And all growth rates are approximated and presented on a year-over-year basis. We have included reconciliations from our gap reported results to the most directly comparable non-gap item in our press release and presentation available on our website.

Speaker #3: Gross profit increased approximately 13% in the fourth quarter. Our gross margin was 54.5%, up 103 basis points year over year, and represents the highest quarterly gross margin in the company's history.

Raul Parra: Our gross margin was 54.5%, up 103 basis points year-over-year, and represents the highest quarterly gross margin in the company's history. The year-over-year improvement in gross margin was primarily driven by mix, by product, and by geography, as well as improvements in pricing compared to the prior year period. As expected, tariffs were a material headwind to the year-over-year improvement in gross margin in Q4, representing 112 basis point incremental impact year-over-year. Operating expense increased by 10%. The increase in operating expenses was driven primarily by a 10% increase in SG&A expense and an 8% increase in R&D expense compared to the prior year period. Total operating income in Q4 increased $13 million, or 19% from prior year period to $82.7 million.

Speaker #3: The year-over-year improvement in gross margin was primarily driven by mixed by product and by geography as well as improvements in pricing compared to the prior year period.

Speaker #3: As expected, TESH were a material headwind to the year-over-year improvement in gross margin in Q4, representing a 112 basis point incremental impact year over year.

Raul Parra: Operating expense increased by 10%. The increase in operating expenses was driven primarily by a 10% increase in SG&A expense and an 8% increase in R&D expense compared to the prior year period. Total operating income in Q4 increased $13 million, or 19% from prior year period to $82.7 million.

Speaker #3: Operating expense increased by 10%. The increase in operating expenses was driven primarily by 10% increase in SG&A expense, and an 8% increase in R&D expense, compared to the prior year period.

Speaker #3: Total operating income in the fourth quarter increased 13 million, or 19%, from prior year period to 82.7 million. Our operating margin was 21%, compared to 19.6% in the prior year period.

Raul Parra: Our operating margin was 21%, compared to 19.6% in the prior year period, an increase of 138 basis points year-over-year. Q4 other expense net was $1.3 million, compared to $1.1 million for the comparable period last year. The change in other expense net was driven primarily by lower interest income associated with lower average cash balances, offset partially by lower interest expense compared to the prior year period. Q4 net income was $62.5 million, or $1.04 per share, compared to $56.3 million, or $0.93 per share in the prior period. Q4 net income and EPS exceeded the high end of our guidance range by $1.8 million and $0.03, respectively.

Speaker #3: An increase of 138 basis points year over year. Fourth quarter other expense net was 1.3 million, compared to 1.1 million for the comparable period last year.

Speaker #3: The change in other expense net was driven primarily by lower interest income associated with lower average cash balances, offset partially by lower interest expense compared to the prior year period.

Raul Parra: Q4 net income was $62.5 million, or $1.04 per share, compared to $56.3 million, or $0.93 per share in the prior period. Q4 net income and EPS exceeded the high end of our guidance range by $1.8 million and $0.03, respectively. We generated $74 million of free cash flow in Q4 2025, up 13% year-over-year. For the full year 2025 period, we delivered constant currency revenue growth of 11%, driven primarily by 7% organic growth and contributions from acquisitions of $62 million.

Speaker #3: Fourth quarter net income was 62.5 million, or $1.04 per share, compared to 56.3 million, or 93 cents per share. In the prior year period, fourth quarter net income and EPS exceeded the high end of our guidance range by 1.8 million and 3 cents, respectively.

Speaker #3: We generated 74 million of free cash flow in the fourth quarter of 2025, up 13% year over year. For the full year of 2025 period, we delivered constant currency revenue growth of 11%, driven primarily by 7% organic growth and contributions from acquisitions of 62 million.

Raul Parra: We generated $74 million of free cash flow in Q4 2025, up 13% year-over-year. For the full year 2025 period, we delivered constant currency revenue growth of 11%, driven primarily by 7% organic growth and contributions from acquisitions of $62 million. We delivered non-GAAP operating profit growth of 19% year-over-year, and non-GAAP net income and EPS growth of 13% and 11%, respectively, year-over-year. We generated nearly $216 million of free cash flow in 2025, up 16% year-over-year, and well ahead of our guidance, which called for free cash flow generation of more than $150 million for the year.

Speaker #3: We delivered non-gap operating profit growth of 19% year over year and non-gap net income and EPS growth of 13% and 11%, respectively, year over year.

Raul Parra: We delivered non-GAAP operating profit growth of 19% year-over-year, and non-GAAP net income and EPS growth of 13% and 11%, respectively, year-over-year. We generated nearly $216 million of free cash flow in 2025, up 16% year-over-year, and well ahead of our guidance, which called for free cash flow generation of more than $150 million for the year.

Speaker #3: We generated nearly $216 million of free cash flow in 2025, up 16% year over year, and well ahead of our guidance, which called for free cash flow generation of more than $150 million for the year.

Speaker #3: This strong free cash flow performance was driven primarily by the year-over-year increase in non-gap net income, along with improving use of cash for working capital, notably we delivered this free cash flow performance while continuing to invest in capital expenditures, both maintenance capex and growth-related capex.

Raul Parra: This strong free cash flow performance was driven primarily by the year-over-year increase in non-GAAP net income, along with improving use of cash for working capital. Notably, we delivered this free cash flow performance while continuing to invest in capital expenditures, both maintenance CapEx and growth-related CapEx. Specifically, $30 million invested in our new distribution center in Utah. Turning to a review of our balance sheet and financial condition.

Speaker #3: Specifically, $30 million invested in our new distribution center in Utah. Turning to a review of our balance sheet and financial condition, as of December 31st, 2025, we had cash and cash equivalents of $446.4 million, total debt obligations of $747.5 million, and available borrowing capacity of approximately $697 million.

Raul Parra: As of 31 December 2025, we had cash and cash equivalents of $446.4 million, total debt obligations of $747.5 million, and available borrowing capacity of approximately $697 million, compared to cash and cash equivalents of $376.7 million, total debt obligations of $747.5 million, and available borrowing capacity of approximately $697 million as of 31 December 2024. Our net leverage ratio as of 31 December was 1.6x on an adjusted basis. Turning to a review of our fiscal year 2026 financial guidance, which we introduced in today's press release.

Speaker #3: Compared to cash and cash equivalents of $376.7 million, total debt obligations of $747.5 million, and available borrowing capacity of approximately $697 million, as of December 31st, 2024.

Speaker #3: Our net leverage ratio as of December 31st was 1.6 times on an adjusted basis. Turning to a review of our fiscal year 2026 financial guidance, which we introduced in today's press release.

Speaker #3: Our 2026 guidance assumes the following: total GAAP net revenue growth in a range of 6% to 8% year over year, and 5% to 7% year over year on a constant currency basis.

Raul Parra: Our 2026 guidance assumes the following: Total GAAP net revenue growth in the range of 6% to 8% year-over-year, and 5% to 7% year-over-year on a constant currency basis, excluding an expected 80 basis point tailwind to GAAP growth from changes in foreign currency exchange rates. Among other factors to consider when evaluating our projected constant currency revenue growth range for 2026 are the following items: First, our total constant currency range of 5% to 7% assumes 6% to 7% growth in the US and 5% to 6% growth outside the US. Second, our total net revenue guidance for fiscal year 2026 assumes inorganic revenue contributions from the BioLife and C2 acquisitions in the range of $13 to $15 million in 2026.

Speaker #3: Basis. Excluding an expected 80 basis point tailwind to gap growth from changes in foreign currency exchange rates. Among other factors to consider when evaluating a projected constant currency revenue growth range for 2026 are the following items: first, our total constant currency range of 5 to 7 percent assumes 6 to 7 percent growth in the US and 5 to 6 percent growth outside the US.

Raul Parra: First, our total constant currency range of 5% to 7% assumes 6% to 7% growth in the US and 5% to 6% growth outside the US. Second, our total net revenue guidance for fiscal year 2026 assumes inorganic revenue contributions from the BioLife and C2 acquisitions in the range of $13 to $15 million in 2026.

Speaker #3: Second, our total net revenue guidance for fiscal year 2026 assumes inorganic revenue contributions from the Biolife and C2 acquisitions in the range of 13 to 15 million in 2026.

Raul Parra: Excluding this inorganic revenue, our 2026 guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately 4.5% to 6% year-over-year. Third, our total net revenue guidance for fiscal year 2026 assumes a US revenue from the sales of Rhapsody CIE of approximately $7 million, compared to $3 million in fiscal year 2025. Fourth, our total net revenue guidance for fiscal year 2026 reflects the decision to divest our DualCap product line. We sold the DualCap product line for $28 million, effective 17 February. The DualCap product line was part of our critical care offering, reported in our customer and procedural solutions revenue category.

Speaker #3: Excluding this inorganic revenue, our 2026 guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately 4.5% to 6% year over year.

Speaker #3: Third, our total net revenue guidance for fiscal year 2026 assumes the US revenue from the sales of Rapsody's CIE of approximately 7 million, compared to 3 million in fiscal year 2025.

Raul Parra: Fourth, our total net revenue guidance for fiscal year 2026 reflects the decision to divest our DualCap product line. We sold the DualCap product line for $28 million, effective 17 February. The DualCap product line was part of our critical care offering, reported in our customer and procedural solutions revenue category.

Speaker #3: Fourth, our total net revenue guidance for fiscal year 2026 reflects the decision to divest our DualCap product line. We sold the DualCap product line for $28 million, effective February 17th.

Speaker #3: The dual-cap product line was part of our Critical Care offering. Reported in our Customer Procedural Solutions revenue category, product sales and royalty revenue for dual-cap total approximately $20 million in 2025, and represent an estimated year-over-year headwind of approximately 140 basis points to our total constant currency revenue growth in 2026.

Raul Parra: Product sales and royalty revenue for DualCap total approximately $20 million in 2025, and represent an estimated year-over-year headwind of approximately 140 basis points to our total constant currency revenue growth in 2026. These products are non-core to our business, and we believe the divestiture will create additional manufacturing capacity and free up sales and marketing resource to invest in higher margin, higher growth products. With respect to profitability guidance for 2026, we expect non-GAAP diluted earnings per share in the range of $4.01 to 4.15, up 5% to 8% year-over-year.

Speaker #3: These products are non-core to our business, and we believe that divestiture will create additional manufacturing capacity and free up sales and marketing resources to invest in higher-margin, higher-growth products.

Speaker #3: With respect to profitability guidance for 2026, we expect non-gap diluted earnings per share in the range of $4.01 to $4.15, up 5 to 8 percent year over year.

Speaker #3: Our 2026 non-gap diluted EPS growth is expected to be driven primarily by solid constant currency growth and non-gap operating margin expansion in the range of $36 to $76 basis points year over year, offset partially by the projected incremental impact of tariffs, trade policies, and related actions implemented by the US and other countries of approximately 7 cents and the estimated incremental dilution from our convertible debt facility of approximately 1 cent.

Raul Parra: Our 2026 non-GAAP diluted EPS growth is expected to be driven primarily by solid constant currency growth and non-GAAP operating margin expansion in the range of 36 to 76 basis points year-over-year, offset partially by the projected incremental impact of tariffs, trade policies, and related actions implemented by the US and other countries of approximately $0.07, and the estimated incremental dilution from our convertible debt facility of approximately $0.01. For avoidance of doubt, our 2026 non-GAAP EPS guidance assumes a 12-month tariff impact of approximately $15 million or $0.19 per share, compared to $9 million or $0.12 per share, realized during the last 8 months of 2025.

Speaker #3: For avoidance of doubt, our 2026 non-gap EPS guidance assumes a 12-month tariff impact of approximately $15 million, or 19 cents per share, compared to 9 million, or 12 cents per share, realized during the last eight months of 2025.

Raul Parra: For avoidance of doubt, our 2026 non-GAAP EPS guidance assumes a 12-month tariff impact of approximately $15 million or $0.19 per share, compared to $9 million or $0.12 per share, realized during the last 8 months of 2025. The expected 12-month tariff impact, assumed in our 2026 non-GAAP EPS range, is based on tariff policies in place prior to the recent decision of the U.S. Supreme Court on 20 February, and does not include any impact from new and/or additional tariffs or retaliatory actions, or changes to tariff policy, which could change the anticipated impact to our non-GAAP EPS in 2026.

Speaker #3: The expected 12-month tariff impact assumed in our 2026 non-GAAP EPS range is based on tariff policies in place prior to the recent decision of the U.S. Supreme Court on February 20th and does not include any impact from new and/or additional tariffs, retaliatory actions, or changes to tariff policy, which could change the anticipated impact to our non-GAAP EPS in 2026.

