Merit Medical (MMSI) Q1 2026 Earnings Transcript

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DATE

Thursday, April 30, 2026, at 4:30 p.m. ET

CALL PARTICIPANTS

• Chair & CEO — Martha Aronson
• Chief Financial Officer & Treasurer — Raul Parra
• Chief Legal Officer & Corporate Secretary — Brian G. Lloyd

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TAKEAWAYS

• Total revenue -- $381.9 million, up 7% on a GAAP basis and 5% on a constant currency basis, exceeding the high end of prior guidance.
• Constant currency organic growth -- 2.7%, increasing to 3.7% when adjusted for divested DualCap revenues.
• Non-GAAP operating margin -- 19.7%, a record for the first quarter and up 47 basis points year over year.
• Non-GAAP EPS -- $0.94, up 9% year over year, surpassing the high end of prior guidance.
• Free cash flow -- $25 million, representing 26% year-over-year growth.
• Geographic revenue growth -- U.S. sales rose by $14.5 million (6.8%), and international sales increased by $4.1 million (3%), both modestly exceeding internal expectations.
• Product category breakdown -- Foundational products grew by $10.1 million (4%) and therapeutic products grew by $8.5 million (7%); organic growth was 1.5% and 5.2% respectively, after adjusting for acquired products.
• OEM segment performance -- OEM sales declined 14% year over year, with weakness in APAC and inventory destocking in the U.S.; management described these trends as transient.
• Gross margin -- 53.2%, down 20 basis points year over year, including a 120 basis point headwind from $4.6 million in tariff costs.
• Cash and liquidity -- $488.1 million in cash and cash equivalents, $747.5 million in total debt, and $697 million in available borrowing as of March 31, 2026.
• Recent strategic acquisition -- Completed a $140 million acquisition of Viewpoint Medical post-quarter; $90 million paid at closing, with $50 million in deferred payments scheduled within two years.
• Viewpoint Medical financial effect -- Projected to contribute $2 million to $4 million in revenue and dilute 2026 non-GAAP EPS by $0.05; expected to be accretive to 2027 non-GAAP EPS, with projected annual OneMark system sales growth of at least 20% and 70% non-GAAP gross margins.
• Updated fiscal 2026 guidance -- GAAP net revenue growth now expected in the 6.3%-7.8% range; constant currency growth of 5.6%-7%; non-GAAP EPS of $4.10-$4.15, up 5%-8%, including all estimated acquisition impacts.
• Revenue recognition changes -- The company is now reporting revenue in two categories (foundational and therapeutic), aligning product platforms and providing four years of historical data for transparency.
• Q2 2026 expectations -- Guidance projects total revenue between $400 million and $410 million, GAAP growth of 5%-7%, and non-GAAP EPS of $0.90-$1.00.
• Supply chain and inventory -- Inventory increased by approximately $20 million to build adequate safety stock for recent acquisitions and to address supply chain needs in Endoscopy, Oncology, Cardiac, and Renal Therapies.
• Resilience stent launch -- U.S. commercial launch of Resilience Through-The-Scope esophageal stent announced, targeting a new oncology/endoscopy market opportunity.

RISKS

• OEM segment sales declined 14% year over year, with international demand impacted by the macro environment in APAC and transient inventory destocking in the U.S.; management does not view this as share loss but as temporary.
• Gross margin pressure from tariffs, with a $4.6 million expense in the first quarter representing a 120 basis point headwind, and full-year 2026 guidance anticipates a $15 million impact unless further reductions occur due to administrative or legal changes.
• Middle East geopolitical disruptions caused $1.5 million in first-quarter revenue to be deferred due to shipping delays, though management presently views the revenue impact as manageable.
• Class I recall disclosed for a product in Renal Therapies, described as financially immaterial for 2026 but representing the segment's first such recall since 2017.

SUMMARY

Merit Medical Systems (NASDAQ:MMSI) delivered revenue, non-GAAP EPS, and free cash flow that each exceeded the high end of prior guidance, driven by organic and acquired growth as well as disciplined operating expense management. The Viewpoint Medical acquisition expanded the company's oncology portfolio and is expected to shift from modest near-term EPS dilution to material accretion in 2027, with the OneMark system opening a threefold market expansion opportunity. The company adopted a new revenue reporting structure, separating foundational from therapeutic products and aligning internal and external transparency with platform leadership and financial targets. Revised fiscal year 2026 guidance incorporates the Viewpoint Medical acquisition and reflects continued tariff headwinds, strategic divestitures, and steady confidence in organic growth.

• Martha Aronson stated, "We have given, I think, our previous guidance or our revised guidance in 2026 of $7 million for Rhapsody for the fiscal year, and we are tracking right on that."
• Raul Parra confirmed the company initiated the tariff refund process, noting, "We have started the process of filing and have essentially filed for the majority of that," but outcomes remain contingent on further U.S. administration actions.
• Management expects improved mid single-digit OEM segment growth sequentially from the first quarter’s decline, referencing "orders for Q2 that give us a lot of confidence" toward that profile.
• Raul Parra said, "Q1 was mid-teens growth — really strong performance — so they are excited about what they are doing, which makes us excited about their potential," regarding the Endoscopy segment, which benefited from product launches and sales force integration following the C2 Cryoballoon acquisition.
• Recent supply chain and sales disruptions in the Middle East led to temporary deferred revenue, but management continues to receive orders from the region without vendor price increases beyond standard fuel surcharges.
• The company maintained net leverage at 1.6 times, emphasizing continued M&A capacity and board-level oversight over potential share repurchases.
• Updated compensation or incentive structures for sales teams were not implemented, though management highlighted heightened focus on higher-margin products and platform leadership.
• New product launches, such as the Resilience stent and expanded training for the OneMark system, are positioned to support multi-platform growth objectives.

