Q2 2026 Merit Medical Systems Inc Earnings Call

July 30, 2026

Operator: Please stand by. Welcome to Merit Medical Systems' Q2 2026 Earnings Conference Call. At this time, all participants have been placed in listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Martha Aronson, Merit Medical Systems' President and Chief Executive Officer.

Speaker #1: call is being recorded and that the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Martha Aronson, MERIT MEDICAL SYSTEMS president and chief executive officer.

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. Welcome everyone. I am joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer, and Brian Lloyd, our Chief Legal Officer and Corporate Secretary. Brian, would you mind taking us through the safe harbor statements, please?

Speaker #2: Brian, would you mind taking us through the safe harbor statements, please?

Speaker #3: Thanks, 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: Thanks, 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. In addition, any forward-looking statements represent our views only as of today, 30 July 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 sections 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.

Speaker #3: In addition, any forward-looking statements represent our views only as of today July 30, 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 sections entitled "Cautionary Statement Regarding Forward-Looking Statements" in today's press release and presentation for important information regarding such statements.

Speaker #3: 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.

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 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 U.S. GAAP measures is included in today's press release and presentation furnished to the SEC under Form 8-K.

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." Readers should consider non-GAAP financial measures in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP.

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: 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.

Speaker #3: I will now turn the call back to Martha.

Speaker #2: Let me start with a brief agenda of what we will cover during our prepared remarks. I will begin with a brief summary of the second quarter financial results.

Martha Aronson: Let me start with a brief agenda of what we will cover during our prepared remarks. I will begin with a brief summary of the Q2 financial results. I will discuss several areas of operating and strategic planning progress in Q2. Raul will provide a more in-depth review of the quarterly financial results, as well as our financial guidance for 2026, which we updated in today's press release. We will open the call for your questions. Beginning with a review of our Q2 results. For avoidance of doubt, all growth figures are on a constant currency basis unless otherwise noted. We reported total revenue of $418.8 million, up 10% year over year on a GAAP basis, and up 9% year over year on a constant currency basis.

Speaker #2: Then I will discuss several areas of operating and strategic planning progress in Q2. Raul will then provide a more in-depth review of the quarterly financial results, as well as our financial guidance for 2026, which we updated in today's press release.

Speaker #2: Then we will open the call for your questions. Beginning with a review of our second quarter results, for avoidance of doubt, all growth figures are on a constant currency basis unless otherwise noted.

Speaker #2: We reported total revenue of $418.8 million up 10% year over year on a GAAP basis and up 9% year over year on a constant currency basis.

Speaker #2: Our constant currency revenue results exceeded the high end of the expectations that we outlined on the Q1 2026 earnings call. Second quarter total constant currency growth was driven by 9% organic growth and, to a lesser extent, contributions from our acquisitions of Biolife and the C2 cryo balloon device, both of which exceeded the high end of our expectations.

Martha Aronson: Our constant currency revenue results exceeded the high end of the expectations that we outlined on the Q1 2026 earnings call. Q2 total constant currency growth was driven by 9% organic growth and, to a lesser extent, contributions from our acquisitions of BioLife and the C2 CryoBalloon device, both of which exceeded the high end of our expectations. Our guidance for Q2 called for an acceleration in organic growth from the 3.7% we reported in Q1. We were pleased to deliver strong organic growth that not only exceeded the high end of our expectations, but also represents the strongest quarterly organic growth the company has delivered in three years. With respect to the profitability performance in Q2, we delivered financial results that significantly exceeded expectations. Our non-GAAP operating margin increased 142 basis points year over year to 22.6%.

Speaker #2: Our guidance for Q2 called for an acceleration in organic growth from the 3.7% we reported in Q1. We were pleased to deliver strong organic growth that not only exceeded the high end of our expectations but also represents the strongest quarterly organic growth the company has delivered in three years.

Speaker #2: With respect to the profitability performance in Q2, we delivered financial results that significantly exceeded expectations. Our non-GAAP operating margin increased 142 basis points year over year to 22.6%.

Speaker #2: Our non-GAAP EPS increased 18% year over year, and we generated nearly $52 million of free cash flow. Importantly, our financial results included a benefit from tariff refunds in Q2.

Martha Aronson: Our non-GAAP EPS increased 18% year over year, and we generated nearly $52 million of free cash flow. Importantly, our financial results included a benefit from tariff refunds in Q2. Excluding this benefit, our Q2 non-GAAP operating margin and non-GAAP EPS results exceeded the high end of our guidance for Q2. I want to congratulate our team members all around the world. The stellar growth and profitability performance delivered in Q2 is a direct result of their efforts. They continue to stay focused on our current three-year strategic plan, which we refer to as Continued Growth Initiatives, or CGI, and most importantly, they demonstrate a commitment to our customers each day. We have increased our 2026 revenue and non-GAAP earnings per share guidance to reflect the stronger than expected results over the H1 of 2026.

Speaker #2: Excluding this benefit, our second quarter non-GAAP operating margin and non-GAAP EPS results exceeded the high end of our guidance for the second quarter. I want to congratulate our team members all around the world.

Speaker #2: The stellar growth and profitability performance delivered in Q2 is a direct result of their efforts. They continue to stay focused on our current three-year strategic plan, which we refer to as continued growth initiatives or CGI, and most importantly, they demonstrate a commitment to our customers each day.

Speaker #2: We have increased our 2026 revenue and non-GAAP earnings per share guidance to reflect the stronger-than-expected results over the first half of 2026. We remain confident in our team's ability to execute, deliver attractive constant currency growth, improve profitability, and generate solid cash flow this year.

Martha Aronson: We remain confident in our team's ability to execute, deliver attractive constant currency growth, improve profitability, and generate solid cash flow this year. Our organization is aligned around our priorities for 2026, specifically to drive strong execution around the globe and to successfully complete our CGI program, which includes our previously disclosed financial targets for the three-year period ending 31 December 2026. Turning now to a brief update on our progress with acquisition integrations. First, we have made considerable progress in our integration of Viewpoint Medical, the strategic acquisition in our oncology platform that we announced on 1 April. By way of reminder, Viewpoint Medical manufactures the OneMark detection imaging system and OneMark tissue markers. This unique ultrasound-enhanced technology offers an innovative solution to localize more lesions at the time of biopsy, representing an estimated 1.3 million procedures annually in the United States alone.

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

Speaker #2: Turning now to a brief update on our progress with acquisition integrations. First, we have made considerable progress in our integration of Viewpoint Medical, the strategic acquisition in our oncology platform that we announced on April 1.

Speaker #2: By way of reminder, Viewpoint Medical manufactures the OneMark detection imaging system and OneMark tissue markers. This unique, ultrasound-enhanced technology offers an innovative solution to localize more lesions at the time of biopsy, representing an estimated 1.3 million procedures annually in the United States alone.

Speaker #2: This acquisition expands our portfolio of therapeutic oncology products dedicated to the diagnosis and localization of breast and soft tissue. We have managed the multiple workstreams we prioritized in preparation for our planned U.S. commercial launch in July, including building the requisite inventory, finalizing our marketing and sales strategies, and training our U.S. field team.

Martha Aronson: This acquisition expands our portfolio of therapeutic oncology products dedicated to the diagnosis and localization of breast and soft tissue tumors. The team has managed the multiple work streams we prioritized in preparation for our planned US commercial launch in July, including building the requisite inventory, finalizing our marketing and sales strategies, and training our US field team. This is an exciting time for our oncology team. The launch of the OneMark system follows the commercial launch of Merit's SCOUT MD technology in late May. The combination of SCOUT and OneMark provides physicians with localization options during the initial diagnostic biopsy, which may reduce the need for a separate procedure to mark the location of the tumor prior to surgery. We are pleased with the initial response from the marketplace following these commercial introductions.

Speaker #2: This is an exciting time for our oncology team. The launch of the OneMark system follows the commercial launch of Merit’s SCOUT MD technology in late May.

Speaker #2: The combination of SCOUT and OneMark provides physicians with localization options during the initial diagnostic biopsy, which may reduce the need for a separate procedure to mark the location of the tumor prior to surgery.

Speaker #2: We are pleased with the initial response from the marketplace following these commercial introductions. The MERIT oncology story is resonating with clinicians. And that is, you can use OneMark for all biopsies and you can select SCOUT MD when advanced localization is needed.

Martha Aronson: The Merit Oncology story is resonating with clinicians. You can use OneMark for all biopsies, and you can select SCOUT MD when advanced localization is needed. Together, they create a comprehensive breast care offering spanning diagnosis, localization, and surgery. The strategic rationale for this acquisition is compelling, and the financial rationale is both attractive and consistent with our Continued Growth Initiatives program. We believe this acquisition represents another example of Merit selectively investing to expand our product portfolio in key strategic markets that leverage our existing commercial footprint. Importantly, the integrations of BioLife and the C2 CryoBalloon have progressed meaningfully over the H1 of 2026 as well.

Speaker #2: Together, they create a comprehensive breast care offering spanning diagnosis, localization, and surgery. The strategic rationale for this acquisition is compelling. And the financial rationale is both attractive and consistent with our continued growth initiatives program.

Speaker #2: We believe this acquisition represents another example of MERIT's selectively investing to expand our product portfolio in key strategic markets that leverage our existing commercial footprint.

Speaker #2: Importantly, the integrations of Biolife and the C2 cryo balloon have progressed meaningfully over the first half of 2026 as well. We acquired Biolife in May of 2025, adding unique, patented hemostatic devices to our portfolio, most notably STATSEAL.

Martha Aronson: We acquired Biolife in May of 2025, adding unique patented hemostatic devices to our portfolio, most notably StatSeal. These products are effective, differentiated hemostatic solutions for percutaneous devices with a broad range of clinical applications, including vascular closure and indwelling catheter bleeding complications. Adding StatSeal to Merit's hemostatic portfolio is intended to provide healthcare partners with an additional effective solution that complements a wide range of percutaneous procedures, including interventional radiology and cardiology, dialysis, electrophysiology, biopsy, and drainage. Biolife operations have been fully integrated within Merit, and their standalone manufacturing facility has requisite capacity to meet our growth objectives. The team continues to execute on our commercial strategy, including launches in markets outside the US.

Speaker #2: These products are effective, differentiated hemostatic solutions for percutaneous devices, with a broad range of clinical applications, including vascular closure and indwelling catheter bleeding complications.

Speaker #2: Adding STATSEAL to Merit’s hemostatic portfolio is intended to provide healthcare partners with an additional, effective solution that complements a wide range of percutaneous procedures, including interventional radiology and cardiology, dialysis, electrophysiology, biopsy, and drainage.

Speaker #2: Biolife operations have been fully integrated within MERIT and their standalone manufacturing facility has requisite capacity to meet our growth objectives. The team continues to execute on our commercial strategy, including launches in markets outside the US.

Speaker #2: Revenue contributions from our acquisition of Biolife exceeded our expectations in the second quarter and first half of 2026, and we now expect annualized revenue of approximately $23 million this year versus our original expectation of $18 to $20 million.

Martha Aronson: Revenue contributions from our acquisition of Biolife exceeded our expectations in the Q2 and H1 of 2026, and we now expect annualized revenue of approximately $23 million this year versus our original expectation of $18 to 20 million. The integration of our acquisition of the C2 CryoBalloon and related technology from Pentax Medical last November is also progressing well. The C2 CryoBalloon treats Barrett's esophagus, as well as a less common vascular disorder known as GAVE, or gastric antral vascular ectasia, by freezing and eliminating abnormal cells while still maintaining the integrity of surrounding tissue structures. This acquisition strengthened our position in the multibillion-dollar gastroenterology market and provides opportunities to treat more patients from the effects of chronic gastroesophageal reflux disease, or GERD. Production has been transferred to our South Jordan facility, and we have added an additional production line to support future demand.