Raul Parra: The expected 12-month tariff impact, assumed in our 2026 non-GAAP EPS range, is based on tariff policies in place prior to the recent decision of the U.S. Supreme Court on 20 February, and does not include any impact from new and/or additional tariffs or retaliatory actions, or changes to tariff policy, which could change the anticipated impact to our non-GAAP EPS in 2026. The ultimate impact of the U.S. Supreme Court decision and subsequent new and/or additional tariffs or retaliatory actions, or changes to tariffs on our business, will depend on the timing, amount, scope, and nature of such tariffs, among other factors, most of which are currently unknown. For modeling purposes, our fiscal year 2026 financial guidance assumes non-GAAP operating margins in the range of approximately 20.6% to 21%, compared to 20.3% in 2025.

Raul Parra: The ultimate impact of the U.S. Supreme Court decision and subsequent new and/or additional tariffs or retaliatory actions, or changes to tariffs on our business, will depend on the timing, amount, scope, and nature of such tariffs, among other factors, most of which are currently unknown. For modeling purposes, our fiscal year 2026 financial guidance assumes non-GAAP operating margins in the range of approximately 20.6% to 21%, compared to 20.3% in 2025.

Speaker #3: The ultimate impact of the US Supreme Court decision and subsequent new and/or additional tariffs or retaliatory actions or changes to tariffs on our business will depend on the timing, amount, scope, and nature of such tariffs.

Speaker #3: Among other factors, most of which are currently unknown. For modeling purposes, our fiscal year 2026 financial guidance assumes non-GAAP operating margins in the range of approximately 20.6 percent to 21 percent, compared to 20.3 percent in 2025.

Speaker #3: Non-gap interest in other expense net of approximately 8 million, compared to 7.7 million in 2025. Non-gap tax rate of approximately 23 percent, and diluted shares outstanding of approximately 62.2 million.

Raul Parra: Non-GAAP interest and other expense net of approximately $8 million, compared to $7.7 million in 2025. Non-GAAP tax rate of approximately 23%, and diluted shares outstanding of approximately 62.2 million. Note: Our weighted average share count assumes an incremental dilution of approximately 500,000 shares related to our convertible debt facility. This represents an approximate impact of $0.04 to our non-GAAP EPS in 2026, compared to a $0.03 impact in 2025. Finally, we expect to generate free cash flow of at least $200 million in 2026, inclusive of the expectation that we will invest approximately $90 million in capital expenditures this year. We would also like to provide additional transparency related to our growth and profitability expectations for Q1 2026.

Speaker #3: Note: our weighted average share count assumes an incremental dilution of approximately 500,000 shares related to our convertible debt facility. This represents an approximate impact of 4 cents to our non-gap EPS in 2026, compared to a 3-cent impact in 2025.

Raul Parra: This represents an approximate impact of $0.04 to our non-GAAP EPS in 2026, compared to a $0.03 impact in 2025. Finally, we expect to generate free cash flow of at least $200 million in 2026, inclusive of the expectation that we will invest approximately $90 million in capital expenditures this year. We would also like to provide additional transparency related to our growth and profitability expectations for Q1 2026.

Speaker #3: Finally, we expect to generate free cash flow of at least $200 million in 2026, inclusive of the expectations that we will invest approximately $90 million in capital expenditures this year.

Speaker #3: We would also like to provide additional transparency related to our growth and profitability expectations for the first quarter of 2026. Specifically, we expect our total revenue in the range of $375 to $380 million, for the first quarter representing growth of 6 to 7 percent year over year on a gap basis, and approximately 3 to 5 percent on a constant currency basis.

Raul Parra: Specifically, we expect our total revenue in the range of $375 to $380 million for Q1, representing growth of 6% to 7% year-over-year on a GAAP basis, and approximately 3% to 5% on a constant currency basis. The midpoint of our fiscal quarter constant currency sales growth expectations assumes US sales increase 6% and international sales increase 2% year-over-year. Our Q1 constant currency sales growth expectations include inorganic revenue in the range of approximately $6 to $7 million. Excluding inorganic contributions, our Q1 total revenue is expected to increase in the range of approximately 2% to 3% on an organic constant currency basis.

Speaker #3: The midpoint of our fiscal quarter constant currency sales growth expectations assumes US sales increase 6 percent and international sales increase 2 percent year over year.

Raul Parra: Our Q1 constant currency sales growth expectations include inorganic revenue in the range of approximately $6 to $7 million. Excluding inorganic contributions, our Q1 total revenue is expected to increase in the range of approximately 2% to 3% on an organic constant currency basis.

Speaker #3: Note: our first quarter constant currency sales growth expectations include inorganic revenue in the range of approximately 6 to 7 million. Excluding inorganic contributions, our first quarter total revenue is expected to increase in the range of approximately 2 to 3 percent on an organic constant currency basis.

Speaker #3: With respect to our profitability expectations for the first quarter of 2026, we expect non-GAAP operating margins in the range of approximately 16.7 percent to 18.5 percent, compared to 19.3 percent last year, and non-GAAP EPS in the range of $0.77 to $0.87, compared to $0.86 last year.

Raul Parra: With respect to our profitability expectations for Q1 2026, we expect non-GAAP operating margins in a range of approximately 16.7% to 18.5%, compared to 19.3% last year, and non-GAAP EPS in the range of $0.77 to 0.87, compared to $0.86 last year. I'll now turn the call back to Martha for closing remarks. Martha?

Speaker #3: I'll now turn the call back to Martha for closing remarks. Martha?

Speaker #1: Thanks, Raul. On our third quarter earnings call, I provided a summary of the areas of focus since taking over as CEO on October 3rd, 2025, as well as where I intended to spend my time over the balance of my "first 100 days." So I thought it would be helpful to provide an update on my progress since that call.

Martha Aronson: Thanks, Raul. On our Q3 earnings call, I provided a summary of the areas of focus since taking over as CEO on 3 October 2025, as well as where I intended to spend my time over the balance of my, quote, "first 100 days." I thought it would be helpful to provide an update on my progress since that call. As discussed, my listening tour has been a top priority for me during my first 4 months on the job, and I expect it to continue for several more. I have now visited the majority of our global sites and have enjoyed meeting the teams at these various locations, touring manufacturing facilities, spending time with our global R&D team, reviewing the business with local management, and holding town halls at each location.

Speaker #1: As discussed, my listening tour has been a top priority for me during my first four months on the job, and I expect it to continue for several more.

Speaker #1: I have now visited the majority of our global sites, and have enjoyed meeting the teams at these various locations, touring manufacturing facilities, spending time with our global R&D team, reviewing the business with local management, and holding town halls at each location.

Martha Aronson: I have now visited the majority of our global sites and have enjoyed meeting the teams at these various locations, touring manufacturing facilities, spending time with our global R&D team, reviewing the business with local management, and holding town halls at each location.

Speaker #1: I've particularly enjoyed meeting with Merit employees around the world, and have been inspired by their enthusiasm and commitment to Merit's mission. To understand, to innovate, and to deliver.

Martha Aronson: I've particularly enjoyed meeting with Merit employees around the world, and have been inspired by their enthusiasm and commitment to Merit's mission: to understand, to innovate, and to deliver. A few weeks ago, I had the opportunity to meet many of the rest of the members of our global commercial team, as Merit's first-ever global sales meeting was held here in Salt Lake City. Many of our colleagues were able to tour our fantastic facility and meet the operators who work so hard to produce our high-quality products. Throughout the week, as I engaged with this team, my belief in the Merit way that guides our entire organization was enhanced even further. I've spent considerable time learning about our products and understanding our processes, and I remain quite optimistic about our future based on all that I've learned in recent months.

Speaker #1: And a few weeks ago, I had the opportunity to meet many of the rest of the members of our global commercial team, as Merit's first-ever global sales meeting was held here in Salt Lake City.

Speaker #1: Many of our colleagues were able to tour our fantastic facility, and meet the operators who work so hard to produce our high-quality products. Throughout the week, as I engaged with this team, my belief in the Merit way that guides our entire organization was enhanced even further.

Martha Aronson: Many of our colleagues were able to tour our fantastic facility and meet the operators who work so hard to produce our high-quality products. Throughout the week, as I engaged with this team, my belief in the Merit way that guides our entire organization was enhanced even further. I've spent considerable time learning about our products and understanding our processes, and I remain quite optimistic about our future based on all that I've learned in recent months.

Speaker #1: I've spent considerable time learning about our products and understanding our processes, and I remain quite optimistic about our future based on all that I've learned in recent months.

Speaker #1: My listening tour has provided me with valuable feedback from across the Merit organization. I've also had the opportunity to solicit feedback from constituents outside our organization, I've attended several key medical meetings, as well as one of our physician advisory board meetings.

Martha Aronson: My listening tour has provided me with valuable feedback from across the Merit organization. I've also had the opportunity to solicit feedback from constituents outside our organization. I've attended several key medical meetings, as well as one of our physician advisory board meetings. I've also had the opportunity to engage with the investment community, and I've spent more time with our board of directors. All of these activities are centered around gathering as much feedback as possible and learning as much as I can. A tall task, to be sure, but one that I remain extremely excited about. While the majority of my time as CEO has been filled with listening and learning, I have made several changes, which I believe will enhance the company's foundation for success going forward. Upon arrival in October, I established a new executive leadership team, as well as a global operating committee.

Speaker #1: I've also had the opportunity to engage with the investment community, and I've spent more time with our board of directors. All of these activities are centered around gathering as much feedback as possible and learning as much as I can.

Martha Aronson: All of these activities are centered around gathering as much feedback as possible and learning as much as I can. A tall task, to be sure, but one that I remain extremely excited about. While the majority of my time as CEO has been filled with listening and learning, I have made several changes, which I believe will enhance the company's foundation for success going forward. Upon arrival in October, I established a new executive leadership team, as well as a global operating committee.

Speaker #1: A tall task to be sure, but one that I remain extremely excited about. While the majority of my time as CEO has been filled with listening and learning, I have made several changes which I believe will enhance the company's foundation for success going forward.

Speaker #1: Upon arrival in October, I established a new executive leadership team as well as a global operating committee. As discussed on our last earnings call, Merit is transitioning from a founder-led to a founder-inspired organization.

Martha Aronson: As discussed on our last earnings call, Merit is transitioning from a founder-led to a founder-inspired organization. I'm impressed with how our leaders across the globe are working more closely together across geographies and across functions. Next, we've solidified our platform structure by pairing up leaders from R&D with marketing, and then surrounding them with the critical functions to develop a cohesive global business strategy and product pipeline roadmap. I just completed our first round of reviews of these platforms, and I'm excited about the progress of these teams. As the new executive leadership team and I have been analyzing the business, it became clear that we had an opportunity to streamline our internal planning and reporting processes with the goal of aligning how we think about, evaluate, and plan each of our underlying businesses.

Speaker #1: I'm impressed with how our leaders across the globe are working more closely together across geographies and across functions. Next, we've solidified our platform structure by pairing up leaders from R&D with marketing, and then surrounding them with the critical functions to develop a cohesive global business strategy and product pipeline roadmap.

Speaker #1: I just completed our first round of reviews of these platforms and am excited about the progress of these teams. As the new executive leadership team and I have been analyzing the business, it became clear that we had an opportunity to streamline our internal planning and reporting processes with the goal of aligning how we think about, evaluate, and plan each of our underlying businesses.

Martha Aronson: I just completed our first round of reviews of these platforms, and I'm excited about the progress of these teams. As the new executive leadership team and I have been analyzing the business, it became clear that we had an opportunity to streamline our internal planning and reporting processes with the goal of aligning how we think about, evaluate, and plan each of our underlying businesses.

Speaker #1: Pursuant to this internal transition, we intend to streamline how we talk about the business externally as well. We believe this will allow us to not only align how we talk about the business both internally and externally, but will also help the investment community and our shareholders better understand the underlying growth drivers of our business today and going forward.

Martha Aronson: Pursuant to this internal transition, we intend to streamline how we talk about the business externally as well. We believe this will allow us to not only align how we talk about the business, both internally and externally, but will also help the investment community and our shareholders better understand the underlying growth drivers of our business today and going forward. As I have dug into the business, I've developed even more appreciation for what Fred and the team have built since they developed Merit's first syringe to inject dye for angiography in 1987. Merit has grown to a $1.5 billion revenue company as of 2025. This revenue is globally diversified, with roughly 40% of our revenue coming from customers outside the United States.

Speaker #1: As I have dug into the business, I've developed even more appreciation for what Fred and the team have built since they developed Merit's first syringe to inject dye for angiography in 1987.