INDUSTRY GLOSSARY

• CGI (Continued Growth Initiatives): Multiyear strategic and financial performance program, with targets ending Dec. 31, 2026.
• SCOUT platform: Radar-based, wire-free system for non-radioactive breast lesion localization.
• OneMark system: Viewpoint Medical’s ultrasound-enhanced device for tissue and lesion marking, used to expand addressable breast and soft tissue localization markets.
• VBP (Volume-Based Purchasing): Pricing and procurement system impacting sales and reimbursement primarily in China, referenced by management as affecting APAC growth rates.
• OEM segment: Business line selling company-manufactured products to third-party companies under their own brands, distinct from contract manufacturing.

Full Conference Call Transcript

Martha Aronson: Thank you, operator, and welcome, everyone. I am joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer, and Brian G. Lloyd, our Chief Legal Officer and Corporate Secretary. Brian, would you please take us through the Safe Harbor statements?

Brian G. Lloyd: Thank you, Martha. This presentation contains forward-looking statements that receive Safe Harbor protection under federal securities laws. Although we believe these forward-looking statements are based upon reasonable assumptions, they are subject to risks and uncertainties. The realization of any of these risks or uncertainties as well as extraordinary events or transactions impacting our company could cause actual results to differ materially from the expectations and projections expressed or implied by our forward-looking statements. In addition, any forward-looking statements represent our views only as of today, 04/30/2026, 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. 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 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 U.S. GAAP measures is included in today's press release and presentation furnished to the SEC under Form 8-Ks. 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. 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.

Martha Aronson: Thank you, Brian. 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 first quarter financial results, then I will discuss several areas of operating and strategic progress that we have made in recent months including an important strategic acquisition in the oncology space that we made subsequent to quarter end. Then 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 then open the call for your questions. Beginning with a review of our first quarter results.

We reported total revenue of $381.9 million, up 7% year-over-year on a GAAP basis and up 5% year-over-year on a constant currency basis. Our constant currency revenue results exceeded the high end of the expectations that we outlined on the Q4 2025 earnings call. First quarter constant currency growth was driven by 2.7% organic constant currency growth, and contributions from our acquisitions of BioLife and the C2 Cryo Balloon device, both of which exceeded the high end of our expectations. Our organic constant currency growth includes the impact of the strategic divestiture of our DualCap product line in February 2026, which we discussed in our Q4 2025 call.

Excluding divested revenue, our organic constant currency growth was 3.7% in the first quarter. With respect to the profitability performance in Q1, we delivered financial results that significantly exceeded expectations. Our non-GAAP operating margin increased 47 basis points year-over-year to 19.7%, representing the highest first quarter operating margin in the company's history. The team delivered 9% growth in non-GAAP EPS, which exceeded the high end of expectations, and we generated $25 million of free cash flow, an increase of 26% year-over-year. We are pleased with the solid start to fiscal year 2026 and I want to thank our team members all around the world for their effort and commitment to our customers.

We updated our guidance in today's press release to include the expected financial impacts from our acquisition of Viewpoint Medical on April 1. Importantly, we remain confident in our team's ability to drive stable constant currency growth, improving profitability, and solid free 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 Continued Growth Initiatives program which includes our previously disclosed financial targets for the three-year period ending December 31, 2026. Turning now to a discussion on three key operating and strategic announcements we made since our last earnings call.

First, on March 16, we announced the U.S. commercial introduction of the Resilience Through-The-Scope, or TTS, esophageal stent. The Resilience stent is indicated for treatment of esophageal fistulas and strictures caused by malignant tumors. Resilience is designed to demonstrate the greatest migration resistance amongst currently available TTS esophageal stents and facilitates physician control and accurate placement. Resilience targets an attractive market opportunity in the United States and we expect adoption and utilization of this differentiated product to contribute nicely to the growth in Merit's endoscopy platform in the coming years.

Second, on April 1, building upon our oncology platform, we announced the acquisition of Viewpoint Medical for an aggregate transaction consideration of $140 million, of which $90 million was paid in cash at closing. Viewpoint Medical is based in Carlsbad, California, and 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. This represents an expansion of the annual addressed procedure opportunity of approximately three times for our oncology business. Merit has built a market leadership position in wire-free non-radioactive breast localization procedures.

Our leadership has been built upon our SCOUT platform, which utilizes the precision and accuracy of radar. The OneMark system is U.S. FDA cleared for percutaneous placement in soft tissue tumors to mark biopsy sites or lesions, and it consists of a surgical detection system and ultrasound-enhanced tissue markers. After placement, the tissue markers are designed to be visible across commonly used imaging modalities and engineered to minimize interference with future imaging studies. This acquisition expands our portfolio of therapeutic oncology products dedicated to the diagnosis and localization of breast and soft tissue tumors.

