Merit Medical Systems, Inc. Aktie

Hi, everyone. Thanks for joining. I'm Jill Hall, Head of Small and Mid-cap Strategy at BofA Global Research. So welcome to first session of Day 2 of our virtual SMID Cap event. Happy you could join us. If you need the schedule for the rest of today or want to sign up for any additional sessions, feel free to reach out to me or to Matty or Ashley actually in corporate access. But great to be hosting day 2.

We have, over the course of the 2 days, about 20 small and mid-cap companies joining us. Our analysts have really great breadth of coverage in the SMID space. They cover about 1,000 small and mid-caps in the U.S. So feel free to reach out to me or any of the analysts if we can get you to subscribe to any research or do any follow-up. But with that, I wanted to pass it over to Travis.

Great, everybody. Thanks for joining. Welcome to have Raul Parra, CFO at Merit Medical, join us for a fireside chat this morning. If there's anything I'm not covering, you want to make sure we ask, just ping me on Bloomberg, and I'll screen questions that way.

But otherwise, we'll kick it off here. Raul, maybe just to kick off for investors who are newer to the Merit story, how would you describe the business in kind of simple terms and kind of what makes Merit different from other MedTech companies?

Yes. No, great question. I think first of all, we play in the -- mostly in the interventional radiology space, cardiac, endoscopy and oncology, specifically kind of the breast. I think Merit has a long history of growth, Travis. I think one thing that is hard to understand is the Merit story and how we consistently grow mid- to high single digits. And we've recently changed our reporting. So hopefully, we can help you guys better understand that.

But I think Merit wins in multiple ways. Pays attention to its customers, introduces products that really do help them. We acquire products that we can bring in that supplement the products that we deliver to our customers. We're vertically integrated in everything we do, and we have a global footprint that allows us to deliver product to our customers. That's really kind of the short answer. And then we take a lot of pride in our quality, right? And so you combine all of those, and we can really deliver value to our customers.

Makes sense. Merit is at an interesting point in its history, transition from a long-time founder, CEO to kind of nearing the end of your LRP, building that strategic plan. As you step back and look at the company today, what's changed the most over the last year and kind of what remains left to do here?

Yes. I mean, look, I think the changes really started really around Foundations for Growth, right? So 5.5 years ago, as we knew Fred would be retiring, we really started setting up processes and getting the right people in the right place in order for that transition to happen and be smooth. And now that we have Martha here, we've really kind of dug into kind of the platforms as we've -- if you look at our revenue reporting, you'll notice we have 8 platforms. And really, that's how we're going to start running the business.

And we set those up early on in Foundations for Growth, and have been increasingly giving people responsibility. And I think here now with Martha, now it's about accountability and making sure that people follow through on everything they're doing for their platform. And Martha has been a great cultural fit. And I think she's asking all the right questions, looking at all the right places.

And we're neck deep in strategic planning right now, and we'll get something out here, hopefully, for a new LRP sometime probably -- maybe with our fourth quarter call or maybe earlier, we're still kind of trying to pencil that out. But look forward for more information, and we're off to the races right now, just kind of doing a deep dive into the business.

Yes. When you think about putting the new LRP together, anything that we should think about differently versus kind of the last LRP?

It's a good question, right? I mean I think those are the questions we're asking ourselves right now, Travis. So I'm not sure that I have a good answer for you guys. I think what we've done has really worked, right? So the metrics we really kind of focused on have been revenue, operating margin expansion, free cash flow and obviously, earnings is the fallout of those. But -- and we've really expanded. I mean, through December of 2025, we've expanded our operating margin about 850 basis points since December of 2019.

And then if we hit the high end of our CGI goals at the end of 2026, you're looking at somewhere around 950 basis points. So those metrics have been working. But when you're neck deep in strategic planning, it's a good time to ask the right -- all the questions, right, and leaving no stone unturned, are these right metrics going forward. So we'll continue to look at them, and we'll see where we end up.

Okay. Makes sense. There's been some notable Board changes as well. Just kind of maybe think about what that brings to Merit and what does it say about where the company is at today, given some of the seasoned industry leadership you're bringing on the board?

I think it made a big difference, right? I mean I think we have -- the latest of that is Scott. He's got a vast background, really nice guy, really knowledgeable about the industry. I think we're excited to have him. Obviously, with Fred leaving, he fills, I think, a nice void just with his expertise and the roles he's done.

Okay. Part of the transitions, the reporting framework to foundational and therapeutic products. And for those new to the story, what does that mean? And kind of what drove the change on the reporting side?

Yes. I think what maybe wasn't understood by the Street and basically, we can talk about it. I think we essentially had a different reporting structure internally, right? So the way we reported prior to the change, there was a lot of confusion not only internally, but externally in how we told the story.

And so when Martha came over, one of the first questions she had was, hey, Raul, how do I reconcile what we report externally versus what we give to the Board versus what the internal reporting is. And I said, well, don't bother, right? We've got a few options for you that I think will clean it up. And so we gave her a couple of options that we have been kicking around internally. And she chose, I think, the one that we were all kind of leaning towards, which is what you guys currently see with the platforms on foundational and therapeutic.

And really, I think at the end of the day, what we're trying to do is better tell the Merit story, right, and really kind of hopefully be able to tell a story where you guys understand where the growth is coming from, what procedures we play in, what our call points are and so you can better assign value to us because I think that's been a missing piece to really understand where the growth is coming from for Merit.

And I think over time, we really want to be able to clarify that. And Martha and myself, you'll hear us kind of talk about these platforms and give you a little bit more color. And I think you'll get even more once we get through our strategic planning because we're asking all the questions about where are we winning, how do we win, where do we need to kind of shore things up and what doesn't make sense anymore.

So it's really more about from an investor perspective to try to let the value get reflected in the multiple for what you're actually doing, right, more of a communication with investors?

Yes. And it's really how we're running the business, too, right? So we have platform leads for each one of those platforms, whether it's access, OEM, vascular intervention, cardiac therapies, endoscopy. So really kind of pushing down the accountability to those platforms. And then we're all hearing the same questions. We're all asking the same questions, right? And it makes it a lot easier to run the business.

What are the kind of the key growth drivers in each of those segments?

Well, I mean, I'm not sure how much time we have here, but -- I think yes, look, I think the nice thing is maybe I'll just start at the high level, right, with foundational and therapeutic. I think when you look at the 3-year CAGRs that we announced when we made the change, the therapeutics is growing at a nice 10% and then you look at the foundational -- or 11%, sorry, when you look at foundational, it's growing at roughly 6%. And the foundational does make up about 2/3 of our revenue and does have a better gross margin than people would expect.

Therapeutics is still growing faster, still has a better gross margin, but the separation between the two isn't as steep as people would think. And I think when you look at the acquisitions and some of the R&D projects that we've come out, we're really kind of investing in all of them, right? I don't necessarily think that the primary focus of the company is going to have to shift to therapeutics.

As you know, a lot of our products, especially on the foundational side, are really therapeutic enabling devices, right? So we have access products. We have delivery products, and we have closure devices. And all of those really kind of help the therapeutic side of things. It's very hard to do a procedure on the therapeutic side without those products. So we think we have a really good portfolio that benefits from each other. They play off each other. And so that's what allows us to deliver that consistent kind of growth that people really like.

So I would say, look, generally speaking, we've made acquisitions in most of the platforms. I think we're kind of waiting and seeing and getting some of the fruits of that hard labor. I think you guys have seen the cardiac therapies growth. It's been outstanding. I think we grew at roughly 22% in Q2. You look at endoscopy, that's off to a really great start. That's a combination of not only the new acquisitions, but new product introductions.

And then OEM, everybody's favorite topic has bounced back. That business is a little bit -- has a little bit of choppiness. I think we've consistently announced it that way and disclosed it. But we think that OEM can deliver mid- to high single digits very consistently. And then you just go down the list, right, with renal therapies, you've got the WRAPSODY, you've got oncology, which we just acquired the View Point. I'm really excited what that can do to a portfolio that was really a single product portfolio. Now they've got 2 products that really complement each other. So a little bit of color there.

That's helpful. Is there -- when you think about like whether it's M&A or investment or focus between the 2 businesses, anything you'd call out? Or is it kind of equal between the 2?

I think it's just depending on what's available out there, right? I mean we did the StatSeal deal, which was a foundational product that could really kind of help across almost all platforms. And then you look at the therapeutic side, right, which we just closed -- obviously, did the View Point deal, that was the most recent announcement for our oncology group.

So look, again, we really do value both the foundational and the therapeutic portfolios. Again, they're very complementary to each other, and we want to do a good job of balancing the investments between both. Now obviously, look, therapeutics is growing faster. So over time, it should kind of move closer to the size of foundational, right, just by the nature of the growth profile. But it won't be intentional. I think it's really about finding a real good balance on our portfolio between the two.

Q2 organic growth on the top line is probably the strongest the company has had, I think, 3 years. Is this level of growth sustainable?

Well, you guys know me, right? I'm more of a conservative type of guy, right? Look, I think Q2 is always a strong quarter for us along with Q4. I do think there's a lot of momentum in the business. We tried to explain that in Q1. I'm not sure that the message came across as clear as we wanted it to. Q1 was 3.9% -- 3.6% growth. And you exclude the OEM issues that we had in Q1 and then the recall in Q1, and the underlying business was doing really good, right? And we tried to kind of explain that to people that as those two things bounce back, you would see some really nice growth.

And that's really what happened in Q2. I mean the OEM bounced back. We got the recall kind of under control, found an alternative product for some of our customers, which really helped. And then the base business or the rest of the business continued to do well, and we were able to deliver really strong kind of quarter. I think the momentum is still there. Obviously, we bumped up our organic constant currency revenue guide.

And now we're looking at roughly 7% for the year kind of at the midpoint or a little bit north of that, 7.5% at the midpoint. But -- so I think things are looking really good. The business feels good. We're not seeing any slowdown in procedures like other people maybe have mentioned. We continue to ask our sales force, and they continue to see the momentum. So we're excited to see how the rest of the year plays out. But I think we've got a good guidance for the rest of the year, we feel pretty confident.

Yes. I mean for the full year, you basically just raised the guidance by the amount of the Q2 beat. It's not a trend for improving relative to expectations. So it's just basically being conservative in the second half of the year.

Yes. I mean I think our approach is to set a guidance that's realistic and achievable. We're not trying to wow anybody with our guidance here. We just want to make sure that we can execute on it. And I think our normal standard operating practice when it comes to guidance is to look at stuff after the second quarter and see where we're at and then kind of flow through any changes that we see. And luckily for us, it was a big beat flowed those through for the most part.

Yes. And then I mean your guidance does assume, I think, a second half slowdown. If you look at the way the guidance implied second half. Is there anything in the business slowing down? Or is just...

Yes, there's a little bit of seasonality in our business that people have to remember right now. I've been around Merit for about 20 years, been an employee of Merit for about 16 years, and most of those quarter, there's typically a step down in the third quarter. Now the last couple of years, I think I've been proven wrong, but I've got more history with that third quarter being down than not. So until I see kind of more consistency in that third quarter, my assumption is that it's going to be down a little bit, and that's what we did essentially. So the fourth quarter should bounce back and be strong like it historically is.

Yes. And I don't know what kind of vantage point you have, but there's some sort of curiosity like, hey, is there -- is this year a little more seasonal with procedures, like more back half weighted with procedures versus prior years, given higher deductibles and stuff like that. I don't know if there's any thought on that or kind of where trends are shaping out, I mean, that's -- if you're seeing any evidence of that happening?

Yes. We're not really seeing anything, right? I mean, again, I think it's -- I'm not sure what to think of trends anymore, right? Post-COVID, I think everybody is still trying to figure out what those trends are. And every time we start to get some level of consistency, we get something else, right? I mean things are starting to look pretty great, and then you get the Middle East conflict, right? That throws everything kind of off and then now you're starting to kind of have to deal with that, too.

So I don't know. I mean, I think our business is doing well. Our sales force is excited about kind of the products that they have and the momentum in the business. We're not seeing any type of slowdown. As far as related to procedures, I would just say you are seeing a little bit of a typical kind of summer, people taking time off, which is pretty standard, right? But nothing that I would call out as a concern. Like I said, the momentum continues in our business.

Right. Yes, I think people usually take vacations every summer, right, because you see that every year. So probably not that big of a difference in trend.

Exactly.

Okay. Excluding the tariff refund, the Q2 margin came in above expectations. How should we think about the drivers of that price mix, productivity, timing on spending, whatever?

Yes. Look, I mean, I think the gross margin has been outstanding -- expansion has been outstanding this year. I think our sales force has done a really good job of just really being hyper focused on mix and our pricing team has been great about holding people accountable to the pricing targets that we've set. Our acquisitions are, for the most part, ahead of target, specifically around the gross margin. They're doing much better than we anticipated. And not only from the -- also the revenue side of things, they're either at or above our expectations.

As a matter of fact, I think we bumped up our inorganic revenue slightly for this year. But -- so things are going well on the revenue side. And operationally, I think we were all anticipating some level of price increases when the conflict in the Middle East came out. We haven't seen anything yet other than freight, which is pretty standard, quite frankly. I think we deal with that just about every year.

And so our operations group is doing everything they can to kind of hold the reins on the expense side of things and be more efficient, just with all the moving parts that they have, and we really focused on shifting more product to the water or ocean versus air, which also helps. So we're really looking at everything. And I know people are getting sick of me saying that we're throwing the kitchen sink at the gross margin, but that's the reality, right?

I mean I just -- I don't know how -- if somebody finds a better way for me to explain it, I'll take it. But we really are focused on the entire thing. Now obviously, there's levers that are bigger and whatnot. But look, if you don't focus on all of it, you don't get the results that we've had over the last 5.5 years as far as that gross margin expansion, especially the gross margin expansion this year. So...

It sounds like nothing onetime in the Q2 margin, except for the tariff refund really?

Yes. Other than the tariff, you're right. And again, I think we flowed most of that through. We did keep some of it to reinvest in the business because obviously, when those hit last year, they were unexpected for everybody. We pulled back on a few things. And as that money came back, we thought we'd bring some of those opportunities forward.

I mean we talked about some of the margin expansion that you guys have driven over the last few years earlier, 400 basis points of gross margin, 300 basis points of op margin between '23 and '26. Like maybe help us understand like how you've been able to get that much margin out of the business?

Yes. Look, I think maybe stepping back historically, right, I think Merit was always well known for being a great top line grower, right, and expanding on the revenue side. I think one of the knocks on Merit pre kind of Foundations for Growth was really like, hey, you guys are great at growing the business, but it's like a continuum of investment, right? Like we never get to see kind of the earnings growth or match the -- get to see the earnings kind of match the revenue side of things.

And so when we launched Foundations for Growth, we set out to really kind of change how we ran the business, setting up processes and programs in place to make sure that we could not only grow the top line, but also just start to focus on free cash flow and also expanding the operating margin. And so the focus, quite frankly, and we were very clear from Foundations for Growth through CGI was, look, to the extent we can grow the gross margin and really focus on it, we will expand our operating margins through that. To the extent we can't get the gross margin to where we want it to, we will also focus on operating expenses and then leaning that thing out.

And so look, over time, specifically through CGI, I think we've done a little bit of both. We've -- the gross margin has really kind of come through, and we've really been able to invest in the business, continue the growth that people like while also expanding the operating margins given that, that gross margin has really kind of come through and expanded. So I think we've expanded our operating margins, as you said, quite a bit, but we still think there's more to be had. And obviously, we're neck deep in that work right now, trying to figure out exactly what -- how much we can do on what's realistic and achievable for our next LRP.

I mean is there a lot of low-hanging fruit already over with? Is it common sense that, hey, maybe the next 3 years is probably a little less opportunity than the last 3 years?

Well, look, I think it's fair to say -- and I typically don't look at it in the 3 years, right? I kind of look at it as the 2 LRPs, right? Over the last 5.5 years, I've said it right, we really expanded the operating margin quite significantly. Nobody at Merit is thinking that, hey, we're done. Are we going to expand another 850 basis points to 950 basis points by the end of 2026? Look, I'd be lying to you if I thought we could do that, right?

But there is definitely more to be had. I think the question right now is how much more. I think we're perpetually kind of on a go-forward, going to be on the kind of in the seventh inning, right? So pricing, we're going to be in the seventh inning, contracts renew every 3 to 5 years, so we'll have an opportunity there. You always can be more efficient, find leaner ways to do things on the operations side.

We'll continue to do acquisitions that make sense. When they make sense, we're in a position where we don't have to do anything. But if we find the right asset, we can, which will also help. Focused on R&D products, both on the foundational and therapeutic side. So look, I think we've got a good game plan. Right now, obviously, we're going through the entire business. It's a good opportunity for Martha to kind of get to know everything that she's -- that we have there and really kind of asking all the right questions so that we have a really robust plan when we come out here.

As you look at '27, a lot of the investments you made over the last few years are kind of maturing at the same time. View Point goes organic, WRAPSODY adoption picks up probably, you got new product launches, more favorable reimbursement dynamics. I mean is it fair to say that there's probably more growth levers available in '27 than today?

Well, I don't want to get ahead of the -- of our LRP announcement, right? But look, I don't think there's anybody at Merit that's worried about growth, right? I mean, obviously, we worry about everything because that's our job. But look, I think we have -- we see a lot of opportunity. And it's just about making sure that we keep our senses about ourselves. We don't get ahead of or over our skis and just make sure that we put a good game plan together that we can execute on.

That's what's been successful for the last 2 LRPs, right? I mean I think there's very few companies, at least I'd like to tell myself that, that have executed 2 LRPs back to back and met or exceeded the goals that they set. And so our intent is, hey, let's lay out another LRP and meet or beat it, right? So that's where everybody's focus is on.

M&A has been a large part of the story over the last few years. I don't know if there's any -- like how you think about prioritizing that going forward and kind of the strategy on the M&A front, what kind of capacity you have or where the interest lies, adjacencies, et cetera?

Yes. I mean, look, I think the strategy we've deployed over the last couple of years -- few years, right, is one we kind of want to continue. And that's really kind of going deeper into the platforms that we already have. And you've seen kind of some of the assets that we've dropped in, right, whether it be in oncology, endoscopy, cardiac therapies, access.