Speaker #2: The integration of our acquisition of the C2 Cryo Balloon and related technology from Pentax Medical last November is also progressing well. The C2 Cryo Balloon treats Barrett's esophagus, as well as a less common vascular disorder known as GAVE, or gastric antral vascular ectasia syndrome.

Speaker #2: By freezing and eliminating abnormal cells while still maintaining the integrity of surrounding tissue structures, this acquisition strengthened our position in the multibillion-dollar gastroenterology market and provides opportunities to treat more patients suffering from the effects of chronic gastroesophageal reflux disease, or GERD.

Speaker #2: Production has been transferred to our South Jordan facility and we have added an additional production line to support future demand. Revenue contributions from this acquisition exceeded our expectations in the second quarter and first half of 2026, and we continue to expect revenue in the range of approximately $8 to $9 million on an annualized basis.

Martha Aronson: Revenue contributions from this acquisition exceeded our expectations in the Q2 and H1 of 2026, and we continue to expect revenue in the range of approximately $8 to 9 million on an annualized basis. While relatively small, this acquisition represents an important strategic transaction that not only expands the portfolio of solutions our endoscopy sales team has to offer customers, but also positions the endoscopy platform to accelerate growth and gain market share in the coming years. I would like to highlight three other noteworthy developments from our Q2 before turning the call over to Raul. First, on 19 May, we announced that shareholders elected Scott Ward to the company's board of directors at Merit's annual meeting. Scott brings more than 40 years of experience in the medical device industry, including nearly three decades at Medtronic, where he held numerous senior leadership roles.

Speaker #2: While relatively small, this acquisition represents an important strategic transaction that not only expands the portfolio of solutions our endoscopy sales team has to offer customers, but also positions the endoscopy platform to accelerate growth and gain market share in the coming years.

Speaker #2: I would like to highlight three other noteworthy developments from our second quarter before turning the call over to Raul. First, on May 19th, we announced that shareholders elected Scott Ward to the company's board of directors at MERIT's annual meeting.

Speaker #2: Scott brings more than 40 years of experience in the medical device industry, including nearly three decades at Medtronic, where he held numerous senior leadership roles.

Speaker #2: He most recently served as CEO, President, and Chairman of Cardiovascular Systems, Inc., up until its acquisition by Abbott. Several of his roles were in markets where MERIT competes today.

Martha Aronson: He most recently served as CEO, president, and chairman of Cardiovascular Systems, Inc., up until its acquisition by Abbott. Several of his roles were in markets where Merit competes today. Scott also brings extensive experience in both venture capital and private equity. Merit's board of directors has appointed Scott to serve on its governance and sustainability committee, as well as the finance and operating committee. Scott's deep medical device experience and proven leadership track record will bring an invaluable perspective as we continue to build on our foundation and advance our strategy. Second, as discussed on our recent investor calls, during 2026, in addition to staying focused on delivering each quarter, we are developing our strategic plan for the period of fiscal years 2027 through 2029. While doing this important work, our team remains focused on delivering our Continued Growth Initiative commitments.

Speaker #2: Scott also brings extensive experience in both venture capital and private equity. MERIT's board of directors has appointed Scott to serve on its Governance and Sustainability Committee as well as the Finance and Operating Committee.

Speaker #2: Scott's deep medical device experience and proven leadership track record will bring an invaluable perspective as we continue to build on our foundation and advance our strategy.

Speaker #2: Second, as discussed on our recent investor calls, during 2026, in addition to staying focused on delivering each quarter, we are developing our strategic plan for the period of fiscal years 2027 through 2029.

Speaker #2: While doing this important work, our team remains focused on delivering on 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%, a non-GAAP operating margin in the range of 20% to 22%, and cumulative free cash flow generation of more than $400 million.

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 are tracking nicely toward these CGI financial targets. Let me share with you a bit more about our strategic plan work. During Q1, we took time to align with our top global leaders on where we felt our strengths were as a company and where we felt we wanted to devote more focus. We took the pulse of these leaders with belief audits and converged on several key themes.

Speaker #2: As our 2026 financial guidance indicates, we are tracking nicely toward these CGI financial targets. Let me share with you a bit more about our strategic plan work.

Speaker #2: During the first quarter, we took time to align with our top global leaders on where we felt our strengths were as a company and where we felt we wanted to devote more focus.

Speaker #2: We took the pulse of these leaders with belief audits and converged on several key themes. We came away with multiple workstreams focused on our drivers of growth for the future, our optimal organizational structure, and necessary leadership capabilities for the future, and our systems and processes necessary to grow.

Martha Aronson: We came away with multiple work streams focused on our drivers of growth for the future, our optimal organizational structure and necessary leadership capabilities for the future, and our systems and processes necessary to grow. During Q2, our work stream leaders collected additional data on our global markets and engaged in dialogue and debate about our product pipeline. Importantly, each work stream engaged across functions and geographies to capture key stakeholder perspectives. While doing so, we continued our work on SKU rationalization, we are examining our registrations around the world for additional rationalization opportunities. We also worked on building out our M&A playbook and broader capital allocation strategy. Now in Q3, we are rolling up our global forecasts, prioritizing our investment opportunities in both our product pipeline and potential tuck-in acquisitions. Alongside that work, our efforts around optimal organizational structure, productivity, and efficiency are well underway.

Speaker #2: During the second quarter, our workstream leaders collected additional data on our global markets and engaged in dialogue and debate about our product pipeline. Importantly, each workstream engaged across functions and geographies to capture key stakeholder perspectives.

Speaker #2: While doing so, we continued our work on SKU rationalization, and we are examining our registrations around the world for additional rationalization opportunities. We also worked on building out our M&A playbook and broader capital allocation strategy.

Speaker #2: Now in Q3, we are rolling up our global forecasts, prioritizing our investment opportunities in both our product pipeline and potential tuck-in acquisitions. Alongside that work, our efforts around optimal organizational structure, productivity, and efficiency are well underway.

Speaker #2: As we mapped our company's core competencies with where we feel our growth opportunities lie, there is a strong correlation. Within each platform, we are highlighting where we feel we have the right to win—whether we are focused on high-growth procedures where we offer foundational products, or an entire procedure where we offer a suite of both foundational and therapeutic products.

Martha Aronson: As we mapped our company's core competencies with where we feel our growth opportunities lie, there is a strong correlation. Within each platform, we are highlighting where we feel we have the right to win Whether we are focused on high-growth procedures where we offer foundational products, or an entire procedure where we offer a suite of both foundational and therapeutic products. At the same time, we're asking ourselves tough questions about product families and whether they still make sense to be part of our longer-term portfolio. In key geographies around the world, we are defining how best to win and what it will take to do so. We look forward to continuing our strategic planning process, we intend to share the key highlights of this strategy and new three-year financial targets related to this strategic plan following the completion of our current CGI program.

Speaker #2: At the same time, we're asking ourselves tough questions about product families and whether they still make sense to be part of our longer-term portfolio.

Speaker #2: In key geographies around the world, we are defining how best to win and what it will take to do so. We look forward to continuing our strategic planning process, and we intend to share the key highlights of this strategy and new three-year financial targets related to this strategic plan following the completion of our current CGI program.

Speaker #2: I'm proud of the team for not only delivering strong execution and better-than-expected financial results over the first half of fiscal 2026, but also engaging so fully with this important strategic planning process.

Martha Aronson: I'm proud of the team for not only delivering strong execution and better than expected financial results over the H1 of fiscal 2026, but also engaging so fully with this important strategic planning process. Finally, I want to highlight an enhancement to our presentation of revenue in our Q2 earnings press release. As discussed on our Q1 earnings call, we transitioned our revenue reporting to focus on two primary product categories: foundational and therapeutic. This decision aligns how we talk about the business externally with how we plan to execute each of our underlying platforms. It also enables greater ownership and accountability for each platform. As part of this transition in reporting, we provided 4 years of historical revenue for the 8 platforms within the foundational and therapeutic categories.

Speaker #2: Finally, I want to highlight an enhancement to our presentation of revenue in our second quarter earnings press release. As discussed on our first quarter earnings call, we transitioned our revenue reporting to focus on two primary product categories: foundational and therapeutic.

Speaker #2: This decision aligns how we talk about the business externally with how we plan to execute each of our underlying platforms. It also enables greater ownership and accountability for each platform.

Speaker #2: As part of this transition and reporting, we provided four years of historical revenue for the eight platforms within the Foundational and Therapeutic categories. We provided this level of detail in the interest of transparency and to help our stakeholders better understand our business today, along with the underlying growth drivers of our business in recent years.

Martha Aronson: We provided this level of detail in the interest of transparency and to help our stakeholders better understand our business today, along with the underlying growth drivers of our business in recent years. As we continue to share the Merit Medical story for both longstanding as well as new investors, we continually look for ways to help people understand our complex business. We have decided to share the global platform revenue results each quarter. My hope is that investors will see more clearly the value of our various platforms and how they contribute to our steady growth. With that, I'll turn the call over to Raul for an in-depth review of our quarterly financial results and our updated financial guidance for 2026. Raul?

Speaker #2: As we continue to share the Merit Medical story, for both long-standing as well as new investors, we continually look for ways to help people understand our complex business.

Speaker #2: So, we have decided to share the global platform revenue results each quarter. My hope is that investors will see more clearly the value of our various platforms and how they contribute to our steady growth.

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

Speaker #2: Raul?

Speaker #1: Thank you, Martha. I will start with the detailed review of our revenue results in the second quarter. Unless otherwise stated, all growth rates are approximated and presented on both a year-over-year and constant-currency basis.

Raul Parra: Thank you, Martha. I will start with a detailed review of our revenue results in Q2. Note, unless otherwise stated, all growth rates are approximated and presented on both a year-over-year and constant currency basis. Q2 total revenue increased $33.4 million or 9%, exceeding the high end of the expectations we outlined on our Q1 call. Our total revenue increased 9% on an organic constant currency basis, exceeding the high end of our expectations by approximately 210 basis points. As detailed in our earnings press release, organic constant currency revenue excludes revenue from acquisitions in Q2 2026 of $4.7 million and revenue from our divested DualCap product line of $5.3 million from Q2 2025.

Speaker #1: Second quarter, total revenue increased 33.4 million, or 9 percent. Exceeding the high end of the expectations we outlined on our Q1 call. Our total revenue increased 9 percent on an organic, constant-currency basis, exceeding the high end of our expectations by approximately $210 basis points.

Speaker #1: As detailed in our earnings press release, organic, constant-currency revenue excludes revenue from acquisitions in the second quarter of 2026 of $4.7 million and revenue from our divested dual-cap product line of $5.3 million from the second quarter of 2025.

Speaker #1: By geography, our total revenue in Q2 was primarily driven by growth in the US, where sales increased $26.1 million, or 12 percent, and international sales increased $7.3 million, or 5 percent.