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 believe this acquisition presents multiple strategic and financial positives and importantly, this acquisition is consistent with our Continued Growth Initiatives program. This acquisition represents another example of Merit selectively investing to expand our product portfolio in key strategic markets that leverage our existing commercial footprint. Finally, I want to highlight our new presentation of revenue, which we formally introduced in a Form 8-K filed on April 13.

As discussed on our Q4 call, Merit's new executive leadership team and I have been working through a comprehensive analysis of the business and it became clear during this process that we had an opportunity to streamline our internal planning and reporting processes with the goal of aligning how we think about, evaluate, and plan each of our underlying businesses. We also identified an opportunity to streamline how we talk about the business externally as well.

We believe there is significant value in aligning how we talk about the business both internally and externally, and we expect these changes to help the investment community not only better understand the composition of our business today, but also the underlying growth drivers of our business going forward. To that end, as disclosed in the Form 8-Ks on April 13, and reported in our earnings press release today, we are now reporting our revenue in two product categories: foundational and therapeutic. Foundational products are used primarily for access and enabling functions in vascular and other procedures.

Merit's foundational products comprised about two-thirds of our total revenue in 2025, and sales increased at a 6% compound annual growth rate over the last three years. Therapeutic products are devices and systems that treat disease in a number of very large markets that together represent significant growth potential. Merit's therapeutic products comprised about one-third of our total revenue in 2025, and sales increased at an 11% compound annual growth rate on an organic basis over the last three years.

Given that we call on a wide variety of clinicians and our products are a part of so many procedures, we have solidified our new operating model internally around eight platforms: Access, Vascular Intervention, Procedural Solutions, Cardiac Therapies, Renal Therapies, Oncology, Endoscopy, and OEM. The Access and Procedural Solutions platforms are comprised entirely of foundational products. The Vascular Intervention and OEM platforms are comprised of both foundational and therapeutic products. And Cardiac Therapies, Renal Therapies, Oncology, and Endoscopy are comprised entirely of therapeutic products. In the Form 8-Ks, we shared four years of historical revenue in each of these platforms. So to reiterate, going forward, we plan to report revenue results by foundational and therapeutic products.

In addition, we intend to continue to highlight additional color on the underlying drivers of growth within the underlying platforms. As I shared last quarter, each of our platforms is being co-led by a marketing lead and a research and development lead, and each team is comprised of cross-functional and cross-geographic members so that we have better alignment on product and commercial priorities, improved communication across functions and geographies, and a team who feels accountable for that platform globally. I am very pleased with how our teams are taking ownership, increasing communication, and thinking about how best to serve our customers in each area.

I truly believe that focusing our efforts in this way will enable us to drive even greater growth within each one of these platforms in the years to come. With that, I will turn the call over to Raul for an in-depth review of our quarterly financial results and our updated financial guidance for 2026. Raul?

Raul Parra: Thank you, Martha. I will start with a detailed review of our revenue results in the first quarter. Note, unless otherwise stated, all growth rates are approximated and presented on both a year-over-year and constant currency basis. First quarter total revenue increased $18.6 million, or 5%, exceeding the high end of the expectations we outlined on our fourth quarter call. Excluding sales of acquired products, our total revenue growth on an organic constant currency basis was 2.7%, at the high end of our expectations. Excluding divested revenue, organic constant currency growth was 3.7% in the first quarter.

By geography, our total revenue in Q1 was primarily driven by growth in the U.S., where sales increased $14.5 million, or 6.8%, and international sales increased $4.1 million, or 3%, both of which modestly exceeded the high end of our expectations in Q1. Turning to a review of our revenue results by product category. First quarter total revenue was driven by a $10.1 million, or 4%, increase in sales of foundational products and an $8.5 million, or 7%, increase in sales of therapeutic products. Including the contributions from acquired products of $6.6 million and $2.5 million, respectively, sales of foundational and therapeutic products increased 1.5% and 5.2%, respectively, on an organic constant currency basis.

Organic growth in the foundational product category was driven primarily by our Vascular Intervention and Access platforms, which offset year-over-year declines in sales of OEM and Procedural Solutions products, the latter of which was impacted by our divestiture of the DualCap product line. 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 Intervention and Oncology platforms, offsetting year-over-year sales declines in our OEM and Renal Therapies platforms. We were pleased with our first quarter total revenue results that exceeded the high end of our expectations despite the notable headwinds to year-over-year revenue growth experienced in our OEM business in Q1.

OEM sales declined 14% year-over-year in Q1, significantly lower than what was assumed in our guidance. Sales to OEM customers outside the U.S. continue to see demand trends impacted by the macro environment, particularly in the APAC region, and these headwinds were largely consistent with our expectations. OEM sales to U.S. customers were impacted by inventory destocking dynamics related to product line transfers to Tijuana, Mexico, as expected. That said, customer orders came in lower than expected, which we would characterize as transient or timing based rather than a reflection of share loss. Our OEM business remains healthy despite the quarter-to-quarter fluctuations in growth rates.

We continue to believe the appropriate normalized growth profile of our OEM business is in the mid to high single digits annually. 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 2026 and our growth rates are approximated and presented on a year-over-year basis. We have included reconciliations from our GAAP reported results to the most directly comparable non-GAAP items in our press release and presentation available on our website. Gross profit increased 7% in the first quarter. Our gross margin was 53.2%, down 20 basis points year-over-year, but notably stronger than our internal expectations.