Martha Aronson: As I have dug into the business, I've developed even more appreciation for what Fred and the team have built since they developed Merit's first syringe to inject dye for angiography in 1987. Merit has grown to a $1.5 billion revenue company as of 2025. This revenue is globally diversified, with roughly 40% of our revenue coming from customers outside the United States.

Speaker #1: Merit has grown to a 1.5 billion revenue company as of 2025, and this revenue is globally diversified with roughly 40% of our revenue coming from customers outside the United States.

Speaker #1: Today, we report our revenue in two segments: cardiovascular and endoscopy. And within each segment, we sell a large number of products that address multiple markets, procedure categories, sites of care, and physician customers all around the world.

Martha Aronson: Today, we report our revenue in two segments, cardiovascular and endoscopy. Within each segment, we sell a large number of products that address multiple markets, procedure categories, sites of care, and physician customers all around the world. As I learned about the business and have engaged with various stakeholders on my listening tour, the same question keeps popping up: What drives growth in this business? Well, the simple answer is that Merit is really fortunate in that we have a very broad portfolio of products that contribute to our strong track record of growth, as seen by a 10% revenue CAGR over the last three years. This 10% CAGR has been driven by our portfolio of products that fall into two primary groups.

Speaker #1: As I learned about the business and have engaged with various stakeholders on my listening tour, the same question keeps popping up. What drives growth in this business?

Martha Aronson: Well, the simple answer is that Merit is really fortunate in that we have a very broad portfolio of products that contribute to our strong track record of growth, as seen by a 10% revenue CAGR over the last three years. This 10% CAGR has been driven by our portfolio of products that fall into two primary groups.

Speaker #1: Well, the simple answer is that Merit is really fortunate in that we have a very broad portfolio of products that contribute to our strong track record of growth, as seen by a 10% revenue CAGR over the last three years.

Speaker #1: This 10% CAGR has been driven by our portfolio products that fall into two primary groups. The first group is what we call foundational products.

Martha Aronson: The first group is what we call foundational products, which are the products that are used primarily for access or enabling in vascular and other procedures. Merit's foundational products comprise about two-thirds of our total revenue and had a 6% compound annual growth rate over the last 3 years. The second group is what we call our therapeutic products, which are devices and systems that treat disease in a number of very large markets that together represent significant growth potential. Merit's therapeutic products comprise about one-third of our total revenue and had a 19% compound annual growth rate over the last 3 years. On an organic basis, they had an 11% CAGR over that time period. We'll be talking more about each of these product groups going forward, but in the interim, it's important to appreciate 2 key themes.

Speaker #1: Which are the products that are used primarily for access or enabling in vascular and other procedures. Merit's foundational products comprise about two-thirds of our total revenue, and had a 6% compound annual growth rate over the last three years.

Speaker #1: The second group is what we call our therapeutic products, which are devices and systems that treat disease in a number of very large markets that together represent significant growth potential.

Martha Aronson: Merit's therapeutic products comprise about one-third of our total revenue and had a 19% compound annual growth rate over the last 3 years. On an organic basis, they had an 11% CAGR over that time period. We'll be talking more about each of these product groups going forward, but in the interim, it's important to appreciate 2 key themes.

Speaker #1: Merit's therapeutic products comprise about one-third of our total revenue, and had a 19% compound annual growth rate over the last three years. On an organic basis, they had an 11% CAGR over that time period.

Speaker #1: We will be talking more about each of these product groups going forward, but in the interim, it's important to appreciate two key themes. First, that we have several platforms where we combine both foundational products and therapeutic products, making Merit a full-line supplier to several of our customer groups.

Martha Aronson: First, that we have several platforms where we combine both foundational products and therapeutic products, making Merit a full line supplier to several of our customer groups. Second, the track record of growth Merit has delivered has been fueled by the powerful combination of strong internally developed product innovation and strategic M&A to enhance our competitive position in key markets. With respect to internally developed product innovation, I think it's important to understand that Merit has a track record of consistent development and introduction of new products that represent important contributors to our growth each year. As an example, approximately 10% of the 2025 revenue growth in our two largest product categories, cardiac intervention and peripheral intervention, came from new products introduced in 2025. As I referenced earlier, as we move into 2026, we remain laser-focused on achieving our continued growth initiative commitments.

Speaker #1: And second, the track record of growth Merit has delivered has been fueled by the powerful combination of strong, internally developed product innovation and strategic M&A to enhance our competitive position in key markets.

Martha Aronson: With respect to internally developed product innovation, I think it's important to understand that Merit has a track record of consistent development and introduction of new products that represent important contributors to our growth each year. As an example, approximately 10% of the 2025 revenue growth in our two largest product categories, cardiac intervention and peripheral intervention, came from new products introduced in 2025. As I referenced earlier, as we move into 2026, we remain laser-focused on achieving our continued growth initiative commitments.

Speaker #1: With respect to internally developed product innovation, I think it's important to understand that Merit has a track record of consistent development and introduction of new products that represent important contributors to our growth each year.

Speaker #1: As an example, approximately 10% of the 2025 revenue growth in our two largest product categories: cardiac intervention and peripheral intervention, came from new products introduced in 2025.

Speaker #1: As I referenced earlier, as we move into 2026, we remain laser-focused on achieving our continued growth initiative commitments specifically for the three-year period ending December 31, 2026, we are targeting an organic, constant currency revenue CAGR of 5% to 7%.

Martha Aronson: Specifically, for the three-year period ending 31 December 2026, we are targeting an organic constant currency revenue CAGR of 5% to 7%, a non-GAAP operating margin in the range of 20% to 22%, and cumulative free cash flow generation of more than $400 million. As our 2026 financial guidance indicates, we believe we are tracking nicely towards these CGI financial targets. During 2026, we will spend time developing our strategy for the period of 2027 through 2030. We will build this out based on the framework of key platforms, where we offer our foundational and therapeutic products. We will prioritize our research and development efforts through the lens of our customers.

Speaker #1: A non-gap operating margin in the range of 20% to 22%, and cumulative free cash flow generation of more than $400 million. As our 2026 financial guidance indicates, we believe we are tracking nicely towards these CGI financial targets.

Speaker #1: During 2026, we will spend time developing our strategy for the period of 2027 through 2030. We will build this out based on the framework of key platforms where we offer our foundational and therapeutic products.

Martha Aronson: During 2026, we will spend time developing our strategy for the period of 2027 through 2030. We will build this out based on the framework of key platforms, where we offer our foundational and therapeutic products. We will prioritize our research and development efforts through the lens of our customers.

Speaker #1: We will prioritize our research and development efforts through the lens of our customers. We will actively engage in potential M&A transactions in a very disciplined manner, while structuring our product portfolio to not only align with our financial goals, but also support our commitment to providing patients with life-saving solutions that positively contribute to the healthcare communities we serve all around the world.

Martha Aronson: We will actively engage in potential M&A transactions in a very disciplined manner, while structuring our product portfolio to not only align with our financial goals, but also support our commitment to providing patients with life-saving solutions that positively contribute to the healthcare communities we serve all around the world. We are looking critically at all parts of the business, and where it makes strategic sense, we will take steps to optimize our offering, like we did with the divestiture of the DualCap product line earlier this month. We will also work to ensure that our infrastructure remains solid, while continuing to identify opportunities to enhance our operational efficiency and productivity. We believe the successful execution of our strategy will enable us to profitably scale the business around the world and drive compelling shareholder returns, while we help patients in the years to come.

Speaker #1: We are looking critically at all parts of the business and where it makes strategic sense we will take steps to optimize our offering, like we did with the divestiture, the dual-cap product line earlier this month.

Speaker #1: We will also work to ensure that our infrastructure remains solid, while continuing to identify opportunities to enhance our operational efficiency and productivity. We believe the successful execution of our strategy will enable us to profitably scale the business around the world and drive compelling shareholder returns, while we help patients.

Martha Aronson: We will also work to ensure that our infrastructure remains solid, while continuing to identify opportunities to enhance our operational efficiency and productivity. We believe the successful execution of our strategy will enable us to profitably scale the business around the world and drive compelling shareholder returns, while we help patients in the years to come.

Speaker #1: In the years to come, I want to conclude my prepared remarks by again thanking our teammates all around the world. I'm honored to be part of Merit Medical, and I'm excited to work on continuing to help so many patients around the world with our products and therapies.

Martha Aronson: I want to conclude my prepared remarks by again thanking our teammates all around the world. I'm honored to be part of Merit Medical, and I'm excited to work on continuing to help so many patients around the world with our products and therapies. Operator, we would now like to open up the line for questions.

Speaker #1: Operator, we would now like to open up the line for questions.

Speaker #2: Thank you. If you would like to ask a question, please signal by pressing star 11 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment.

Operator: Thank you. If you would like to ask a question, please signal by pressing star 11 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you please limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself again to the queue by pressing star 11. One moment for our first question. Our first question comes from the line of Jason Bednar from Piper Sandler.

Speaker #2: We do ask that you please limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself again to the queue by pressing star 11.

Speaker #2: One moment for our first question. Our first question comes from the line of Jason Bedner from Piper Sandler.

Jason Bednar: Hey, afternoon, everyone. Thanks for taking the questions, and congrats on another good quarter here. Just to start, I'm probably going to sound like a broken record, but the gross margin progress has just been really impressive here. It's almost unheard of to have the kind of improvement you've seen. I think it's expanded, like, 400 basis points here in a 2-year period. You've done it in spite of tariffs. I know you'll tell us not to extrapolate, so maybe I'll just ask the question, where additional gross margin drivers exist for the company at this point? Are there core opportunities, or does it need to come through actions like more M&A or, you know, more in, like, the therapeutic M&A or divestitures, like what we're seeing with DualCap?

Speaker #3: Hey. Afternoon, everyone. Thanks for taking the questions and congrats on another good quarter here. Just to start, I'm probably going to sound like a broken record, but the gross margin progress has just been really impressive here.

Speaker #3: It's almost unheard of to have the kind of improvement you've seen. I think it's expanded like 400 basis points here in a two-year period.

Speaker #3: You've done it in spite of tariffs. I know you'll tell us not to extrapolate. So maybe I'll just ask the question, where additional gross margin drivers exist for the company at this point?

Jason Bednar: You've done it in spite of tariffs. I know you'll tell us not to extrapolate, so maybe I'll just ask the question, where additional gross margin drivers exist for the company at this point? Are there core opportunities, or does it need to come through actions like more M&A or, you know, more in, like, the therapeutic M&A or divestitures, like what we're seeing with DualCap?

Speaker #3: Are there core opportunities, or does it need to come through actions like more M&A, or more in the therapeutic M&A? Or divestitures, like what we're seeing with DualCap?

Speaker #4: Yeah. Look, I mean, I think it continues to be more of the same, right? And Jason, I'm just going to repeat what you said.

Raul Parra: Yeah, look, I mean, I think it continues to be more of the same, right? Jason, you know, I'm just gonna repeat what you said. I'm gonna sound like a broken record too, right? Look, I think, you know, first of all, just to kind of, you know, to, you know, just gonna congratulate our sales force and our operations group, you know, for what they've done. I think, which is in a really tough environment, and to overcome the tariffs in the way they did, I think, you know, applause to them. Just, you know, it's just impressive to be able to do, you know, what we've done here in the last, you know, few years. Again, just, you know, thank you.

Speaker #4: I'm going to sound like a broken record too, right? Look, I think first of all, just to kind of just going to congratulate our sales force and our operations group for what they've done.

Speaker #4: I think which is in a really tough environment and to overcome the tariffs in the way they did, I think applause to them. Just it's just impressive to be able to do what we've done here in the last few years.

Speaker #4: And again, just thank you. I know they're listening, so I just want to thank them. But it's really just more of the same, right?

Raul Parra: You know, I know they're listening, so I just wanna thank them. It's really just more of the same, right? You know, continue to be focused on mix, whether that's, you know, new R&D projects, you know, or acquisitions, you know, pushing the geography, you know, kind of, you know, areas too. I think you saw the divestiture of DualCap. That was a low-margin product. You know, just making sure that we continue our SKU rationalization process, and just, you know, really throw the kitchen sink at the gross margin. I know you guys are getting sick of hearing that, but that's really what it takes to drive the gross margin in this environment.

Speaker #4: So continue to be focused on mix. Whether that's new R&D projects, or acquisitions, pushing the geography, kind of areas too. I think you saw the divestiture of dual-cap.

Raul Parra: That was a low-margin product. You know, just making sure that we continue our SKU rationalization process, and just, you know, really throw the kitchen sink at the gross margin. I know you guys are getting sick of hearing that, but that's really what it takes to drive the gross margin in this environment.