So all these investments, I think we're trying to find the right balance and find the areas that our platforms are telling us, hey, we need a little more products in this area, or we're short on this, we need this, right? So I think you'll start to see a lot more of that type of deals where we're really more trying to focus on the call points that we're already in. I mean we're already pretty broad. And I think over the last 2 to 3 years, you've really started to see kind of -- really as part of CGI, like, hey, we've got good businesses already, we're in good procedures, we've got good call points, so let's start digging deeper in there. We've already got the sales forces that we can really take advantage of. And so that's really the strategy that we'll deploy, but we'll just have more people involved, right, at the platform level.

What kind of like deal sizes or kind of what's the ceiling when you think about deal sizes? And are you willing to take on leverage for the right opportunity? Or is this like a max leverage you're willing to take on?

Yes. Look, in this environment, we've been pretty open about saying, hey, we probably don't want to be greater than 3x, I know with interest rates where they're at. Look, I think -- I said this earlier, Merit is in a position where we don't have to do anything. And so it allows us to be pretty disciplined in our approach. I think we look at it as really doing tuck-ins. Obviously, tuck-ins will vary by size. I don't ever like committing to any type of size or dollar value just because you just don't know what's going to be out there. But I think we've proven that we can do tuck-ins fairly well.

Obviously, we're getting bigger. So, do tuck-ins get a little bit bigger? Maybe, but it's not like it's intentional, right? I think we're really looking at where is our holes in our portfolio, what enhances the products that we currently have. And then you look at kind of, okay, well, what's the size of the deal, right? I mean it's more about what the needs of the business are versus going out there and finding a deal of a specific size.

Okay. But 3x is probably the max leverage?

Yes, I think so. I think that's -- especially in this environment, right? If you asked me 6, 7 years ago, I probably told you 4x, right, because the interest rates were different.

Right. Is the LRP view of buybacks versus M&A like you probably about the same? Or is like with Martha at the helm now, is there kind of a different kind of maybe priority between the 2 going forward?

Look, I mean, I think -- again, I think there's a lot of opportunity that we see out there. I think capital allocation is obviously one of the key areas that we're strategically planning on. We're asking all those questions, does the stock buybacks make sense? What's the opportunities that are out there right now? I mean, I can tell you that there's a ton of opportunity from an M&A standpoint.

It's the most active I've ever seen it, and I've been around Merit for, like I said, for 20 years, and they've been very active since I've been around. But again, it's about finding the right assets. So I think those questions are being asked right now. Obviously, we're getting Board up to speed, executive team, we're thinking about what the right answer is. And so I don't know that I have a change of philosophy right now other than to say, look, we're looking at it, and it should definitely be part of the discussion as you lay out the next 3 to 5 years.

You said there's more M&A than you've seen in a long time. Why is that? Is it people wanting to sell? Is it your team finding assets that are interesting? Is it valuation? Why is...

I think it's actually just a tough environment for MedTech companies, right? I mean if you think of kind of like a smaller companies, I think if you're like sub-$100 million and you're trying to build the sales force, I mean those are expensive, right? I mean -- and financing is hard. Finding a way to financing those things is not an easy task. You look at Europe, they are dealing with MDR and trying to find capital. I mean it's a really tough environment.

So I just think it's -- and the bigger companies, they're trying to lean themselves out, right, and find opportunity to continue the growth and increase profitability. So I think it's -- and then PE firms are just -- they're having a hard time on loading their assets, right? So I think they have a bolus of assets they want to get rid of. So I just think there's -- it's a combination of everything that's going on. And obviously, during COVID, things kind of slowed down a little bit and now all of a sudden, post-COVID, the interest rate environment has changed. The cost of capital has increased. You have more regulations. And so now you're kind of -- there's just a lot more assets out there, people just saying, hey, maybe it's better just to sell off.

Do you find that you're competing more with private equity on the buying side? Are we seeing more private equity trying to buy in MedTech as well?

I think it's a combination of both, right? I mean either strategic or PEs. I mean those are the two -- I mean -- so look, I think it just depends on the asset, to be honest, right? If we're lucky enough, we're early in on an asset and there's really very, very little competition, we've been lucky in a couple of the assets where we had great relationships with the company we were acquiring. It's been a long-term relationship, and we were able to kind of pick it up without any competition at all.

Okay. How do you think about managing the dilution from M&A on the op profit and EPS line?

Well, I mean, look, we're very clear about making sure that we hit our LRPs, right? So I mean, one of the check boxes that we check is like, hey, what does this do to our operating margin? We've got a target we've got to hit. Look, if it's 6 months to a year to integrate it and we have increased expenses, but then we can accelerate out of that after.

Look, I think then obviously, it's not a big deal, right? But look, we asked those questions because, again, we are set on hitting those LRP goals. I mean there is no deviation from those. We have yet to find an asset where we go to our Board and say, hey, we have to change our CGI goals. Like that's just -- I mean, that's a high hurdle, not only just from the management team, but then even to the Board -- to go to the Board and say, we're going to change these goals.

So look, it's something we definitely look at. I think we've been lucky enough to find assets that have a nice strong gross margin. And then when we integrate them, we can really get that operating margin. And the business is also doing good, so we can absorb some assets that might take a little bit longer. But we definitely don't want to be acquiring a bunch of assets that are dilutive to our operating margin as we definitely want to hit our goals.

Right. How do you think about like that balance between higher growth versus less margin expansion? So obviously, take a little bit less on the margin expansion for an LRP, maybe grow a little faster or vice versa, expand margin a little more, grow a little less. How do you kind of tie up between those 2?

Yes. I mean those -- I mean, again, I feel like I'm kind of deferring all your questions, but I mean those are the questions we're asking, right? I mean, so it's a great question. And so I think we're -- again, we're asking, we're looking through our portfolios and saying, hey, where are we winning? Where can we accelerate those wins? What -- where we have a right to win and maybe it's not panning out the way we want it to be. And so what do we need to do there? What R&D projects do we have? What's the kind of the short, mid- and long-term kind of view on when those come out and how much can they contribute?

And then obviously, the big unknown is obviously acquisitions, right? You kind of just park that on the side and you really dig deep into your portfolios. But I think those are the questions we're asking, Travis is like, hey, what -- for what can we spend more, and accelerate revenue and then still expand operating margins? Or do we have to slow things? I mean those are all the questions we're kind of going through right now. I mean that's the whole strategic planning piece.

I guess, it's good you're asking the right questions, so we'll have to wait for the answers.

Yes. Hopefully, we have some good answers for you. And again, the whole premise behind the revenue reporting is that hopefully, we can get you better answers, better ideas, the procedures and the places we're playing in so that you guys, as investors can then hopefully better understand the Merit story. And then hopefully, it then makes us a little bit more articulate in where the growth is coming from. And so hopefully, you guys assign more value to us, right? I mean that's the end game. And obviously, internally, it matches how we're running the business, which makes it way easier for all of us and the added bonus is that we get to tell a better story to you guys. So hopefully, we get more value for all of us.

Now that the stock has moved higher, what do you think about the 2029 convert? Any plans for that at this point?

I mean, obviously, I think it's been a great tool for us, right? I mean, look, the interest rates locked in at 3%. I think when we took out the convert, everybody was kind of saying, "Hey, what are you doing, interest rates are going to be down? Why would you lock yourself in? And I honestly felt like interest rates weren't going to be going down, right? I mean -- or not at the pace that people expected.

And so when Fred and I talked, we thought it made sense to go out and raise the money and park it on the balance sheet, especially since we were earning over 5% on that 3% money. So I think it's been a good tool. Obviously, we'll -- as we get closer, we'll start to think about what we do with that, whether it's a new convert or we do something else to supplement that. So -- but yes, I mean, I think it will be a question we're asking, quite frankly, probably another year or so, and then I'll start kind of thinking about what we do.

Makes sense. We'll kind of wait and see. I mean one thing I was thinking about, you guys are in structural heart, EP, oncology, endoscopy, peripheral vascular, all these different end markets. Is there certain end markets that you kind of feel are the most attractive or at least -- less attractive? And are there end markets that maybe you're not in today that you kind of want to be in?

Well, look, I think we really like the markets that we're in right now, right? And I think one thing we don't probably want to do is expand outside of the areas that we're already in, right? I mean we're pretty wide already. And like I said earlier, we've taken a lot of pride in finding assets that allow us to go deeper in the areas that we already play in.

So that story kind of is already unfolding. We're introducing our new products that begin to go deeper into the bag, deeper into the call points that we're in without expanding into other areas that then thin us out more, right? And so -- yes, I mean, I think the focus for us right now is really kind of the 8 platforms that we have, let's get better at those, let's get deeper. But I always caveat that by saying you just never know what's going to come your way. If you find something that makes sense, you got to think about it. But for us, it's not like we're out there looking for something that expands the areas that we play in. We really want to stay in these channels.

Makes sense. Honestly, that was mostly my questions. I don't know if there's anything that you feel like we haven't covered, you want to make sure to get out or anybody else on the line has questions, ping me in the chat here on Zoom or ping me on Bloomberg either one, I'll make sure to ask it.

Great. Well, Travis, I just appreciate you guys for having us. Again, the business continues to do well. We feel like there's a lot of momentum in the business. We're excited about introducing our LRP. I know people would like to kind of get that information sooner rather than later. I would just say, look, we're very methodical about how we go about these LRPs. We're thoughtful. We want to make sure we deliver something to you guys that we feel strongly we can execute on. And so a little patience. And before you know it, it will be at the end of the year, and we'll give you guys something to chew on here for the next few years.

Will you do that on an earnings call, the LRP? Will you just give on an earnings call or...

It's a good question. So one of the questions that we're asking ourselves is whether we would do kind of a small couple of hour -- few hour investor meeting. And that would either be here in the state of Utah, in our corporate headquarters or in New York, piggybacking off of a conference to make it easier for people.

One of the things that we really wanted to do, Travis, which we haven't done a good enough job of is introducing more of the executive team to investors, right? I think we have a really good team. I think we've done a disservice to you guys by not introducing you to the depth that we have here at Merit. I know Martha embraces that to get more people out. So I think that would be a good avenue to kind of introduce people to the Street and making sure that you guys kind of understand who's behind Merit, right? It wasn't just Fred. There was a whole team of people that were executing. And so we think it's important that you guys know who those people are.

So it gives you guys even more confidence in what we can do. But yes, we're still kind of, again, one of those ones where we're trying to figure out what to do, right, neck deep in that strategic planning, and that's how do we announce that work and what we've done, and we're kicking ideas around right now. So if anybody has any ideas, send me an e-mail, send it to Travis, ping him, give me your thoughts and take an input right now. So we'd love to have it.

All right. Great. I'll make sure to pass it along.

Great.

All right. Thanks a lot. Thanks for joining us. Good conversation.

Great. Thank you, guys. Appreciate it. We'll talk later.

Bye.

Bye.

Welcome to Merit Medical Systems' Second Quarter 2026 Earnings Conference Call. [Operator Instructions] 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.

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.

Brian, would you mind taking us through the safe harbor statements, please?

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, July 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, 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 U.S. 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. 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.

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. 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. 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. 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. 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 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 3 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%. 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 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. The stellar growth and profitability performance delivered in Q2 is a direct result of their efforts. They continue to stay focused on our current 3-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 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.

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 3-year period ending December 31, 2026.

Turning now to a brief update on our progress with acquisition integrations. First, we have made considerable progress in our integration of View Point Medical, the strategic acquisition in our oncology platform that we announced on April 1st. By way of reminder, View Point 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. This acquisition expands our portfolio of therapeutic oncology products dedicated for 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 U.S. commercial launch in July, including: building the requisite inventory; finalizing our marketing and sales strategies; and training our U.S. 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. 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. 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 first half of 2026 as well. 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 health care 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 stand-alone 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 U.S.

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 million 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 syndrome, 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. 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 million 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 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. 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.

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. Specifically, for the 3-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. 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 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. We took the pulse of these leaders with belief audits and converged on several key themes. 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 the second quarter, 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. 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. Now in Q3, we are rolling up our global forecast, 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.

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. And we intend to share the key highlights of this strategy and new 3-year financial targets related to this strategic plan following the completion of our current CGI program. 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.

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. 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. 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 long-standing as well as new investors, we continually look for ways to help people understand our complex business. 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.

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?

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

Second quarter 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 the second quarter of 2026 of $4.7 million and revenue from our divested DualCap product line of $5.3 million from the second quarter of 2025. By geography, our total revenue in Q2 was primarily driven by growth in the U.S., 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. Second quarter 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 year 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%.

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. 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 of 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 the second quarter. Our total OEM sales increased 15% year-over-year in Q2. We expect to see continued improvement in OEM year-over-year growth trends over the second half of 2026.

Second, sales of Procedural Solutions 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 second quarter of 2026. And all growth rates are approximated and presented on a year-over-year basis. We have included reconciliations from our GAAP reported results to the most directly comparable non-GAAP item in our press release and presentation available on our website.

Gross profit increased 15%. Gross margin was 55.8%, up 262 basis points year-over-year. Excluding $6.9 million of refunds related to previously paid i.e. for 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%. 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.

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. Excluding the after-tax benefit from tariff refund of approximately $0.09, second quarter 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 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. Our net leverage ratio as of June 30 was 1.6x on an adjusted basis. Our cash and cash equivalents at June 30 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 View Point Medical acquisition.

Turning to a review of our fiscal year 2026 financial guidance. For the 12 months ending December 31, 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. Our organic growth guidance excludes revenue from acquisitions in the range of approximately $18 million to $20 million compared to $17 million 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 U.S. 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. 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 8 months of 2025.

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 in the range of $408 million 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 third quarter organic constant currency growth is expected in the range of 7% to 8%, excluding revenue from acquisitions in the range of approximately $2.8 million to $3.8 million and revenue from our divestiture of DualCap of $5.2 million in the prior year period.

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

Thanks, Raul. As I reflect on my 9 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 second half of the year. I want to reiterate how pleased I am that we are on track to meet our 3-year CGI goals. 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. 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.

[Operator Instructions] Our first question or comment comes from the line of Jason Bednar from Piper Sandler.

Congrats on a really impressive quarter for your team. I'll start big picture. There's 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 second half of the year?

Yes, 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. 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.

All right. Perfect. Very helpful. And then, Raul, just as I think about 2Q guidance, you just put up a smash on margins this quarter, is really impressive. If you 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 $0.05 or so 2Q to 3Q in most normal years when I look back to past years.

Your guidance range is maybe a little bit wider than I would think, $0.10 for 3Q. What are you baking in, in terms of the conservatism or the puts and takes on 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 2Q.

Yes, Jason, I think just with the ever-evolving tariffs, right? I mean, 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. And 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 and obviously just put up a stellar second quarter. So it's really just more of a reflection of just kind of the changing dynamic in tariffs that seems to come at us like on a weekly basis. And so just a little bit of coverage there. But obviously, feeling pretty optimistic about the third quarter and the fourth quarter.

Our next question or comment comes from the line of Robbie Marcus from JPMorgan.

This is Lilia on for Robbie. 9% organic growth is a really big number. So 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?

Yes, Lili, 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. And we continue to see that business, right, in the -- annually in the sort of mid to high single-digit range. So 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. So really pretty broad-based results for the second quarter.

Yes. I mean I'll add that it was also very balanced between our two product categories, between Therapeutic and Foundational. So the beat was really broad-based. And again, when our portfolio -- because kind of the index style portfolio that we have when it all kind of is hitting, you get these type of growth rates. So it was really exciting to see.

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 supply, the Medtronic agreement, OEM improved. Now it looks like 3Q 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?

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.

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. It's really just that seasonality we're adjusting for.

Our next question or comment comes from the line of Larry Biegelsen from Wells Fargo.

It's Lei calling in for Larry. Just on the first one, going back to the Q3 guidance, can you dive a little bit more into the 6% to 8% and 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? And I have a follow-up.

Yes. Again, 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. Again, 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. That's very typical for us to see a step down and then a pretty strong rebound in the fourth quarter. So from our standpoint, if you look at kind of the back half of the year, we think it's pretty consistent with what we're doing for -- what we did with the first half. 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.

Got it. That's helpful. And for my follow-up, you're absorbing obviously, tariffs. There's the View Point dilution, the convert dilution. But 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?

Yes. I mean, 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. I mean, these guys have been delivering for a better part of 30-plus years. So what's another quarter for them. But kudos to them for going out and just performing again.

Obviously, we've had -- 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. And you're seeing that kind of come through. I think when you look at the gross margin specifically, I typically -- this wouldn't be a Merit Medical earnings call if I didn't throw the kitchen sink comment out there and I'll throw it out there again, but it really is.

And I'll give you guys a little more detail, but 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 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. I mean it's been a really challenging, I would say, 5 years with tariffs and COVID and supply chain issues, labor shortages. I mean you name it, they've had to deal with it. But they've done some really good things.

I mean 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 freight -- air freight. You're starting to see the benefits of that.

So 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. And this is kind of the result 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, right, like the tariffs. I mean I don't think anybody anticipated the whipsaw on the tariffs that we're seeing. But 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 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.

So 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.

So we're just a lot more focused on the entire P&L and it's clearly showing. And obviously, we're doing -- we're neck deep in strategic planning right now. And we continue to look to see what else we can do. And we're excited to announce that when we get done with that. But there is more to be had. And we can't wait to present that.

Our next question or comment comes from the line of Travis Steed from Bank of America Securities.

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? And then I have one follow-up.

Yes. So the main clinical benefit of SCOUT MD is that you have these 4 distinct shapes of the reflectors. So it makes it super easy to see these on x-ray. So 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. This has been a platform where we've really only had sort of one product for quite some time.

So to have SCOUT and now have the improved SCOUT MD and then combine that with OneMark from the acquisition of View Point, it just provides us with a really comprehensive offering. And 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. 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 we just got everybody trained up in the last month and they're ready to go.

Great. And then obviously, a great quarter. You're raising by the beat. And from your comments, it sounds like the underlying operating environment is really strong. So I guess why not raise more than the beat if you think that's going to continue into the second half?

Yes. I mean that's just not our style, right? I mean I think we typically will take what we did this quarter, which is we take the first half beat, flow it through. 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 a strong finish to our CGI program.

Our next question or comment comes from the line of Mike Matson from Needham & Company.

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

Yes. So yes, OEM is inherently lumpy, definitely, right? And 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. So a big shout out to our OEM team. And 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.

So 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. So that accounts for some of our growth. But 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 3 to 6 months and 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.

We still continue to believe that mid to high single digits.

Yes. Okay. And then just want to ask one on WRAPSODY. I mean 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?