Q1 gross margin included a $4.6 million impact from tariffs, compared to no impact in the prior-year period, representing a 120 basis point impact to gross margin in the period. Operating expenses increased 5% in the first quarter. The increase in operating expense was driven primarily by a $5.4 million, or 5%, increase in SG&A expense and, to a lesser extent, a $1.1 million, or 5%, increase in R&D expense compared to the prior-year period. Total operating income in the first quarter increased $6.9 million, or 10%, from the prior-year period to $75.3 million. Our operating margin was 19.7% compared to 19.3% in the prior-year period, an increase of 47 basis points year-over-year.

First quarter other expense, net, was $1.2 million compared to $1.7 million for the comparable period last year. The change in other expense, net, was driven primarily by gain/loss on foreign exchange and higher interest income. First quarter net income was $56.7 million, or $0.94 per share, compared to $52.9 million, or $0.86 per share in the prior-year period. First quarter net income and EPS exceeded the high end of our guidance range by $3.7 million and $0.07, respectively. Turning to a review of our balance sheet and financial condition.

As of 03/31/2026, we had cash and cash equivalents of $488.1 million, total debt obligations of $747.5 million, and available borrowing capacity of approximately $697 million, compared to cash and cash equivalents of $446.4 million, total debt obligations of $747.5 million, and available borrowing capacity of approximately $697 million as of December 31, 2025. Our net leverage ratio as of March 31 was 1.6 times on an adjusted basis.

The increase in cash and cash equivalents in the first quarter was driven by a combination of strong free cash flow generation of $24.7 million and $25.5 million of proceeds from our divestiture and sale of the DualCap product line, offset partially by $6.3 million in cash used for financing activities in the period. Subsequent to quarter end, we acquired Viewpoint Medical for an aggregate consideration of $140 million. Of that amount, $90 million was paid in cash at closing, and two deferred payments of $25 million each are scheduled to be paid no later than the first and second anniversary of the closing date, respectively.

In addition to the favorable strategic rationale for this acquisition that Martha outlined earlier, the financial rationale for this transaction is compelling. While we expect the transaction to be $0.05 dilutive to our 2026 non-GAAP EPS, for the twelve months ending 12/31/2027 the acquisition is projected to be accretive to our non-GAAP EPS. Longer term, we project this acquisition to be accretive to Merit's multiyear growth and profitability profile. Specifically, we project sales of Viewpoint Medical's OneMark system to grow at least 20% per year, with 70% non-GAAP gross margins and non-GAAP operating margins above our company average. Turning to a review of our fiscal year 2026 financial guidance.

As reported in our earnings press release, we have updated our financial guidance for 2026 to reflect the projected contributions to our total revenue and impact on our non-GAAP EPS previously disclosed on 02/24/2026. Specifically, from the acquisition effective date of 04/01/2026 through 12/31/2026, the acquisition is projected to contribute revenue in the range of $2 million to $4 million and to dilute Merit's initial 2026 guidance for non-GAAP earnings per share by approximately $0.05. This non-GAAP EPS dilution includes approximately $2 million of lower interest income on cash balances used for the total purchase consideration and excludes approximately $5.3 million of non-cash, non-recurring transaction-related expenses.

For the twelve months ending 12/31/2026, we now expect total GAAP net revenue growth in the range of 6.3% to 7.8% year-over-year, and 5.6% to 7% year-over-year on a constant currency basis, excluding an expected 80 basis point tailwind to GAAP growth from changes in foreign currency exchange rates. There are a few factors to consider when evaluating our projected constant currency revenue growth range for 2026, including first, 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 digits year-over-year.

Second, our total net revenue guidance for fiscal year 2026 now assumes inorganic revenue contributions in the range of approximately $17 million to $20 million compared to $13 million to $15 million previously. This increase in inorganic revenue expectation is driven by the combination of $2 million to $4 million of Viewpoint Medical revenue and stronger than expected contributions from our BioLife and C2 acquisitions in the first quarter. Excluding inorganic revenue, our 2026 guidance continues to reflect total net revenue growth on a constant currency organic basis in the range of approximately 4.5% to 6% year-over-year.

Third, our total net revenue guidance for fiscal year 2026 continues to assume U.S. revenue from the sales of the Rhapsody CIE of approximately $7 million. Fourth, our total net revenue guidance for fiscal year 2026 reflects the impact of our DualCap divestiture. Product sales and royalty revenue for DualCap totaled approximately $20 million in 2025, and net of approximately $1.6 million of sales in Q1 2026, the divestiture represents an estimated year-over-year headwind of approximately 130 basis points to our total constant currency revenue growth in 2026. With respect to profitability guidance for 2026, we continue to expect non-GAAP diluted earnings per share in the range of $4.10 to $4.15, up 5% to 8%.

Note, our non-GAAP EPS range reflects the $0.05 of dilution from the acquisition of Viewpoint Medical, funded by the better-than-expected non-GAAP EPS results we delivered in the first quarter. All of the modeling considerations regarding our profitability and cash flow expectations for 2026 introduced on our fourth quarter call remain unchanged. For avoidance of doubt, our 2026 non-GAAP EPS guidance continues to assume a twelve-month tariff impact of approximately $15 million, or $0.19 per share, compared to a $9 million, or $0.12 per share, impact realized during the last eight months of 2025.