Speaker #4: That was a low-margin product. Just making sure that we continue our skew rationalization process. And just really throw the kitchen sink at the gross margin.

Speaker #4: And I know you guys are getting sick of hearing that, but that's really what it takes to drive the gross margin in this environment.

Raul Parra: It's focused on pricing, focused on cost discipline, you know, moving things to lower cost areas, mix, you know, our R&D department just focusing on launching the right products at the right price, and our manufacturing department being able to manufacture those at the lowest cost, you know, possible, while keeping our quality where it needs to be. You know, it's just more of the same for us.

Speaker #4: And it's focused on pricing focused on cost discipline, moving things to lower-cost areas, mix, our R&D department just focusing on launching the right products at the right price in our manufacturing department, being able to manufacture those at the lowest cost possible while keeping our quality where it needs to be.

Speaker #4: So it's just more of the same for us.

Speaker #3: Okay. All right. That's helpful. And I'll follow up with one on Rhapsody here. We're a few months into the commercial launch and the outpatient setting.

Jason Bednar: Okay. All right. That's helpful. I'll follow up with one on Rhapsody here. We're a few months into the commercial launch in the outpatient setting. The real genesis of the question is going to be, is the business where you thought of it, what would be... You know, what's going well? What could go better? You know, why is $7 million the right starting point for revenue expectations this year? Really, is that guide a reflection of what you're seeing today? Is it a conservative swipe at the outlook? Just trying to think about how to, you know, think about that guide in the context of what you're seeing real time here with Rhapsody.

Speaker #3: The real genesis of the question is going to be, is the business where you thought of it what would be? So what's going well?

Speaker #3: What could go better? And then why is 7 million the right starting point for revenue expectations this year? And really, is that guide a reflection of what you're seeing today?

Jason Bednar: You know, why is $7 million the right starting point for revenue expectations this year? Really, is that guide a reflection of what you're seeing today? Is it a conservative swipe at the outlook? Just trying to think about how to, you know, think about that guide in the context of what you're seeing real time here with Rhapsody.

Speaker #3: Is it a conservative swipe at the outlook? Just trying to think about how to think about that guide in the context of what you're seeing real-time here with Rhapsody.

Speaker #5: Yeah, Jason, thanks for the question. Let me make a couple of comments, if I could, about Rhapsody. I mean, first, I do think it is fair to say, right, our original 2025 Rhapsody revenue expectations missed the mark.

Martha Aronson: Yeah, Jason, thanks for the question. Let me make a couple comments, if I could, about Rhapsody. I mean, first, I do think it is fair to say, right, our original 2025 Rhapsody revenue expectations missed the mark. That's fair to say. As we really thought about our guidance for 2026, I mean, I think, as you said, you know, we're only about 4 months into our newer strategy for the non-hospital locations. We really tried to take a similar approach as we thought about our guidance for Rhapsody, in a similar way to how we provide guidance for the whole company, right? We have a high level of confidence in hitting this $7 million revenue number.

Speaker #5: That's fair to say. So as we really thought about our guidance for 2026, I mean, I think as you said, we're only about four months into our newer strategy for the non-hospital locations.

Speaker #5: But we really tried to take a similar approach as we thought about our guidance for Rhapsody in a similar way to how we provide guidance for the whole company, right?

Martha Aronson: We really tried to take a similar approach as we thought about our guidance for Rhapsody, in a similar way to how we provide guidance for the whole company, right? We have a high level of confidence in hitting this $7 million revenue number.

Speaker #5: So we have a high level of confidence in hitting this $7 7 million revenue number. I think as you said, what are we seeing out there?

Martha Aronson: You know, I think, as you said, what are we seeing out there? You know, we still feel very strongly that this is a fantastic options for the clinicians who really think about, you know, I wanna treat patients with the best clinical data, and Rhapsody has that, and it's a very high-performing product. We're thrilled with that, and we believe this market does definitely support a third player. I think our team is really energized, and they're working really hard each and every day out there. At the same time, we know we've entered a competitive space, and we know competitors don't stand still when they see an outstanding product come to market. I'd say that's kind of how we're looking at things right now for Rhapsody.

Speaker #5: We still feel very strongly that this is a fantastic option for the clinicians who really think about, "I want to treat patients with the best clinical data and Rhapsody has that." And it's a very high-performing product.

Speaker #5: So we're thrilled with that. And we believe this market does definitely support a third player. And I think our team has really energized. And they're doing they're working really hard each and every day out there.

Martha Aronson: I think our team is really energized, and they're working really hard each and every day out there. At the same time, we know we've entered a competitive space, and we know competitors don't stand still when they see an outstanding product come to market. I'd say that's kind of how we're looking at things right now for Rhapsody.

Speaker #5: At the same time, we know we've entered a competitive space, and we know competitors don't stand still when they see an outstanding product come to market.

Speaker #5: So I'd say that's kind of how we're looking at things right now for Rhapsody.

Speaker #3: All right. Helpful. Thank you.

Raul Parra: All right. Helpful. Thank you.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of Mike Matson from Needham.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Mike Matson from Needham.

[Analyst] (Needham & Company): Hi, Martha Rowe. Thank you very much. This is Joseph on for Mike. Maybe just wanted to dive a little deeper into guidance, I guess maybe just on free cash flow. I understand you have the divestiture, but it looks like 2026 guiding down versus 2025. Is this, you know, more conservatism? You know, does this have to do with more of the divestiture or increased CapEx spend? Just wondering your thinking around the guidance there.

Speaker #6: Hi. Martha Rowe, thank you very much. This is Joseph Han from Mike. Maybe just wanted to dive a little deeper into guidance. I guess maybe just on free cash flow.

Speaker #6: Understand you have the divestiture, but it looks like 2026 guiding down versus 2025. Is this more conservatism? Does this have to do with more of the divestiture or increased CapEx spend?

Speaker #6: Just wondering you're thinking around the guidance there.

Speaker #3: Yeah. No, thank you. Thank you for the question. I'm going to take the time to take a small victory lap, right? I mean, when we launched CGI, as you know, our target was a minimum of $400 million in free cash flow.

Raul Parra: Yeah, no, thank you. Thank you for the question. I'm gonna take the time to take a small victory lap, right? I mean, you know, when we launched CGI, as you know, our target was a minimum of $400 million in free cash flow. You know, we're obviously, you know, ahead of that, so super proud of the team for, you know, for continued focus on that. I will say a couple things: super happy with the performance in Q4. You know, $216 million of free cash flow for the year is just a really impressive number, I think. I think we'll continue to, you know, to focus on free cash flow.

Speaker #3: We're obviously ahead of that, so super proud of the team for continued focus on that. I will say a couple of things—super happy with the performance in Q4.

Speaker #3: $216 million of free cash flow for the year. It's just a really impressive number, I think. So I think we'll continue to focus on free cash flow.

Raul Parra: You know, $200 million, it's a minimum of $200 million. We do have the, you know, the building that's going up across the street, and we've got a couple of things that we want to do. Generally speaking, I think, you know, there is a lot of timing-based, you know, items that happen with free cash flow. It, it is a little bit of a conservative, you know, nature to it, just because I, you know, there are certain timing things that we can't control that are, quite frankly, just hard to predict. I can say that, you know, we always kind of take a minimum approach.

Speaker #3: 200 million, it's a minimum of 200 million. We do have the building that's going up across the street. And we've got a couple of things that we want to do.

Speaker #3: But generally speaking, I think there is a lot of timing-based items that happen with free cash flow. It is a little bit of a conservative nature to it just because there are certain timing things that we can't control, that are quite frankly just hard to predict.

Raul Parra: It, it is a little bit of a conservative, you know, nature to it, just because I, you know, there are certain timing things that we can't control that are, quite frankly, just hard to predict. I can say that, you know, we always kind of take a minimum approach. Our expectation is that we'll hit at least, you know, $200 million in free cash flow, which will set us up really nice for our CGI goals.

Speaker #3: But I can say that we always kind of take a minimum approach. So our expectation is that we'll meet that we'll hit at least 200 million dollars in free cash flow, which will set us up really nice for our CGI goals.

Raul Parra: Our expectation is that we'll hit at least, you know, $200 million in free cash flow, which will set us up really nice for our CGI goals.

Speaker #6: Okay. Of course. Yeah. That makes sense. And 2025, very strong year. Maybe just one on the M&A. Target list. I guess just what are the areas there that merit strategically looking at?

[Analyst] (Needham & Company): Okay. Of course. Yeah, that makes sense. You know, 2025, very strong year. Maybe just one on the M&A target list. I guess just what are the areas there that Merit's strategically looking at? Is this, you know, looking more at innovative technology or therapeutic products that have that higher growth potential? You know, is it more tuck-ins to leverage your, you know, your current growth drivers, maybe Rhapsody? Yeah, maybe just broadly, you know, what areas are you looking at? Is it, you know, EP, dialysis, endoscopy? Any help there would be great. Thank you very much, congrats on the quarter.

Speaker #6: Is this looking more at innovative technology or therapeutic products that have that higher growth potential? Is it more tuck into leverage your current growth drivers, maybe Rhapsody?

Speaker #6: Yeah. Maybe just broadly, what areas are you looking at? Is it EP dialysis, endoscopy? Any help there would be great. Thank you very much.

Speaker #6: And congrats on the quarter.

Speaker #5: Yeah. Thanks, Joseph. So I think as you've heard us start to talk about, right, we're really organizing the company and the organization around these platforms, right?

Martha Aronson: Yeah. Thanks, Joseph. I think as you've heard us start to talk about, right, we're really organizing the, you know, the company and the organization around these platforms, right? We have a number of platforms, where we've really put a cross-functional team and cross-geographic team together, that's really, frankly, thinking about all aspects of the business, including, right, what would be helpful from an acquisition standpoint. We're really looking to those teams to come with sort of, I'll call it, their wish list, if you will. We want to try to be very strategic about how we think about some of those opportunities and where they'll make the most sense. We definitely have sort of strategic criteria we think about, as well as financial criteria when we're thinking about M&A.

Speaker #5: And so we have a number of platforms where we've really put across-functional team and cross-geographic team together. That's really, frankly, thinking about all aspects of the business, including what would be helpful from an acquisition standpoint.

Speaker #5: So we're really looking to those teams to come with sort of, I'll call it their wish list, if you will, and so we want to try to be very strategic about how we think about some of those opportunities and where they'll make the most sense.

Martha Aronson: We're really looking to those teams to come with sort of, I'll call it, their wish list, if you will. We want to try to be very strategic about how we think about some of those opportunities and where they'll make the most sense. We definitely have sort of strategic criteria we think about, as well as financial criteria when we're thinking about M&A.

Speaker #5: So we definitely have sort of strategic criteria we think about as well as financial criteria when we're thinking about M&A. It will include both foundational products and therapeutic products because in some cases, the gap, if you will, or an area where we feel like we could fill a rep's bag out even more fully could be either on the therapeutic side or the foundational side.

Martha Aronson: It will include, you know, both foundational products and therapeutic products, because in some cases, the gap, if you will, or, you know, an area where we feel like we could fill a rep's bag out even more fully, could be either on the therapeutic side or the foundational side. That's really the way we're thinking about that as we, as we continue to think about the growth drivers of the business going forward. We very much intend to continue both internal, you know, development, as well as inorganic M&A to drive growth.

Speaker #5: So that's really the way we're thinking about that as we continue to think about the growth drivers of the business going forward. But we very much intend to continue both internal development as well as inorganic M&A to drive growth.

Speaker #2: Thank you.

[Analyst] (Needham & Company): Thank you.

Martha Aronson: Thank you very much.

Speaker #3: Thank you very much.

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

Speaker #2: Our next question comes from the line of Larry Beagleson from Wells Fargo.

Speaker #4: Hey, guys. Thanks for taking the question. Could we just spend a minute on OEM? Was Q4 all inventory destocking of both the US and OUS?

Larry Biegelsen: Hey, guys. Thanks for taking the question. Hey, could we just spend a minute on OEM? Was Q4 all inventory destocking in both the US and OUS, and why would that happen, you know, in both geographies at the same time? I just want to make sure the mid to high single digits, kind of underlying growth, that you said on the call, is that what's baked into 2026?

Speaker #4: And why would that happen? In both geographies at the same time. And I just want to make sure the mid to high single digits kind of underlying growth that you said on the call, is that what's baked into 2026?

Speaker #3: Yeah, Larry. Great question, right? So just to maybe clarify, the US component of OEM is really what we were talking about from a customer inventory destocking.