Raul Parra: By geography, our total revenue in Q2 was primarily driven by growth in the US, where sales increased $26.1 million or 12%, and international sales increased $7.3 million or 5%. Turning to a review of our revenue results by product category. Q2 total revenue growth was notably balanced between our two product categories. Sales of foundational products increased $17 million or 6%, and sales of therapeutic products increased $16.4 million or 14%. In terms of organic growth in Q2, excluding the contributions from acquired products of $2.4 million in the current period and divested products in the prior period of $5.3 million, sales of foundational products increased 7.8%. Excluding $2.3 million of acquired product revenue, sales of therapeutic products increased 11.7%.

Speaker #1: Turning to a review of our revenue results by product category. Second quarter, total revenue growth was notably balanced between our two product categories. Sales of foundational products increased 17 million or 6 percent, and sales of therapeutic products increased 16.4 million or 14 percent.

Speaker #1: In terms of organic growth, in Q2—excluding the contributions from acquired products of $2.4 million in the current period and divested products in the prior period of $5.3 million—sales of foundational products increased 7.8%, excluding $2.3 million of acquired product revenue. Sales of therapeutic products increased 11.7%.

Speaker #1: Organic growth in the foundational product category was driven primarily by our vascular intervention and access platforms again in the second quarter. We also experienced notable improvement in OEM growth trends, as expected.

Raul Parra: Organic growth in the foundational product category was driven primarily by our vascular intervention and access platforms again in Q2. We also experienced notable improvement in OEM growth trends as expected. Organic growth in the therapeutic product category was driven by strong growth in our cardiac therapies and endoscopy platforms, and contributions from solid growth in our vascular interventions and oncology platforms. Growth in the therapeutic product category also benefited from the improvement in OEM sales trends mentioned earlier. A couple items to bear in mind when evaluating our constant currency growth results detailed in the presentation of revenue by platform in our earnings release. First, as noted earlier, we were pleased to see improving growth trends in our OEM business in Q2. Our total OEM sales increased 15% year-over-year in Q2.

Raul Parra: Organic growth in the foundational product category was driven primarily by our vascular intervention and access platforms again in Q2. We also experienced notable improvement in OEM growth trends as expected. Organic growth in the therapeutic product category was driven by strong growth growth in our cardiac therapies and endoscopy platforms, and contributions from solid growth in our vascular interventions and oncology platforms. Growth in the therapeutic product category also benefited from the improvement in OEM sales trends mentioned earlier. A couple items to bear in mind when evaluating our constant currency growth results detailed in the presentation of revenue by platform in our earnings release. First, as noted earlier, we were pleased to see improving growth trends in our OEM business in Q2. Our total OEM sales increased 15% year-over-year in Q2.

Speaker #1: Organic growth in the therapeutic product category was driven by strong growth in our cardiac therapies and endoscopy platforms and contributions from solid growth in our vascular interventions and oncology platforms.

Speaker #1: Growth in the therapeutic product category also benefited from the improvement in OEM sales trends mentioned earlier. A couple items to bear in mind when evaluating our constant-currency growth results detailed in the presentation of revenue by platform in our earnings release.

Speaker #1: First, as noted earlier, we were pleased to see improving growth trends in our OEM business in the second quarter. Our total OEM sales increased 15 percent year-over-year in Q2.

Speaker #1: We expect to see continued improvement in OEM year-over-year growth trends over the second half of 2026. Second, sales of procedural solution products declined 12 percent on a constant-currency basis.

Raul Parra: We expect to see continued improvement in OEM year-over-year growth trends over the H2 2026. Second, sales of procedural solution products declined 12% on a constant currency basis. This is entirely due to our divestiture of the DualCap product line. Excluding this impact, procedural solutions sales increased 5% on an organic basis in Q2. Finally, sales of renal therapies products declined 2%, but increased approximately 10%, excluding the impact to our business resulting from the product recall discussed on our Q1 call. 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 the Q2 2026, and all growth rates are approximated and presented on a year-over-year basis.

Speaker #1: This is entirely due to our divestiture of the dual-cap product line. Excluding this impact, procedural solutions sales increased 5 percent on an organic basis in Q2.

Speaker #1: Finally, sales of renal therapies products declined 2 percent, but increased approximately 10 percent excluding the impact to our business resulting from the product recall discussed on our Q1 call.

Speaker #1: 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 the second quarter of 2026, and all growth rates are approximated and presented on a year-over-year basis.

Speaker #1: 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.

Raul Parra: 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 15%. Gross margin was 55.8%, up 262 basis points year-over-year. Excluding $6.9 million of refunds related to previously paid IEEPA tariffs recognized within cost of sales, gross profit increased 12% and our gross margin was 54.2%, up 98 basis points year-over-year. Gross margin, excluding tariff refunds, exceeded the high end of our expectations. This performance is particularly impressive given the approximately $2 million incremental impact from tariffs incurred year-over-year, representing an approximately 50 basis point impact to gross margin in that period. Operating expenses increased 14%.

Speaker #1: Gross profit increased 15 percent. Gross margin was 55.8 percent, up 262 basis points year-over-year. Excluding $6.9 million of refunds related to previously paid IEPA tariffs, recognized within the cost of sales, gross profit increased 12 percent, and our gross margin was 54.2 percent, up 98 basis points year-over-year.

Speaker #1: Gross margin excluding tariff refunds exceeded the high end of our expectations. This performance is particularly impressive given the approximately 2 million incremental impact from tariffs incurred year-over-year.

Speaker #1: Representing approximately 50 basis point impact to gross margin in that period. Operating expenses increased 14 percent, the increase in operating expenses was driven primarily by a 15.5 million or 16 percent increase in SG&A expenses and, to a lesser extent, a 1.2 million or 5 percent increase in R&D expense, compared to the prior year period.

Raul Parra: The increase in operating expenses was driven primarily by a $15.5 million or 16% increase in SG&A expenses, and to a lesser extent, a $1.2 million or 5% increase in R&D expense compared to the prior year period. Total operating income was $94.6 million. Excluding the tariff refund, operating income increased $6.8 million or 8% from the prior year period to $87.7 million. Our operating margin, excluding refund, was 20.9% compared to 21.2% in the prior year period, a decrease of 22 basis points year-over-year. Operating margin, excluding refund, exceeded the high end of our expectations by approximately 56 basis points. Q2 other expense net was $2.3 million, compared to $2.3 million for the comparable period last year. Q2 net income was $71.3 million or $1.19 per share, compared to $61 million or $1.01 per share in the prior year period.

Speaker #1: Total operating income was $94.6 million, excluding the tariff refund, operating income increased 6.8 million or 8 percent from the prior year period to $87.7 million.

Speaker #1: Our operating margin excluding refund was 20.9%, compared to 21.2% in the prior year period, a decrease of 22 basis points year-over-year. Operating margin excluding refund exceeded the high end of our expectations by approximately 56 basis points.

Speaker #1: Second quarter other expense, net, was $2.3 million, compared to $2.3 million for the comparable period last year. Second quarter net income was $71.3 million, or $1.19 per share, compared to $61 million, or $1.01 per share, in the prior year period.

Speaker #1: Excluding the after-tax benefit from tariff refund of approximately 9 cents, second quarter EPS was $1.10, exceeding the high end of our guidance range by 9 cents.

Raul Parra: Excluding the after-tax benefit from tariff refund of approximately $0.09, Q2 EPS was $1.10, exceeding the high end of our guidance range by $0.09. Turning to a review of our balance sheet and financial condition. As of 30 June 2026, we had cash and cash equivalents of $448.7 million, total debt obligations of $747.5 million, and available borrowing capacity of approximately $697 million. Our net leverage ratio as of 30 June was 1.6x on an adjusted basis. Our cash and cash equivalents at 30 June were essentially flat year to date, driven by a combination of strong free cash flow generation of $76.6 million and $25.5 million of proceeds from our divestiture of the DualCap product line, offset partially by $90 million in cash used for the Viewpoint Medical acquisition. Turning to a review of our fiscal year 2026 financial guidance.

Speaker #1: Turning to a review of our balance sheet and financial condition: as of June 30, 2026, we had cash and cash equivalents of $448.7 million, total debt obligations of $747.5 million, and available borrowing capacity of approximately $697 million.

Speaker #1: Our net leverage ratio as of June 30th was 1.6 times on an adjusted basis. Our cash and cash equivalents at June 30th were essentially flat year-to-date, driven by a combination of strong free cash flow generation of $76.6 million and $25.5 million of proceeds from our divestiture of the DualCap product line, offset partially by $90 million in cash used for the Viewpoint Medical acquisition.

Speaker #1: Turning to a review of our fiscal year 2026 financial guidance. For the 12-months ended, ending December 31st, 2026, we now expect total gap net revenue growth in the range of 7.6 percent to 8.4 percent year-over-year and 6.9 to 7.6 percent year-over-year on a constant-currency basis, excluding an expected 80 basis point tailwind to gap growth from changes in foreign currency exchange rates.

Raul Parra: For the 12 months ending 31 December 2026, we now expect total GAAP net revenue growth in the range of 7.6% to 8.4% year over year and 6.9% to 7.6% 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. There are a few factors to consider when evaluating our projected constant currency revenue growth range for 2026, including, first, the increase in our revenue guidance range reflects the flow-through of our better-than-expected results in Q2. Second, our constant currency growth range assumes sales of foundational products increase in the mid-single digits year over year and sales of therapeutic products increase in the high single to low double digits year over year. Third, we now expect organic constant currency growth in the range of 6.9% and 7.5%, compared to 6% to 7% previously.

Speaker #1: There are a few factors to consider when evaluating our projected constant-currency revenue growth range for 2026, including: First, the increase in our revenue guidance range reflects the flow-through of our better-than-expected results in Q2.

Speaker #1: Second, our constant-currency growth range assumes sales of foundational products increased in the mid-single digits year-over-year and sales of therapeutic products increased in the high-single to low-double digits year-over-year.

Speaker #1: Third, we now expect organic constant-currency growth in the range of 6.9 and 7.5 percent. Compared to 6 to 7 percent previously. Our organic growth guidance excludes revenue from acquisitions in the range of approximately $18 million to $20 million, compared to $17 to $20 million previously.

Raul Parra: Our organic growth guidance excludes revenue from acquisitions in the range of approximately $18 million to $20 million, compared to $17 to $20 million previously, and product sales and royalty revenue from our divestiture of DualCap of $20.3 million in 2025 and approximately $1.6 million of sales in Q1 2026. Fourth, our total net revenue guidance for fiscal year 2026 continues to assume US revenue from the sales of Wrapsody CIE of approximately $7 million. With respect to profitability guidance for 2026, we now expect non-GAAP diluted earnings per share in the range of $4.25 to $4.35, up 11% to 14%, compared to $4.01 to $4.15 previously.

Speaker #1: And product sales and royalty revenue from our divestiture of dual-cap of $20.3 million in 2025 and approximately $1.6 million of sales in Q1, 2026.

Speaker #1: Fourth, our total net revenue guidance for fiscal year 2026 continues to assume U.S. revenue from the sales of RAPSODY CIE of approximately $7 million.

Speaker #1: With respect to profitability guidance for 2026, we now expect non-gap diluted earnings per share in the range of $4.25 to $4.35, up 11 to 14 percent, compared to $4.01 to $4.15 previously.