Yes. So again, we're really pleased with how WRAPSODY is doing in the U.S. The clinician feedback we're getting continues to be strong. We're continuing -- I think as we've talked about previously, WRAPSODY is being used in the hospital setting as well as nonhospital settings. And our team, frankly, is pursuing both very vigorously and aggressively and frankly, having good success in both locations.

And again, we continue to see the competitors not standing still. We knew that, right? So it's a day-to-day battle out there for sure. But again, the feedback on how it's -- 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.

Our next question or comment comes from the line of Michael Petusky from Barrington Research.

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?

Yes. I mean it essentially came in as expected, right? I mean I don't think there's anything significant there. It was in line with our expectations. VBP was a little bit lower than expected, but still no changes to our expectations for China for this year. It continues to kind of move along.

I mean was it flat or slightly down?

It was in line. So I think it was slightly up.

Slightly up. Okay.

Low single digits.

Yes. 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 '27-'29 period. And I would just love to ask Martha, if -- just in terms of how you guys think about like key metrics that you may want to attach to any kind of public 3-year plan? I mean, are there different ways that you think about the thing -- sort of the key goals, obviously, currently revenue growth, OP margin, free cash flow.

I mean, 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?

Yes. Thanks very much. Look, I mean, 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.

So to do that and deliver the kind of quarter we did, it really is just very thrilling, quite frankly. So -- but 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. 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.

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. But suffice to say, it's a very important part of the discussion.

Our next question or comment comes from the line of Sam Eiber from BTIG.

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?

Yes. Thanks for the question. And 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. 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. And 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 multicenter RCT that we're comparing the cTIF procedure to the standard of care Nissen Fundoplication procedure.

And it really -- 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. 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.

And then as you said, the C2 integration is going well. And I think we had just launched our Resilience through the scope product at the end of Q1. And that business -- 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.

Okay. Really helpful color there, Martha. And maybe just a follow-up question on the renal. And I know growth was 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?

Yes. I mean, again, so I'd say a couple of things. 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. And we got that resolved before the end of the quarter. So that was some really good work by our internal team. So we are back in the market and it will take some time.

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

Our next question or comment comes from the line of David Rescott from Baird.

Congrats on the results here. I want to follow up on some of the comments you provided already just on OEM in China and Asia Pac. 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 the bigger driver of the outperformance in OEM in this quarter.

So when you think about -- if that's true, I'd love to hear that. But when you think about growth in this, what sounds like a reiterated OEM guide for the full year of 2026, does -- 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 the second half of the year?

Yes. I mean we did see a little bit of better results in China, specifically for our OEM business. But at the end of the day, I mean, 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 the back half of the year. And the beat was broad-based with customers coming back after kind of some of the destocking that they had.

So we're pretty confident. Obviously, OEM beat our expectations. So 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. And so there was no adjustments. We repeated that. I just repeat it again. It is lumpy business. But we do have visibility and feel confident that we can hit that mid to high single digits.

Okay. That's helpful. Martha, I appreciate the comments you made on some of the longer term strategic planning goals. And I know you're not going to comment on that upcoming 3-year outlook. But when you think about the 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 3-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, I guess, should we gauge, I guess, what this longer term strategy, as you're going through the process, ultimately could become?

Yes. I mean, again, these are all the questions we're asking, right? We're asking ourselves. And I think it's fair to say everything is on the table, right? And there's not really a stone that we're leaving unturned in this process. And 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?

So again, all the things that we're talking about. And again, I'm 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.

Yes. I mean I think we're very pragmatic about the way we approach these long-term plans. I mean 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 yard line.

We want to make sure that we get that across the finish line. But 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.

And 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. So we still think there's more to be had. But this does take a lot of detailed work. We're neck deep in that. We're all very excited about the work that Martha is leading here. And we're just excited about the opportunity that Merit has on a go-forward basis.

Our next question or comment comes from the line of John Young from Canaccord Genuity.

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?

Yes. Thanks for that. So when we only had SCOUT in our bag, we felt like we were looking at probably about 400,000 procedures per year. This is U.S. -- really mostly U.S. data right now. And so 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. So that's how it really expands the market.

We also -- these are 2 separate technologies, right? One uses ultrasound, one uses more radar technology. So part of it is physician preference. And then there is a price differentiation, too. And so in some cases, people want a lower price point 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.

So that's really how it's getting differentiated. And again, I think our team has done an outstanding job. The good news is, right, they already know these customers very, 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. And so they're able to sell in the most applicable and useful technology to them.

Great. And for my follow-up, I know you talked about WRAPSODY, you 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?

Yes. I mean, 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? And certainly, in office-based labs, you have a far more price-sensitive sites of service. And 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. And that's what they're out, there doing. They're being competitive and yet being smart, I would say. So we're not ones to give up on price if we don't -- if we certainly don't need to. So overall, as I said, though, we are seeing a range of prices because we are seeing the range of sites of service.

Our next question or comment comes from the line of Jim Sidoti from Sidoti & Company.

Inventory is up a little over $20 million in the quarter. Is that due to the View Point acquisition? Or are you ramping up inventory in anticipation of higher sales in the second half of the year?

Thanks, Jim. I'll take the opportunity to kind of -- just kind of take a victory lap here on free cash flow, right? 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 for this year. As you just mentioned, we spent a lot of cash on inventory. It's been strategic, I would say.

So we had a couple of product lines last year where we thought the inventory could be better. So we increased the inventory there. We talked -- I talked a little bit earlier about moving more -- from a shipping standpoint, moving more to the ocean. So we've done that. That takes more inventory because it just takes a little bit longer.

And we've also -- we're strategic as the Middle East kind of conflict plays out about buying resin and certain raw materials to make sure that we had enough on hand for any disruption that may happen. 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, but continue to be excited about shooting for that $200 million for this year.

Okay. Got it. And do you anticipate any additional tariff refunds? Or do you think what you received in the second quarter is what you'll have for the year?

So we've essentially received just about everything that we were expecting. There is still, I'd say, about $1.5 million 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 kind of dealing with. So I wouldn't expect anything back this year. If we do, 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. They're working through the process. And so hopefully, we'll get that here in the next year or so. But for the most part, we've gotten everything that we were expecting.

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.

Well, thanks very much. And again, I just want to thank our global team for delivering the strongest quarterly organic growth in 3 years, just an outstanding result. So hats off to them. And again, I 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.

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

We're time here, so we'll go ahead and get started. Very pleased to welcome Raul Parra, Chief Financial Officer of Merit Medical. I have a bunch of questions. Happy to open it up to the audience if there are questions as well.

So I was hoping to sort of start a little bit higher level and then go into some of the details. I mean you've talked in a lot of different settings about this. founder-led to founder inspired, you just did this re-segmentation, difference in reporting structure, change in the way you're running the business, like it seems like a lot of stuff happening at once. How are you keeping it all straight? Like where are you in this transition? And how should we just think about the operating dynamics going forward?

I think that's a great question, right? And I think internally, from our perspective, it doesn't feel like a lot, right? And so obviously, ever since kind of Foundations for Growth, which was our previous LRP, we were preparing for a CEO transition, right? It was very clear that Fred was going to be retiring. We were setting up some foundational stuff under Foundations for Growth.

And obviously, that accelerated and continued growth initiatives as we knew kind of -- the reporting changes, quite frankly, I've been wanting to do for a while. It just -- what you guys don't see is that the business internally talks how we currently -- the new reporting style, right? And so there was this reconciliation process that kind of went in between the finance guys and the rest of the business as we reported out.

And so when Martha came on, like the first question she asked me, she's like, "Hey, Raul, like help me make sense of this, right?" Like we've got the internal reporting that says this. We've got our 10-K that says this. And we're telling investors this, like how do I reconcile it? And I basically looked at her and said, like don't, right? Like we've got a few options for you. We've been waiting for the CEO transition. Give us a week or 2, we'll present them to you and then you kind of pick what feels kind of natural to you. And that's what she did. She went with the foundational and therapeutic, which I thought was a great call.

And it just makes it significantly easier for us as we kind of run the business, one of the things that you guys haven't seen is internally, we -- under Foundations for Growth, we have set up these platforms. And so now we can hold the platforms more accountable. We're all kind of talking the same numbers and language and just.

And one of the things that we've seen across the whole industry has been -- there's a lot of changes in reporting structure. We've also seen a lot of changes in the way companies are running with you hear about verticalizing businesses, getting closer to the customer. Like can you do that on this platform strategy? There's a lot of products within each of these segments, like does this structure allow you to have same customer centricity as your competitors?

Yes. And again, it's not new, right? We've been running it essentially, I'll call it, kind of baby stepping through it, right, since Foundations for Growth. So 5 years. It's not something we turned on last month when the reporting changed. It's been -- we've been gradually giving them more responsibility. And we're vertically integrated already. We're very close to the customer already. All these things just come naturally to us. It's really just the alignment of how the business is run.

And I think Martha has given more responsibility to those platforms now, just given that she's new to the business. And obviously, I don't know what Fred could do, given that he built place brick by brick is different than what Martha can do expect. So there's more responsibility to those platforms. I think the big change kind of this year is that our marketing and R&D head are very kind of tied at the hip and each of the platforms has a marketing and an R&D person that's tied to it.

And so we're really focused on making sure that we deliver products to our sales force that they can sell in the spaces that they want to sell and that customers want. So I think there's greater alignment from that standpoint. It's actually going to get us closer to...

And do each of these platforms kind of operate as their own is similar to like a product -- you have a product owner or what's sort of the autonomy of each of the platforms and they just roll up into these operating segments? Like how does it actually work on a day-to-day basis?

Yes. Well, they're not business units, right? I mean we're not of scale to have business units. And so there is shared resources in certain cases. But yes, I mean, they basically -- they're in charge of their products within their platforms.

Okay. And I know you gave multiple years of disclosures on an annual basis when you provided this updated outlook. As you go into each of those, there were a few that kind of stood out as OEM in the past couple of years kind of flattish, other businesses seeing bigger growth. As you look forward, which of those platforms do you expect to lead total company growth?

Yes. I mean I think that's the nice thing about the portfolio. I mean we generally think that it can all deliver, right? So when you look at kind of the foundational side of things, the 3-year CAGR on that was 6%. When you look at the therapeutic, that was 11% kind of start to kind of dig down and you look at -- let's just talk about OEM. I think we're very confident that mid- to high single digits is kind of where that business will run on a year-over-year basis.

The nature of OEM is that it will ebb and flow. It can be choppy business. I remember a couple of years ago when they were growing at 15%, 20%, everybody would ask me, hey, is this a new normal level? And I would say, absolutely not, pump the brakes, please put your model around 15% to -- mid- to high single digits. That's really what you should think about it. This business will slow down eventually. I was wrong for about 3 years in a row.

And then finally, they kind of came back into that mid- to high single digits kind of expect them to be. But if you look at the rest of the therapeutic platforms, I mean, we just did an acquisition for our Endoscopy segment, right? So I think they've got additional products to sell. We feel really optimistic about that.

You look at our oncology platform, again, we just did an acquisition there with Viewpoint. Scout was doing great already. You tack on Viewpoint, we're expecting growth out of there. Our cardiac platform has been doing really good. Those guys have some new products coming in the pipeline. We feel good about that.

Obviously, OEM bouncing back will also help. You look at our vascular bag, again, doing very well. So I think -- and the foundational products are really just enablers for those therapeutic kind of -- so we feel overall pretty positive about the portfolio.

And how do you think about just sort of framing growth? I think one of the things investors always struggle with stories like this is there are a lot of moving. Everyone wants a thing to like grab on to it becomes Rhapsody because it's like a PMA product, and it seems super identifiable, but it's like $7 million like, okay, fine, whatever. Like how do you think about textualize the business and like divorcing it from we're just a utilization exposed company to we have some more discrete growth drivers?

Well, I think that's why we're excited about the reporting. I think over time, you guys will start to see what procedures we play in and what areas we're in. And so I think it will make it easier for you guys to generally have a better understanding of where that growth is because I think in our historical reporting, quite frankly, it was very hard to kind of understand where the hell are you guys playing that like and people really struggle with, which is why kind of I think Rhapsody was such a highlighted product, right, because it was easy for people to say, well, I know how many procedures are there, and I know what the ASP is, and I can really kind of assign value to that. What we're trying to do with the new reporting is hopefully give you guys a little bit more color as to what procedures. Hopefully, that makes some value.

And as you maybe deconstruct the growth a little bit further, how should we think about just pure volume growth, pure price, innovation-driven mix? Like how do you kind of break apart UGI and maybe just the business going forward?

Well, most of our growth continues to be from volume. Pricing has helped over the last few years, and it will continue to help. But volume is the primary growth driver at Merit. And obviously, we're very consistent in launching new products, which also helps.

And as you kind of describe the market, when I look at the business, it seems like you're playing sort of in the periphery of a lot of attractive categories. You're sort of -- you're hanging around the hoop. You're not going to go head-to-head with super large, well-resourced competitors sort of on the playing field. Like how do you think about just the strategy and how you select what markets to play in and what products to go after?

Yes. I mean I think it all starts with our foundational products, right? I mean I think when you look at kind of the therapeutic procedures that are out there, there's not much you can do without an access, a delivery device and closure, right? And those are all kind of the foundational products of the -- and so when we look at it, we feel like we're in a really good spot where -- yes, we get to play with some of the big guys, but we're not actually kind of competing directly.

And then as you think about the portfolio, when I listen to kind of the narrative around viewpoint that Martha described, I think one of the things you talked about was you have mammograms and biopsies and then within the biopsy population, sort of have your super high-end products, and then you sort of saw demand for, I don't know to call it downtrading or...

Yes, we call it good and best, right?

Yes. Good and best. I guess I know it's early, but maybe give us some sense of how that's playing out. And then maybe as a corollary, are there other pieces of your portfolio where you're selling best, but good might be acceptable?

I mean, look, I think there is a little bit of cannibalization that we baked into our modeling just naturally. But there is -- when there is a high-risk kind of outcome that the doctor is see, they're going to use Scout. I mean they're not going to cut.

I think what we've seen is that maybe the cases that aren't as risky, there was hesitation from the doctor saying, well, man, this is pretty expensive to use on something that could or could not be an issue. And so that's the market that we really get to fill with Viewpoint. And it takes it -- essentially kind of triples kind of the TAM for us. It gets it to $1.1 billion, $1.2 billion.

So I mean, I think when you look at that, then it starts to make sense. And I think our sales force is really excited about it. I think it's a little early to tell. There is a capital component, right? It takes time to kind of ramp that up and get through all the committees that you have to, which is kind of why you see the ramp from $2 million to $4 million this year and then $15 million at the midpoint next year. So as we work through that process, we'll start to get more -- I think there'll be kind of more momentum in that. But our sales force was really excited about it. It's something that they really wanted. And so we're happy we were able to do that for them.

And what does the M&A pipeline look like?

Look, I think -- look, I think it's been pretty active the last couple of years. I mean there's just a lot of things out there. I mean I think the nice thing about us is that we don't have to do anything if we don't want to. I think if you look at the acquisitions that we've done over the last few years, it gives you kind of a sense of what we're looking for, right? We want to get kind of deeper in the areas that we're already playing in as opposed to getting wide.

And so I think we've done a really good job of finding areas that like our specific call points that our sales force is already there and getting them the products that they really want. And so I think you'll probably see more of that. It is a very active market. There's also a lot of bad assets out there. So you got to be careful. So we're not in a situation where we feel like we have to do something, a great spot to be.

So you wouldn't want investors interpreting you're at the last year of your CGI, growth is slower, M&A needs to pick up to pad the next CGI?

No. I'm not -- we're not thinking about that. We're not doing acquisitions to hide any growth deficiency at all. I mean I think we've been very consistent in our acquisition and acquisitions over the years, but it's definitely not something we...

And maybe it's a good transition to talk a little bit about the LRP. I mean, assuming even at variances to the guidance that you provided, you will achieve your 3-year plan, I think, probably putting you in a small list of companies their LRPs. So that would be a good thing. But as you round out the CGI period and kind of reflect and get ready to set another one, what are some of the things that are kind of on your minds as you exit this 3-year plan that are -- that might be different just from an operating environment perspective or competitive dynamic standpoint as you look forward?

It's a great question, and that's the type of questions that we're asking ourselves right now, right? So I think one of the nice things of how the CEO transition happened is that I think the Board was very thoughtful in how it kind of all worked. So CGI runs, which is our current LRP for those acronym for that growth. It ends at the end of 2026. Obviously, the CEO transition happened in October. That gives Martha really kind of 1.5 years to kind of dig in and look at the business.

And one of the things that we are doing right now is asking those same questions and saying, hey, what do we -- where do we have the right to win? What makes sense in the portfolio? Where do we want to go? We're spending in the next year kind of really just hyper focused on the portfolio and what we think we can do. And once we understand that, I think we'll have to make a decision on what we do, whether we put another LRP out.

I know generally, we do pretty good on them. I think people like them. I like them, but a decision hasn't been made one way or the other. And that's, by the way, very consistent LRPs. I'll take a minute here to plug that we also hit our Foundations for Growth targets. And it looks like we -- I'm not going to knock on wood. It looks like we will be also hitting our CGI targets, which will be two LRPs in a row that we execute on. So I think we're being very thoughtful right now, hey, can we keep that going? And do we want to put another LRP up.

And maybe that's a good segue to dive into some of the operating dynamics specific to 2026, and I'm sure this is not an especially novel question, but one that you get a lot is just about the ramp through the rest of the year. you started you're below your full year guidance. I believe the second quarter, you're targeting a number sort of midpoint at the low end of your full year guidance. Like what -- maybe just contextualize for people now Q1 and what you were seeing in the business when you gave the guidance in May, I guess, and how we should think about the rest of the year?

I think really what I saw, and I generally believe that we don't -- that our guidance isn't significantly different than how we've guided before, right? There is a couple of things that are kind of creating a little bit of noise, and I want to talk about those because I think once you look at the underlying business, I truly believe it's doing well, right?

And the issues that we're having, I think, are addressable and things that we have somewhat visibility to that we believe kind of come back and help us reach our guidance. So if you look at kind of the foundational kind of side of the business and you strip out the DualCap divestiture and the OEM impact, that business is growing -- it grew at 5.5% on an organic constant currency basis in the first quarter, which is essentially in line with a 6% 3-year CAGR.

Similarly, if you look at therapeutic and you adjust for OEM, again, which is kind of in both buckets. And then you adjust for the recall that we think we can be done with here by the end of the second quarter and we'll start to see some of that business back. that business grew at 12% in the first quarter on an organic constant currency basis as opposed to the 11% 3-year CAGR, right?