Raul Parra: Yeah, Larry, you know, great question, right? Just to, you know, maybe clarity, the US component of OEM is really what we were talking about from a customer, inventory destocking. I think when you look, you know, outside of the US, it's really kind of the macro environment, and it's really kind of centered around, you know, China and some of the, you know, some of the impacts we're seeing there just related to the macro environment. Hopefully that, you know, clarifies that. I think, again, I've been pretty consistent, I think, in our messaging. OEM, you know, tends to be choppy. I think when we look at that business, we think it's a great business. It's a great addition to-...

Speaker #3: I think when you look outside of the US, it's really kind of the macro environment. And it's really kind of centered around China and some of the impacts we're seeing there just related to the macro environment.

Speaker #3: So hopefully, that clarifies that. I think, again, I've been pretty consistent. I think in our messaging, OEM tends to be choppy. I think when we look at that business, we think it's a great business.

Raul Parra: Hopefully that, you know, clarifies that. I think, again, I've been pretty consistent, I think, in our messaging. OEM, you know, tends to be choppy. I think when we look at that business, we think it's a great business. It's a great addition to to, you know, to Merit, it really delivers a lot of volume growth, you know, through, since we're essentially selling, you know, capacity.

Speaker #3: It's a great addition to merit. It really delivers a lot of volume growth through since we're essentially selling capacity. Our OEM business remains healthy.

Raul Parra: to, you know, to Merit, it really delivers a lot of volume growth, you know, through, since we're essentially selling, you know, capacity. Our OEM business, you know, remains healthy, despite the quarter-to-quarter fluctuations in, you know, in growth rates. We continue to believe the appropriate normalized growth profile of our OEM business is in the mid to high single digits. I've been pretty consistent in that messaging.

Raul Parra: Our OEM business, you know, remains healthy, despite the quarter-to-quarter fluctuations in, you know, in growth rates. We continue to believe the appropriate normalized growth profile of our OEM business is in the mid to high single digits. I've been pretty consistent in that messaging.

Speaker #3: Despite the quarter-to-quarter fluctuations. And growth rates, but we continue to believe the appropriate normalized growth profile of our OEM business is in the mid to high single digits.

Speaker #3: And I've been pretty consistent in that messaging. So I think we're doing great.

Larry Biegelsen: It was 2%. Sorry.

Speaker #4: Sorry, but it was.

Raul Parra: Yeah, that one year. What they do the year before, Larry? I think they did pretty good.

Speaker #3: Yeah, that's one year. What did they do the year before, Larry? I think they did pretty good.

Larry Biegelsen: Okay.

Speaker #4: Okay. Okay.

Speaker #3: Right? Yeah.

Raul Parra: Right?

Larry Biegelsen: Okay.

Raul Parra: Yeah.

Speaker #4: Got it. And for my follow-up, Raul, let's focus on the Q1 guidance. Why only two to three percent organic? How much is the impact greater from the divestiture in Q1 and the lower operating margin?

Larry Biegelsen: Got it. For my follow-up, Raul, let's focus on the Q1 guidance. Why only 2% to 3% organic? You know, how much is the impact greater from the divestiture in Q1 and the lower operating margin? Look, the math I'm getting at the midpoint, it's about 170 basis points down year-over-year. Could you bridge us on how much is, you know, tariffs? Why would... You know, I understand tariffs didn't occur a year ago, but you just grew operating margin 140 basis points, by my math, in Q4, where it didn't have a tariff impact. It would be helpful to understand kind of the Q1 guidance for organic growth and the operating margin a little bit more. Thanks for taking the question.

Speaker #4: Look, the math I'm getting at the midpoint, it's about 170 basis points down year over year. Could you bridge us on how much is tariffs?

Speaker #4: And why I understand tariffs didn't occur a year ago, but you just grew operating margin 140 basis points by my math in Q4 where it didn't have a tariff impact.

Larry Biegelsen: Why would... You know, I understand tariffs didn't occur a year ago, but you just grew operating margin 140 basis points, by my math, in Q4, where it didn't have a tariff impact. It would be helpful to understand kind of the Q1 guidance for organic growth and the operating margin a little bit more. Thanks for taking the question.

Speaker #4: So it would be helpful to understand kind of the Q1 guidance for organic growth and the operating margin a little bit more. Thanks for taking the question.

Speaker #3: Yeah, no problem. I'll just start, right? I mean, I think I appreciate the focus on Q1. And I'll give you some color around that, Larry.

Raul Parra: Yeah, no problem. You know, I'll just start, right? I mean, I think, you know, I appreciate the focus on Q1, and I'll give you some color around that, Larry. I will highlight that I think we've put a pretty strong year together from a, you know, from a guidance perspective. I think it's right in line with our CGI goals. I just wanna highlight that, right? Because I don't wanna lose, you know, the focus on, you know, the quarterly discussion. I think we've put a great year together and, you know, well on our way to, you know, for our CGI goals. As, you know, when it comes to Q1, you know, I think you do have to think about, you know, a DualCap.

Speaker #3: But I will highlight that I think we've put a pretty strong year together. From a guidance perspective, I think it's right in line with our CGI goals.

Speaker #3: And so I just want to highlight that, right? Because I don't want to lose the focus on the quarterly discussion. But I think we've put a great year together.

Raul Parra: Because I don't wanna lose, you know, the focus on, you know, the quarterly discussion. I think we've put a great year together and, you know, well on our way to, you know, for our CGI goals. As, you know, when it comes to Q1, you know, I think you do have to think about, you know, a DualCap.

Speaker #3: And well on our way for our CGI goals. When it comes to Q1, I think you do have to think about dual cap.

Raul Parra: You know, obviously, you know, excluding that, you'd be up, you know, to, you know, 3% to 4%. There is some primary, you know, drivers of slower organic growth in Q1 that I'll highlight, we talked about the first one, OEM. You know, we do expect, you know, 2026 growth to be in the, you know, in the mid to high single digits, consistent with our normalized annual growth profile for OEM. You know, Q1 revenue, we will be down year-over-year, due to some continued OUS softness and a little bit of that inventory destocking that we talked about. Also, you know, wanna talk about China. Softer in Q1, given really the weighting of full-year expected VBP impact.

Speaker #3: Obviously, excluding that, you'd be up to three to four percent. There are some primary drivers of slower organic growth in Q1 that I'll highlight.

Speaker #3: And we talked about the first one, OEM. We do expect 2026 growth to be in the in the mid to high single digits consistent with our normalized annual growth profile for OEM.

Speaker #3: But Q1 revenue, we will be down year over year. Due to some continued OUS softness and a little bit of that inventory destocking that we talked about.

Raul Parra: You know, Q1 revenue, we will be down year-over-year, due to some continued OUS softness and a little bit of that inventory destocking that we talked about. Also, you know, wanna talk about China. Softer in Q1, given really the weighting of full-year expected VBP impact.

Speaker #3: And also, I want to talk about China. Softer in Q1, given really the weighting of full-year expected VBP impact. And then we're also dealing with a few little supply chain-related challenges.

Raul Parra: We're also dealing with a few little supply chain related challenges that we expect to resolve as we move through 2026. As you know, I've been pretty frank about the, you know, supply chain issues that although they're a lot less than they have been, you know, post-COVID, we are still dealing with them. You know, there's, you know, vendor consolidations and things like that that are happening. As they come, we deal with them. But our manufacturing group, our operations group, does a really good job of getting this out of them as quickly as they can. Those would be the kind of the three primary drivers for that, you know, softer Q1 that you guys would expect.

Speaker #3: That we expect to resolve as we move through 2026. As you know, I've been pretty frank about the supply chain issues that although there are a lot less than they have been post-COVID, we are still dealing with them.

Speaker #3: There's vendor consolidations and things like that that are happening. And so as they come, we deal with them. But our manufacturing group, our operations group does a really good job of getting this out of them as quickly as they can.

Raul Parra: As they come, we deal with them. But our manufacturing group, our operations group, does a really good job of getting this out of them as quickly as they can. Those would be the kind of the three primary drivers for that, you know, softer Q1 that you guys would expect. I would urge everybody to kind of focus on the full year numbers that we put together, because I think it's a really solid plan.

Speaker #3: So those would be kind of the three primary drivers for that softer Q1 that you guys would expect. But I would urge everybody to kind of focus on the full-year numbers that we put together because I think it's a really solid plan.

Raul Parra: I would urge everybody to kind of focus on the full year numbers that we put together, because I think it's a really solid plan.

Speaker #4: All right. Thank you.

Larry Biegelsen: All right. Thank you.

Speaker #3: Yep.

Raul Parra: Yep.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of Jason Bedford from Raymond James & Associates.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jayson Bedford from Raymond James & Associates.

Jayson Bedford: Good afternoon, and congrats on the progress here. I guess maybe just to piggyback on the last line of questioning, can you comment on growth in China in 25 and then your assumption in 26?

Speaker #4: Good afternoon and congrats on the progress here. So I guess maybe just to piggyback on the last line of questioning, can you comment on growth in China in '25 and then your assumption in '26?

Raul Parra: You know, we're not gonna call out the China, you know, growth in 2026. You know, sorry, I'm still, you know, stuck on Larry here. Jason, I think China was down year-over-year. I would say that, you know, we continue to see volume-based purchasing kind of impact the business. Generally, you know, the metric that I use, and I think you guys have heard me say this, you know, a lot before, volume continued to be up year-over-year, which is a good sign for us.

Speaker #3: We're not going to call out the China growth in 2026. Sorry. I'm still stuck on Larry here. Jason, but I think China was down year over year.

Speaker #3: I would say that we continue to see volume-based purchasing kind of impact the business. Generally, the metric that I use, and I think you guys have heard me say this a lot before, volume continued to be up year over year, which is I think a good sign for us.

Speaker #3: We'll continue to deal with volume-based purchasing in 2026. The goal is obviously to kind of hopefully it gets better every year. And so we'll see if that kind of shakes out according to plan.

Raul Parra: We'll continue to deal with volume-based purchasing in 2026. You know, the goal is obviously to kind of, you know, hopefully it gets better every year, you know, we'll see if that kind of shakes out according to plan. I would say, you know, 2025 China, you know, I think was down as a, you know, basically in line with our expectations.

Speaker #3: But I would say 2025 China I think was down as basically in line with our expectations.

Speaker #4: Okay. Okay. And then as my second question or follow-up, you mentioned freeing up capacity from the dual cap sale. Just wondering, you kind of framed the revenue impact.

Jayson Bedford: Okay. As my second question or follow-up, you mentioned freeing up capacity from the DualCap sale. Just wondering, you kind of framed the revenue impact. What does this sale do to margins in 2026? Is there an associated EPS impact? Thanks.

Speaker #4: What does this sale do to margins in '26? And is there an associated EPS impact? Thanks.

Raul Parra: There is a minimal, you know, EPS impact. Won't call it out. It's not worth mentioning, you know. It's not material enough to worry about. I mean, really, you know, we'll talk about, you know, gross margin or operating margin. It is a 100, you know, 40 basis point headwind to growth, you know, that everybody should consider as they look at the, you know, revenue guidance. It's, you know, specifically, you know, with the US, that's about 240 basis point, you know, headwind to growth, you know, for the US. It's very US-centric. Again, it's still driving operating expansion in 2026, despite, you know...

Speaker #3: There is a minimal EPS impact. We won't call it out. It's not worth mentioning. It's not material enough to worry about. I mean, really, we won't talk about gross margin or operating margin.

Speaker #3: It is 140 basis points headwind to growth. That everybody should consider, as they look at the revenue guidance. And it's specifically with the US, that's about 240 basis points headwind to growth for the US.

Raul Parra: It's, you know, specifically, you know, with the US, that's about 240 basis point, you know, headwind to growth, you know, for the US. It's very US-centric. Again, it's still driving operating expansion in 2026, despite, you know... We are still driving operating margin expansion, you know, despite, you know, the divestiture and despite tariffs. Again, that we've got a $15 million impact baked into our guidance.

Speaker #3: So it was very US-centric. But again, it's still driving operating expansion in '26 despite we are still driving operating margin expansion despite the divestiture and despite tariffs.

Raul Parra: We are still driving operating margin expansion, you know, despite, you know, the divestiture and despite tariffs. Again, that we've got a $15 million impact baked into our guidance.

Speaker #3: Again, we've got a $15 million impact baked into our guidance.

Operator: ... Okay. Thank you.

Speaker #4: Okay. Thank you.

Speaker #3: Yep.

Raul Parra: Yep.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of David Rescott from Baird.

Operator: Thank you. One moment for our next question. Our next question comes from the line of David Rescott from Baird.