Speaker #1: For avoidance of doubt, our 2026 non-gap EPS guidance now assumes a 12-month tariff impact of approximately $16 million or 21 cents per share, compared to $15 million or 19 cents previously and $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 now assumes a 12-month tariff impact of approximately $16 million or $0.21 per share compared to $15 million or $0.19 previously, and $9 million or $0.12 per share realized during the last eight months of 2025. Finally, we would like to provide additional transparency related to our growth and profitability expectations for Q3 2026. Specifically, we expect our total revenue in the range of $408 to $413 million, representing growth of 6% to 8% year over year on a GAAP basis, and up approximately 6% to 7.5% on a constant currency basis. Note, our Q3 organic constant currency growth is expected in the range of 7% to 8%, excluding revenue from acquisitions in the range of approximately $2.8 to $3.8 million and revenue from our divestiture of DualCap of $5.2 million in the prior year period.

Speaker #1: Finally, we would like to provide additional transparency related to our growth and profitability expectations for the third quarter of 2026. Specifically, we expect our total revenue to be in the range of $408 million to $413 million, representing growth of 6% to 8% year-over-year on a GAAP basis.

Speaker #1: And up approximately 6 to 7 and a half percent on a constant-currency basis. Note our third quarter organic constant-currency growth is expected in the range of 7 to 8 percent, excluding revenue from acquisitions of in the range of approximately 2.8 to 3.8 million and revenue from our divestiture of dual-cap of 5.2 million in the prior year period.

Speaker #1: With respect to our profitability expectations for the third quarter of 2026, we expect non-gap operating margins in the range of approximately 19.6 to 21.5 percent, compared to 19.7 percent last year.

Raul Parra: With respect to our profitability expectations for Q3 2026, we expect non-GAAP operating margins in the range of approximately 19.6% to 21.5%, compared to 19.7% last year.

Raul Parra: With respect to our profitability expectations for Q3 2026, we expect non-GAAP operating margins in the range of approximately 19.6% to 21.5%, compared to 19.7% last year. Non-GAAP EPS in the range of $0.98 to $1.08, compared to $0.92 last year. With that, I will now turn the call back to Martha for closing.

Speaker #1: And non-GAAP EPS in the range of $0.98 to $1.08, compared to $0.92 last year. With that, I will now turn the call back to Martha for closing.

Raul Parra: non-GAAP EPS in the range of $0.98 to $1.08, compared to $0.92 last year. With that, I will now turn the call back to Martha for closing.

Speaker #2: Thanks, Raul. As I reflect on my nine months since joining Merit Medical, I continue to be inspired by our global team and their commitment to customers and patients.

Martha Aronson: Thanks, Raul. As I reflect on my nine months since joining Merit Medical, I continue to be inspired by our global team and their commitment to customers and patients. This team delivered an excellent Q2 and has strong momentum as we move into the H2. I want to reiterate how pleased I am that we are on track to meet our three-year CGI goals. While staying focused on that goal, this team is putting the hard work into our global strategic plan. Simultaneously, we are integrating several acquisitions and evaluating additional tuck-in possibilities. Once again, my hat goes off to the team, and I am energized by the opportunities I see ahead to enhance our strong growth profile and to create long-term value for our shareholders. Operator, we would now like to open up the line for questions.

Speaker #2: This team delivered an excellent Q2 and has strong momentum as we move into the second half of the year. I want to reiterate how pleased I am that we are on track to meet our three-year CGI goals.

Speaker #2: And while staying focused on that goal, this team is putting the hard work into our global strategic plan. Simultaneously, we are integrating several acquisitions and evaluating additional tuck-in possibilities.

Speaker #2: Once again, my hat goes off to the team and I am energized by the opportunities I see ahead to enhance our strong growth profile and to create long-term value for our shareholders.

Speaker #2: Operator, we would now like to open up the line for questions.

Speaker #3: Thank you. Ladies and gentlemen, if you'd 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. Ladies and gentlemen, if you'd like to ask a question, please signal by pressing star one one 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 limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing star one one. Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Jason Bednar from Piper Sandler. Mr. Bednar, your line is open.

Speaker #3: We do ask that you limit yourself to one question and one follow-up. If you would like to ask additional questions, we invite you to add yourself to the queue again by pressing *11.

Speaker #3: Please stand by while we compile the Q&A roster. Our first question or comment comes from the line of Jason Bednar from Piper Sandler. Mr. Bednar, your line is open.

Jason Bednar: Hey, good afternoon. Thanks for taking the questions, congrats on a really impressive quarter, your team. I'll start big picture. Been a lot of questions across the med tech community with respect to procedure volumes, different data points, painting different pictures. With Merit posting such a strong top-line result, this seems maybe a little silly question to ask, but I'll ask it anyways. Have you seen any slowdown in procedure volumes tied to ACA subsidy changes across any of your end markets? Or do you anticipate any moderation in volumes tied to this issue when you look at the H2?

Speaker #4: Hey, good afternoon. Thanks for taking the questions, and congrats on a really impressive quarter for your team. I'll start big picture. There have been a lot of questions across the MedTech community with respect to procedure volumes.

Speaker #4: You know, different data points paint different pictures. With Merit posting such a strong top-line result, this may seem like a silly question to ask, but I'll ask it anyway.

Speaker #4: Have you seen any slowdown in procedure volumes tied to ACA subsidy changes across any of your end markets? Or do you anticipate any moderation in volumes tied to this issue when you look at the second half of the year?

Speaker #2: Yeah, Jason, thanks very much. And obviously, we've been hearing some of the various reports, as I'm sure you have as well. But we've been doing very regular checks with our field.

Martha Aronson: Yeah, Jason, thanks very much. Obviously, we've been hearing some of the various reports, as I'm sure you have as well. We've been doing very regular checks with our field. At this point, we have not seen a slowdown in procedures. Currently, that's the reports we're getting from the field. As you said, I think given the strong results from the quarter, that checks.

Speaker #2: And at this point, we have not seen a slowdown in procedures. So currently, that's the reports we're getting from the field. And as you said, I think given the strong results from the quarter, that checks.

Speaker #4: All right. Perfect. Very helpful. And then, Raul, just as I think about, you know, two Q guidance, you just you put up a smash on the on the margins this quarter is really impressive.

Jason Bednar: All right. Perfect. Very helpful. Raul, just as I think about Q2 guidance, you put up a smash on margins this quarter. It's really impressive. If we try to normalize for EPS, I think you said a $1.10 excluding those tariff refunds. Usually, you get a little bit of a step down, maybe a nickel or so, Q2 to Q3 in most normal years when I look back to past years. Your guidance range is maybe a little bit wider than I would think, a dime for Q3. What are you baking in in terms of a conservatism or the puts and takes or bottom end and top end there? Because it is a little bit of a wide EPS and wide margin range coming off of a really strong Q2.

Speaker #4: You know, if we try to normalize for EPS, I think you said $1.10, excluding those tariff refunds. Usually, you get a little bit of a step down—maybe a nickel or so—from Q2 to Q3 in most normal years.

Speaker #4: When I look when I look back to past years, your guidance range is maybe a little bit wider than I would think a dime for three Q.

Speaker #4: What are you baking in, in terms of conservatism, or, you know, the puts and takes, or, you know, the bottom end and top end there?

Speaker #4: Because it is a little bit of a wide EPS and wide margin range, coming off of a really strong two quarters.

Speaker #2: Yeah, Jason, I think just with—

Raul Parra: Yeah, Jason, I think just with the ever-evolving tariffs, right? We just had an announcement right on Friday. It's just so hard to kind of predict what's going to happen with that and when they're going to be in place. With the Section 122 still out there, obviously with NAFTA, USMCA, sorry. There's just a lot of variables. We thought just in this environment with that being out there, let's just go a little wider. Obviously feel super confident about the back half and our guidance for the year. Obviously just put up a stellar Q2. It's really just more of a reflection of just kind of the changing dynamic in tariffs that seems to come at us on a weekly basis, just a little bit of coverage there. Obviously feeling pretty optimistic about Q3 and Q4.

Speaker #5: The ever-evolving tariffs, right? I mean, we just had an announcement on Friday. It's just so hard to kind of predict what's going to happen with that and when they're going to be in place.

Speaker #5: You know, with the Section 122 still, you know, out there, obviously, with, you know, you know, NAFTA, you know, USMCA, sorry, you know, there's just a lot of variables.

Speaker #5: And we thought, you know, just in this environment, with that being out there, let's just go a little wider. Obviously, we feel super confident about the back half and our guidance for the year, and obviously, just put up a stellar second quarter.

Speaker #5: So it's really just more of a reflection of just kind of the changing dynamic in tariffs that, you know, seems to come at us like on a weekly basis.

Speaker #5: And so just a little bit of coverage there. But, you know, obviously feeling pretty optimistic about the third quarter and the fourth quarter.

Speaker #4: All right. Understood. Thanks.

Jason Bednar: All right. Understood. Thanks.

Speaker #3: Thank you. Our next question or comment comes from the line of Robbie Marcus from JP Morgan. Mr. Marcus, your line is open.

Operator: Thank you. Our next question or comment comes from the line of Robbie Marcus from JPMorgan. Mr. Marcus, your line is open.

Speaker #6: Hi, this is Lily on for Robbie. Thanks for taking the question. 9 percent organic growth is a really big number. So can you walk through what drove that strength and the sustainability of this sort of growth?

[Analyst] (JPMorgan): Hi, this is Lily on for Robbie. Thanks for taking the question. 9% organic growth is a really big number. Can you walk through what drove that strength and the sustainability of this sort of growth? How much of that was catch-up following some of the dynamics that pressured growth in the first quarter versus true underlying demand?

Speaker #6: How much of that was catch-up following some of the dynamics that pressured growth in the first quarter versus true underlying demand?

Speaker #2: Yeah, Lily, thanks very much. Look, you know, I think as we mentioned, you know, in the first quarter, you know, our OEM business is, you know, is a business that fluctuates a bit just by nature of the business.

Martha Aronson: Yeah, Lily, thanks very much. Look, I think as we mentioned, in the first quarter our OEM business is a business that fluctuates a bit just by nature of the business, and we were obviously really pleased to see a 15% uplift in the second quarter on the OEM business. We continue to see that business right annually in the sort of mid to high single-digit range. That was certainly one of the drivers. I think we also saw our access platform as well as our VI or vascular intervention platforms on the foundational side, along with cardiac therapies and endoscopy having very strong quarters on the therapeutic side. Really pretty broad-based results for the second quarter.

Speaker #2: And we were obviously really pleased to see, you know, a 15% uplift in the second quarter on the OEM business. And we continue to see that business, right, annually in the sort of mid to high single-digit range.

Speaker #2: So that was certainly, you know, one of the drivers. I think we also saw, you know, our access platform, as well as our VI, or vascular intervention platforms on the foundational side.

Speaker #2: Along with cardiac therapies and endoscopy having very strong quarters on the therapeutic side. So really pretty broad-based you know, results for the second quarter.

Speaker #5: Yeah, I mean, I'll add that it was also very balanced between, you know, our two product categories, you know, between therapeutic and foundational. So the beat was really broad-based and, you know, again, when our portfolio, you know, because it, , you know, kind of kind of the index-style portfolio that we have, when it all kind of is hitting you get these type of growth rates.

Raul Parra: Yeah. I'll add that it was also very balanced between our two product categories, between therapeutic and foundational. The beat was really broad-based. Again, when our portfolio kind of the index style portfolio that we have, when it all kind of is hitting, you get these type of growth rates. It was really exciting to see.

Speaker #5: So it was really exciting to see.

Speaker #6: Great. And maybe just to follow up on that, last time you were pointing to a continued ramp in organic growth in the back half of the year as some of the trends around supplies and Medtronic agreement, OEM improved.