As a reminder, the expected twelve-month tariff impact assumed in our 2026 non-GAAP EPS range was based on tariff policies in place prior to the decision of the U.S. Supreme Court in late February. This continues to be an evolving situation. The ultimate impact of the U.S. Supreme Court decision and subsequent new and/or additional tariffs or retaliatory actions or changes to tariffs on our business will depend on the timing, amount, scope, and nature of such tariffs, among other factors, most of which are currently unknown. We intend to review our 2026 financial guidance when we report our financial results for the three and six month periods ending 06/30/2026.

We will provide an update on the estimated twelve-month tariff impact and potential gains related to refunded tariff payments in prior periods. Finally, we would like to provide additional transparency related to our growth and profitability expectations for the second quarter of 2026. Specifically, we expect total revenue in the range of $400 million to $410 million, representing growth of 5% to 7% year-over-year on a GAAP basis, and up approximately 4% to 7% on a constant currency basis.

Note, our second quarter constant currency sales growth expectations include inorganic revenue in the range of approximately $4 million to $4.5 million; excluding inorganic contributions, total revenue is expected to increase in the range of approximately 3% to 5% on an organic constant currency basis. With respect to our profitability expectations for the second quarter of 2026, we expect non-GAAP operating margins in the range of approximately 18.7% to 20.4% compared to 21.2% last year, and non-GAAP EPS in the range of $0.90 to $1.00 compared to $1.10 last year. With that, I will now turn the call back to Martha for closing comments on the prepared remarks.

Martha Aronson: Thanks, Raul. As you can hear, we continue to be on a nice trajectory to successfully complete the third and final year of CGI. I want to commend the organization once again for staying focused on delivering these results while also closing a strategic acquisition on April 1 and embarking on our long-range strategy work. I want to add that when our extended leadership team spent several days kicking off our long-range strategy work during the quarter, we had very robust conversations about each platform and there was tremendous energy around this work. We also recommitted ourselves to ensuring that our infrastructure is solid so that we can continue to scale our business globally.

As I have said before, we will do that with both organic product development alongside disciplined tuck-in acquisitions focused on our strategic platforms. Finally, as I have continued my global travels and spend time with customers, investors, and employees, I continue to be inspired and excited about the future of Merit Medical Systems, Inc. We will now open the call for questions.

Operator: Thank you. Please signal by pressing star 11 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. 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 11. And our first question will come from Michael Petusky of Barrington Research. Your line is open.

Michael John Petusky: Hi, good evening. Nice results. I guess there was not much in the way other than, I guess, the reaffirmed guide on Rhapsody. Martha, are there any updates you want to share there, whether it is anecdotal or more quantitative, just on early days progress? Thanks.

Martha Aronson: Yes. Thanks very much, Mike. You asked—just to clarify—you are asking about Rhapsody?

Michael John Petusky: Yes. Yeah.

Martha Aronson: We are very pleased with how Rhapsody is going. Again, just to remind folks, we did a bit of a reset, if you will, on how we are approaching our go-to-market strategy with Rhapsody. We really instituted that toward the end of last year. And I would say at this point, we are very pleased with how we are doing. We have given, I think, our previous guidance or our revised guidance in 2026 of $7 million for Rhapsody for the fiscal year, and we are tracking right on that.

Michael John Petusky: Okay, great. And then I am not sure who this is for, but I am just curious about—are you guys, like, is there a formal process? Are you seeking refunds in terms of the tariffs that you had to pay last year and the first part of this year? And if so, how does that process work? Thanks.

Raul Parra: I will just give a guidance overview if you do not mind, Mike, because there are a lot of moving parts to this. Just as a reminder, for our 2026 guidance, we have left it unchanged essentially from what we did in the first quarter, which is we have got $15 million that is baked into our guidance for 2026 versus the $9 million that we had in 2025. That is unchanged since the U.S. Supreme Court decision.

I think there is still a potential for the administration to challenge that, I believe, through May, and so we will reevaluate that as part of our second quarter reevaluation and we will discuss that further after the second quarter once we are on firmer ground. It is a moving target, but there is also the Section 232 stuff that is hanging out there.

Michael John Petusky: I was just going to say, have you guys filed it? Like, is there paperwork to file to seek refunds at this point for you guys or no?

Raul Parra: Yes. We have started the process of reimbursement. Like I said, though, I think the challenge is that the administration can still challenge the reimbursement through May. From our perspective, we have started the process of filing and have essentially filed for the majority of that. I think we will have an update, hopefully, on our second quarter call as to how that shakes out. Feeling optimistic, I would say, if things stay as they are today, I definitely think the $15 million would come down.

Michael John Petusky: Okay. Very good. Thanks, guys.

Operator: Thank you. And our next question comes from Jason Bednar of Piper Sandler. Your line is open.

Jason M. Bednar: Hey, good afternoon, everyone. Thanks for taking the questions and nice start to the year here. I wanted to start first on Viewpoint, the recent deal. It is a pretty sizable revenue contribution step-up from this year to next. Could you help us out with how you see this coming together—what is supporting the growth ramp going from $2 million to $4 million in revenue this year up to $14 million to $16 million next year? And then should we think about that 20% growth rate you referenced starting in 2028, building on that $14 million to $16 million? And then, looped in here, just any considerations around synergies that could be realized with respect to that SCOUT platform?