David Rescott: Great. Thanks for taking the questions. Appreciate the comments on, you know, the near term Rhapsody, right? I think, you know, you're four months or so, I guess two or three or four months or so into this, you know, post reimbursement landscape rollout. You know, I heard some of the commentary just around how you're thinking about the contribution for this year, but maybe could you help us understand more of the longer term, you know, vision here?

Speaker #5: So great. Thanks for taking the questions. Appreciate the comments on the near-term rapidity, right? I think your four-month or so I guess two or three, three or four months or so into this, post-reimbursement landscape rollout.

Speaker #5: And I heard some of the commentary just around how you're thinking about the contribution for this year. But maybe could you help us understand more of the longer-term vision here?

David Rescott: Obviously reimbursement, you know, is a plays a role, but, you know, when you think about just the longer term story on what Rhapsody can be, you know, is there any reason to think that longer term, this isn't a product that, you know, captures 20, 30 plus % of the market?

Speaker #5: Obviously, reimbursement. It is plays a role, but when you think about just the longer-term story, what rapidity can be, is there any reason to think that longer-term this isn't a product that captures 20, 30-plus percent of the market?

Speaker #3: Yeah. Thanks, David. Appreciate the question. And look, again, I think it's fair to say, right, we're in early innings here, if you will. As you said, with kind of the new with kind of the new strategy, so we're pleased with where we are so far.

Martha Aronson: Yeah. Thanks, David. Appreciate the question. Look, again, I think it's fair to say, right, we're in, we're in early innings here, if you will, as you said, with kind of the new strategy. You know, we're pleased with where we are so far. I think, you know, as we've talked about, this is really the initial PMA product for this company. We do think about Rhapsody, I would say as more of a platform than just a one-off product. We do, you know, and I think you've heard me say, we will spend time during this year, during 2026, doing a strategic planning work. We're really gonna think, you know, spend a lot of time thinking about, you know, where are some of our bigger future opportunities?

Speaker #3: I think, as we've talked about, this is really the initial PMA product for this company. We do think about RAPIDITY, I would say, as more of a platform than just a one-off product.

Martha Aronson: We do think about Rhapsody, I would say as more of a platform than just a one-off product. We do, you know, and I think you've heard me say, we will spend time during this year, during 2026, doing a strategic planning work. We're really gonna think, you know, spend a lot of time thinking about, you know, where are some of our bigger future opportunities?

Speaker #3: So we do, and I think you've heard me say we will spend time during this year, during 2026, doing a strategic planning work. And we're really going to spend a lot of time thinking about where are some of our bigger future opportunities?

Speaker #3: Where do we want to continue to drive growth as we go forward? So, we'll continue to think about that. We're not ready to share any more specifics on that at this point.

Martha Aronson: Where do we wanna continue to drive growth as we go forward? We'll continue to think about that. We're not ready to, you know, to share any more specifics on that at this point. That is definitely how we're thinking about that opportunity as we move forward.

Speaker #3: But that is definitely how we're thinking about that opportunity as we move forward.

Raul Parra: Maybe, you know, maybe I'll give you a little more color on just kind of, you know, maybe the assumptions, right? I, you know, just a little color, David, to help you out. You know, obviously, we don't wanna get ahead of ourselves, you know, past 2026, but, you know, we do not provide specific assumptions, including unit price, you know, and site of care, et cetera. I'll remind you that market data providers, including Clarivate, which we have referenced on prior earnings calls, reported 100,000 stents and implanted in approximately 77,000 procedures in 2023, or roughly 1.2 stents per procedure. An estimated 60,000 to 70,000 of the total 77,000 procedures occur in the non-hospital setting each year.

Speaker #4: Maybe I'll give you a little more color on just kind of maybe the assumptions, right? So just a little color, David, to help you out.

Speaker #4: Obviously, we don't want to get ahead of ourselves past 2026. But we do not provide specific assumptions, including unit price and side of care, etc.

Speaker #4: But I'll remind you that market data providers, including Claravate, which we have referenced on prior earnings calls, reported $100,000 in implanted in approximately 77,000 procedures in 2023.

Raul Parra: I'll remind you that market data providers, including Clarivate, which we have referenced on prior earnings calls, reported 100,000 stents and implanted in approximately 77,000 procedures in 2023, or roughly 1.2 stents per procedure. An estimated 60,000 to 70,000 of the total 77,000 procedures occur in the non-hospital setting each year.

Speaker #4: Or roughly 1.2 cents per procedure. An estimated 60 to 70 thousand of the total 77,000 procedures occur in the non-hospital setting each year. Claravate now, this is Claravate's number, reported an average selling price for covered stents in the non-hospital setting of approximately 2,400.

Raul Parra: Clarivate, now this is Clarivate's number, reported an average selling price for covered stents in the non-hospital setting of approximately $2,400. We will not comment on our pricing in either sites of care specifically, but we want, you guys, investors, are free, you know, to model potential scenarios for each of these inputs and depending on a range of potential ASPs. It is fair, I think, to assume the $7 million estimate implies market penetration in the low to mid single digits in the first full year of commercialization under the new strategy that we have for the US Rhapsody. Hopefully, you know, that gives you a little bit of color. Again, I think we've referenced Clarivate, you know, several times, so you know, that's how we're kind of thinking about it.

Speaker #4: We will not comment on our pricing in either site of care specifically, but we want you guys investors are free to model potential scenarios for each of these inputs and depending on a range of potential ASPs.

Speaker #4: It is fair, I think, to assume the $7 million estimate implies market penetration in the low- to mid-single digits in the first full year of commercialization.

Raul Parra: It is fair, I think, to assume the $7 million estimate implies market penetration in the low to mid single digits in the first full year of commercialization under the new strategy that we have for the US Rhapsody. Hopefully, you know, that gives you a little bit of color. Again, I think we've referenced Clarivate, you know, several times, so you know, that's how we're kind of thinking about it.

Speaker #4: Under the new strategy that we have for the US rapidity. So hopefully, that gives you a little bit of color. Again, I think we've referenced Claravate several times.

Speaker #4: So that's how we're kind of thinking about it.

Speaker #5: Okay. That's helpful. And then maybe just on the margin contribution, from the product, obviously, it's a smaller number relative to the broader portfolio. But any just insight or can you level set us on maybe how you're thinking about the product from a contribution perspective on the margin front?

David Rescott: Okay, that's helpful. Maybe just on the, you know, the margin contribution, you know, from the product, obviously it's a smaller number, relative to the broader portfolio, but any just, you know, insight or can you level set us on maybe how you're thinking about the product from a contribution perspective on the margin front, not only in the, or implied in the guide, but also just, you know, as you think about this product in the portfolio longer term. Thank you.

Speaker #5: Not only in the or implied in the guide, but also just as you think about this product and the portfolio longer term. Thank you.

Speaker #3: Well, look, I think thank you. Probably not going to answer it the way you want, but I'll just say this. I think I just want to point out, right, our total constant currency growth expectations for 2026 are 5 to 7 percent, right?

Raul Parra: Well, look, I think, you know, thank you. Probably not gonna answer it the way you want, but I'll just say this. I think I just wanna point out, right, our total constant currency growth expectations for 2026 are 5 to 7%, right? I think it's compelling, nearly all of this growth is expected to be driven by our globally diversified business, right? We've got a broad product portfolio, not to take away anything from Rhapsody, specifically, sales of US Rhapsody are expected to contribute somewhere around 25 basis points to this constant currency growth range. We are excited about the product. We're excited about what it can do. Martha, you know, covered it nicely.

Speaker #3: I think it's compelling. And nearly all of this growth is expected to be driven by our globally diversified business, right? So we've got a broad product portfolio.

Raul Parra: We've got a broad product portfolio, not to take away anything from Rhapsody, specifically, sales of US Rhapsody are expected to contribute somewhere around 25 basis points to this constant currency growth range. We are excited about the product. We're excited about what it can do. Martha, you know, covered it nicely.I, you know, I can't add anything there, but I just wanna kind of, you know, focus everybody on the, on the entire portfolio.

Speaker #3: Not to take away anything from rapidity, but specifically, sales of US rapidity are expected to contribute somewhere around 25 basis points to this constant currency growth range.

Speaker #3: So we are excited about the product. We're excited about what it can do. I think Martha covered it nicely. I can't add anything there.

Raul Parra: I, you know, I can't add anything there, but I just wanna kind of, you know, focus everybody on the, on the entire portfolio.

Speaker #3: But I just want to kind of focus everybody on the entire portfolio.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of Michael Petushki from Barrington Research.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Michael Petusky from Barrington Research.

Operator: Thank you. One moment for bour next question. Our next question comes from the line of Michael Petusky from Barrington Research.

Michael Petusky: Hey, good evening. Thanks for the question. Well, I'm just curious, the incremental growth or the growth in PI from 2024 to 2025 in terms of just the 3 months, roughly about $20 million, how much of that was related to that SCOUT system?

Speaker #4: Hey, good evening. Thanks for the question. Well, I'm just curious. The incremental growth or the growth in PI from 24 to 25 in terms of just the three months, roughly about 20 million, how much of that was related to that SCOUT system?

Raul Parra: Well, I mean, I think, you know. I won't, you know, kind of, you know, comment on it specifically, but it was a primary, you know, growth driver, you know. I think when you, when you think about the, you know, radar localization and the delivery system itself. You know, or the delivery systems, you know, category, together, they increased, you know, more than 25% year-over-year. I mean, they represented, you know, between radar localization and our delivery systems.

Speaker #3: Well, I mean, I think I won't kind of comment on it specifically, but it was a primary growth driver. I think when you think about the radar localization, and the delivery system itself, or the delivery system's category, together, they increased more than 25% year over year.

Speaker #3: So I mean, they represented between radar localization and our delivery systems, Mike, they represented almost 45% of our total PI growth year over year.

Michael Petusky: Right.

Raul Parra: Mike, you know, they represented almost 45% of our total PI growth year-over-year.

Michael Petusky: Oh, okay. It was roughly half then of the $20 million was attributable to SCOUT®. Is that correct?

Speaker #4: Oh, okay. Okay. So it was roughly half, then, of the $20 million was attributable to SCOUT. Is that correct?

Raul Parra: Well, it's two different, you know, product categories, right? Just to be clear.

Speaker #3: Well, it's two different product categories, right, just to be clear. But yeah, yeah.

Michael Petusky: Right. Right, right.

Raul Parra: Yeah.

Speaker #4: Okay. Okay. All right.

Michael Petusky: Okay. All right.

Speaker #1: And Mike, just Martha here, just to if I could just add, I mean, I think we shared on the last call, SCOUT hit a really significant milestone too in terms of the number of procedures.

Martha Aronson: Mike, just Martha here.

Michael Petusky: Yeah.

Martha Aronson: If I could just add, I mean, I think we shared on the last call, you know, SCOUT hit a really significant milestone, too, in terms of the number of procedures it's been used in. Again, we're very pleased with how that business is doing, and it's one of those that just makes an enormous difference in patients' lives.

Speaker #1: It's been used in. So again, we're very pleased with how that business is doing and it's one of those that just makes an enormous difference in patients' lives.

Michael Petusky: What explains that level of growth? I mean, were there just big contract wins? Like, what's happened there?

Speaker #4: But what explains that level of growth? I mean, were there just big contract wins? What's happened there?

Michael Petusky: What explains that level of growth? I mean, were there just big contract wins? Like, what's happened there?

Speaker #1: Well, I mean, I think I don't know that it's been that huge of a number, right? I mean, it's a nice it's certainly a very nice growth number.

Martha Aronson: Well, I don't, I mean, I think, I don't know that it's been, you know, that huge of a number, right? I mean, it's certainly a very nice growth number, but I think we've got a really, really top-notch sales organization out there. They've got excellent relationships with the key physicians who, you know, do this work. I think, like other things, people see the clinical value, you know, in the product and what it can do. I think you combine all those things. We had a little bit of a, you know, a slowdown in supply, I think. I can't remember the exact timing, but we picked that back up, so that can lead to a little lumpiness, too.

Speaker #1: But I think we've got a really top-notch sales organization out there. They've got excellent relationships with the key physicians who do this work. And I think like other things, people see the clinical value in the product and what it can do.

Martha Aronson: I think, like other things, people see the clinical value, you know, in the product and what it can do. I think you combine all those things. We had a little bit of a, you know, a slowdown in supply, I think. I can't remember the exact timing, but we picked that back up, so that can lead to a little lumpiness, too. Again, just overall, you know, the team all pulling together from the operations side to the clinical side, you know, to the sales side.

Speaker #1: So I think you combine all those things. We had a little bit of a slowdown in supply, I think. I can't remember the exact timing, but we picked that back up.

Speaker #1: So that can lead to a little lumpiness too. But again, just overall, the team all pulling together from the operations side to the clinical side, to the sales side.