[Analyst] (JPMorgan): Great. Maybe just to follow up on that, last time you were pointing to a continued ramp in organic growth in the back half of the year as some of the trends around supplies and Medtronic agreement, OEM improved. Now it looks like Q3 is going to be a slight step down on an organic basis. Do you think you've seen all of those improvements already, or is this just some conservatism? Thanks so much.

Speaker #6: Now, it looks like Q3 is going to be a slight step down on an organic basis. So, do you think you've seen all of those improvements already, or is this just some conservatism?

Speaker #6: Thanks so much.

Speaker #5: No, that's a great question. And thank you for asking it. I always had to remind everybody, there is a level of seasonality in our business with, you know, Q3 usually having a step down.

Raul Parra: No, that's a great question, and thank you for asking it. I always have to remind everybody, there is a level of seasonality in our business with Q3 usually having a step down. Now, that wasn't true last year, but most years it is. I'll always just highlight that Q1 and Q3 are typically our softer quarters from a revenue standpoint. Q2 and Q4 are our strongest. Really what you're seeing, that step down, is not that we're not confident. We're very highly confident in the business and how it's performing. It's really just that seasonality we're adjusting for.

Speaker #5: Now, that wasn't true last year, but, you know, most years it is. I'll always just highlight that, you know, Q1 and Q3 are typically our softer quarters from a revenue standpoint.

Speaker #5: Q2 and Q4 are our strongest. And so really what you're seeing, that step down is not that we're not confident. We're very highly confident in the business and how it's performing.

Speaker #5: It's really just that seasonality we're adjusting for.

Speaker #3: Thank you. Our next question or comment comes from the line of Larry Biggleson from Wells Fargo. Mr. Biggleson, your line is open.

Operator: Thank you. Our next question comes from the line of Larry Biegelsen from Wells Fargo. Mr. Biegelsen, your line is open.

Speaker #7: Hi, it's Lei calling in for Larry. Thanks for taking the questions. Just on the first one, going back to the Q3 guidance, can you dive a little bit more into the six to eight percent?

[Analyst] (Wells Fargo): Hi, it's Lei calling in for Larry. Thanks for taking the questions. Just on the first one, going back to the Q3 guidance, can you dive a little bit more into the 6% to 8%? Kind of maybe by business, what slows down a little bit seasonally in Q3 versus Q2 to get you to the 6% to 8% versus the 9% we saw in Q2? I have a follow-up.

Speaker #7: Can you maybe, by business, you know, walk through what slows down a little bit seasonally in Q3 versus Q2 to get you to the 6% to 8% versus the 9% we saw in Q2?

Speaker #7: And I have a follow-up.

Speaker #5: Yeah, again, we're not going to, you know, you know, get into the details that, you know, we guide on total revenue. Obviously, giving you some commentary on what we think Q3 will be so you guys can, you know, work your models.

Raul Parra: Yeah. We're not going to get into the details. We guide on total revenue, obviously giving you some commentary on what we think Q3 will be so you guys can work your models. It's really just the seasonality in our business that we're adjusting for. As most of you guys know, it's the summertime, doctors take time off, patients don't go in for procedures. It's very typical for us to see a step down, then a pretty strong rebound in Q4. From our standpoint, if you look at kind of the H2 of the year, we think it's pretty consistent with what we're doing for what we did with the H1. Really optimistic about how the business is doing, and we see a lot of momentum. It's really just us adjusting for that seasonality.

Speaker #5: Again, it's really just the seasonality in our business that we're adjusting for, you know, as most of you guys know, it's the summertime, you know, doctors and, you know, take time off, you know, patients, you know, don't go in for procedures.

Speaker #5: It's very typical for us to see a step down, and then a pretty strong rebound in the fourth quarter. So, you know, from our standpoint, if you look at kind of the back half of the year, we think it's pretty consistent with, you know, what we're doing—or what we did—with the first half.

Speaker #5: So again, really optimistic about how the business is doing and we see a lot of momentum. It's really just us adjusting for that seasonality.

Speaker #7: Got it. That's helpful. And for my follow-up, you know, you're absorbing obviously tariffs. There's the viewpoint dilution, the convert dilution. But you're still looking to grow EPS faster than the top line.

[Analyst] (Wells Fargo): Got it. That's helpful. For my follow-up, you're absorbing, obviously, tariffs. There's the Viewpoint dilution, the convert dilution, you're still looking to grow EPS faster than the top line. Can you just remind us what's giving you the operating leverage there? Thank you again.

Speaker #7: Can you just remind us what's giving you the operating leverage there? And thank you again.

Speaker #5: Yeah, I mean, look, it's obviously broad-based, you know, just like our revenue beat. If I'm just being honest, you know, I think when you look at obviously the performance that our sales team has put up, it's excellent.

Raul Parra: Yeah. Look, it's obviously broad-based, just like our revenue beat, if I'm just being honest. I think when you look at, obviously, the performance that our sales team has put up, it's excellent. These guys have been delivering for better part of 30-plus years, what's another quarter for them? Kudos to them for going out and just performing again. Obviously, we're in the last year of our CGI program. The progress that we continue to develop there with the programs that we have in place, you're seeing those kind of come through. Gross margin was a big part of that. When we announced CGI, we said that a big piece of it would come from gross margin, you're seeing that kind of come through.

Speaker #5: I mean, you know, these guys have been delivering for, you know, better part of 30-plus years, you know. So you know, what's another quarter for them?

Speaker #5: But you know, you know, kudos to them for going out and just, you know, performing again. You know, obviously we've had, you know, we're in the last year of our CGI program.

Speaker #5: You know, the progress that we continue to develop there, with the programs that we have in place, you're seeing those kind of come through.

Speaker #5: Gross margin was a big part of that. When we announced CGI, we said that a big piece of it would come from, you know, gross margin.

Speaker #5: And you're seeing that kind of come through. I think, you know, when you look at, you know, the gross margin specifically, I typically, you know, this wouldn't be a Merit Medical, you know, earnings call if I didn't, you know, throw the kitchen sink, you know, comment out there.

Raul Parra: I think, when you look at the gross margin specifically, this wouldn't be a Merit Medical earnings call if I didn't throw the kitchen sink comment out there. I'll throw it out there again. It really is. I'll give you guys a little more detail. It's our sales force focusing on pricing. It's them focusing on the right product mix. It's the acquisitions that are ahead of plan from a gross margin standpoint and in sales. You guys saw us tick that up a little bit. Our operations group too, right? I don't think they get as much credit as they should. It's been a really challenging, I would say, 5 years with tariffs and COVID and supply chain issues, labor shortages. You name it, they've had to deal with it. They've done some really good things.

Speaker #5: And I'll throw it out there again, but it really is. And I'll give you guys a little more detail, but you know, it's our Salesforce focusing on pricing.

Speaker #5: It's them focusing on the right, you know, product mix. It's the acquisitions, you know, that are ahead of plan from a gross margin standpoint.

Speaker #5: And sales. I mean, you guys saw us tick that up a little bit. And our operations group too, right? I mean, I don't think they get as much credit as they should.

Speaker #5: It's been a really challenging, I would say, five years with tariffs and, you know, COVID and supply chain issues, labor shortages. I mean, you name it, they've had to deal with it.

Speaker #5: But they've done some really good things. I mean, we've moved, you know, just in the last year or so, we moved one of our largest, actually the largest manufacturing department that we had to Tijuana.

Raul Parra: We've moved, just in the last year or so, we moved one of our largest, actually the largest, manufacturing department that we had to Tijuana. We're starting to see the benefits of that. We've implemented some automation. You're starting to see the labor efficiencies come through on that. We're looking at our supply chain and our distribution network and getting more inventory on the water, which is obviously less cost than air freight. You're starting to see the benefits of that. Again, it is a kind of a kitchen sink approach, and I hate describing it that way, but I just don't know how else to do it other than to say we're looking at everything. We don't want any leakage.

Speaker #5: We're starting to see the benefits of that. We've implemented some automation. You're starting to see the labor efficiencies come through on that. We're, you know, looking at our supply chain.

Speaker #5: And our distribution network, and getting more inventory on the water, which is, you know, obviously less cost than air freight. You're starting to see the benefits of that.

Speaker #5: So again, it is a kind of a kitchen sink approach. And I, you know, I hate describing it that way, but I just don't know how else to do it other than to say we're looking at everything we don't want any leakage.

Speaker #5: And this is kind of the results that you get. Because we're hyper-focused on making sure that we put a ring around the gross margin and we protect it.

Raul Parra: This is kind of the results that you get because we're hyper-focused on making sure that we put a ring around the gross margin and we protect it. Even when we see things or things come our way that we don't anticipate, like the tariffs. I don't think anybody anticipated the whipsaw of tariffs that we're seeing. Again, it's working and we're just going to continue to do it. We've been doing this for a long time. I think when you look at Foundations for Growth for that matter, and CGI, when you look at the operating margin improvement through the end of 2025, almost 850 basis points. If we hit the high end of our guidance for this year, you're looking at almost 950 basis points of operating margin improvement.

Speaker #5: Even when we see things or things come our way that we don't anticipate, right? Like the tariffs. I mean, I don't think anybody anticipated, you know, the whip sign of tariffs that we're seeing.

Speaker #5: But you know, again, it's working and we're just going to continue to do it. We've been doing this for a long time. I think when you look at foundations for growth for that matter and CGI, I mean, when you look at, you know, the operating margin improvement, you know, through the end of 2025, almost 850 basis points.

Speaker #5: You know, if we hit the high end of our guidance for this year, you're looking at almost 950 basis points of operating margin improvement.

Speaker #5: So that gross margin, we're letting it flow through while also looking at, you know, making the right investments in the business. You can see, you know, operating expenses grew.

Raul Parra: That gross margin, we're letting it flow through while also looking at making the right investments in the business. You can see operating expenses grew, but we're very specific in how we're investing those dollars. We're very controlled in the way we do it, making sure that the gross margin is coming in where it needs to be, and making sure that the sales are coming through, too. We're just a lot more focused on the entire P&L, and it's clearly showing. Obviously we're neck deep in strategic planning right now, and we continue to look to see what else we can do. We're excited to announce that when we get done with that. There is more to be had, and we can't wait to present that.

Speaker #5: But we're very specific in how we're investing those dollars. We're very controlled in the way we do it, making sure that the gross margin is coming in where it needs to be.

Speaker #5: And making sure that the sales are coming through too. So we're, you know, we're in, we're just a lot more focused on the entire P&L and it's clearly showing and obviously we're doing, you know, we're neck deep in strategic planning right now.

Speaker #5: And we continue to look to see what else we can do. And we're excited to, you know, announce that when we get, you know, done with that.

Speaker #5: But there is more to be had and we can't wait to, you know, to present that.

Speaker #1: Thank you. Our next question or comment comes from the line of Thomas Steed from Bank of America Securities. Mr. Steed, your line is open.

Operator: Thank you. Our next question or comment comes from the line of Travis Steed from Bank of America Securities. Mr. Steed, your line is open.

Speaker #6: Hi, this is Aiden Nunn for Travis. I guess one question on Scout MD. I know you said it started shipping. Can you remind us what the clinical benefits are there, their price uplift, or margin benefit?

[Analyst] (Bank of America Securities): Hi, this is Aidan on for Travis. I guess one question on SCOUT MD. I know you said it started shipping. Can you remind us what the clinical benefits are there, if there's a price uplift or a margin benefit? I have one follow-up.

Speaker #6: And then I have one follow-up.