So when you look at kind of the underlying business outside of those kind of items we've called out, it's actually doing pretty well. And so as OEM comes back, we think it's going to do at least mid-single digits this quarter, and you get the recalls behind you. Obviously, DualCap divestiture, you'll have to adjust for that all year long. We think the business is doing great and are just fine and it doesn't seem overwhelming hit our numbers.

And just to be clear, the DualCap divestiture is excluded from the 4.5% to 6% or included?

It's excluded, right? So you have to adjust for it.

All right. And any other -- so just those OEM normalization, dual cap is already out, but OEM normalization sounds like the big thing that bridges through the balance of the year. How about kind of the overall operating environment? I'm sure you get a ton of questions on this. It's really not -- and the data points are super mixed. Like you have the hospitals, generally weak Q1, but said it's all going to be fine. The managed care companies are saying, O, no, it's all going to be fine for us. Most recently, we had Medtronic, obviously, reported said everything is fine. So like what's your perspective on kind of the operating environment?

I mean I would agree with Medtronic, right? I mean we're not seeing anything that would give us pause. The environment seems healthy. Yes, I don't have anything else other than that. And I think, obviously, keeping an eye on things, but generally, the environment feels good.

And maybe this is not an update that you provide, but maybe you sort of give your stance on this, that one of the things that came out in first quarter earnings and I think subsequently for a lot of companies and in different surveys and other things that this year did start at a disproportionately sharp step down from the fourth quarter, whether it was weather or seasonality or deductible resets, whatever the dynamics might have been, but it does seem like the most recent set of facts investors are generally living with is that things have progressively gotten better throughout 2026. So what have you seen in your business?

Honestly, it's why I kind of highlighted the growth, excluding kind of those -- I don't want to call them one-timers, right, but those issues that we kind of talked about on both foundational and therapeutic was because I think when you peel that back, the business did great. Had it not been for those couple of things, I think we would have been just kind of back to our kind of normal cells. And I don't think anybody would have had any questions.

Unfortunately, I think we got caught up in that noise, right, where, hey, there was other companies that were a little bit slower. Merit was a little bit slower than normal. Once I get out there and kind of start helping people kind of understand the underlying business, and I think we get it. But Yes. I mean I think the business has been doing great. Our sales force is out there and doing what they're good at. And hopefully, that can continue.

Okay. Are there any other areas that you want to call out that you feel like people aren't paying attention to like the OEM dynamic where 50 or is in the teens, you're like, guys is going to be 5% to 7% or like oh, no, they're just sandbagging. Like are there other areas that are seeing sort of outsized growth or even underrepresented growth right now that you don't know that people are fully digesting?

I mean look, I think it was unfortunate that our OEM business happened to have issues at the same time as everybody else's OEM business, which means we kind of got caught up and kind of everybody thinking we all had the same issue. I think for us, it was very unique to us. Again, we're not a contract manufacturer. I think most of you know that. We sell our OEM customers products that we sell every day to our own customers. It's just products that it's areas that we don't directly -- as long as they don't directly compete with our sales force and/or they're not strategic in nature.

The best way I kind of can explain it is we essentially sell capacity, right? And so we had made some product line transfers to Tijuana. Customers stocked up in inventories. Some customers got acquired, so then they had inventory policy changes or people started looking at their working capital and saying, "Hey, I can probably use a little bit less inventory." And they just take a little bit longer for them to burn through that inventory that they had. But again, heading into the first quarter and into the second quarter, I've been pretty vocal that the orders are back. We have good visibility. We feel pretty comfortable that we can hit at least that mid-single digit in the second quarter.

And how do we put together the dynamic of destocking in some of those businesses, would seem like you'd only do that if you had an air pocket of demand on the other side. How do we square that with the commentary around the stability of the end market?

I mean it's a good question. I'm not sure that I have a good answer for you other than I think generally speaking, people will look at their working capital and see they'll forget hey, what happened under COVID, right? Like, hey, I maybe should have had more inventory or there was a supply chain issues after COVID where people just were not maybe stocked up on inventory.

And I think over time, as you get more comfortable with the supply chain, you say, well, maybe I don't have the whole that much, right? And I think -- I mean, I think those are all things that kind of ebb and flow, which is why our inventory and -- or sometimes the customers just say, "Hey, you know what, I think I can go get the product a little bit cheaper over here. And inevitably, what happens is we never really lose a customer at Merit. What happens is they go and they try and that other product and they usually boomerang back. And so that's why our business is a little bit choppy. Again, I've been pretty straightforward about that. But consistently, I think if you look at it over time, we're going to be in that 5 to high single digit...

I know like many of your peers and other companies you follow, there's a heavy focus on the U.S., but you do have a pretty strong business internationally. And maybe just sort of talk through what you're seeing in markets outside the U.S. And obviously, China always has its own set of specific criteria operating factors like VBP and otherwise. But what are you seeing OUS? And how does that factor into your kind of growth algorithm?

Yes. Again, I think when we look at our international markets, we think they're doing just fine. I mean, I think if you look at the European markets, we delivered growth there, maybe it was kind of right in line with our guidance. You look at China, that's essentially been a headwind for us the last few years with accretive revenue it's actually contributing, not much, but it's at least positive. We hope over time and that we're kind of on the path to kind of delivering growth out of there. But I think it's too early to tell, right? I'd kind of like to get this year behind me and specifically in China and see kind of how that market is doing. But it's trending in the right direction, right? It's not holding us back like it did in the last few years.

And as part of your kind of next round of whether you do an LRP or strategic plan that Martha really owns, how are you thinking about -- everyone to talk about acquisitions, but there's the other side of it, too, either portfolio pruning or market exits and international -- any of the markets outside the U.S. rise to the level of discussion?

Look, I think it's maybe the natural progression for us, right? I mean I think we were very poor at product life cycle management, quite frankly. It's something we started to pick up under Foundations for Growth. You guys saw us divest of 2 pack businesses, one in our European market and the other one in Australia.

This year, you saw us divest of dual cap. I mean I think it's just kind of the -- and there was a bunch of SKU rationalization that happened too, or more like SKU consolidation that's happened over the years. And so I think it's a natural thing to kind of look at. It's expensive to be in a lot of countries, and there's a lot of regulatory requirements and statutory things that you have to do. And so we'll do like we've done the last -- every other year, right, when we're launching RRPs, hey, let's look at the markets that we're in.

Do they make sense financially? Do we think we can get the growth? Or should we be investing dollars in other areas? And same with the portfolios. We'll look at the portfolios. But you also just heard me kind of talk about our therapeutic side of things. We've essentially done acquisitions in just about every single one of them, and we think we've got the product -- is that something we want to divest. But I think things will natural thing that happen. But I'm not size or things like that, I don't know yet. That's all the work that we're doing right now. But I consider it more of a product life cycle manage where I do.

Great. Let's maybe turn to the P&L. I mean this is sort of a very -- a lot of moving parts in this year's earnings outlook, but you are stepping over and absorbing a lot of headwinds while still growing earnings this year. I think you have tariffs, you have viewpoint, convert dilution, but you're still going to grow earnings slightly faster than what you're planning to grow revenue, you take midpoint to midpoint, I think. So what are some of the puts and takes in the P&L for this year?

Yes, I'll take the easy one first. I mean obviously, the convert dilution is probably not going to happen, right? I mean, just given where the stock price is. But look, I think tariffs is the tricky one. I think everybody, at least I felt like it was probably prepared to book some sort of receivable based on the tariff refunds.

Obviously, over the last few days, the government DOJ has decided that they're going to challenge what people can get. I will say that we have started to get some reimbursements, not a material amount, but some. And so I think that will be the kind of one thing that we'll kind of look at and obviously, the historical tariffs that we paid, right? Do we get a credit for that or not? That would be a onetime benefit. And then there's the tariffs that are ongoing this year.

Obviously, I think -- we think those will start to get better than what we initially guided to. I think how much better, I think we'll adjust everything after our second quarter numbers as we finalize the quarter, we'll take a deep dive with the tariffs and what makes sense adjusting. But I think we have a pretty good game plan to overcome the things that are happening.

I mean, luckily, we haven't seen any significant input cost increases. We're seeing fuel surcharges. We're pretty used to those. I think I kind of feel like those happen every year. But yes, we're keeping an eye on things. And I think our guidance is not a significant jump from our operating margin, right, from last year. I think we were trying to be realistic. And again, our guidance is usually set to be kind of realistic and achievable. We'll check it out at the end of the second quarter and see where we're at and adjust it if necessary.

Yes. Sometimes I feel like when companies experience these headwinds, everyone says, oh, they're all going to go away next year. So you're going to have this giant outsized earnings growth here, but it never seems to always other stuff that comes into the mix with capitalized variances or flow-through timing of inventory or cost increases? Like how are you kind of framing normalized EPS growth with these headwinds? Or do you not kind of want people doing this math that weren't for the $0.12 of headwind, earnings would have grown this amount, so it should just grow low teens next year?

Yes. I mean, honestly, I think it's obviously -- that's why we set up the LRPs. I think that hopefully gives people some visibility. Obviously, we don't call the EPS out, but we do call out operating margin. That hopefully gives you guys a sense of where we think we'll end up, at least for this year, what we go on a go-forward basis.

But yes, no, I mean, I think, look, there's always something every year that I feel you've got to overcome. I mean that's just the nature of the business. That's what the executive team gets paid to do is whatever challenge comes our way, we've got to figure out how we're going to make the commitments that we made.

I think that also helps from a guidance perspective. People sometimes want to call me a sandbagger. I'll take it all day because I know what the alternative is. I lived it and don't want to go back to that. I think what we try and do is set realistic and achievable guidance. we're not going to try and wow you with some guidance that we think is unrealistic, like that's not our nature. So that, I think, helps too. So I mean nothing has changed from that perspective.

And I was trying to sort of obviously, as always to read through Martha's comments at BofA around kind of forward margin trajectory. But if you look at your like, I don't know, call it, low to mid-50s gross margin business, like low 20s operating margin is like pretty good. If you look across the peer set, you don't see company to materially better than that at those types of gross margins, kind of like the forward trajectory of margins was probably a little more balanced and you were -- there's sort of a trade-off discussion to have between margin expansion and growth reinvestment? Did I...

Yes, I don't think so, right? Like I mean, I think we think we can continue to drive profitability and and continue to expand our operating margin. I will be very transparent. don't expect what we've done in the last 5 years. I mean we did almost 700, 800 basis point improvement. That's just not doable. But we do think that we can find leverage in the business. We think we can continue to expand gross margins, albeit a little bit slower, right?

But hopefully, we're going to go through our strategic planning. Hopefully, we'll give you guys some good color on what we think we can hit and get you guys comfortable, but I think generally, there's nobody in Merit think we expand our operating margins.

Maybe just in the brief time we have left, I'll turn it back to you just to closing remarks. sort of saw the start to the year, stock has been volatile. Like what do you want people to walk away from this presentation, those on the webcast and also from your one-on-one meetings, like how do you want people to leave this conference is like probably your last public appearance before Q2?

No, I mean, look, I think we're feeling pretty confident. I think maybe the one thing we haven't really discussed is kind of the CEO change, right, with Martha coming on. I feel like she's a great cultural fit. I think she's doing all the right things. There hasn't been any significant changes in the executive team, actually, none really other than a couple of people that we brought on for some holes that we wanted to fill.

But yes, I think we're doing all the right things this year, I think, as we kind of look forward to the next few years. And so my confidence level is pretty positive. And I think it seems like a very challenging environment out there, but the business continues to do well. So we'll see how it all shakes out.

Excellent. Well, thank you, appreciate you making...

Thank you for having us. I appreciate it.

Look forward to the next update.

Great. Thank you.

Travis McDougal. Travis, Martha, thanks for joining us.

Thank you.

Thanks.

So to kick off, Martha, you've been in the seat for a couple of quarters now. You've talked about transitioning the company from founder-led to founder inspired at a high level, can you talk about kind of the changes you've made so far, what you've seen in the business? What is already working better? And maybe where do you see some opportunities to continue to tweak the business to optimize it?

Yes. Thanks, Aidan, and thanks for having us here today. Yes. I mean, I think as you said, Merit Medical was run by our founder for 38 years. And so it is a bit of a transition, right, to go from a founder-led to a founder-inspired organization as we like to call it. So I think the biggest change really in terms of that is just thinking about -- I think, as you know, what it takes to build a business from start-up to $1.5 billion in revenue is different from what it takes to go from $1.5 billion beyond.

And so what we're trying to think about is really around sort of the people and the processes that we need to do that to be able to scale. And so we've established 8 platform teams, and we're really asking those teams that are cross-functional and cross geographic to take ownership of kind of each particular platform, sort of like a mini business and think about all aspects of the pipeline, the go-to-market strategy, what are the international opportunities, what are the M&A opportunities, et cetera.

So again, as we try to scale, you just can't have so many decisions come up to this chair. And so we're really working, I'd say, on building that out. In addition, we've added a few new resources. We're adding some internal muscle on reimbursement. So we're excited to have build -- start to build that capability more in-house. And I also just recently added an executive to work on global enterprise excellence, which again is just looking at many of our processes and ensuring that we feel very good about that foundation and the infrastructure so that we can scale from there.

And then I think the only other thing I'd add just at this point is we are undergoing a very robust strategic planning process. So for those of you who follow our story, we're in the third year of what we call CGI or Continued Growth Initiatives, which were a number of financial goals that we had laid out for a 3-year period. That ends in the end of 2026. I'm pleased to say we're tracking nicely toward our CGI goals. So while we're staying focused on completing CGI, we're also undergoing a lot of work around our strategy. And so we'll share more of that toward the end of the year or early next year about kind of what's the next chapter of Merit Medical.

Okay. And obviously, part of that -- the changes you made, you changed the reporting of the business to segments. You changed to -- from endoscopy and cardiovascular to foundational and therapeutic. Why do you think that's a better way to frame the business to investors? And maybe when you came in, how did framing it that way help you learn the business?

Yes. So as I came into the business and about a year ago when I was going through the interviewing process, right, I mean, all I had was the publicly available information to try to understand the company. And frankly, I found it pretty challenging. And so as I got into the company and met and understood that we had these platforms, and it really makes sense to me because the platforms are really organized around our product groupings, which support particular physician groups as well as particular procedures.

So it's very focused on the customer and thinking about what is the best things or the best products that we can offer each particular customer or procedure in each of these 8 different platforms. And so what was happening before is that our financial team would take that information and then have to do a bit of a translation for the external reporting. This way, we are very consistent with how we're reporting externally. It's very consistent with how we're viewing and running the business internally.

And when you think about foundational products, at a high level, can you talk about what foundational means to Merit?

Yes. So what foundational really means are what I generally think of as our enabling products. So -- and for those again who've been following the Merit story for a number of years, think about sort of how Merit has grown up, if you will, on syringes and inflation devices and guides and catheters and sheets, those types of products that are very, very necessary for so many medical procedures that are happening out there. But that's really how we think about our foundational products. And I think it's important to note that in the last -- over the last 3 years, the compound annual growth rate of our foundational products has been around a 6% CAGR. So still a very nice and nicely growing set of products and really important for our overall strategy.

And I think one of the things investors try to wrap their head around is kind of what drives growth in these 2 segments now. So when you think about the growth drivers in foundational, what do you ascribe those to? And you can talk about some of the procedures that your products are mostly used in that segment?

Yes. I mean, again, we are used in so many procedures that it's hard to bring them all together, right? But things like you have electrophysiology procedures, you have TAVR procedures, you have biopsy procedures. There's a pretty long list, if you will. Just think about just about anything that needs access to go perform a procedure, diagnostic procedures, those kinds of things.

So almost parallel to just general utilization as a whole. Okay. And when you think about the margin profile of that segment relative to the corporate average, is there any color you could provide on how investors think about that?

Yes. I mean that's the other nice thing is our foundational products are above our corporate average for gross margin. So another reason we like our foundational products very well.

And when we think about the go-forward strategy for that segment in terms of product development, sales force, how should we think about that fitting into the overall growth algorithm for the company?

Yes. So again, what you really need to do is look at each one of the 8 platforms. And 2 of those 8 platforms are all foundational products, right? Our access business as well as our...

Procedural Solutions.

Thank you, Procedural Solutions. It's been a long day. Procedural Solutions business. So those 2 are comprised of solely foundational products. And then 4 of our platforms are solely therapeutic products, oncology, endoscopy, renal therapies group and cardiac therapies. And then there's 2 platforms, OEM and Vascular Intervention that have both foundational and therapeutic products within them, okay?

So it's hard to say exactly. You really have to look at it, as I said, by each platform to think about where we're making the investments, where do we think the growth is coming from.

And to our understanding, you provided that when you did the 8-K when you did the resegmentation, you gave the subsegments in there, but you're not going to be reporting that on a go-forward basis. Is there any way how we could think about that intra-year if you think of that?

So right. So we provided an 8-K in April that shows the 8 segments with -- the 8 platforms, excuse me, with 4 years of history. And what we will do going forward is call out between foundational and therapeutic, again, where there are certain highlights, et cetera. I think, look, like any of these things, we will give this a shot for a while. This is how it makes sense to us. This is how we're running the business and thinking about the business. If we need to make an adjustment down the road based on feedback, we will consider that. But that's the way we're providing the information for now. And as I said, we will certainly continue to call out various growth highlights quarter-by-quarter.

Okay. Very helpful. And moving on to therapeutic. These are kind of your higher priced, more complicated products, more core to the procedure. Can you walk us through the key products in that category and the growth drivers there? I imagine that's less tacked on to general utilization then?

Yes, right. So again, as we look across the platform, so for example, in our cardiac therapies platform, I'd say our lead management business, which is primarily lead extraction is a very good. It's one of our nice drivers there. In the Endoscopy business, we added an acquisition at the end of last year, the C2 CryoBalloon, which along with our EsophyX for the cTIF procedure. And now we just launched a new esophageal stent called Resilience in early March, which is off to a very nice start.

If we look at our oncology platform, we obviously just -- we had one product line there for quite some time, the SCOUT, which is a wire-free localization product for breast cancer. And we've just added then the OneMark product in the beginning of April. So we see that as having a great deal of growth in that platform going forward. So again, as you look -- and then I think on vascular intervention, embolics has been a pretty high-growth area for us, and we anticipate that continuing as well.