Martha Aronson: Again, just overall, you know, the team all pulling together from the operations side to the clinical side, you know, to the sales side.

Speaker #4: Okay. Great. And just one more. I don't think I missed this, but maybe I did. Did you guys give sort of by region sort of performance?

Michael Petusky: Okay, great. Just one more. I don't think I missed this, but maybe I did. Did you guys give sort of, you know, by region sort of performance? Usually, you guys give, like, EMEA and APAC and sort of make some commentary, obviously, around China. I don't feel like I've heard that tonight, or did I miss it?

Speaker #4: Usually, you guys give EMEA and APAC and sort of make some commentary obviously around China. I don't feel like I've heard that tonight or did I miss it?

Speaker #3: Yeah. I mean, I think we can say, right, so at least for the fourth quarter, US sales increased about 12% year over year. They were up roughly 8% on an organic constant currency basis.

Raul Parra: Yeah, I mean, I think we can say, right, at least for Q4, you know, US sales increased about 12% year-over-year. They were up roughly 8% on an organic constant currency basis. When you look at the international side of the business, it increased about 6% year-over-year, up 4% on an organic constant currency basis. I would highlight that both were at the high end of our organic growth expectations. You know, APAC, roughly up, 3% constant currency. EMEA, up, you know, 12% constant currency. Rest of world, 4.5%, you know, constant currency.

Speaker #3: When you look at the international side of the business, it increased about 6% year over year, up 4% on an organic constant currency basis.

Speaker #3: I would highlight that both were at the high end of our organic growth expectations. APAC, roughly up 3% constant currency, EMEA up 12% constant currency, rest of world 4.5% constant currency.

Speaker #4: Okay. And you said earlier, sorry, this is the last one for real. You said earlier that China was down in line with your expectations.

Michael Petusky: Okay. You said earlier... Sorry, this is the last one for real. You said earlier that China was down in line with your expectations. Can you remind me what your expectations were? I don't recall at the beginning of the year what you guys said as your expectations for China.

Speaker #4: Can you remind me what your expectations were? I don't recall, at the beginning of the year, what you guys said as your expectations for China.

Raul Parra: I think it came in right around where we thought it would be, right about 2%, perhaps. Is that? Yeah.

Speaker #3: I think it came in right around where we thought it would be right about 2%, perhaps you said? Yeah. Down? Yeah.

Raul Parra: I think it came in right around where we thought it would be, right about 2%, perhaps. Is that? Yeah.

Michael Petusky: Down?

Speaker #4: Down. Down 2%. Okay. All right. Great. Thank you so much. And congrats on the free ree cash.

Raul Parra: Down, yeah.

Michael Petusky: Down 2%. Okay. All right, great. Thank you so much, and congrats on the free cash.

Speaker #3: No problem. Yeah.

Raul Parra: Yeah, no problem. Yeah.

Speaker #1: Thank you.

Martha Aronson: Thank you. Our next question comes from the line of John Young from Canaccord.

Speaker #2: Thank you. Our next question comes from the line of John Young from Canaccord.

Speaker #5: Well, Martha and I will congrats on the quarter. I want to ask on rapidity. I know you're giving somewhat limited information, but try to get a little bit more here.

John Young: Mark and I, well, congrats on the quarter. I want to ask on Rhapsody. I know you're giving, you know, some limited information, but try to get a little bit more here. Mark, I know you said you just held a national sales meeting. I would love to hear what you're hearing from the sales force so far, in selling the product with the new strategy. Are you focusing the sales force on opening new accounts versus going deep in accounts? Can you remind me, too, is there any staffing revenue as they go and open these accounts? Thanks.

Speaker #5: Martha, I know you said you just held a national sales meeting. I would love to hear what you're hearing from the sales force so far, selling the product with a new strategy.

Speaker #5: Are you focusing the sales force on opening new accounts versus going deep in accounts? And can you remind me too, is there any stocking revenue as they go and open these accounts?

Speaker #5: Thanks.

Speaker #1: Yeah. So first of all, I would tell you we have an extremely energized group. I guess I would call it small yet mighty. I think if you compare to perhaps some of the competitors in this area.

Martha Aronson: Yeah. First of all, I would tell you, we have an extremely energized group. I guess I would call it small, yet mighty. I think if you compare to perhaps, you know, some of the competitors in this area. As I said, really inspiring for me, frankly, to spend some time with this group and see how motivated they are. You know, heard a lot of really moving patient stories about when a physician would use Rhapsody and the difference that they would see pretty immediately with it. I think, again, you know, that was super exciting. The team has very detailed plans around, you know, their targeting and, you know, where they're going. You know, we're pursuing...

Speaker #1: So as I said, really inspiring for me, frankly, to spend some time with this group and see how motivated they are heard a lot of really moving patient stories.

Martha Aronson: You know, heard a lot of really moving patient stories about when a physician would use Rhapsody and the difference that they would see pretty immediately with it. I think, again, you know, that was super exciting. The team has very detailed plans around, you know, their targeting and, you know, where they're going. You know, we're pursuing...

Speaker #1: About when a physician would use rapidity, and the difference that they would see pretty immediately with it. So, I think, again, that was super exciting.

Speaker #1: The team has very detailed plans around their targeting, and where they're going we're pursuing. I mean, as we talked about, if you look at the market, right, it's primarily predominantly probably 85, 90 percent non-hospital setting versus the hospital.

Martha Aronson: I mean, as we talked about, if you look at the market, right, it's primarily, predominantly, probably 85%, 90% non-hospital setting versus the hospital. At the same time, as you know, since we had the NTAP, you know, there's slightly higher pricing on the hospital side, and we had a lot of that work in process, you know, last year. That certainly continues, albeit oftentimes, as you probably know, with challenges to get through VAC committees and that kind of thing. That can take a long time, and you can get just pushed quarter to quarter in getting your slot on a VAC committee meeting. Simultaneously then, of course, they're pursuing the non-hospital, you know, sites of service as well.

Speaker #1: At the same time, as you know, since we had the NTAP, there's slightly higher pricing on the hospital side, and we had a lot of that work in process.

Speaker #1: Last year. So that certainly continues. Albeit oftentimes, as you probably know, with challenges to get through VAC committees and that kind of thing. So that can take a long time.

Martha Aronson: That certainly continues, albeit oftentimes, as you probably know, with challenges to get through VAC committees and that kind of thing. That can take a long time, and you can get just pushed quarter to quarter in getting your slot on a VAC committee meeting. Simultaneously then, of course, they're pursuing the non-hospital, you know, sites of service as well.

Speaker #1: And you can get just pushed quarter to quarter in getting your slot on a VAC committee meeting. So simultaneously then, of course, they're pursuing the non-hospital sites of service as well.

Speaker #1: So I think the answer is they're looking they're going everywhere. As I said, as much as our small and mighty team can. So I think that's how we spend some time better understanding that and came to our guidance for this year in the US.

Martha Aronson: I think the answer is, you know, they're going everywhere, as I said, as much as our small and mighty team can. I think that's how we, you know, spent some time better understanding that and came to our guidance for this year in the US. That's kind of how we're thinking about it. Again, you know, just have to remind everybody, I know Raul just did, but have to remind everybody, you know, that Rhapsody is a great product, a critical product for us, and one of many in a $1.5 billion portfolio.

Speaker #1: So that's kind of how we're thinking about it. Again, I just have to remind everybody—I know Raul just did—but I have to remind everybody that Rapidity is a great product, a critical product for us, and one of many, many, many in a $1.5 billion portfolio.

Operator: I appreciate that, Martha. Also just to follow up on that, it sounds like you've been doing a lot of work on R&D with that platform approach that you're talking about. Just any color on the pipeline for 2026 for investors, and longer term, given where you are today with Rhapsody so far, do you expect Merit to pursue additional PMAs?

Speaker #5: I appreciate that, Martha. And also, just to follow up on that, it sounds like you've been doing a lot of work on R&D with that platform approach that you're talking about.

Speaker #5: Just any color on the pipeline for 2026 for investors? And longer term, given where you are today with rapidity so far, do you expect Merit to pursue additional PMAs?

Speaker #1: Yeah. So as I said, we're going to do a lot of work this year around our strategic plan and our long-term product and platform roadmaps, if you will.

Martha Aronson: Yeah. As I said, we're gonna do a lot of work this year around our strategic plan and our long-term, you know, product and platform roadmaps, if you will. Yes, I think the answer is, I don't see any reason for us not to continue to pursue PMA-type products. Again, one, you know, as we think about it, we wanna figure out how do we best leverage, you know, the technical talent that we have in this organization, which is extraordinary. We wanna think about that. As I said, we also wanna layer that on top of, you know, each one of our various platforms and think about the customer groups that we're serving and figure out, again, you know, how can we best help them? How can we, you know, make their procedures more efficient?

Speaker #1: So yes, I think the answer is I don't see any reason for us not to continue to pursue PMA-type products. Again, one, as we think about it, we want to figure out how do we best leverage the technical talent that we have in this organization, which is extraordinary.

Speaker #1: So we want to think about that. And then, as I said, we also want to layer that on top of each one of our various platforms and think about the customer groups that we're serving and figure out, again, how can we best help them?

Martha Aronson: We wanna think about that. As I said, we also wanna layer that on top of, you know, each one of our various platforms and think about the customer groups that we're serving and figure out, again, you know, how can we best help them? How can we, you know, make their procedures more efficient?

Speaker #1: How can we make their procedures more efficient? How can we help bring costs down of a procedure? How do we fill a bag where there's a gap in a sales rep's bag?

Martha Aronson: How can we help bring costs down of a procedure? You know, how do we fill a bag where there's a gap in a sales rep's bag? You know, those are all the questions we're really going to be asking ourselves as we do this work and think about the longer-term strategy.

Speaker #1: Those are all the questions we're really going to be asking ourselves as we do this work and think about the longer-term strategy.

Speaker #4: Thanks again.

Operator: Thanks again.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of Travis Steed from Bank of America Securities.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Travis Steed from BofA Securities.

Aiden Cary: Hi, this is Aiden on for Travis. Just my first one, a point of clarification. Does the organic growth guide not back out the divestiture, or is that included in there?

Speaker #6: Hi, this is Aidan on for Travis. Just my first one, a point of clarification. So does the organic growth guide not back out the divestiture, or is that included in there?

Raul Parra: No, I mean, we gave you our guidance, and we didn't make a, you know, an adjustment. You know, I think other companies might do that. We gave you the number, we gave you the impact. I think, you know, obviously, you should consider it as you look at our revenue growth numbers.

Speaker #3: No, I mean, we gave you our guidance, and we didn't make an adjustment. I think other companies might do that. We gave you the number.

Speaker #3: We gave you the impact. I think, obviously, you should consider it as you look at our revenue growth numbers.

Speaker #6: Okay. Great. Thank you.

Aiden Cary: Okay, great. Thank you.

Raul Parra: Just to maybe repeat it, right, 140 basis points, you know, to constant currency growth, you know, 240 basis points for the US.

Speaker #3: Just to maybe repeat it, right? 140 basis points to constant currency growth. And then 240 basis points for the US.

Speaker #6: Got it. Thank you. And then in January, you talked about your exposure to TAVR, EP Renal, and maybe that's less appreciated in terms of the exposure you have to these higher growth procedures.

Aiden Cary: Got it. Thank you.

Raul Parra: Yep.

Aiden Cary: You know, in January, you talked about your exposure to TAVR, EP renal, and maybe that's less appreciated in terms of the exposure you have to these higher growth procedures. Kind of as you think ahead at a high level, are there any other procedures you think you have the opportunity to deepen your penetration to or expand into that you weren't in before? Thank you.

Speaker #6: Kind of as you think ahead at a high level, are there any other procedures you think you have the opportunity to deepen your penetration into or expand into that you weren't in before?

Speaker #6: Thank you.

Speaker #1: Yeah. I mean, I think you've hit on some of the current bigger ones, right? And I mean, I think this is really as we think about strategy going forward, right, it's really you're asking, I think, the question, would we enter into I'll call it a whole new platform, potentially calling on a whole new customer group?

Martha Aronson: Yeah, I mean, I think you've hit on some of the current bigger ones, right? You know, I mean, I think this is really as we think about strategy going forward, right, it's really you're asking, I think, the question, you know, would we enter into, I'll call it, a whole new platform, potentially calling on a whole new customer group? You know, the answer is, would we consider it? Yes. I'd say right now, the primary focus is really focusing in on the platforms that we currently have. Again, you know, as you all know, the cost of a distribution organization is not inexpensive, we have a lot of really talented reps out there around the world.