Speaker #7: Yeah. So the main clinical benefit of SCOUT MD is that you have these four distinct shapes of the reflectors, so it makes it super easy to see these on X-ray.

Martha Aronson: The main clinical benefit of SCOUT MD is that you have these four distinct shapes of the reflectors, so it makes it super easy to see these on X-ray. That's really the primary advantage of SCOUT MD. As we said, I think right now our Merit oncology team is just super excited. This has been a platform where we've really only had sort of one product for quite some time. To have SCOUT and now have the improved SCOUT MD, and then combine that with OneMark from the acquisition of Viewpoint Medical, it just provides us with a really comprehensive offering. I think, as you heard me say in the scripted comments, that the way we think about it is you can really use the OneMark technology for all biopsies. That really expands the market.

Speaker #7: So that's really the, that's really the primary advantage of Scout MD. And as we said, I think right now our Merit Oncology team is just super excited.

Speaker #7: You know, this has been a platform where we've really only had sort of one product for quite some time. So to have, you know, have Scout and now have the improved Scout MD and then combine that with one mark from the acquisition of Viewpoint, you know, it's just provides us with a really comprehensive offering.

Speaker #7: And I think as you heard me say in the, you know, in the scripted comments that, you know, the way we think about it is you can really use the one mark technology for all biopsies.

Speaker #7: So that really expands the market. And then when you really want advanced localization, you select Scout MD. So our team is super excited and just got everybody trained up in the last month and they're ready to go.

Martha Aronson: When you really want advanced localization, you select SCOUT MD. Our team is super excited, and we just got everybody trained up in the last month, and they're ready to go.

Speaker #6: Great. Thank you. And then, you know, obviously Gray Quarter, you're raising by the beat. And from your comments, it sounds like the underlying, you know, operating environment is really strong.

[Analyst] (Bank of America Securities): Great, thank you. Obviously, great quarter, you're raising by the beat. In terms of comments, it sounds like the underlying operating environment is really strong. I guess why not raise more than the beat if you think that's going to continue into the H2?

Speaker #6: So I guess why not raise more than the beat if you think that's going to continue into the second half?

Speaker #5: Yeah, I mean, that's just not our style, right? I mean, I think, you know, if, you know, we typically will take, you know, what we did, you know, this quarter, which is we take the first half beat, flow it through.

Raul Parra: Yeah, that's just not our style, right? I think we typically will take what we did this quarter, which is we take the H1 beat, flow it through, and we typically just leave our H2 unchanged. That's essentially what we did. We obviously remain fully confident in our full-year guidance, and look forward to a strong finish to our CGI program.

Speaker #5: And we typically just leave our back half unchanged. And that's essentially what we did. But we obviously remain fully confident in our full year guidance and look forward to, you know, to a strong finish to our CGI program.

Speaker #6: Okay. Thank you very much.

[Analyst] (Bank of America Securities): Great. Thank you very much.

Speaker #1: Thank you. Our next question or comment comes from the line of Mike Matson from Needham and Company. Mr. Matson, your line is open.

Operator: Thank you. Our next question or comment comes from the line of Mike Matson from Needham & Company. Mr. Matson, your line is open.

Speaker #4: Yeah, thanks. So I just wanted to follow up again on the OEM business. So you know, it's good to see it recover. Is there anything you would call out there?

Mike Matson: Yeah, thanks. I just wanted to follow up again on the OEM business. It's good to see it recover. Is there anything you would call out there? Did you get new contract wins, and is this level of growth sustainable in your view now, or is this just sort of an inherently lumpy business quarter-to-quarter?

Speaker #4: Did you get new contract wins, and is this level of growth sustainable in your view now, or is this just sort of an inherently lumpy business quarter to quarter?

Speaker #7: Yeah. So yeah, OEM is inherently lumpy. Definitely, right? And, you know, I think as we shared in the last quarter, you know, we were very confident that we'd have a nice rebound in this quarter and as you heard, we saw a nice 15% increase in this quarter.

Martha Aronson: Yes. Yeah, OEM is inherently lumpy, definitely, right? I think as we shared in the last quarter, we were very confident that we'd have a nice rebound in this quarter, and as you heard, we saw a nice 15% increase in this quarter. A big shout-out to our OEM team. We believe, though, again, in terms of it being a bit lumpy, that it will annually, should really perform in our mid to high single-digit range. I think we shared last quarter, and I know that one of our OEM customers put out a press release that we've done some work with them, that accounts for some of our growth.

Speaker #7: So a big shout out to our OEM team. And we believe though, again, you know, in terms of it being a bit lumpy, that it will annually should really perform in our mid to high single digit range.

Speaker #7: So I think we shared last quarter and I know that one of our OEM customers, you know, put out a press release that we've done some work with them.

Speaker #7: So that accounts for some of our, some of our growth. But frankly, this team just got out there, did a lot of the hard work and there was some, you know, some increase in stocking due to some transfers that we had done, you know, in the last three to six months.

Martha Aronson: Frankly, this team just got out there, did a lot of the hard work, and there was some increase in stocking due to some transfers that we had done in the last three to six months. That's all come due this quarter, too. Again, just an outstanding result by our OEM team, you do have to expect that business to go a bit up and down.

Speaker #7: And, you know, that's all come due this quarter, too. So again, just an outstanding result by our OEM team. But you do have to expect that business to go a bit up and down.

Speaker #4: Okay, I understand.

Mike Matson: Okay, I understand.

Speaker #5: We still continue, you know, to believe in mid- to high-single digits.

Raul Parra: We still continue to believe that it'll be mid to high single digits.

Speaker #4: Yeah, okay. And then just wanted to ask one on wrap fee. I mean, I heard you reiterate the $7 million target. You know, just what are you hearing and seeing out in the field from the physicians? And, you know, is there a potential for that to ramp more aggressively over the next few years?

Mike Matson: Yeah. Okay. Just want to ask one on Wrapsody. I heard you reiterate the $7 million target. Just what are you hearing, seeing out in the field from the physicians, and is there a potential for that to kind of ramp more aggressively over the next few years?

Speaker #7: Yeah. So again, we're really pleased with how Rapsody is doing in the US. You know, the clinician feedback we're getting continues to be strong.

Martha Aronson: Yeah. Again, we're really pleased with how Wrapsody's doing in the US. The clinician feedback we're getting continues to be strong. We're continuing, I think as we've talked about previously, Wrapsody's being used in the hospital setting as well as non-hospital settings, and our team, frankly, is pursuing both very vigorously and aggressively. Frankly, having good success in both locations. Again, we continue to see the competitors not standing still. We knew that, right? It's a day-to-day battle out there for sure. Again, the feedback on how the delivery system is working well, all very positive clinical feedback, and we continue to be on track to meet the $7 million guidance that we've given for this year.

Speaker #7: We're continuing, you know, I think as we've talked about previously, Rapsody is being used in the hospital setting as well as non-hospital settings. And our team, frankly, is pursuing both very, you know, vigorously and aggressively.

Speaker #7: And frankly, having good success in both locations. And again, we continue to see the competitors, not standing still. We, you know, we knew that, right?

Speaker #7: So it's, you know, it's a day-to-day battle out there for sure. But again, the feedback on how it's, you know, the delivery system is working well.

Speaker #7: All very positive clinical feedback. And we continue to be on track to meet the 7 million dollar guidance that we've given for this year.

Speaker #4: Okay, great. Thank you.

Mike Matson: Okay, great. Thank you.

Speaker #1: Thank you. Our next question or comment comes from the line of Michael Petreski from, let's see, Barrington Research. Mr. Petreski, your line is open.

Operator: Thank you. Our next question or comment comes from the line of Michael Petusky from, let's see, Barrington Research. Mr. Petusky, your line is open.

Speaker #6: Thank you very much. So congrats and I did not hear, if you mentioned it, did you make any comments around how the quarter was in China and if not, if you could speak to that.

Michael Petusky: Thank you very much. Congrats, I did not hear if you mentioned it. Did you make any comments around how the quarter was in China, if not, if you could speak to that? Thanks.

Speaker #6: Thanks.

Speaker #5: Yeah, I mean, you know, we essentially came in as expected, right? I mean, I don't think there's anything significant there. It was in line with our expectations.

Raul Parra: Yeah. We essentially came in as expected, right? I don't think there is anything significant there. It was in line with our expectations. VBP was a little bit lower than expected. Still, no changes to our expectations for China for this year. It continues to kind of move along.

Speaker #5: VPP was a little bit lower than expected. But still, you know, no changes to our expectations for China, for this year. It continues to kind of move along.

Speaker #6: I mean, was it flat or slightly down?

Michael Petusky: Was it flat or slightly down?

Speaker #5: It was in line. So I think it was slightly up. Low single digits.

Raul Parra: It was in line, I think it was slightly up.

Michael Petusky: Slightly up. Okay.

Raul Parra: Little single digits. Yeah.

Speaker #6: Okay, great. So I guess then, turning— I know that you guys are highly focused on the current CGI and you want to get that done, but I feel like you did open the door talking about the strategic planning starting for the 2027-2029 period.

Michael Petusky: Okay, great. I know that you guys are highly focused on the current CGI, and you want to get that done, but I feel like you did open the door talking about the strategic planning starting for the 2027, 2029 period. I would just love to ask Martha if, just in terms of how you guys think about key metrics that you may want to attach to any kind of public three-year plan. Are there different ways that you think about the thing, sort of the key goals, obviously, currently, revenue growth, op margin, free cash flow. Are there other metrics that you think are important for investors to understand or important goals to target? I'm just wondering if you have a different way of thinking about how to sort of talk about longer term plans and how you might communicate that with investors.

Speaker #6: And I would just love to ask Martha if, you know, just in terms of how you guys think about like key metrics that you may want to attach to any kind of public three-year plan.

Speaker #6: I mean, are there different ways that you think about the thing, you know, sort of the key goals, you know, obviously currently, you know, revenue growth, op margin, free cash flow.

Speaker #6: I mean, are there other metrics that you think are important for investors to understand or important or important goals to target? I'm just wondering if you have a different way of thinking about how to sort of talk about longer-term plans and how you might communicate that with investors.

Speaker #6: Thanks.

Michael Petusky: Thanks.

Speaker #7: Yeah, thanks very much. Look, I mean, I'm super excited about the work that this organization is undertaking on our strategic plan. You know, it's a big lift, as you know.

Martha Aronson: Yeah. Thanks very much. Look, I'm super excited about the work that this organization has undertaken on our strategic plan. It's a big lift, as you know, and I think for this team to be doing it, we are engaging a pretty large swath of our global leaders to do this work because we really want to get all the input across functions, across geographies. To do that and deliver the kind of quarter we did, it really is just very thrilling, quite frankly. To get to your point, to your question, we are talking about various metrics, right? We are in debate and discussion, and I'd say healthy debate and discussion within the management team.

Speaker #7: And I think for this team to be doing it, we—you know, we are engaging a pretty large swath of our global leaders to do this work because we really want to get all the input across functions, across geographies.

Speaker #7: So to do that and deliver the kind of quarter we did, it really is just very thrilling, quite frankly. So you know, but to get to your point, to your question, you know, we are talking about various metrics, right?

Speaker #7: We are in debate and discussion. And I'd say, you know, healthy debate and discussion. Within the management team, we have these discussions with our board of directors as well, as we do think about, you know, what are the possibilities and what makes the most sense, just given where we are in our evolution as a company.