Martha Aronson: Yes. Thanks, Jason. Appreciate the question. A couple of comments on that. First, taking a step back on oncology: it is about a $100 million platform for us, and it has been growing very nicely. It has been pretty much a one-product platform, so we have been looking for a while at ways to add to that because we have an outstanding field organization and we wanted to get some additional products in their hands. If you think about the breast cancer market, particularly the biopsy phase—someone has a mammogram or something is seen—in the U.S. alone there are 1.6 million breast biopsies done each year.

For SCOUT, the product that we have had for a period of time now, the applicable market has been about 300,000 of those procedures each year. With the addition of OneMark, you actually expand the market three to four times because the other 1.3 million breast biopsies tend to be done for lower-risk patients; SCOUT tends to be used for higher-risk patients. We are really seeing a terrific market expansion opportunity. It then comes down to physician choice about whether they would rather use radar technology or ultrasound technology. We are super excited about that.

Both of these approaches happen at the time of biopsy, whereas if you do not do something at time of biopsy, a patient may have to go through an additional localization procedure before surgery. We are excited about what it means for patients. Breast cancer grows about 4% a year, and the wire-free localization market where we play is growing at about 13% a year, so when you ask about our confidence in the future growth rates, we feel good about that.

Raul Parra: I will add, Jason, at the midpoint of our 2027 guide, which was around $15 million, you can definitely tack on the 20% that we called out. On the synergies, just to be clear, in the guide for 2027 on a full-year basis it is accretive, both on the top line and the bottom line, with strong gross margins at 70%. We are really excited about it.

Jason M. Bednar: Thank you for all that. Super helpful. I want to pivot to the OEM part of the business. I appreciate all the extra color in the prepared remarks, Raul. I heard you on the 1Q performance and the normalized growth profile for OEM. But can you say whether the worst is behind you for OEM? Does that performance get sequentially better in 2Q? Does growth return in the second half of this year? And bigger picture on OEM, Martha, we have seen you take actions on portfolio management at Merit.

How do you think of the value OEM provides to Merit versus maybe what you could potentially realize through strategic moves like some of the actions we have seen across other med tech OEM players here the last several months?

Raul Parra: I will take the last part first. To level set on what our OEM business is: we essentially sell capacity. We are different than other OEM companies out there; we are not a contract manufacturer. We are selling our own products. Divesting of that just does not really work—we would end up with a bunch of extra capacity. Having said that, we love our OEM business. It is a great asset and remains healthy despite quarter-to-quarter fluctuations. I know you find that frustrating, but as we see the visibility, we are getting excited about what we can do there. We continue to believe the appropriate normalized growth profile is in the mid to high single digits.

We are starting to see orders for Q2 that give us a lot of confidence that we are going to be at, at the very least, that mid single-digit growth profile that I just talked about. We are excited to see how the quarter goes; the early start is looking really good.

Jason M. Bednar: Just to clarify, you are saying mid singles is how you are seeing 2Q come together, mid single-digit growth for OEM?

Raul Parra: That is right.

Jason M. Bednar: Perfect. Thanks so much.

Operator: Thank you. And our next question comes from Sam Elber of BTIG. Your line is open.

Sam Elber: Hey, good afternoon. Thanks for taking the questions here. Maybe I can follow up on some of the dynamics in the Cardiac business that was called out in the prior quarter. Just curious to get an update on how that is shaking out here, and then I will have a quick follow-up.

Raul Parra: We continue to be on track. To walk through that issue: when we initially had our fourth quarter call, it was a supply chain issue that unfortunately turned into a recall, and I am sure many of you saw the notice go out. From a financial perspective, it is immaterial to our 2026 financial results. We continue to be on track to have this product back on the market. It is unfortunate that it came to this, but to highlight it, it is a Class I recall, and we have not had any of those since 2017. Just to clarify, this was in Renal, right?

Martha Aronson: Just for clarity, Sam.

Sam Elber: Okay. That is helpful. And maybe just a quick follow-up on some of the geopolitical issues we are seeing out of the Middle East. Are you able to help quantify or think through any impact on the revenue line and then to input costs, whether it is freight or oil—how should we be thinking about that over the rest of the year?

Raul Parra: On the positive side, we have yet to receive any price increases from our vendors. We are seeing fuel surcharges; those are pretty typical and we usually see those at least once a year as gas prices fluctuate, so that is nothing unusual. Right now everything is manageable. If the issue continues, we will have to reevaluate, but as of now, we feel like we can overcome whatever is coming our way. On the sales side, we continue to get orders from the Middle East region. We did leave about $1.5 million of revenue on the table from shippers that were not able to pick the product up and deliver it.

We are seeing an impact, but it is very manageable, and we continue to feel really optimistic about the guidance that we put out for 2026.

Martha Aronson: Thank you.

Operator: And our next question comes from David Rescott of R.W. Baird. Your line is open.

David Kenneth Rescott: Great. Thanks for taking the questions. Two from us, and I will ask them both upfront. I heard some of the commentary around OEM as it relates to the quarter, Q2, and the guide for the year. I recall that there is some APAC impact in there in general. Can you provide any color around what the assumptions are for China and APAC at this point and, in broad strokes, how that is shaking out versus contribution from that region in the prior year at least? And then on the operating margin side, I believe the results were a little better than we expected. Lower OpEx growth seemed to be the case, better gross margin.

Can you help us think about how you are thinking about controls on the OpEx side through the rest of the year? I believe you commented on gross margins already, but would be curious around any of the underlying assumptions you have for better-than-expected operating margins for the year.