Speaker #1: The answer is, would we consider it? Yes, but I'd say right now, the primary focus is really focusing in on the platforms that we currently have and, again, as you all know, the cost of a distribution organization is not inexpensive.

Martha Aronson: Yes. I'd say right now, the primary focus is really focusing in on the platforms that we currently have. Again, you know, as you all know, the cost of a distribution organization is not inexpensive, we have a lot of really talented reps out there around the world. As I said, what we wanna make sure we're doing is helping make sure they have a full bag wherever possible and some of the latest and, you know, best technology wherever possible. That's really our areas of focus for now, rather than, I'd say, adding on a whole new platform.

Speaker #1: And so we have a lot of really talented reps out there around the world. And as I said, what we want to make sure we're doing is helping make sure they have a full bag wherever possible and some of the latest and best technology wherever possible.

Martha Aronson: As I said, what we wanna make sure we're doing is helping make sure they have a full bag wherever possible and some of the latest and, you know, best technology wherever possible. That's really our areas of focus for now, rather than, I'd say, adding on a whole new platform.

Speaker #1: So that's really our area of focus for now, rather than, I'd say, adding on a whole new platform.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of Jim Sadote from Sadote & Company.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Jim Sidoti from Sidoti & Company.

Operator: Hi, good afternoon, thanks for taking the questions. another question on R&D, because I noticed it's up about $1 million year-over-year, $2 million sequentially. you know, I would expect R&D to be at least flat because of the end of the work on Rhapsody's PMA. Where are those dollars going right now?

Speaker #7: Hi. Good afternoon. Thanks for taking the questions. Another question on R&D because I noticed it's up about a million year over year, two million sequentially.

Speaker #7: I would expect R&D to be at least flat because of the end of the work on rapidities PMA. Where are those dollars going right now?

Speaker #3: Yeah. I mean, I think the better way to look at it, and there's obviously, as a percentage of revenue, I mean, that'll continue to be about 6%.

Raul Parra: Yeah, I mean, I think the better way to look at it and, you know, is obviously as a percentage of revenue, right? I mean, that'll continue to be about 6%. You know, Jim, especially as you guys think about 2026, right? Just, you know, kind of focus you there. You know, as far as 2025 or Q4, you know, we did have some higher clinical spend, but we also had some one-time events. You know, higher regulatory submission spend and some product development expense, you know, that we'll call out.

Speaker #3: Jim, especially as you guys think about 2026, right? So just kind of focusing you there. As far as 2025 or Q4, we did have some higher clinical spend, but we also had some one-time events, higher regulatory submission spend, and some product development expense that we'll call out.

Speaker #3: But I think as you look at 2026, you should think about it as a percentage of revenue and it should be about 6%. In that ballpark.

Raul Parra: I think as you look at 2026, you should think about it as a percentage of revenue, and it should be about 6%, you know, in that ballpark.

Speaker #7: Right. And then I also noticed the MDR expenses, I mean, really have ticked down. Is that project completed at this point?

Operator: Right. Then I also noticed the MDR expenses have, I mean, really have ticked down. Is that project completed at this point?

Speaker #3: Yeah, we’re getting closer and closer every year, right? I mean, I think as you guys know, that’s been pretty frustrating, right? I mean, to re-register products that we’ve been selling in there for a lot of years—my guess is, as soon as we’re done with it, they’ll change the rules and make it easier.

Raul Parra: Yeah, you know, we're getting closer and closer every year, right? I mean, I think, you know, as you guys know, that's been a, you know, pretty frustrating, right? I mean, you know, to re-register products that we've been selling in there for a lot of years, you know. My guess is, you know, as soon as we're done with it, you know, they'll change the rules and make it easier. You know, that's usually how it works. I think those are winding down. Our regulatory group and, you know, our R&D and operations group have done a great job of staying ahead of it, and making sure our products stay registered, you know, outside the US.

Raul Parra: You know, that's usually how it works. I think those are winding down. Our regulatory group and, you know, our R&D and operations group have done a great job of staying ahead of it, and making sure our products stay registered, you know, outside the US. You know, applaud them for keeping their head down and getting that done.

Speaker #3: That's usually how it works. But I think those are winding down. Our regulatory group and our R&D and operations group have done a great job of staying ahead of it and getting making sure our products stay registered.

Speaker #3: Outside the US, so applaud them for keeping their head down and getting that done.

Raul Parra: You know, applaud them for keeping their head down and getting that done.

Operator: All right. Thank you.

Speaker #7: All right. Thank you.

Speaker #1: Thanks, Jim.

Martha Aronson: Thanks, Jim.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of Robbie Marcus from JPMorgan.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Robbie Marcus from J.P. Morgan.

Speaker #4: Oh, great. Thanks for taking the question. Maybe I could, Raul, if you don't mind, circle back to Larry's question on first quarter. And I guess I'll follow up with the question of you kind of highlighted what's driving some of the first quarter softness.

Robbie Marcus: Oh, great. Thanks for taking the question. Maybe I could, Raul, if you don't mind, circle back to Larry's question on Q1. I guess I'll follow up with the question. You know, you kind of highlighted what's driving some of the Q1 softness. What's driving the Q2 through Q4 acceleration, and how should we think about the cadence of improvement and drivers of improvement throughout the year?

Speaker #4: What's driving the second through fourth quarter acceleration, and how should we think about the cadence of improvement and drivers of improvement throughout the year?

Raul Parra: You know, I think, Robbie, I think that's a great question, right? I mean, I think I'll, you know, as far as the detail quarter by quarter, I, you know, I don't think that I'll get into that. You know, obviously gave you guys modeling considerations for Q1, so you guys can have that. I will point you maybe just at a higher level, just the seasonality, you know, in our business. You know, Q1 and Q3 are typically from a revenue standpoint, you know, lower, you know, growth and revenue quarters, with the second and the fourth being our strongest quarters. You know, again, I think we have a great plan for the year.

Speaker #3: I think, Robbie, I think that's a great question, right? I mean, I think as far as the detailed quarter-by-quarter, I don't think that I'll get into that.

Speaker #3: Obviously, I gave you guys modeling considerations for Q1, so you can have that. I will point you, maybe just at a higher level, to the seasonality in our business.

Raul Parra: You know, Q1 and Q3 are typically from a revenue standpoint, you know, lower, you know, growth and revenue quarters, with the second and the fourth being our strongest quarters. You know, again, I think we have a great plan for the year. You know, as we progress throughout the year, we'll give you additional color as we head into the next quarter. You know, for now, we're just talking about Q1.

Speaker #3: Q1 and Q3 are typically from a revenue standpoint lower growth and revenue quarters with the second and the fourth being our strongest quarters. Again, I think we have a great plan for the year, and as we progress throughout the year, we'll give you additional color as we head into the next quarter.

Raul Parra: You know, as we progress throughout the year, we'll give you additional color as we head into the next quarter. You know, for now, we're just talking about Q1.

Speaker #3: But for now, we're just talking about Q1.

Speaker #4: And maybe again, just to follow up on Larry's question, the margin considerations in first quarter, it feels like it's implying down and what's the components of that?

Robbie Marcus: Maybe, again, just to follow up on Larry's question, you know, the margin considerations in Q1, it feels like.

Raul Parra: Yeah.

Robbie Marcus: -it's implying down, and what's the components of that? Thanks.

Speaker #4: Thanks.

Speaker #3: Well, you got to remember, right? The tariffs didn't start until April. So there is a component to that that you should consider. I think it's about 80 basis points or $3 million of gross margin impact as we apply the tariffs.

Raul Parra: Well, you gotta remember, right, the tariffs didn't start until April. You know, there is a component to that you should consider. You know, I think it's about 80 basis points, or $3 million of gross margin impact, you know, as we apply the, you know, the tariffs, right. I think when you look at, you know, when you look at that, you know, there's obviously, you know, that makes up the kind of the majority of it, you know, 80 basis points. I think if you look at it, you know, also, you're really seeing the impact of a larger expense base, you know, as we progress, you know, throughout the year on a smaller revenue quarter. As I mentioned, the seasonality in our business.

Speaker #3: Right? So I think when you look at when you look at that, there's obviously that makes up kind of the majority of it, kind of 80 basis points.

Raul Parra: I think when you look at, you know, when you look at that, you know, there's obviously, you know, that makes up the kind of the majority of it, you know, 80 basis points. I think if you look at it, you know, also, you're really seeing the impact of a larger expense base, you know, as we progress, you know, throughout the year on a smaller revenue quarter. As I mentioned, the seasonality in our business.

Speaker #3: I think if you look at it, also, you're really seeing the impact of a larger expense base as we progress throughout the year. On a smaller revenue quarter, because as I mentioned, the seasonality in our business.

Speaker #3: And also just to highlight, right? I mean, I think there's some good things going on. I mean, we had our first-ever global sales meeting one of a number of items that are kind of that increase the expense in Q1 that's taking that operating margin down.

Raul Parra: Also just to highlight, right? I mean, I think there's some good things going on. I mean, we had our first ever global sales meeting, you know, one of a number of items that are kind of, you know, that increase the expense, you know, in Q1, you know, that's taking that operating margin down. Again, just, you know, focus everybody on the year, you know, year-over-year results that we're shooting for.

Speaker #3: But again, just focus everybody on the year-over-year results that we're shooting for.

Speaker #4: Thank you.

Robbie Marcus: Thank you.

Speaker #2: Thank you. One moment for our next question. Our next question comes from the line of Sam Iber from BTIG.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Sam Eiber from BTIG.

Sam Eiber: Hi, good afternoon. Thanks for taking the questions here. Just one on my end, and I don't mean to beat a dead horse here on capital allocation, but, you know, at 1.6x leverage, it feels like you guys have the capacity to do something maybe bigger than you've done in the year past. I guess, what's the appetite for that? Obviously, I know the prior commentary on strategic and financial guardrails, but would love to get any more color you could provide. Thanks.

Speaker #5: Hi. Good afternoon. Thanks for taking the questions here. Just one on my end, and I don't mean to beat a dead horse here on capital allocation, but at 1.6 times leverage, it feels like you guys have the capacity to do something maybe bigger than you've done in your past.

Speaker #5: So I guess what's the appetite for that? Obviously, I know the prior commentary on strategic and financial guardrails, but we'll love to get any more color you can provide.

Speaker #5: Thanks.

Speaker #1: Yeah. Sam, thanks for the question. And here's the way I guess we're thinking about it, right? I mean, I think the answer is there is an appetite for some things that could be slightly larger from some of the things that this company's done in the past.

Martha Aronson: Yeah, Sam, thanks for the question. You know, here's the way I guess we're thinking about it, right? I mean, I think the answer is, you know, there is an appetite for some things that could be slightly larger from some of the things that, you know, this company's done in the past. Again, it's gotta make good sense. We are gonna be disciplined about it, but, you know, we do wanna continue to be a growth company. You know, we believe we've still got lots of opportunity to be out helping patients. If we're gonna continue to, you know, have the kind of growth that we'd like to have, I think you can also do some math, right?

Speaker #1: Again, it's got to make it's got to make good sense. We are going to be disciplined about it, but we do want to continue to be a growth company.

Martha Aronson: Again, it's gotta make good sense. We are gonna be disciplined about it, but, you know, we do wanna continue to be a growth company. You know, we believe we've still got lots of opportunity to be out helping patients. If we're gonna continue to, you know, have the kind of growth that we'd like to have, I think you can also do some math, right?

Speaker #1: We believe we've still got lots of opportunity to be out helping patients. And so if we're going to continue to have the kind of growth that we'd like to have, I think you can also do some math, right, that says if we're going to be inquisitive it might make sense to do some things that are slightly larger.

Martha Aronson: That says, you know, if we're gonna be acquisitive, it might make sense to do some things that are slightly larger. I do not mean a transformative deal by any means, but I think, you know, tuck in or slightly larger than tuck in, depending on how you define these things, would be reasonable for you to think about.

Speaker #1: So I do not mean a transformative deal by any means. But I think tuck in or slightly larger than tuck in, depending on how you define these things, would be reasonable for you to think about.

Speaker #2: Thank you. At this time, I would now like to turn the conference back over to Martha Aronson for closing remarks.

Operator: Thank you. At this time, I would now like to turn the conference back over to Martha Aronson for closing remarks.

Speaker #1: Thanks very much. Again, I just want to thank all of our hardworking employees, all around the world, and thank our shareholders and our investors for your interest in Merit Medical.

Martha Aronson: Thanks very much. Again, I just wanna thank all of our hardworking employees all around the world and thank our shareholders and our investors for your interest in Merit Medical. Have a great day.

Speaker #1: So have a great day.

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

Q4 2025 Merit Medical Systems Inc Earnings Call

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