Martha Aronson: We have these discussions with our board of directors as well as we do think about what are the possibilities and what makes the most sense just given where we are in our evolution as a company. Again, right now, as we said, we want to keep our teams very focused on finishing out CGI this year. We'll continue these discussions, but tonight it's a little early for me to start listing off some of the other metrics. Suffice to say, it's a very important part of the discussion.

Speaker #7: So again, right now, as we said, we want to keep our teams very focused on finishing out CGI this year. We'll continue these discussions, but tonight it's a little early for me to start listing off some of the other metrics. Suffice it to say, it's a very important part of the discussion.

Speaker #6: Thank you.

Michael Petusky: Thank you.

Speaker #1: Thank you. Our next question or comment comes from the line of Sam Eibor from BTIG. Mr. Eibor, your line is now open.

Operator: Thank you. Our next question or comment comes from the line of Sam Eiber from BTIG. Mr. Eiber, your line is now open.

Speaker #8: Hey, good afternoon. Thanks for taking the questions here and congrats on the nice quarter. Maybe I can just get a status check on the endoscopy business.

Sam Eiber: Hey, good afternoon. Thanks for taking the questions here, and congrats on the nice quarter. Maybe I can just get a status check on the endoscopy business. I know it's still relatively small today, but you've done a few deals over the past few years. C2 sounds like it's going well. Are we far enough in the integrations at this point where you feel like you have the right team in place, the right product portfolio to better compete, and maybe this is the start of accelerated growth to come from here?

Speaker #8: I know it's still relatively small today, but you know, you've done a few deals over the past few years. C2 sounds like it's going well.

Speaker #8: Are we far enough in the integrations at this point where you know, you feel like you have the right team in place, the right product portfolio to better compete and maybe this is the start of accelerated growth to come from here?

Speaker #7: Yeah, thanks for the question. And, you know, I think the answer is it is, right? I mean, again, I think it's fair to say that our endoscopy platform was definitely a contributor to our growth this quarter.

Martha Aronson: Yeah. Thanks for the question. I think the answer is it is, right? Again, I think it's fair to say that our endoscopy platform was definitely a contributor to our growth this quarter. Super excited about that. I think, as you said, the team really has come together. It is a team I've actually spent a decent amount of time with, and it was actually pretty exciting, even at the recent DDW meeting. One of the things, as you all know, during Q2, there's a lot of these medical congresses, and during DDW, which is Digestive Disease Week, a critical one for that platform, we had some results actually presented from a multi-center RCT that were comparing the cTIF procedure to the standard of care Nissen fundoplication procedure.

Speaker #7: So, super excited about that. And I think, as you said, the team really has come together. It is a team I've actually spent a decent amount of time with.

Speaker #7: And you know, it was actually pretty exciting even at the recent DDW meeting. I mean, one of the things as you all know during the second quarter, there's a lot of these medical congresses and during DDW, which is a digestive diseases week, a critical one for that platform, we had some results actually presented from a multi-center RCT that we're comparing the CTIF procedure to the standard of care Nissen fundoplication procedure.

Speaker #7: And it really the room was packed and it was really exciting data that shows that the CTIF procedure, which uses our esophagus product, represents an effective alternative to the Nissen fundoplication for patients who have chronic GERD.

Martha Aronson: The room was packed, and it was really exciting data that shows that the cTIF procedure, which uses our EsophyX product, represents an effective alternative to the Nissen fundoplication for patients who have chronic GERD. Again, you all know the GERD market is a very big one, so this was a really nice additional bit of clinical evidence for our endoscopy business. As you said, the C2 integration is going well. I think we had just launched our Resilience through the scope product at the end of Q1, and that product line has also continued to do very, very nicely for us throughout Q2. I think there is a lot to be excited about when it comes to our endoscopy team.

Speaker #7: So again, you all know the GERD market is a very big one. So this was a really nice additional bit of clinical evidence for our endoscopy business.

Speaker #7: And then as you said, you know, the C2 integration is going well. And I think we had just launched our Resilience, you know, through the scope product you know, at the end of Q1.

Speaker #7: And that that business or sorry, that product line has also continued to do very, very nicely for us throughout Q2. So I think there is a lot to be excited about when it comes to that to our endoscopy team.

Speaker #8: Okay, really helpful color there, Martha. And maybe just a follow-up question. On renal and I know, you know, growth has impacted this quarter by the recall, but I guess does the guidance assume an immediate recapture of any lost revenue there?

Sam Eiber: Okay. Really helpful color there, Martha. Maybe just a follow-up question on renal. I know growth is impacted this quarter by the recall, but I guess does the guidance assume an immediate recapture of any lost revenue there? How should we be thinking about that?

Speaker #8: How should we be thinking about that?

Speaker #7: Yeah, I mean, again, so I'd say a couple of things that, you know, again, hats off to our team here. I think we shared last quarter that we would probably resolve the issue in the second half of the year.

Martha Aronson: Yeah. Again, I'd say a couple things that, again, hats off to our team here. I think we shared last quarter that we would probably resolve the issue in H2 of the year, and we got that resolved before the end of the quarter. That was some really good work by our internal team. We are back in the market, and it will take some time. We definitely had some accounts that obviously had to go to somebody else in the absence of our product being on the market. That will definitely take some time, but honestly, we don't feel that that's really a material impact for H2.

Speaker #7: And we got that resolved before the end of the quarter, so that was some really good work by our internal team. And it will take some time.

Speaker #7: I mean, we definitely had some accounts that obviously had to go to somebody else in the absence of our product being on the market.

Speaker #7: So that will definitely take some time. But honestly, we don't feel that that's really a material impact for the second half.

Speaker #8: Okay, great. Thanks for taking questions.

Sam Eiber: Okay, great. Thanks for taking the questions.

Speaker #7: Yep.

Martha Aronson: Yep.

Speaker #1: Thank you. Our next question or comment comes from the line of David Rescott from Baird. Mr. Rescott, your line is now open.

Operator: Thank you. Our next question or comment comes from the line of David Rescott from Baird. Mr. Rescott, your line is now open.

Speaker #9: Can you hear me?

David Rescott: Can you hear me?

Speaker #7: Yep.

Martha Aronson: Yep.

Speaker #9: Oh, sorry. Great. Thanks for taking the questions for us on the results here. I wanted to follow up on some of the comments you provided already, just on an OEM and China Asia PAC.

David Rescott: Oh, sorry. Great. Thanks for taking the questions for us on the results here. I wanted to follow up on some of the comments you provided already just on OEM in China, Asia Pacific. I know that part of the weaker growth you saw in OEM in part was due to some stuff in Asia and China, and maybe at least it sounds like that's not massively getting better or at least a bigger driver of the outperformance in OEM in this quarter. If that's true, I'd love to hear that.

Speaker #9: You know, I know that part of the weaker growth you saw in OEM in part was due to some stuff in Asia and China.

Speaker #9: And maybe, at least, it sounds like that's not massively getting better, or at least a bigger driver of the outperformance in OEM in this quarter.

Speaker #9: So when you think about if that's true, I'd love to hear that. But when you think about growth, you know, in this, what sounds like a reiterated OEM guide for the full year of 2026, you know, does what I guess are the bigger factors to either A, you know, just hitting that expectation that you have in the back half of the year, or B, whether or not this is something that potentially you know, from a mid-team's growth number in Q2, is something that likely, you know, could sustain in the second half of the year?

David Rescott: When you think about growth in this, what sounds like a reiterated OEM guide for the full year of 2026, what I guess are the bigger factors to either, A, just hitting that expectation that you have in the back half of the year, or B, whether or not this is something that potentially from a mid-teens growth number in Q2, is something that likely could sustain in H2?

Speaker #6: Yeah, I mean, we did see a little bit of, you know, better results in China specifically for our OEM, you know, business. But at the end of the day, I mean, I think, you know, we feel pretty confident. As you know, we've signed new agreements with customers.

Raul Parra: Yeah, we did see a little bit of better results in China, specifically for our OEM business. At the end of the day, I think we feel pretty confident. As you know, we've signed new agreements with customers. We know those are going to be strong in H2. The beat was broad-based with customers coming back after kind of some of the destocking that they had. We're pretty confident. Obviously, OEM beat our expectations. From our standpoint, they're kind of ahead of where they need to be for that mid to high single-digit expectation that we have for them. There was no adjustments. We repeated that. I just repeated it again. It is lumpy business, but we do have visibility and feel confident that we can hit that mid to high single digits.

Speaker #6: We know those are going to be strong in the back half of the year. And the beat was broad-based. You know, with customers coming back after kind of some of the destocking that they had.

Speaker #6: So, you know, we're pretty confident. You know, obviously, OEM beat our expectations. So from our standpoint, they're kind of ahead of where they need to be.

Speaker #6: For that mid to high single-digit expectation that we have for them. And so, you know, there was no adjustments. We repeated that. I just repeated it again.

Speaker #6: It is lumpy business, but we do have visibility and feel confident that we can hit that mid to high single digits.

Speaker #9: Okay, that's helpful. Martha, I appreciate the comments you made on some of this longer-term strategic planning goals. And I know you're not going to comment on that upcoming three-year outlook, but you know, when you think about the potential M&A, you know, maybe some divestitures in the portfolio, can you help us maybe think about what the, you know, goals or metrics are around how you're thinking about that next, you know, three-year plan?

David Rescott: Okay, that's helpful. Martha, I appreciate the comments you made on some of the longer-term strategic planning goals. I know you're not going to comment on that upcoming three-year outlook. When you think about potential M&A, maybe some divestitures in the portfolio, can you help us maybe think about what the goals or metrics are around how you're thinking about that next three-year plan? Meaning, is this the case where you get some of these slower business segments out and it naturally raises the weighted average market growth of the portfolio? Are there some key segments that even though they are slower growth, are still pretty decent from a contributing operating margin expansion story? How should we gauge what this longer-term strategy as you're going through the process ultimately could become?

Speaker #9: Meaning, you know, is this the case where, you know, you get some of these slower business segments out and it naturally raises the weighted average market growth of the portfolio, you know, are there some key segments that even though they are slower growth, they're still pretty decent from a contributing operating margin expansion story?

Speaker #9: You know, how should we gauge, I guess, what this longer-term strategy, as you're going through the process, ultimately could become?

Speaker #7: Yeah, I mean, again, these are all the questions we're asking, right? We're asking ourselves, and, you know, I think it's fair to say everything's on the table, right?

Martha Aronson: Yeah. Again, these are all the questions we're asking, right? We're asking ourselves, I think it's fair to say everything's on the table, right? There's not really a stone that we're leaving unturned in this process. We really are looking across the entire portfolio, and we are looking at product families and yes, asking ourselves those questions. What's the strategic rationale? What's the financial profile of these? Are they part of procedures that are going to continue to be high, fast-growing procedures around the world? Again, all the things that we're talking about. Again, I am looking forward to discussing this with all of you when we've completed the work, but we're still a little bit in process here.

Speaker #7: And, you know, there's not really a stone that we're leaving unturned in this process. We really are looking across the entire portfolio, and we are looking at product families and, you know, yes, asking ourselves those questions.

Speaker #7: You know, what's the strategic rationale? You know, what's the financial profile of these? You know, are they part of procedures that are going to continue to be high, you know, high fast-growing procedures around the world?

Speaker #7: So again, all the things that we're talking about—and, you know, again, I'm looking forward to discussing this with all of you when we've completed the work.

Speaker #7: You know, but we're still a little bit in process here.