Okay. And we'll talk more about this later in the discussion, but you had Rhapsody therapeutics as first PMA product. Can you talk about your innovation strategy inside therapeutic and how you think about, one, PMA products and then kind of your strategy at a high level in terms of entering new markets or expanding your current markets?

Yes. I mean, so a couple of comments on Rhapsody. Again, for those who have been following the story, right, we did a little bit of a reset on Rhapsody toward the end of last year. We're guiding this year in the U.S. market to be aimed towards $7 million of U.S. revenue for Rhapsody. We continue to see -- we have outstanding clinical evidence for Rhapsody. The customer reaction to Rhapsody has been very, very good. And at the same time, I think it's fair to say we have some formidable competitors in that space, and they're doing what competitors do when they see a new product come on the market.

So we're continuing the good fight there, if you will, and so far on track for that product for the fiscal year. Now having said that, again, when you talk about what products we will add to various platforms, I'd say we're looking at it 2 ways. One, we're really trying to be more proactive in sort of, again, I do a quarterly executive review of each platform and sitting with the teams and saying, tell me what's on your wish list, so to speak, right? What other products are you hearing from your customer groups all around the world, not just in the U.S., right, but all around the world where they say, I really need this or if I had this, it would make the product or the procedure easier or less expensive or less painful for a patient.

Those are the kind of inputs we want to hear and then want to try to proactively think about, okay, again, it's a make versus buy. Is that something we feel like we have the technical expertise to go do, do in a timely and cost-effective manner? Or is it something where we know there's some other device out on the market that we should go look at acquiring? So that's really the way we're thinking about it, again, and we really rely on each platform to do that. Now having said that, we'll still take incoming -- we get a lot of incoming ideas and thoughts, people approaching us with assets that could be actionable, and we'll continue always to take a look at those and evaluate those as they come through.

Got it. And you said that foundational had a higher gross margin than the corporate average. Does that mean therapeutic is below corporate average?

No.

Other way around.

Yes.

But they're not as far apart as you would expect.

Sorry, did I misspeak on that? Okay. Thank you, Travis. I misspoke. So foundational is just below the corporate average, but it's not as far -- there's not as much of a gap, I think, is what Travis is saying as one would think. So yes, the therapeutic products are above the corporate average.

Got it. Another thing is like maybe an underappreciated part of the Merit story is, to your point earlier, kind of your exposure to those higher-growth procedures like EP and TAVR. It kind of sounds like from the answer to your previous question that the product development strategy is not really new markets, but more so adding on to the platforms you already have. Is there -- how far away from your current platform, so to speak, would you be willing to go in terms of new products? Or is it kind of strictly tangential to what you already have?

Yes. I think right now -- and again, we're undergoing our strategic planning and strategic review. So it's a little premature to say. But I can tell you right now, I do not have a big appetite to go beyond the 8 platforms. It feels like plenty for us. And there is a sort of complexity factor that comes along with it when you call on that many different customer groups and just managing the manufacturing and the quality and all the rest, certainly. So I would say right now, the goal is really to think about within each platform. And I'm pleased to say that every platform has ideas and wants that they -- things they would love to add to their portfolio. So it's not that we lack ideas anywhere. I think it's just about making smart choices that have great strategic rationale as well as meet the financial metrics that we think are critical.

Got it. And kind of going out to tangent here. you said exposure to EP. So have you seen any a large benefit from the rise of PFA in the past couple of years? And then as that market becomes more penetrated, is there any risk that you see less benefit from the increased volume of patients going to the cath lab?

Yes. I mean we have -- again, we haven't been a major player in PFA. So -- and this is part of the advantage, frankly, of being as broad as we are that there's just -- there's rarely any one procedure or one product line that's going to have a significant impact either way. We kind of like to say we're like an index fund, right? I mean we're very well diversified. And if one part dips a little bit, usually, we've got another part that's doing better.

Got it. Kind of shifting gears here to Q1 and the guide. strong beat on both top and bottom line in Q1, but didn't pass through the entire beat, kind of passed through the M&A contribution from View Point. Can you talk about what you're seeing on a business and macro level that drove that decision to not pass through the entire beat?

Well, I think that follows in lockstep with how we've guided previously. Typically, we don't really reassess our guide until the second quarter. So we know that one quarter does not a year make. And so we're not in the habit of doing that mark-to-marketing every quarter.

So some prudence, especially given the macro environment, some prudence there.

Okay. In Q1, in Q4, you had flagged some one-timers like OEM, China, the new sales meeting kind of taking the sales force our of action for a little bit in the quarter. Can you talk about what you saw in Q1 that maybe outperformed your expectations or underperformed? And any kind of residuals from the supply chain dynamics with the production line transfers to Mexico?

Yes. I mean a couple of comments on that. I'd say, right? I mean we've talked about a couple. I mean, endoscopy has been off to a nice start. Cardiac Therapies is performing very nicely. Again, those platforms via Vascular Intervention had a very good first quarter as well. OEM, as you mentioned, right, was softer than we had anticipated. We had anticipated some softness, came in a bit worse than that. I think the good news is on the OEM front, we've got very good line of sight into our orders. I mean, I think, as you said, and I'll talk about U.S. OEM.

For the U.S. OEM business, there was -- we did transfer some product lines from our Utah facility down to Tijuana. So a number of our customers built up a pretty significant safety stock, and bridge inventory, and it just didn't work its way down far enough for them to reorder. We're now seeing those reorders come through. We also -- things happen in the OEM business. There was an acquisition of one of our customers from a major strategic. The major strategic sometimes view their inventory management approaches differently from the start-up they've acquired. So -- and we also then -- and we don't share about our customers unless they share. So Medtronic did put out a press release about a product of ours, they'll be distributing. So we inked a very nice longer-term deal with Medtronic.

So those are the things that give us the confidence as we move through the rest of the year that the OEM will bounce back. And again, we've guided to mid- to high single digits there and still anticipate that's where we'll come in.

Got it. And you talked about confidence in OEM, but in the current environment, there's obviously a lot of worries with the war, inflation and in general, just med tech environment as a whole. What gives you confidence in achieving or exceeding the full year guide given those factors?

Yes. Look, I mean, it is. It's a tough environment out there right now, and there's a lot that is out of our control. Again, I think I can still say as a newcomer, I give medical a lot of credit. The company has gone through lots of things, including COVID and other things and weathered the storms quite well. So again, I just -- I give our team lots of credit. The day you start to see things breaking out in the Middle East, for example, our teams are on it. We ordered extra resins to have more supply as an example. I mean people are thinking about this stuff. So Again, can you think about everything? Of course, not, right? I mean there could be some unexpected things that we don't know about yet. But overall, given the picture as we see it, we have confidence we can manage through it.

Well, and then too, when you normalize Q1 growth for the different elements that we saw, so OEM and our DualCap divestiture, foundational growth was about 5.5% and you do the same on the therapeutic side, it is about 12%. So for us, going forward, that gives us confidence that the growth was pretty healthy when you normalize it for the long. What we view as onetime events.

Okay. And we think about Q2, I think the guide came in modestly below what the Street was expecting. Can you walk us through the drivers of the quarter-over-quarter and year-over-year step down at the midpoint? And then in the context of that, how are you thinking about confidence in achieving the year-end '26 CGI goal?

Yes. So sequentially, if you were to look at it, again, the tariff -- there's tariffs that are hung up on our balance sheet. So about 70-ish or 75 basis points of tariff overhang from sequentially when you look at it, that's a part of it. There's some timing of some operating expenses. And then I think that's kind of -- that's the sequential view of life.

And when you think about the margin guidance, how comfortable are you with that if freight resins and tariffs remain where they are today? Are you assuming any normalization? Or are you assuming everything stays steady where it is today?

Yes. If we look forward, we -- our history and guidance is to lay out things that we believe are realistic and achievable. So we feel like we're in a good shape.

Okay. Kind of shifting gears, I know we said we're going to talk about Rhapsody a bit more. It's your first in-house PMA product, kind of first platform product, so to speak. What has Rhapsody taught the organization about competing in these more complex categories and kind of the muscles you need to flex to get that to market?

Yes. So the answer is a good number of things. And again, this is why I'm so excited about our platform approach because when you have a whole team, again, with all the functions sitting around the table with regulatory, with quality, with reimbursement, with clinical, with operations, sitting there with marketing and R&D. And when you start to think about that next generation of a product or a continuation of a platform, very early on as you think about what is your -- what is the clinical strategy, right, not only to achieve approval in various countries around the world, but to also, if necessary, do clinical work that will impact reimbursement going forward.

So that is, I think, one of the biggest learnings that we've had, and that's why this focus on these platform groups makes so much sense to me. And again, to have the inputs from our global colleagues as well so that we're really considering the most important markets and where we think this product makes the most sense for us to sell, so we make the right investments. So I think, again, and adding sort of in-house reimbursement muscle is really important. As I said, that was someone I added, I think, the first week on the job and we'll likely be adding to that. I think those are some of the lessons on -- and I think the other one is we may or may not talk about all this stuff until we absolutely have to.

I think that's fair. There's been some proposed changes to kind of the FDA CMS approval process that might allow new products to get coverage decisions quicker if they're breakthrough. Anything there that affects your innovation plans?

No. I mean, again, we'll have to look at those on a case-by-case basis. Many of our products, right, are kind of already -- you know what the reimbursement will be. So again, we'll look at it case by case as it comes along.

Okay. In terms of the Rhapsody, you did a kind of commercial reset. As you talked about earlier, the clinical data is demonstrably better than the peers. It seems like pricing was the biggest headwind. You did a commercial reset, opened up the doors on pricing a little bit. Can you talk about what you're seeing on the ground today in response to those pricing changes and how that compares to maybe the initial launch?

Yes. I mean I think the good news is for the initial launch, right, before the kind of reset, we definitely had reps walking into accounts and the accounts just said, I can't talk to you. Your price is just way too high. Depending on the site of service, right? I mean we do have the NTAP for the hospital, and so we've maintained a nice price in the hospital setting. The majority of the procedures are not done in a hospital setting. So that's where the real, if you will, sort of battleground is.

So we did open up those pricing corridors much, much wider, which again, has been a good opportunity for our reps to get in there. We're still at a gross margin that we're comfortable with given that. So again, of course, you want to be smart about pricing decisions. And as I mentioned earlier, we're seeing, I think, a pretty -- a competitive response. We've seen some added reps and junior reps be added to some of our competitors' accounts. They're doing what anyone would do. I think that's a real compliment to our team for how fantastic the product is. So we'll continue battling it out.

Okay. Great. Kind of shifting gears to something more recent. You acquired View Point Medical in April. Can you talk about the strategic gap you're trying to fill with that acquisition and how that fits in with your current SCOUT product?

Sure. So this is in our oncology platform. And the best way to think about it is each year in the United States, there are 1.6 million biopsies done of people who see something -- once they see something on a mammogram that doesn't look good. So of those 1.6 million biopsies that are done, the Scout is really the premium product, which is the product we've had in our portfolio. And so -- and first of all, I should just say all these are done at time of biopsy, which really does mean there's one less step, and it's a wireless -- both technologies are wireless. So it's taking away one additional step, which is a very sort of anxiety-inducing step for many women before they have their surgery.

But if you go to the 1.6 million biopsies, generally, about 300,000 of them are cases where the physician is very sure it's a very suspicious-looking lesion. That's where they tend to use the SCOUT, which is the premium product. For the other 1 million to 1.3 million biopsies, they aren't always so sure, and so they don't necessarily want to use the premium product. This is where the OneMark will fit in, okay? So -- and the real difference in many cases will come down to physician preference because the Scout technology that we've had before uses RADAR and so you listen for the sound. The OneMark uses ultrasound, so it's visual.

So some physicians just prefer one over the other. But it really gives us, as I call it, sort of the better and the best offerings in this area of wire-free localization. So we're super excited because we're basically expanding the market 3 to 4x. So we're thrilled about it, and our commercial teams are taking a very targeted approach on the accounts where they plan to go pursue the market. We get asked a lot, do we think there could be a little cannibalization. We modeled some into our modeling just to make sure. But I've got to tell you, there's so much opportunity for places that aren't using any time of biopsy wireless technology, wire-free technology. So we feel very good about the opportunity to truly expand this market.

It sounds like it can kind of open up the OUS opportunity as well and sites that are more cost sensitive.

Absolutely. So yes, it's a great product. There have been plenty of markets internationally where they've just said, the SCOUT is a price point that's too high for us. So this will give us that opportunity. We don't yet have CE Mark. So we'll start, obviously, in the countries that are more consistent with FDA approvals.

Got it. And asking everyone's favorite question on M&A. Obviously, M&A has been a big part of Merit's growth algorithm recently and capital allocation strategy. So going forward, should we look at more deals like View Point where it's kind of adjacent, maybe a tiered product offering with something you already have in your portfolio? Or is this something that we could see an earlier acquisition where you have to kind of ramp it a little bit more where they can't just fit right in and plug and play?

Yes. Again, I mean, it will depend. I mean we're going to -- each platform is a little bit different. But suffice it to say, I mean, in general, we'll continue to look for tuck-ins, again, by platform, could be a foundational product, could be more on the therapeutic side. We will continue to look at both. But again, just in thinking with each customer group, what are the right procedures, how can we make the procedures better for the patient, better outcomes, easier for the physician to perform.

And you've said this multiple times, but nothing transformational.

Nothing transformational.

Okay. Obviously, you've had a very impressive track record in the past couple of years of margin expansion. To your point earlier, we're kind of hitting the end of CGI, and you're on track for that. When we think about steady-state margins for the business, how should we think about that going forward?

Well, again, I mean, we're not going to jump the gun on post CGI by any means. But I think, look, if you look back in the 6 years, right, where there's been foundations for growth followed by the CGI programs, that's been some pretty incredible margin expansion. So I think it's unrealistic for people to think we would do a repeat of something kind of at that rate and with that level of improvement because, again, we want to continue to invest in the business certainly and grow the top line. So we'll stay focused on it, but not ready to talk about any details.

Got it. Asked it maybe a different way. When you think about incremental margin improvement from here, where is that most likely to come from? Are we looking at mix, portfolio actions? I know we've talked about throwing the kitchen sink care gross margins a couple of times. Like how should we think about where that improvement could come from?

Yes. I mean, again, we really do. We look at all the opportunities. I mean, I think it's about 5 years ago, the company added formal pricing expertise to the company. They've done a lot of great work, and we'll continue to look at that team to do more. We will continue to look at short-term cost improvement opportunities in operations as well as, frankly, longer-term footprint. We need to start thinking about where do we want to be longer term. Are we looking at mix? Absolutely. Are we looking across the portfolio as part of the strategic plan at potential some additional pruning or possibly divesting as we did like with the DualCap. There could be other product lines and product families where we just say this doesn't make sense anymore strategically. So yes, we'll continue to look at all those options.

I know we're out of time, but Martha, anything you think the Street is underappreciating that you want to get out there with the time we have left?

Look, I mean, look, Merit Medical is a company that hits singles and doubles, right? And I think we are well diversified. You heard me mention before, we're kind of like an index fund that way. We're very excited about the future of Merit Medical. It's a very passionate team. And I think the other great thing is we can see some very nice growth without having to go out and even do any more acquisitions, right? So we will only do ones that we think are really strategic and make financial sense for the company. But we will continue to look at ways to continue to grow our top line in a very profitable way.

Great. Thank you for joining us today, and thank you, everyone, in the audience.

Thanks very much.

Please stand by. Welcome to the Merit Medical Systems First Quarter 2026 Earnings Conference Call. [Operator Instructions]. Please note that this conference call is being recorded, and the recording will be available on the company's website for replay shortly.

I would now like to turn the call over to Martha Aronson, Merit Medical Systems' President and Chief Executive Officer.

Thank you, operator, and welcome, everyone. I'm joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer; and Brian Lloyd, our Chief Legal Officer and Corporate Secretary. Brian, would you please take us through the safe harbor statements?

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 utilization 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, April 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, 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 U.S. 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. 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.

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 CryoBalloon 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 of 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. 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 View Point 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 3-year period ending December 31, 2026.

Turning now to a discussion on 3 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 structures 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 View Point Medical for an aggregate transaction consideration of $140 million, of which $90 million was paid in cash at closing. View Point 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 addressable procedure opportunity of approximately 3x 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. 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-K on April 13 and reported in our earnings press release today, we are now reporting our revenue in 2 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 2/3 of our total revenue in 2025 and sales increased at a 6% compound annual growth rate over the last 3 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 1/3 of our total revenue in 2025 and sales increased at an 11% compound annual growth rate on an organic basis over the last 3 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 8 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. Cardiac therapies, renal therapies, oncology and endoscopy are comprised entirely of therapeutic products.

In the Form 8-K, we shared 4 years of historical revenue in each of these platforms. 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. 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'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?

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, our 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 solution products, the later of which impacted by our divestiture of DualCap product line. Organic growth in the therapeutic product category was driven by strong growth in our cardiac therapies and Endoscopy platforms and contribution 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 the first quarter of 2026, and all growth rates are approximated and presented on a year-over-year basis. We have included reconciliations from our GAAP reported results to the most directly comparable non-GAAP item in our press release and presentation available on our website.

Gross profit increased 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 $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 March 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 1.6x 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 View Point Medical for an aggregate consideration of $140 million. Of that amount, $90 million was paid in cash at closing and 2 deferred payments of $25 million each are scheduled to be paid no later than 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 12 months ending December 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 View Point 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 February 24, 2026. Specifically, from the acquisition effective date of April 1, 2026, through December 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 noncash and nonrecurring transaction-related expenses. For the 12 months ending December 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 View Point 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 WRAPSODY 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 $4.01 to $4.15, up 5% to 8%. Note, our non-GAAP EPS range reflects the $0.05 of dilution from the acquisition of View Point 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 12-month tariff impact of approximately $15 million or $0.19 per share compared to a $9 million or $0.12 per share realized during the last 8 months of 2025. As a reminder, the expected 12-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 3- and 6-month periods ending June 30, 2026. We will provide an update on the estimated 12-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 our total revenue in the range of $400 million to $410 million, representing a 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 compared to $1.01 last year.

With that, I will now turn the call back to Martha for closing comments.

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've said before, we will do that with both organic product development alongside disciplined tuck-in acquisitions focused on our strategic platforms. Finally, as I've 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.

Operator, we would now like to open the line for questions.

[Operator Instructions]. Our first question will come from Michael Petusky of Barrington Research.

Nice results. I guess there wasn't much in the way other than, I guess, the reaffirmed guide on WRAPSODY. Martha, are there any updates you want to share there, whether it's anecdotal or more quantitative just on early days progress?