Raul Parra: On the APAC region and OEM: that was essentially in line with our expectations. APAC as a whole was up 1% on a constant currency basis in Q1, which was a beat versus the high end of our guidance. China sales increased by about 2% year-over-year on a constant currency basis in Q1, essentially in line with our expectations. VBP impact was modestly better than expected. As far as China, we continue to expect low single digits for 2026 as we continue to deal with volume-based purchasing. Moving to operating expenses, we were expecting a lower gross margin, so we controlled operating expenses.

With the conflict, as that came out, we really talked to the executive team about being in control of operating expenses, and they did a really good job. We let that flow through to the bottom line with an $0.11 beat and a much better operating margin than we had initially indicated on the fourth quarter call. One of the nice things is that we were able to offset the $0.05 dilution of Viewpoint and essentially increased our EPS guide to cover for that. Overall, the P&L was off to a really strong start for Q1.

We beat on the revenue side by over $4 million, gross margin was better than anticipated, we controlled operating expenses, and that gives us a lot of confidence as we head into the rest of the year. We are really confident in the full-year operating margin guide and obviously focused on our CGI targets.

Martha Aronson: And, David, I might add one comment. Hats off to Raul and Travis in our finance team. One of the things we have been working on is a number of our processes across the company and getting our finance partners involved earlier in the process. We are doing our best to ensure discipline throughout the organization when it comes to spend. Hats off to our finance team partnering with engineering, operations, etcetera. Thank you.

Operator: And our next question comes from Aidan Lahey of Bank of America. Your line is open.

Aidan Lahey: Hi, thanks for taking the questions. Two from me on OneMark. One, when you did the deal, how much were you factoring in it being complementary versus cannibalistic to SCOUT? I know you said physician preference. Is this a move that can open up broader accounts? Would some accounts have both systems? And do you think there is any impact on SCOUT sales during the inorganic period that could impact growth?

Martha Aronson: Thanks for the question. We really view this as a market expansion play. There could be a handful of accounts where some have both, and there could be some where someone chooses one over the other. There is an opportunity—it is a bit of a better-and-best offering. There is an opportunity to target accounts very specifically, which our team has done a great job preparing to do. We see it as a total expansion of that time-at-biopsy localization market.

Aidan Lahey: Got it, really helpful. And then I think we saw OneMark was actually running a trial that was head-to-head with SCOUT. Now that both products are yours, do the outcomes of that trial change the strategy of SCOUT depending on if it goes one way or the other, and what are the plans there?

Martha Aronson: I literally got off the phone earlier today with one of the team members from OneMark. This group is super excited to be part of Merit, and Merit is super excited to have them as part of our team. There is a major congress happening starting today—the Society for Breast Surgeons. There was a training with fellows earlier today, and the team reported that it really is a physician preference. Some are more “audible” and like the radar and hearing it; others prefer being able to see it visually. We are excited to have this enhanced product offering across the portfolio and, as we said, it is a great add to the Merit Oncology platform.

Aidan Lahey: Great. Thank you.

Operator: Thank you. And our next question comes from James Sidoti of Sidoti & Company. Your line is open.

James Philip Sidoti: Good afternoon. Thanks for taking the questions. If I heard you correctly, with gross margin, you were able to keep that basically flat despite about $5 million of tariff expense. What drove that? Was that a mix issue? Can you give us more color on that?

Raul Parra: It is essentially a 120 basis point impact to our gross margin from tariffs. Hats off to our sales force for focusing on selling the right products at the right price. We have some acquisitions helping us, and that is part of the mix component. We continue to focus on the “throw the kitchen sink” approach at gross margin. The conflict in the Middle East is exactly why we do that—there are surcharges coming that we were still able to overcome. Our operations group is doing everything they can to maintain or improve costs in a really challenging environment. It is a little bit of everything, but there is a mix component helping us.

We divested the DualCap, which was a very low gross margin product, and that is helping as well. We are hyper-focused on CGI goals, and gross margin is an important contributor to operating margin, which is why we focus on it so much.

James Philip Sidoti: And then, inventory was up about $20 million in the quarter. Can you explain that?

Raul Parra: We have acquisitions that have taken place, and we are building out those inventories. There were certain areas we were a little low in. Over the last year in our Endoscopy segment, we dealt with some supply chain issues, so getting that to a healthy point. Same with our Oncology business, and same within our Cardiac and Renal Therapies—areas that had really strong sales. We are getting safety levels to an area we feel comfortable with. You are also in an environment where you look at the supply chain to make sure you are covered given the performance we expect, so we are making sure our safety stocks are at the right level.

James Philip Sidoti: Alright. And if I can, I am going to sneak one more in. Can you just tell us what the distribution looked like for the OneMark system prior to the acquisition, and how many people will be selling it now that it is a Merit product?

Martha Aronson: We do not share exactly how big our sales organizations are. Viewpoint was certainly a smaller organization. It will fold really nicely into our team, who are excited to have their Viewpoint colleagues join them. It is not a major expansion of our commercial footprint, but the energy behind it will certainly make up for that.

James Philip Sidoti: Okay. So the big jump to revenue in 2027—that is not because of increased distribution. You think that should occur due to product awareness?

Martha Aronson: Correct. It is increased product awareness, having options as you go into each and every account, and excellent account planning and targeting that our team is undertaking.

James Philip Sidoti: Alright. Thank you.