Speaker #6: Yeah, I mean, I think we're, you know, we're very pragmatic about the way we approach these long-term plans. I mean, you guys saw us execute Four Foundations for Growth.

Raul Parra: I think we're very pragmatic about the way we approach these long-term plans. You guys saw us execute for Foundations for Growth. We're on target to execute on CGI, obviously clearly focused on not dropping the ball at the one-yard line. We want to make sure that we get that across the finish line. These take a lot of work, and we want to make sure that we get everything right, and then when we come out with our long-range plan, that we're giving you something that we think is realistic and achievable. I'll just highlight again, we've done 850 basis points of operating margin improvement through 2025. Like I said earlier, if we hit the high end of our guidance, we'll be somewhere around 950 basis points. We still think there's more to be had. This does take a lot of detailed work.

Speaker #6: You know, we're on target to execute, you know, on CGI. Obviously, clearly focused on not dropping the ball at the one-yard line. We want to make sure that we get that across the finish line.

Speaker #6: But, you know, these take a lot of work, you know, and we want to make sure that we get everything right. And then, when we come out with our long-range plan, that we're giving you something that we think is realistic and achievable.

Speaker #6: And I'll just highlight again, we, you know, we've done 850, you know, basis points of operating margin improvement, you know, through 2025. Like I said earlier, if we hit the high end of our guidance, we'll be somewhere around So we still think there's more to be had, but this does take a lot of detailed work where neck deep in that, we're all very excited about the work that Martha's leading.

Raul Parra: We're neck deep in that. We're all very excited about the work that Martha's leading here, and we're just excited about the opportunity that Merit has on a go-forward basis.

Speaker #6: Here and we're just excited, you know, about the opportunity that Merit has on a go forward basis.

Speaker #1: Thank you. Our next question or comment comes from the line of John Young from Countercord at Genuity. Mr. Young, your line is now open.

Operator: Thank you. Our next question or comment comes from the line of John Young from Canaccord Genuity. Mr. Young, your line is now open.

Speaker #2: Hi, thank you for taking the question. It's Zachary on for John. When you think about SCOUT, Scout MD, and OneMARK, can you maybe get a little more granular on the cross-selling potential? What does the 1.3 million soft tissue localizations represent?

[Analyst] (Wells Fargo): Hi, thank you for taking the question. It's Zachary on for John. When you think about SCOUT MD and OneMark, can you maybe get a little more granular on the cross-selling potential with the 1.3 million soft tissue localization TAM? Thank you.

Speaker #2: Thank you.

Speaker #7: Yeah, yeah. Thanks for that. So I, you know, when we only had SCOUT in our bag, we felt like we were looking at probably about, you know, 400,000 procedures, you know, per year.

Martha Aronson: Yeah. Thanks for that. When we only had SCOUT in our bag, we felt like we were looking at probably about 400,000 procedures per year. This is really mostly US data right now. When we add in OneMark, that expands by about 3 to 4x, up to maybe 1.3 million procedures, because those tend to be the lower risk biopsies that happen. That's how it really expands the market. These are two separate technologies, right? One uses ultrasound, one uses more radar technology, part of it is physician preference. Then there is a price differentiation too. In some cases, people want a lower price point and where they feel like it's a potentially higher risk biopsy situation, they feel like that's maybe where the SCOUT MD makes more sense to be used.

Speaker #7: This is US, really mostly US data right now. And so when we add in One Mark, that expands by, you know, about three to four X up to maybe 1.3 million procedures because those tend to be the lower-risk biopsies that happen.

Speaker #7: So that's how it really expands the market. You know, we also—these are two separate technologies, right? One uses ultrasound, one uses more radar technology.

Speaker #7: So part of it is physician preference. And then there is a price differentiation too. And so in some cases, you know, people want a lower price point.

Speaker #7: And where they feel like it's a higher-risk, potentially higher-risk biopsy situation, they feel like that's maybe where the Scout MD makes more sense to be used.

Speaker #7: So that's really how it's getting differentiated. And again, I think our team has done an outstanding job. You know, the good news is, right, they already know these customers very, very well, and they know: A, you know, the physician preferences; and B, you know, they understand, you know, the various hospitals and sites of service, and what their economics tend to look like.

Martha Aronson: That's really how it's getting differentiated, and again, I think our team has done an outstanding job. The good news is they already know these customers very well, and they know, A, the physician preferences, and B, they understand the various hospitals and sites of service and what their economics tend to look like. They're able to sell in the most applicable and useful technology to them.

Speaker #7: And so they're able to sell the most applicable and useful technology to them.

Speaker #2: Great, thank you for that. And for my follow-up, I know you've talked about RAPID and still feel good about it in the long term, but can you talk more about what you're seeing in terms of sensitivity to pricing in the outpatient setting, given that you don't have add-on payment?

[Analyst] (Wells Fargo): Great. Thank you for that. For my follow-up, I know you've talked about ASC and still feel good about it in the long term, but can you talk more about what you're seeing in terms of sensitivity to pricing in the outpatient setting, given that you don't have add-on payment? Thank you very much.

Speaker #2: Thank you very much.

Speaker #7: Yeah. I mean, look, the, you know, the outpatient setting—you know, it now, again, it depends if that outpatient is connected to a hospital or more of a freestanding ASC, you know, or OBL-type situation, right?

Martha Aronson: Yeah. Look, the outpatient setting, now, again, it depends if that outpatient is connected to a hospital or more of a freestanding ASC or OBL type situation, right? Certainly in office-based labs, you have a far more price sensitive site of service. Again, we're not going to share pricing detail, obviously, but I think it's fair to say we have asked our commercial organization to be very competitive. That's what they're out there doing. They're being competitive, and yet being smart, I would say. We're not ones to give up on price if we certainly don't need to. Overall, as I said, though, we are seeing a range of prices because we are seeing the range of sites of service.

Speaker #7: And certainly in office-based labs, you have a far more price-sensitive site of service. And again, you know, we're not going to share pricing detail, obviously, but I think it's fair to say we have asked our commercial organization to be very competitive.

Speaker #7: And that's what they're out there doing. They're being competitive. And yet being smart, I would say. So, you know, we're not ones to give up on price if we don't, if we certainly don't need to.

Speaker #7: So overall, as I said, we are seeing a range of prices because we are seeing a range of sites of service.

Speaker #1: Thank you. Our next question or comment comes from the line of Jim Sadodi from Sadodi and Company. Mr. Sadodi, your line is now open.

Operator: Thank you. Our next question or comment comes from the line of Jim Sidoti from Sidoti & Company. Mr. Sidoti, your line is now open.

Jim Sidoti: Hi, good afternoon. Thanks for taking the questions. Inventory is up a little over $20 million in the quarter. Is that due to the Viewpoint acquisition, or are you ramping up inventory in anticipation of higher sales in H2?

Speaker #8: Hi, good afternoon. Thanks for taking the questions. Inventory is up a little over $20 million in the quarter. Is that due to the Viewpoint acquisition, or are you ramping up inventory in anticipation of higher sales in the second half of the year?

Speaker #2: Thanks, Jim. You know, I'll take the opportunity to kind of, you know, just take a victory lap here on free cash flow, right?

Raul Parra: Thanks, Jim. I'll take the opportunity to just take a victory lap here on free cash flow, right? As you guys know, CGI, our goal was $400 million. We hit that essentially at the end of last year. We're still focused on the $200 million for this year. As you just mentioned, we've spent a lot of cash on inventory. It's been strategic, I would say. We had a couple product lines last year where we thought the inventory could be better, so we increased the inventory there. I talked a little bit earlier about, from a shipping standpoint, moving more to the ocean. We've done that. That takes more inventory because it just takes a little bit longer.

Speaker #2: So, as you guys know, CGI—our goal was $400 million. We hit that essentially at the end of last year. We're still focused on the $200 million.

Speaker #2: For this year, as you just mentioned, we've spent a lot of, you know, cash on inventory. It's been strategic. I would say, we had a couple of product lines last year where we thought the inventory, you know, could be better.

Speaker #2: So, we increased the inventory there. I talked a little bit earlier about moving more, from a shipping standpoint, moving more to the ocean.

Speaker #2: So we've done that. That takes, you know, more inventory because it just takes a little bit longer and we've also, we're strategic as the Middle East, you know, kind of conflict plays out about buying resin and certain raw materials to make sure that we had enough, you know, on hand for any disruption that may happen.

Raul Parra: We're strategic as the Middle East conflict plays out, about buying resin and certain raw materials to make sure that we had enough on-hand for any disruptions that may happen. We haven't seen anything yet. We also haven't really seen any pricing increases. I think we're pretty well managed right now, and I would expect that to taper off the rest of the year. Continue to be excited about shooting for that $200 million for this year.

Speaker #2: We haven't seen anything yet. We also haven't really seen any pricing increases. So, I think we're pretty well managed right now, and I would expect that to taper off the rest of the year.

Speaker #2: But, you know, continue to be excited about, you know, shooting for that 200 million dollars for this year.

Speaker #8: Okay, got it. And do we anticipate any additional tariff, or do you think what you received in the second quarter is what you'll have for the year?

Jim Sidoti: Okay, got it. Do you anticipate any additional tariff refunds, or do you think what you received in Q2 is what you'll have for the year?

Speaker #2: So, we've essentially received just about everything that we were expecting. There is still, I'd say, you know, about $1.5 million or so that's going to come from a third party, who's our freight forwarder.

Raul Parra: We've essentially received just about everything that we were expecting. There is still, I'd say, about a million and a half or so that's going to come from a third party who's our freight forwarder, and they're responsible for submitting. It's a large shipper, and I'm sure they have a lot of customers that they're dealing with. I wouldn't expect anything back this year. If we do, great. I know they have a lot of customers that they're working through, and I know they've tried to keep us up to date. They're working through the process. Hopefully we'll get that here in the next year or so. For the most part, we've gotten everything that we were expecting.

Speaker #2: And they're responsible for submitting. It's a large shipper, and I'm sure they have a lot of customers that they're kind of dealing with. So, you know, I wouldn't expect anything back this year.

Speaker #2: If we do, you know, great. But I know they have a lot of customers that they're working through, and I know they've tried to keep us up to date.

Speaker #2: They're working through the process. And so, you know, hopefully we'll get that, you know, here in the next year or so.

Speaker #2: But for the most part, we've gotten everything that we were expecting.

Speaker #8: Great. Thank you.

Jim Sidoti: Great. Thank you.

Speaker #1: Thank you. I'm sure there are no additional questions in the queue at this time. I'd like to turn the conference back over to Ms. Martha Aronson for any closing remarks.

Operator: Thank you. I'm showing no additional questions in the queue at this time. I'd like to turn the conference back over to Martha Aronson for any closing remarks.

Speaker #7: Well, thanks very much. And again, I just want to thank our global team for delivering the strongest quarterly organic growth in three years—just an outstanding result.

Martha Aronson: Well, thanks very much. Again, I just want to thank our global team for delivering the strongest quarterly organic growth in three years. Just an outstanding result. Hats off to them. Again, appreciate all of our investors for taking your time today to be with us. We appreciate your attention and your interest in Merit Medical. Thank you very much.

Speaker #7: So hats off to them. And again, appreciate all of our investors, for taking your time today to be with us. We appreciate your attention and your interest in MERIT MEDICAL.

Speaker #7: Thank you very much.

Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.

Operator: Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyonef, have a wonderful day.

Q2 2026 Merit Medical Systems Inc Earnings Call

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