Yes. Thanks very much, Mike. You asked -- just to clarify, you asked about WRAPSODY?

Yes.

No, we're real pleased with how WRAPSODY is going. Again, just to remind folks, we did a bit of a reset, if you will, on how we're approaching our go-to-market strategy with WRAPSODY. We really instituted that toward the end of last year. I'd say at this point, we're very pleased with how we're doing. We've given, I think, our previous guidance or our revised guidance in 2026 of $7 million for WRAPSODY for the fiscal year, and we're tracking right on that.

Then I'm not sure who this is for, but just curious about -- are you guys -- like is there a formal process? Are you guys seeking refunds in terms of the tariffs that you had to pay last year and the first part of this year? If so, how does that process work?

Yes. Maybe just -- I'll just kind of give a guidance overview, if you don't mind, Mike, because there's 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've got $15 million that's baked into our guidance for 2026 versus the $9 million that we had in 2025. That's unchanged since the U.S. Supreme Court decision. I think there's still a potential for the administration to challenge that, I believe, through May. I think we'll reevaluate that as part of our second quarter kind of reevaluation and we'll discuss that further, I think, after the second quarter once we kind of get a little -- I guess on firmer ground, right? It's a moving target. There's also the Section 232 stuff that's hanging out there.

I was just going to say, have you guys filed -- like is there a paperwork to file to seek refunds at this point for you guys or no?

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. I think from our perspective, we've started the process of filing and have essentially filed for the majority of that. I think we'll 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 that the $15 million would come down.

Our next question comes from Jason Bednar of Piper Sandler.

Nice start to the year here. I wanted to start first on View Point, the recent deal. It's a pretty sizable revenue contribution step up from this year to next. Maybe just if you could help us out with how you see this coming together? What's supporting that growth ramp going from $2 million to $4 million in revenue this year up to $14 million to $16 million next year? Then should we think about that 20% growth rate you referenced starting in 2028, building on that $14 million to $16 million? Then I guess, looped in here, just any considerations around synergies that could be realized with respect to that SCOUT platform?

Yes. Thanks, Jason. I appreciate the question. A couple of comments on that, if you will. I mean, first of all, I mean, I'm just going to kind of take a step back, if you will, on oncology, right? It's about a $100 million platform for us, and it's been growing very nicely. Yet it's been a one product -- pretty much a one-product platform. We have been looking for a while at ways to try to add to that platform because we have an outstanding field organization, and we want to get some additional products in their hands.

If you think about the breast cancer market, right, and particularly, you have to go to the biopsy phase, in terms of the whole phase. Somebody has a mammogram or something is seen, and so in the U.S. alone, there's 1.6 million breast biopsies that are done each year. For SCOUT, the product that we've 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 3x to 4x because now that other 1.3 million breast biopsies that are done tend to be done for lower-risk patients.

The SCOUT tends to be used for higher-risk patients. We're really just seeing a terrific market expansion opportunity here. It really then just comes down to a physician choice about whether they'd rather use Radar technology or ultrasound technology. We're super excited about that. I'll just say, I think the other really important thing about this is that both of these approaches happen at the time of biopsy, whereas many of the other -- if you don't do something at a time biopsy, a patient may have to go through an additional localization procedure before their surgery. We're really excited about what it means for patients.

I think, again, breast cancer grows about 4% a year and actually the wire-free localization market where we play is growing at about 13% a year. I think when you ask about our confidence in the future growth rates, we feel good about that.

Yes. I'll add, Jason, at the midpoint of our '27 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 nice strong gross margins at 70%. We're really excited about it.

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. I guess kind of the genesis of the question here is, can you say that the worst is behind you for OEM? Does that performance get sequentially better in 2Q? Does growth return in the second part of this year, second half of this year?

Bigger picture on OEM, Martha, we've obviously seen you take some actions on portfolio management at Merit. How do you think about the value OEM provides to Merit versus maybe what you could potentially realize through strategic moves like some of the actions we've seen across other medtech OEM players here in the last several months?

I'll take the last part of the question first, Jason, if you don't mind. I think just to kind of level set people on what our OEM business is, we essentially sell capacity, so I would say that we're different than other OEM companies out there. We're not a contract manufacturer. We are selling our own product. Divesting of that just doesn't really work, right? We end up with a bunch of extra capacity.

Having said that, we love our OEM business. It's a great asset. Our OEM business remains healthy despite the quarter-to-quarter fluctuations. I know you guys find that frustrating. I think as we see the visibility specifically, we're getting excited about what we can do there. We continue to believe the appropriate kind of normalized growth profile is in the mid- to high single digits. I think we're starting to see orders for Q2. That gives us a lot of confidence that I think we are going to be in that mid -- at the very least, I always kind of like to point to the low end. You guys know how I work, but we should be at the very least at that mid-single digits growth profile that I just talked about. Excited about to see how the quarter goes, but early start is looking really good.

Just to clarify, you're saying mid-singles is how you're seeing 2Q come together, mid-single-digit growth for OEM.

That's right.

Our next question comes from Sam Eiber of BTIG.

Maybe I can follow up on some of the supply dynamics in the cardiac business that was called out in the prior quarter. Just curious to get an update on how that's shaking out here? Then I'll have a quick follow-up.

Yes. I mean I think we continue to be on track. I think maybe to kind of walk through that issue, right, when we initially had our first quarter -- or sorry, fourth quarter call, it was a supply chain issue that unfortunately did turn into a recall. I'm sure a lot of you guys saw the notice go out. Again, from a financial perspective, it's immaterial to our 2026 financial results. We continue to be on track to have this product back on the market. It's unfortunate that this came to this, but just to kind of highlight it, it's a Class I recall, but we haven't had any of those since 2017. Just to clarify, this was in renal, right, just for clarity.

Maybe just a quick follow-up on some of the geopolitical issues we're seeing out of the Middle East. Just wondering if you're able to help, I guess, quantify or think through any kind of impact on the revenue line and then the input costs, whether it's freight, oil, how should we be thinking about that over the course over the rest of the year?

Yes. I mean on the positive side, I mean, we have yet to receive any price increases from our vendors. We are seeing fuel surcharges. I think those are pretty typical. We usually see those at least once a year as gas prices fluctuate. That's nothing that we're used to dealing with that. I would say that right now, I think what we're seeing, everything is manageable. I guess if the issue continues, I think we'll have to reevaluate that. As of now, we feel like we can overcome whatever is coming our way.

The other thing, too, that I'll call out is 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 just weren't able to come and pick the product up and deliver it. We are seeing an impact. I would say that it's very manageable. Again, we continue to feel really optimistic about the guidance that we put out there for 2026.

Our next question comes from David Rescott of R.W. Baird.

Two from us, and I'll ask them both upfront. I heard some of the commentary around OEM as it relates to the quarter and Q2 and the guide for the year. I recall there is some Asia Pac impact in there in general. Curious on if you could provide any color just around what the assumptions are for China and Asia Pac at this point and more broad strokes on how that is shaking out versus contribution from that region in the prior year, at least?

Then thinking more on the operating margin side, I believe the results that you put up were a little bit better than we had expected on the operating margin front, lower OpEx growth, it seemed to be the case, better gross margin. Can maybe you help us think about how you're thinking about some of the controls on the OpEx side through the rest of the year? I believe you've commented on gross margins already, but I would be curious around any of the underlying assumptions you have for better-than-expected operating margins through the year.

Yes. Maybe I'll just hit on the APAC region, right? I mean I think on the OEM side, that's where you started, specific to kind of the APAC region. That was essentially in line with our expectations. APAC as a whole was up 1% on a constant currency in Q1, which was a beat for us. It was versus the high end of our guidance. China sales increased by about 2% year-over-year on a constant currency in Q1, essentially in line with our expectations. [VBP] impact was, I would say, modestly better than expected. As far as China, I think we continue to expect, I would say, low single digits for 2026 as we continue to deal with volume-based purchasing.

Moving on to the operating expense side of things. Yes, look, I mean, I think when -- obviously, we were expecting a lower gross margin. We controlled operating expenses and then with the conflict, as that came out, we really kind of talked to the executive team about being in control of those operating expenses. I think they did a really good job of doing that. We obviously let that flow through to the bottom line with $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 View Point and essentially increased our EPS guide to cover for that. Again, overall, I think the P&L was off to a really good start, strong start for Q1. We beat on the revenue side by over $4 million. Gross margin was better than anticipated. We've controlled operating expenses. That gives us a lot of confidence as we head into the rest of the year and really confident in the full-year operating margin guide and obviously focused on our CGI targets.

David, I might just throw in one comment, if I could. I mean hats go off to Raul and Travis and our finance team. I think one of the things we've been working on is a number of our processes across the company and getting our finance partners involved in that earlier in the process. I just think we're doing our best to ensure discipline, I'd say, throughout the organization when it comes to spend. Again, just a hats off to our finance team partnering up with all of our engineering staff, our operations team, etc.

Our next question comes from Ed Leahy of Bank of America.

Two for 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 a physician preference. Is this a move that can open up broader accounts? Would some accounts have both systems? Do you think there are any impact on SCOUT sales during the inorganic period that could impact growth?

Yes. Thanks for the question. No, we really do think this is a market expansion play, right? Obviously, there could be a handful of accounts. As you said, we could have a situation where some have both. and there could be some where someone does choose one over the other, but there really is an opportunity, frankly, it's a little bit of a -- we call it a better and the best offering, if you will. There's really an opportunity to target the accounts very specifically, which our team has done a great job already in being ready to go do that so that we really see it as a total expansion of that time and biopsy localization market.

Then I think we saw one market was actually running a trial that was head-to-head with SCOUT. Obviously, now that both products are yours, do the outcomes of that trial change the strategy with SCOUT depending on if it goes one way or the other and what are the plans there?

No. Again, I mean I just literally got off the phone earlier today with one of the team members from OneMark. I mean, this group is super excited to be part of Merit. Merit is super excited to have them as part of our team. There was actually -- there's a major congress happening literally starting today, the society for breast surgeons, and there was a training with fellows earlier today. Literally, what the team was reporting back to me is how it really is a physician preference kind of a thing. Some people are just more sort of audible and they like the radar and hearing it. Then frankly, others say being able to see it visually, they prefer that approach. We're just excited to have this enhanced product offering across the portfolio. As we said, just a great add to the Merit Oncology platform.

Our next question comes from James Sidoti of Sidoti & Company.

If I heard you correctly, with gross margin, we're able to maintain that, keep that basically flat despite about $5 million of tariff expense. What drove that? Was that a mix issue? Or can you give us some more color on that?

Yes. I mean, it was essentially 100 basis point impact to -- or 120 basis point impact to our gross margin, the tariffs were. Again, hats off to our sales force and focusing on selling the right product at the right price. Obviously, we have some acquisitions, too, that are helping us, and that's part of that mix component. We continue to focus on the throw the kitchen sink approach at the gross margin. I think the conflict in the Middle East is exactly why we do that. There are surcharges that are coming that we were still over being able to overcome. Our operations group is doing everything they can to try and maintain or improve costs in a really challenging environment. I would say it's a little bit of everything, Jim, but there is a mix component that's helping us.

Again, I think we've done a really good job over the last -- under FSG and CGI and really focusing on the right products. Then we did divest of the DualCap. That was a very low gross margin product, and that's helping also. Again, we're hyper focused on those CGI goals. As you guys know, gross margin is an important contributor to operating margin, which is why we focus on it so much.

Then inventory was up about $20 million in the quarter. Can you explain that?

Yes. I mean, again, there's acquisitions that have taken place, and we're building out those inventories. I think there are certain areas that we were a little low in. As you guys recall, over the last year in our Endoscopy segment, we dealt with a little bit of supply chain issues. Getting that to a healthy point. Same with our oncology business. I would say same within our cardiac and renal therapies. Those are all areas that had really strong sales that we essentially just getting the safety levels to an area that we feel comfortable with.

You're also in an environment right now where you start to look at the supply chain, just making sure that you're covered just given the performance of the company that we expect, and so just making sure our safety stocks are at the right level.

If I can, I'm going to sneak one more in. Can you just tell us what the distribution looks like for the OneMark system prior to the acquisition? How many people will be selling it now that it's a Merit product?

Well, we don't -- Jim, we don't share exactly how big our sales organizations are. I mean, View Point was certainly a smaller organization. Again, it will fold really nicely into our team, as I said, who's really excited to have their View Point colleagues join them. I'll say this, it's not a major expansion of our sort of commercial footprint, but I would say the energy behind it will certainly make up for that.

The big jump to revenue in 2027, that's not because of increased distribution, you think that should increase product awareness?

Correct. It's increased product awareness and it's being able to have options as you go into each and every account, and it's some really excellent account planning and targeting that our team is undertaking.

Our next question comes from John Young of Canaccord.

Congratulations on the quarter. Martha, I just wanted to ask, when you came into the seat, just there was an emphasis on OUS growth of your background. Any updates on the progress or changes that you've made there? I know in the script, you spoke about some alignment changes. Has compensation incentives changed at all for the reps?

No, as we go into 2026, there have not been any significant comp changes for our reps. I mean I will say you heard Raul talk about our gross margin improvement. I would say over the last several years, this organization has done a really nice job making sure our team knows which products to keep focused on, and we really are pushing a bit more emphasis on some of our higher-margin products. There's certainly that.

I would just say, in general, I mean, we do have about 40% of our revenue is outside the United States. Again, as you heard, our international teams continue to do a really nice job for us. I'm quite pleased with that.

Then just looking perhaps for any additional color on the Endoscopy segment and any progress that you guys made in the quarter on the integration and training of that sales force.

Yes. We're really excited about the endoscopy platform. I mean, so we brought in the C2 CryoBalloon acquisition, which is so far doing better than our high-end expectations. We're really pleased about that. Then as you probably saw, we announced a new product, and we mentioned it in the script, The Resilience product, which is this through-the-scope esophageal stent. This is a really nice market for us. It's sub-$100 million size in terms of market.

Again, that's in the world of Merit Medical, that's a really nice market sort of space for us. This is a great stent. It's actually because physicians get to put it in through a scope, they feel like they have a lot more control and accurate placement. Most importantly, what the feedback we've gotten initially is that it's not moving once it's there. Migration has really been an issue with the number of the stents that are out there in that market. Again, we're just -- we're really excited about the opportunity for Resilience and frankly, the endoscopy business in general. In fact, next week, I'll be at Digestive Diseases Week with the team, which is one of their big shows more on the GERD side of things. Again, all across endoscopy, we're very pleased.

Maybe I'll add a little color. As hopefully, you guys saw last year, I think our endoscopy team just got better every quarter as they integrated and learned how to sell kind of both bags essentially. Q1 was mid-teen growth. Really strong performance by them, and they're excited about what they're doing, which makes us excited about the potential that they have.

Our next question comes from Jason Bedford of Raymond James.

It's Zach Gold on for Jason Bedford here. You guys have talked about being open to deals that are somewhat larger than historical tuck-ins. Of course, we saw the View Point deal. As you look at the pipeline, can you remind us what those key areas are for the next deal? Then kind of in terms of sizing, would you say View Point is a good proxy for deal characteristics and size in terms of just helping us level set expectations on acquisitions?

Yes. Thanks. Appreciate the question. Look, I mean, I think doing deals is not something where you get to say, I want to do something of exactly this size at this time to add precisely to this particular platform. That would be great. That would be a lovely world in which to live. Unfortunately, that's not reality. We're not going to put sort of a number around size of deal, if you will. As I said, we're looking at a lot of things. This company has grown a lot through acquisition. We plan to continue to do that.

Again, I think it's really important to think of it in terms of tuck-ins or bolt-ons, nothing transformational. Every deal has to have a lot of strategic fit. As we're talking about, when we look at these platforms, part of what's exciting about this platform structure that we're using is I am looking to each platform to have a lot of conviction around any proposed deal, because they're going to own it. That's the way we're building up these various business lines. It's really critical that they believe in it and they have done the work and the analysis. We do a lot of that here kind of at corporate as well, but that's the way we're really thinking about acquisitions going forward. It's got to be strategic, and then it's got to fit certain financial metrics that we've got in place as well. Certainly being margin accretive would be one of them.

Then if I can ask a second one here. Just curious on that Medtronic distribution deal you guys did during the quarter. Is there any stocking tied to that? Yes, is there stocking tied to that and then sort of a material impact for you guys on growth that comes from this agreement?

Obviously, they're going to gear up, and we're not going to give details. I mean this is -- it's not our practice to talk about our customers, what they're going to do and how they're going to launch. I would just say that we're really excited for our OEM division. I think they've done a good job of 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 again gives us a high level of confidence in that mid-single-digit growth that we expect out of OEM. I think we're excited for them. I know there's been a lot of comments around OEM. I can tell you that, again, we have a high level of confidence in their performance for the rest of the year.

Yes. I think this is -- I mean, it's actually -- it's just a really good example. I mean this is -- when we say OEM is lumpy, this is kind of a good example of it. As you saw, and Medtronic put out a press release on it. I mean we have a relationship with them. They've been an OEM customer as they shared in their press release. These things, they ebb and flow a little bit. I think as Raul said, though, we're very excited, and this definitely is a factor in us and are gaining confidence on our OEM platform for this fiscal year.

Our next question comes from Mike Matson of Needham & Company.

I just want to ask one on capital allocation. I mean, I understand you're focused on M&A, and that's kind of been the priority. The stock is pretty beaten up, pretty cheap here. Would you consider doing a share repurchase at all?

Look, I think, obviously, that's a Board-level decision. I don't want to speak on their behalf. I think for now, with our net leverage ratio of 1.6, a lot of opportunity out there from an M&A perspective. We continue to, I think, conserve cash. We continue to generate strong free cash flow, as you guys saw, almost approximately $25 million for the first quarter, which was a really strong increase over prior Q1 of 2025. For now, we're just focused on CGI. We're focused on our free cash flow goals, and we are focused on delivering long-term sustainable growth.

This concludes our question-and-answer session. I'd like to turn it back to Martha Aronson for closing remarks.

Well, look, I just want to say thanks, everybody. Appreciate you dialing in today. As I said, pleased with our strong start to 2026. As I said, feel good about tracking nicely to our CGI goals. Most importantly, I do want to thank our team who's so committed to helping patients all around the world. Again, thanks, everybody, for joining us today.

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

Welcome to the Merit Medical Systems Fourth Quarter 2025 Earnings Conference Call. [Operator Instructions] 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.