Martha Aronson: Thanks, Jim.

Operator: Thank you. And our next question comes from John Young of Canaccord. Your line is open.

John Young: Hi, guys. Thanks for taking the question and congratulations on the quarter. Martha, when you came into the seat there was an emphasis on OUS growth given your background. Any updates on the progress or changes that you have made there? In the script, you spoke about some alignment changes. Has compensation changed at all for the reps?

Martha Aronson: As we go into 2026, there have not been any significant comp changes for our reps. You have heard Raul talk about our gross margin improvement. Over the last several years, this organization has done a nice job making sure our team knows which products to stay focused on, and we are pushing a bit more emphasis on some of our higher-margin products. In general, about 40% of our revenue is outside the United States, and as you heard, our international teams continue to do a really nice job. I am quite pleased with that.

John Young: Great. Thanks. And then perhaps any additional color on the Endoscopy segment and any progress you made in the quarter on the integration and training of that sales force. Thanks again.

Martha Aronson: We are really excited about the Endoscopy platform. We brought in the C2 Cryoballoon acquisition, which is so far doing better than our end expectations. We also announced a new product, the Resilience through-the-scope esophageal stent. This is a really nice market for us—sub-$100 million in size. For Merit Medical Systems, Inc., that is a really nice market space. This is a great stent, and because physicians deploy it through a scope, they feel they have more control and accurate placement. Most importantly, the initial feedback is that it is not moving once it is there. Migration has been an issue with a number of stents in that market.

We are really excited about the opportunity for Resilience and the Endoscopy business in general. Next week, I will be at Digestive Disease Week with the team, which is one of their big shows—more on the GERD side of things—but across Endoscopy we are very pleased.

Raul Parra: I will add a little color. As you hopefully saw last year, our Endoscopy team just got better every quarter as they integrated and learned how to sell both bags. Q1 was mid-teens growth—really strong performance—so they are excited about what they are doing, which makes us excited about their potential.

John Young: Great. Thank you.

Operator: Thank you. And our next question comes from Jason Bedford of Raymond James. Your line is open.

Analyst: Hey, Raul. Hey, Martha. It is Zack on for Jason Bedford here. Thanks for taking the question. You have talked about being open to deals that are somewhat larger than historical tuck-ins, and of course we saw the Viewpoint deal. As you look at the pipeline, can you remind us what those key areas are for the next deal? And in terms of sizing, would you say Viewpoint is a good proxy for deal characteristics and size in terms of helping us level set expectations on acquisitions?

Martha Aronson: Thanks. Doing deals is not something where you get to say you want to do something of exactly this size at this time to add precisely to this particular platform. That would be lovely, but that is not reality. We are not going to put a number around a deal. We are looking at a lot of things. This company has grown a lot through acquisition; we plan to continue to do that. It is important to think in terms of tuck-ins or bolt-ons—nothing transformational. Every deal has to have a lot of strategic fit. With our platform structure, I am looking to each platform to have conviction around any proposed deal because they are going to own it.

That is how we are building these business lines. It is critical that they believe in it and have done the work and analysis. We do a lot of that at corporate as well, but that is how we are thinking about acquisitions going forward. It has to be strategic and fit certain financial metrics that we have in place—certainly being margin accretive would be one of them.

Analyst: That makes sense. Appreciate the color. Then, if I can ask a second one: just curious on that Medtronic distribution deal you did during the quarter. Is there any stocking tied to that, and is there a material impact for you on growth that comes from this agreement?

Raul Parra: They are going to gear up, and we are not going to give details. It is not our practice to talk about our customers’ launch plans. We are really excited for our OEM division. They have done a good job working with our OEM partners and customers on finding opportunity, and this happens to be one of them. It is built into our guidance for the year, which gives us a high level of confidence in that mid single-digit growth that we expect in OEM. We have a high level of confidence in their performance for the rest of the year.

Martha Aronson: This is a really good example of why we say OEM is lumpy. As you saw—and Medtronic put out a press release on it—we have a relationship with them; they have been an OEM customer as they shared in their press release. These things ebb and flow a bit. As Raul said, we are very excited, and this is a factor in gaining confidence on our OEM platform for this fiscal year.

Operator: Thank you. And our next question comes from Mike Matson of Needham & Company. Your line is open.

Michael Stephen Matson: I just want to ask one on capital allocation. I understand you are focused on M&A and that has been the priority. But the stock is pretty beaten up, pretty cheap here. Would you consider doing a share repurchase at all?

Raul Parra: That is a board-level decision, and I do not want to speak on their behalf. For now, with our net leverage ratio of 1.6, and a lot of opportunity out there from an M&A perspective, we continue to conserve cash. We continue to generate strong free cash flow—as you saw, approximately $25 million for the first quarter, a strong increase over 2025. For now, we are focused on CGI, on our free cash flow goals, and on delivering long-term sustainable growth.

Michael Stephen Matson: Got it. I will leave it there. Thanks.

Operator: Thank you. This concludes our question and answer session. I would like to turn it back to Martha Aronson for closing remarks.

Martha Aronson: Thank you, everybody. I appreciate you dialing in today. We are pleased with our strong start to 2026 and feel good about tracking nicely to our CGI goals. Most importantly, I want to thank our team who is so committed to helping patients all around the world. Thanks, everyone, for joining us today.

Operator: This concludes our conference call for today. Thank you for your participation.

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