Thank you, operator, and welcome, everyone. I'm joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer; and Brian Lloyd, our Chief Legal Officer and Corporate Secretary.

Brian, would you please take us through the safe harbor statements, please?

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, February 24, 2026, and should not be relied upon as representing our views as of any other date. We specifically disclaim any obligation to update such statements, except as required by applicable law.

Please refer to the section entitled Cautionary Statement regarding Forward-Looking Statements in today's press release and presentation for important information regarding such statements. 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 U.S. 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. 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.

Thank you, Brian. Let me start with a brief agenda of what we plan to cover during our prepared remarks. I will begin with a brief summary of the fourth quarter and full year 2025 financial results. Then Raul will provide a more in-depth review of the quarterly and full year financial results as well as financial guidance for 2026, which we introduced in today's press release. I'll then provide some closing comments before opening the call for your questions.

Beginning with a review of our fourth quarter results. We reported total revenue of $393.9 million, up 11% year-over-year on a GAAP basis and up 10% year-over-year on a constant currency basis. The constant currency revenue growth delivered in the fourth quarter exceeded the high end of the range of the growth expectations that we outlined on the Q3 2025 earnings call. Our constant currency growth in Q4 was driven by 6.6% organic constant currency growth in Q4, which modestly exceeded the high end of the range assumed in our guidance and contributions from our acquisitions, which also exceeded the high end of our expectations.

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

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

For the full year 2025, the team delivered total constant currency revenue growth of 11%, a non-GAAP operating margin of 20.3%, representing a 131 basis point increase year-over-year and more than $215 million of free cash flow. These are impressive financial results on their own to be sure. But more importantly, each of these exceeded the high end of the original guidance range for 2025 provided on the fourth quarter 2024 call last February, despite the continued challenges related to the dynamic and uncertain global macro environment. Specifically, the high end of the original 2025 guidance called for constant currency revenue growth of 10%, non-GAAP operating margin of 19.7% and free cash flow of $150 million.

This outstanding performance is a direct result of the team's strong execution and commitment to achieving the company's multiyear financial targets. We introduced financial guidance for 2026 in today's press release, which calls for solid constant currency growth, year-over-year non-GAAP operating margin expansion and strong free cash flow generation. The organization is aligned around our priorities for 2026, specifically, to drive strong execution around the globe and to successfully complete our continued growth initiatives program, which includes our previously disclosed financial targets for the 3-year period ending December 31, 2026.

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

Thank you, Martha. I will start with a detailed review of our revenue results in the fourth quarter, beginning with the sales performance in each of our primary reportable product categories. Note, unless otherwise stated, all growth rates are approximated and presented on both year-over-year and constant currency basis.

Fourth quarter total revenue growth of 10% was driven primarily by 9% growth in our Cardiovascular segment and, to a lesser extent, by 15% growth in our Endoscopy segment. Cardiovascular segment sales exceeded the high end of the expectations we outlined on our third quarter call, and Endoscopy sales came in at the midpoint of our expectations. Q4 total revenue results included approximately $10.8 million of inorganic revenue from our acquisitions of lead management products from Cook Medical, Biolife Delaware LLC and C2 CryoBalloon device from PENTAX of America. Excluding sales of acquired products, our total revenue growth on an organic constant currency basis was 6.6%, slightly better than the high end of our expectations in the fourth quarter.

Turning to a review of our fourth quarter revenue results by product category. Cardiac Intervention product sales increased 21%, representing the largest driver of Cardiovascular segment growth in the period. CI sales increased 12%, excluding the contributions from the sale of acquired products. This performance was well above the high-end organic growth expectations we assumed for Q4. Organic growth in our CI business was driven primarily by strong sales in our EP, CRM, angiography and access products, which together represented more than 60% of our total CI organic growth year-over-year.

Demand for our Prelude SNAP and our Ventrax Delivery System were the largest contributors to EP/CRM organic growth in Q4. High teens growth in sales of wires fueled our angiography product sales results and demand for our Prelude radial sheath and our Prelude wave hydrophilic sheath introducer with SNAP Fix technology were the largest drivers of our access products, organic growth in Q4.

Peripheral intervention products sales increased 13% and represented the largest driver of organic cardiovascular segment growth in the period. PI sales exceeded the high end of our growth expectations in Q4. Growth in our PI business was driven primarily by strong sales in our radar localization and delivery systems categories, which together increased more than 25% year-over-year, representing 45% of our total PI growth year-over-year. Importantly, fourth quarter PI growth was driven primarily by broad-based strength across multiple categories, including embolotherapy, drainage, angiography and access products, which together represent more than half of our total PI business and posted 10% growth in Q4.

Rounding out the Q4 performance across the rest of our Cardio segment, sales of our Custom Procedural Solutions products increased 4%, above the high end of our expectations, driven primarily by high teens growth in kit sales, offset partially by high single-digit declines in sales of critical care products. CPS growth in Q4 was impacted in part due to the planned divestiture of our DualCap line, which I'll discuss in further detail shortly.

Finally, sales of our OEM products decreased 15%, significantly lower than the low single-digit growth assumed in our guidance. The largest contributor to the softer-than-expected OEM performance in Q4 was sales to OEM customers outside the U.S., which continued to see demand trends impacted by macro environment. Sales to OEM customers in the U.S. decreased in the high single digits year-over-year compared to low single-digit growth we had expected.

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

Turning to a brief summary of our sales performance on a geographic basis. Our fourth quarter sales in the U.S. increased 12% year-over-year and 8% on an organic constant currency basis. International sales increased 6% year-over-year and 4% on an organic constant currency basis. Q4 U.S. and international sales results were both at the high end of our organic growth expectations.

Turning to a review of our P&L performance. For the avoidance of doubt, unless otherwise noted, my commentary will focus on the company's non-GAAP results during the fourth quarter of 2025. And all growth rates are approximated and presented on a year-over-year basis. We have included reconciliations from our GAAP reported results to the most directly comparable non-GAAP item in our press release and presentation available on our website.

Gross profit increased approximately 13% in the fourth quarter. Our gross margin was 54.5%, up 103 basis points year-over-year and represents the highest quarterly gross margin in the company's history. The year-over-year improvement in gross margin was primarily driven by mix by product and by geography as well as improvements in pricing compared to the prior year period. As expected, tariffs were a material headwind to the year-over-year improvement in gross margin in Q4, representing a 112 basis point incremental impact year-over-year.

Operating expense increased by 10%. The increase in operating expenses was driven primarily by a 10% increase in SG&A expense and an 8% increase in R&D expense compared to the prior year period. Total operating income in the fourth quarter increased $13 million or 19% from prior year period to $82.7 million. Our operating margin was 21% compared to 19.6% in the prior year period, an increase of 138 basis points year-over-year. Fourth quarter other expense net was $1.3 million compared to $1.1 million for the comparable period last year. The change in other expense net was driven primarily by lower interest income associated with lower average cash balances, offset partially by lower interest expense compared to the prior year period.

Fourth quarter net income was $62.5 million or $1.04 per share compared to $56.3 million or $0.93 per share in the prior year period. Fourth quarter net income and EPS exceeded the high end of our guidance range by $1.8 million and $0.03, respectively. We generated $74 million of free cash flow in the fourth quarter of 2025, up 13% year-over-year.

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

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

Turning to a review of our balance sheet and financial condition. As of December 31, 2025, we had cash and cash equivalents of $446.4 million, total debt obligations of $747.5 million and available borrowing capacity of approximately $697 million, compared to cash and cash equivalents of $376.7 million, total debt obligations of $747.5 million and available borrowing capacity of approximately $697 million as of December 31, 2024. Our net leverage ratio as of December 31 was 1.6x on an adjusted basis.

Turning to a review of our fiscal year 2026 financial guidance, which we introduced in today's press release. Our 2026 guidance assumes the following: total GAAP net revenue growth in the range of 6% to 8% year-over-year and 5% to 7% year-over-year on a constant currency basis, excluding an expected 80 basis point tailwind to GAAP growth from changes in foreign currency exchange rates. Among other factors to consider when evaluating our projected constant currency revenue growth range for 2026 are the following items: First, our total constant currency range of 5% to 7% assumes 6% to 7% growth in the U.S. and 5% to 6% growth outside the U.S. Second, our total net revenue guidance for fiscal year 2026 assumes inorganic revenue contributions from the BioLife and C2 acquisitions in the range of $13 million to $15 million in 2026.

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

Product sales and royalty revenue for DualCap totaled approximately $20 million in 2025 and represent an estimated year-over-year headwind of approximately 140 basis points to our total constant currency revenue growth in 2026. These products are noncore to our business, and we believe the divestiture will create additional manufacturing capacity and free up sales and marketing resource to invest in higher-margin, higher-growth products.

With respect to profitability guidance for 2026, we expect non-GAAP diluted earnings per share in the range of $4.01 to $4.15, up 5% to 8% year-over-year. Our 2026 non-GAAP diluted EPS growth is expected to be driven primarily by solid constant currency growth and non-GAAP operating margin expansion in the range of 36 to 76 basis points year-over-year, offset partially by the projected incremental impact of tariffs, trade policies and related actions implemented by the U.S. and other countries of approximately $0.07 and the estimated incremental dilution from our convertible debt facility of approximately $0.01.

For avoidance of doubt, our 2026 non-GAAP EPS guidance assumes a 12-month tariff impact of approximately $15 million or $0.19 per share compared to $9 million or $0.12 per share realized during the last 8 months of 2025. The expected 12-month tariff impact assumed in our 2026 non-GAAP EPS range is based on tariff policies in place prior to the recent decision of the U.S. Supreme Court on February 20 and does not include any impact from new and/or additional tariffs or retaliatory actions or changes to tariff policy, which could change the anticipated impact to our non-GAAP EPS in 2026. The ultimate impact of the U.S. Supreme Court decision and subsequent new and/or additional tariffs or retaliatory actions or changes to tariffs on our business will depend on the timing, amount, scope and nature of such tariffs, among other factors, most of which are currently unknown.

For modeling purposes, our fiscal year 2026 financial guidance assumes non-GAAP operating margins in the range of approximately 20.6% to 21% compared to 20.3% in 2025. Non-GAAP interest and other expense net of approximately $8 million compared to $7.7 million in 2025. Non-GAAP tax rate of approximately 23% and diluted shares outstanding of approximately 62.2 million. Note, our weighted average share count assumes a incremental dilution of approximately 500,000 shares related to our convertible debt facility. This represents an approximate impact of $0.04 to our non-GAAP EPS in 2026 compared to a $0.03 impact in 2025.

Finally, we expect to generate free cash flow of at least $200 million in 2026, inclusive of the expectation that we will invest approximately $90 million in capital expenditures this year. We would also like to provide additional transparency related to our growth and profitability expectations for the first quarter of 2026. Specifically, we expect our total revenue in the range of $375 million to $380 million for the first quarter, representing growth of 6% to 7% year-over-year on a GAAP basis and approximately 3% to 5% on a constant currency basis. The midpoint of our fiscal quarter constant currency sales growth expectations assumes U.S. sales increased 6% and International sales increased 2% year-over-year. Note, our first quarter constant currency sales growth expectations include inorganic revenue in the range of approximately $6 million to $7 million.

Excluding inorganic contributions, our first quarter total revenue is expected to increase in the range of approximately 2% to 3% on an organic constant currency basis. With respect to our profitability expectations for the first quarter of 2026, we expect non-GAAP operating margins in the range of approximately 16.7% to 18.5% compared to 19.3% last year and non-GAAP EPS in the range of $0.77 to $0.87 compared to $0.86 last year.

I'll now turn the call back to Martha for closing remarks. Martha?

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

I particularly enjoyed meeting with Merit employees around the world and have been inspired by their enthusiasm and commitment to Merit's mission to understand, to innovate and to deliver. And a few weeks ago, I had the opportunity to meet many of the rest of the members of our global commercial team as Merit's first-ever global sales meeting was held here in Salt Lake City. Many of our colleagues were able to tour our fantastic facility and meet the operators who work so hard to produce our high-quality products. Throughout the week, as I engage with this team, my belief in the Merit way that guides our entire organization was enhanced even further.

I've spent considerable time learning about our products and understanding our processes and I remain quite optimistic about our future based on all that I've learned in recent months. My listening tour has provided me with valuable feedback from across the Merit organization. I've also had the opportunity to solicit feedback from constituents outside our organization. I've attended several key medical meetings as well as one of our physician advisory Board meetings.

I've also had the opportunity to engage with the investment community, and I've spent more time with our Board of Directors. All of these activities are centered around gathering as much feedback as possible and learning as much as I can. A tall task to be sure, but one that I remain extremely excited about.

While the majority of my time as CEO has been filled with listening and learning, I have made several changes, which I believe will enhance the company's foundation for success going forward. Upon arrival in October, I established a new executive leadership team as well as a global operating committee. As discussed on our last earnings call, Merit is transitioning from a founder-led to a founder-inspired organization. I'm impressed with how our leaders across the globe are working more closely together across geographies and across functions.

Next, we've solidified our platform structure by pairing up leaders from R&D with marketing and then surrounding them with the critical functions to develop a cohesive global business strategy and product pipeline road map. I just completed our first round of reviews of these platforms, and I'm excited about the progress of these teams.

As the new executive leadership team and I have been analyzing the business, it became clear that we had an opportunity to streamline our internal planning and reporting processes with the goal of aligning how we think about, evaluate and plan each of our underlying businesses. Pursuant to this internal transition, we intend to streamline how we talk about the business externally as well. We believe this will allow us to not only align how we talk about the business, both internally and externally, but will also help the investment community and our shareholders better understand the underlying growth drivers of our business today and going forward.

As I have dug into the business, I've developed even more appreciation for what Fred and the team have built since they developed Merit's first syringe to inject dye for angiography in 1987. Merit has grown to a $1.5 billion revenue company as of 2025 and this revenue is globally diversified with roughly 40% of our revenue coming from customers outside the United States. Today, we report our revenue in 2 segments: cardiovascular and endoscopy. And within each segment, we sell a large number of products that address multiple markets, procedure categories, sites of care and physician customers all around the world.

As I learned about the business and have engaged with various stakeholders on my listening tour, the same question keeps popping up. What drives growth in this business? The simple answer is that Merit is really fortunate in that we have a very broad portfolio of products that contribute to our strong track record of growth, as seen by a 10% revenue CAGR over the last 3 years. This 10% CAGR has been driven by our portfolio of products that fall into 2 primary groups. The first group is what we call foundational products. which are the products that are used primarily for access or enabling in vascular and other procedures.

Merit's foundational products comprise about 2/3 of our total revenue, and had a 6% compound annual growth rate over the last 3 years. The second group is what we call our therapeutic products which are devices and systems that treat disease in a number of very large markets that together represent significant growth potential. Merit's therapeutic products comprise about 1/3 of our total revenue and had a 19% compound annual growth rate over the last 3 years. On an organic basis, they had an 11% CAGR over that time period.

We will be talking more about each of these product groups going forward. But in the interim, it's important to appreciate 2 key themes. First, that we have several platforms where we combine both foundational products and therapeutic products, making Merit a full-line supplier to several of our customer groups. And second, the track record of growth Merit has delivered has been fueled by the powerful combination of strong internally developed product innovation and strategic M&A to enhance our competitive position in key markets.

With respect to internally developed product innovation, I think it's important to understand that Merit has a track record of consistent development and introduction of new products that represent important contributors to our growth each year. As an example, approximately 10% of the 2025 revenue growth in our 2 largest product categories, cardiac intervention and peripheral intervention came from new products introduced in 2025. As I referenced earlier, as we move into 2026, we remain laser-focused on achieving our continued growth initiative commitments, specifically for the 3-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. As our 2026 financial guidance indicates, we believe we are tracking nicely towards the CGI financial targets.

During 2026, we will spend time developing our strategy for the period of 2027 through 2030. We will build this out based on the framework of key platforms where we offer our foundational and therapeutic products. We will prioritize our research and development efforts through the lens of our customers. We will actively engage in potential M&A transactions in a very disciplined manner while structuring our product portfolio to not only align with our financial goals, but also support our commitment to providing patients with life-saving solutions that positively contribute to the health care communities we serve all around the world.

We are looking critically at all parts of the business and where it makes strategic sense, we will take steps to optimize our offering like we did with the divestiture of the DualCap product line earlier this month. We will also work to ensure that our infrastructure remains solid while continuing to identify opportunities to enhance our operational efficiency and productivity. We believe the successful execution of our strategy will enable us to profitably scale the business around the world and drive compelling shareholder returns while we help patients in the years to come.

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

Operator, we would now like to open up the line for questions.

[Operator Instructions] Our first question comes from the line of Jason Bednar from Piper Sandler.

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

Yes. Look, I mean, I think it continues to be more of the same, right? And Jason, I'm just going to repeat what you said. I'm going to sound like a broken record, too, right? Look, I think first of all, just going to congratulate our sales force and our operations group for what they've done, I think, which is in a really tough environment and to overcome the tariffs in the way they did, I think, applause to them. It's just impressive to be able to do what we've done here in the last few years. And again, just thank you. I know they're listening, so I just want to thank them. But it's really just more of the same, right?

So continue to be focused on mix, whether that's new R&D projects or acquisitions, pushing the geography kind of areas too. I think you saw the divestiture of DualCap. That was a low-margin product. Just making sure that we continue our SKU rationalization process and just really throw the kitchen sink at the gross margin. I know you guys are getting sick of hearing that, but that's really what it takes to drive the gross margin in this environment. It's focused on pricing, focused on cost discipline, moving things to lower-cost areas, mix, our R&D department just focusing on launching the right products at the right price and our manufacturing department being able to manufacture those at the lowest cost possible while keeping our quality where it needs to be. So it's just more of the same for us.

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

Yes, Jason, thanks for the question. Let me make a couple of comments, if I could, about Rhapsody. I mean, first, I do think it is fair to say, right, our original 2025 Rhapsody revenue expectations missed the mark, that that's fair to say. So as we really thought about our guidance for 2026, I mean, I think as you said, we're only about 4 months into our newer strategy for the nonhospital locations, but we really tried to take a similar approach as we thought about our guidance for Rhapsody in a similar way to how we provide guidance for the whole company, right? So we have a high level of confidence in hitting the $7 million revenue number. I think, as you said, what are we seeing out there?

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

Our next question comes from the line of Mike Matson from Needham.

This is Joseph on for Mike. Maybe just wanted to dive a little deeper into guidance. I guess maybe just on free cash flow. I understand you had the divestiture, but it looks like 2026 guiding down versus 2025. Is this more conservatism? Does this have to do with more of the divestiture or increased CapEx spend? Just wondering your thinking around the guidance there.

Yes. No, thank you. Thank you for the question. I'm going to take the time to take a small victory lap, right? I mean when we launched CGI, as you know, our target was a minimum of $400 million in free cash flow. We're obviously ahead of that. So super proud of the team for continued focus on that. I will say a couple of things. Super happy with the performance in Q4. $216 million of free cash flow for the year is just a really impressive number, I think. So I think we'll continue to focus on free cash flow. $200 million, it's a minimum of $200 million.

We do have the building that's going up across the street, and we've got a couple of things that we want to do. But generally speaking, I think there is a lot of timing-based items that happen with free cash flow. It is a little -- a bit of a conservative nature to it just because there are certain timing things that we can't control that are, quite frankly, just hard to predict. But I can say that we always kind of take a minimum approach. So our expectation is that we'll hit at least $200 million in free cash flow, which will set us up really nice for our CGI goals.

Okay. Of course, yes, that makes sense. And 2025, very strong year. Maybe just one on the M&A target list. I guess just what are the areas there that Merit is strategically looking at? Is this looking more at innovative technology or therapeutic products that have that higher growth potential? Is it more tuck-ins to leverage your current growth drivers, maybe Rhapsody? Yes, maybe just broadly, what areas are you looking at? Is it EP, dialysis, endoscopy? Any help there would be great. Congrats on the quarter.

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

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

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

Could we just spend a minute on OEM? Was Q4 all inventory destocking in both the U.S. and OUS? And why would that happen in both geographies at the same time? And I just want to make sure the mid- to high single digit kind of underlying growth that you said on the call, is that what's baked into 2026?

Yes, Larry, great question, right? So just to maybe clarity, the U.S. component of OEM is really what we are talking about from a customer inventory destocking. I think when you look outside of the U.S., it's really kind of the macro environment, and it's really kind of centered around China and some of the impacts we're seeing there just related to the macro environment. So hopefully, that clarifies that. I think, again, I've been pretty consistent, I think, in our messaging, OEM tends to be choppy. I think when we look at that business, we think it's a great business. It's a great addition to Merit. It really delivers a lot of volume growth through -- since we're essentially selling capacity.

Our OEM business remains healthy despite the quarter-to-quarter fluctuations in growth rates. But we continue to believe the appropriate normalized growth profile of our OEM business is in the mid- to high single digits. And I've been pretty consistent in that messaging. So it's pretty interesting...

So it was 2%? Sorry, it was 2%...

Yes, that 1 year -- what they do the year before, Larry. I think they did pretty good.

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

Yes, no problem. I'll just start, right? I mean I think -- I appreciate the focus on Q1, and I'll give you some color around that, Larry. But I will highlight that I think we've put a pretty strong year together from a guidance perspective. I think it's right in line with our CGI goals. And so I just want to highlight that, right, because I don't want to lose the focus on the quarterly discussion, but I think we've put a great year together and well on our way to -- for our CGI goals.

When it comes to Q1, I think you do have to think about DualCap. Obviously, excluding that, you'd be up to 3% to 4%. There is some primary drivers of slower organic growth in Q1 that I'll highlight. And we talked about the first one, OEM, we do expect 2026 growth to be in the mid- to high single digits, consistent with our normalized annual growth profile for OEM. But Q1 revenue will be down year-over-year due to some continued OUS softness and a little bit of that inventory destocking that we've talked about.

And also, I want to talk about China, softer in Q1, given really the weighting of full year expected VBP impact. And then we're also dealing with a few little supply chain-related challenges, that we expect to resolve as we move through 2026. As you know, I've been pretty frank about the supply chain issues that although they're a lot less than they have been post COVID, we are still dealing with them. There's vendor consolidations and things like that, that are happening. And so as they come, we deal with them. But our manufacturing group, our operations group does a really good job of getting this out of them as quickly as they can. So those would be the kind of the 3 primary drivers for that softer Q1 that you guys would expect. But I would urge everybody to kind of focus on the full year numbers that we put together because I think it's a really solid plan.

Our next question comes from the line of Jayson Bedford from Raymond James & Associates.

Congrats on the progress here. So I guess maybe just to piggyback on the last line of questioning. Can you comment on growth in China in '25 and then your assumption in '26?

We're not going to call out the China growth in 2026, Larry -- sorry, I'm still stuck on Larry here, Jason. But I think China was down year-over-year. I would say that we continue to see volume-based purchasing kind of impact the business. Generally, the metric that I use, and I think you guys have heard you say this a lot before, volume continued to be up year-over-year, which is, I think, a good sign for us. We'll continue to deal with volume-based purchasing in 2026. The goal is obviously to kind of hopefully gets better every year. And so we'll see if that kind of shakes out according to plan. But I would say 2025 China I think, was down basically in line with our expectations.

Okay. And then as my second question or follow-up, you mentioned freeing up capacity from the DualCap sale. Just wondering you kind of framed the revenue impact. What does the sale do to margins in '26? And then is there an associated EPS impact?

There is a minimal EPS impact. I won't call it out. It's not worth mentioning. It's not material enough to worry about. I mean really we'll talk about gross margin and operating margin, it is a 140 basis point headwind to growth that everybody should consider as they look at the revenue guidance. And it's specifically with the U.S., that's about 240 basis point headwind to growth for the U.S. So it's very U.S.-centric. But again, it's still driving operating expansion in '26 despite -- we are still driving operating margin expansion despite the divestiture and despite tariffs. Again, that we've got a $15 million impact baked into our guidance.

Our next question comes from the line of David Rescott from Baird.

I appreciate the comments on the near-term Rhapsody right, I think you're 4 months or so, I guess, 2 or 3, 3 or 4 months or so into this post reimbursement landscape rollout. And I heard some of the commentary just around how you're thinking about the contribution for this year. But maybe could you help us understand more of the longer-term vision here. Obviously, reimbursement is -- plays a role. But when you think about just a longer-term story on what Rhapsody can be, is there any reason to think that longer term, this isn't a product that captures 20, 30-plus percent of the market?

Yes. Thanks, David. Appreciate the question. And look, again, I think it's fair to say, right, we're in early innings here, if you will, as you said, with kind of the new strategy. So we're pleased with where we are so far. I think as we've talked about, this is really the initial PMA product for this company. We do think about Rhapsody, I would say, is more of a platform than just a one-off product. So we do -- and I think you've heard me say, we will spend time during this year, during 2026 doing a strategic planning work. And we're really going to think -- spend a lot of time thinking about where are some of our bigger future opportunities, where do we want to continue to drive growth as we go forward. So we'll continue to think about that. We're not ready to share any more specifics on that at this point. But that is definitely how we're thinking about that opportunity as we move forward.

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

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

Okay. That's helpful. And then maybe just on the margin contribution from the product. Obviously, it's a smaller number relative to the broader portfolio. But any just insight or can you level set us on maybe how you're thinking about the product from a contribution perspective on the margin front, not only in the -- or implied in the guide, but also just as you think about this product in the portfolio longer term?

Well, look, I think -- thank you, probably not going to answer it the way you want, but I'll just say this. I think -- I just want to point out, right, our total constant currency growth expectations for 2026 are 5% to 7%, right? I think it's compelling. And nearly all of this growth is expected to be driven by our globally diversified business, right? So we've got a broad product portfolio, not to take away anything from Rhapsody, but specifically, sales of U.S. Rhapsody are expected to contribute somewhere around 25 basis points to this constant currency growth range. So we are excited about the product. We're excited about what it can do. I think Martha covered it nicely. I can't add anything there. But I just want to kind of focus everybody on the entire portfolio.

Our next question comes from the line of Michael Petusky from Barrington Research.

Well, I'm just curious, the incremental growth or the growth in PI from '24 to '25 in terms of just the 3 months, roughly about $20 million. How much of that was related to that SCOUT system?

Well, I mean, I think I won't kind of comment on it specifically, but it was a primary growth driver. I think when you think about the radar localization and the delivery system itself or the delivery systems category, together, they increased more than 25% year-over-year. So I mean, they represented -- between radar localization and our delivery systems, Mike, they represented almost 45% of our total PI growth year-over-year.

Okay. So it was roughly half then of the $20 million was attributable to SCOUT. Is it correct?

Well, it's 2 different product categories, right, just to be clear. But yes.

And Mike, this is Martha here. Just if I could just add. I mean I think we shared on the last call, SCOUT hit a really significant milestone too in terms of number of procedures. It's been used in. So again, we're very pleased with how that business is doing, and it's one of those that just makes an enormous difference in patients' lives.

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

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

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

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

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

I think it came in right around where we thought it would be right about 2% perhaps so. Down, yes.

Down 2%. Congrats on the free cash.

Our next question comes from the line of John Young from Canaccord.

Congrats on the quarter. I want to ask on Rhapsody. I know you're giving somewhat limited information, but try to get a little bit more here. Martha, I know you said you just held a national sales meeting. I would love to hear what you're hearing from the sales force so far in selling the products with the new strategy. Are you focusing the sales force on opening new accounts versus going deep in accounts? And can you remind me, too, is there any stocking revenue as they go and open these accounts?

Yes. So first of all, I would tell you, we have an extremely energized group. I guess I would call it small yet mighty. I think if you compare to perhaps some of the competitors in this area. So as I said, really inspiring for me, frankly, to spend some time with this group and see how motivated they are. Heard a lot of really moving patient stories about when a physician would use Rhapsody and the difference that they would see pretty immediately with it. So I think, again, that was super exciting. The team has very detailed plans around their targeting and where they're going. We're pursuing -- I mean, as we talked about, if you look at the market, right, it's primarily predominantly probably 85%, 90% non-hospital setting versus the hospital.

At the same time, as you know, since we had the NTAP, there's slightly higher pricing on the hospital side, and we had a lot of that work in process last year. So that certainly continues, albeit oftentimes, as you probably know, with challenges to get through VAC committees and that kind of thing. So that can take a long time. And you can get just pushed quarter-to-quarter and getting your slot on a VAC committee meeting. So simultaneously then, of course, they're pursuing the nonhospital sites of service as well.

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

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

Yes. So as I said, we're going to do a lot of work this year around our strategic plan and our long-term product and platform road maps, if you will. So yes, I think the answer is I don't see any reason for us not to continue to pursue PMA-type products. Again, one, as we think about it, we want to figure out how do we best leverage the technical talent that we have in this organization, which is extraordinary. So we want to think about that.

And then as I said, we also want to layer that on top of each one of our various platforms and think about the customer groups that we're serving and figure out, again, how can we best help them? How can we make their procedures more efficient? How can we help bring costs down of a procedure? How do we fill a bag where there's a gap in a sales rep's bag? Those are all the questions we're really going to be asking ourselves as we do this work and think about the longer-term strategy.

Our next question comes from the line of Travis Steed from Bank of America Securities.

This is Aidan on for Travis. Just my first one, a point of clarification. So does the organic growth guide not back out the divestiture? Or is that included in there?

No. I mean we gave you our guidance, and we didn't make an adjustment. I think other companies might do that. We just -- we gave you the number. We gave you the impact. I think, obviously, you should consider it as you look at our revenue growth numbers. Just to maybe repeat it, right, 140 basis points to constant currency growth and then 240 basis points for the U.S.

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

Yes. I mean I think you've already -- you've hit on some of the current bigger ones, right? And I mean, I think this is really -- as we think about strategy going forward, right, it's really you're asking, I think, the question, would we enter into, I'll call it, a whole new platform, potentially calling on a whole new customer group. The answer is, would we consider it? Yes. But I'd say right now, the primary focus is really focusing in on the platforms that we currently have. And again, as you all know, the cost of a distribution organization is not inexpensive. And so we have a lot of really talented reps out there around the world. And as I said, what we want to make sure we're doing is helping make sure that you have a full bag wherever possible and some of the latest and best technology wherever possible. So that's really our areas of focus for now rather than, I'd say, adding on a whole new platform.

Our next question comes from the line of Jim Sidoti from Sidoti & Company.

Another question on R&D because I noticed it's up about $1 million year-over-year, $2 million sequentially. I would expect R&D to be at least flat because of the end of the work on Rhapsody's PMA. Where are those dollars going right now?

Yes. I mean I think the better way to look at it is obviously as a percentage of revenue. I mean, that will continue to be about 6%. Jim, especially as you guys think about 2026, right? So just kind of focus you there. As far as 2025 or Q4, we did have some higher clinical spend, but we also had some onetime events. Higher regulatory submission spend and some product development expense that we'll call out. But I think as you look at 2026, you should think about it as a percentage of revenue, and it should be about 6% in that ballpark.

All right. And then I also noticed the MDR expenses, I mean, really have ticked down. Is that project completed at this point?

Yes. We're getting closer and closer every year, right? I mean I think as you guys know, that's been pretty frustrating, right? I mean to reregister products that we've been selling in there for a lot of years. My guess is as soon as we're done with it, they'll change the rules and make it easier. That's usually how it works. But I think those are winding down our regulatory group and our R&D and operations group have done a great job of staying ahead of it and getting -- making sure our products stay registered outside the U.S. So applaud them for keeping their head down and getting that done.

Our next question comes from the line of Robbie Marcus from JPMorgan.

Maybe I could -- Raul, if you don't mind, circle back to Larry's question on first quarter. And I guess I'll follow up with the question of -- you kind of highlighted what's driving some of the first quarter softness. What's driving the second through fourth quarter acceleration? And how should we think about the cadence of improvement and drivers of improvement throughout the year?

I think, Robbie, I think that's a great question, right? I mean I think as far as the detail quarter-by-quarter, I don't think that I'll get into that. Obviously, gave you guys modeling considerations for Q1, so you guys can have that. I will point you maybe just at a higher level, just the seasonality in our business. Q1 and Q3 are typically from a revenue standpoint, lower growth and revenue quarters with the second and the fourth being our strongest quarters. Again, I think we have a great plan for the year. And as we progress throughout the year, we'll give you additional color as we head into the next quarter. But for now, we're just talking about Q1.

And maybe, again, just a follow-up on Larry's question. The margin considerations in first quarter, it feels like it's implying down? And what's the components of that?

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

And also, just to highlight, right, I mean, I think there's some good things going on. I mean we had our first-ever global sales meeting. One of a number of items that are kind of -- that increased the expense in Q1 that's taking that operating margin down. But again, just focus everybody on the year-over-year results that we're shooting for.

Our next question comes from the line of Sam Eiber from BTIG.

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

Yes. Sam, thanks for the question. And here's the way I guess, we're thinking about it, right? I mean I think the answer is there is an appetite for some things that could be slightly larger from some of the things that this company has done in the past. Again, it's got to make good sense. We are going to be disciplined about it. But we do want to continue to be a growth company.

We believe we've still got lots of opportunity to be out helping patients. And so if we're going to continue to have the kind of growth that we'd like to have, I think you can also do some math, right, that says if we're going to be acquisitive, it might make sense to do some things that are slightly larger. So I do not mean a transformative deal by any means. But I think tuck-in or slightly larger than tuck-in, depending on how you define these things would be reasonable for you to think about.

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

Thanks very much. Again, I just want to thank all of our hard-working employees all around the world and thank our shareholders and our investors for your interest in Merit Medical. So have a great day.

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

Good afternoon, everyone. I'm Robbie Marcus, the MedTech analyst at JPMorgan. Really happy to present Merit Medical. We have new CEO, Martha Aronson. Martha is going to give a presentation, and then we'll do some Q&A after. Martha?

Great. Well, thanks very much, Robbie, and thank you to JPMorgan for the opportunity today to speak to you all. Here's our forward-looking statements as well as our non-GAAP financial measures. So let me start by just saying that I'm extremely excited to be here today as the new CEO of Merit Medical. I'm joined today also by Raul Parra, our CFO. Raul has been at Merit for about 16 years and has served as our CFO for the last 7.5 years.

So for those of you I haven't had the chance to meet, again, my name is Martha Aronson, and I was appointed CEO on October 3, 2025, succeeding our company's founder, Fred Lampropoulos. I've actually been in the industry for several decades now, having worked at Medtronic and Hill-Rom prior to the Baxter acquisition as well as the Ecolab Healthcare business. In addition, I served on a number of Boards of Directors in the last number of years. And as I said, I'm just so excited to be here at Merit Medical.

So I'm going to take the time this afternoon to cover a brief company history, a little overview of our business, our key products, our go-to-market strategy and what I think is our company's very impressive financial performance. I'm also going to share a little bit with you on where I've been focused since stepping into the role, some recent areas of progress for the business as well as some of the near-term priorities for the organization.

Let me start with a quick overview and snapshot of Merit Medical. The company developed its first syringe to inject dye for angiography in 1987. And since that time, we've grown to be a $1.5 billion revenue company with a market cap of over $5 billion. Currently, we have over 7,500 employees worldwide, and our global employee engagement levels have been rising steadily over the past few years since we began measuring and working with Gallup and doing a lot of work on manager training and employee engagement.

We also have a very strong global footprint with vertically integrated manufacturing in Salt Lake City, Tijuana, Mexico, Galway, Ireland as well as Singapore. The company has invested over $1 billion in capital on mergers and acquisitions since 2016, which is a very important part of the company's growth story.

So let me talk a little bit about our business in some more detail. As I said, we're a $1.5 billion revenue company as of 2025. And this revenue is globally diversified with roughly 40% of our revenue coming from customers outside the U.S. and about 60% from customers within the United States. We currently report our revenue in two segments: cardiovascular and endoscopy. And within each one, we sell a large number of products that address multiple markets, procedure categories, sites of care and physician customers all around the world.

So I've already been asked by a number of different stakeholders. So what drives the growth in this business? And the simple answer is that Merit is really fortunate in that we have a very broad portfolio of products that contribute to our long-term track record of growth. Over the last 3 years, our total revenue has increased at a 10% compounded annual growth rate.

As I was digging into the business and examining this business, I start to think about our portfolio in terms of falling into two primary groups. The first is foundational products, which are a variety of products that are used primarily for access, and I call it enabling in vascular procedures. The foundational products, as you can see here, comprise about 2/3 of our revenue and are growing nicely and had about a 6% compound annual growth rate over the last 3 years. The other group is our therapeutic products, which are growing much faster that had a 19% compound annual growth rate over the last 3 years and today comprise approximately 1/3 of our global revenues.

So I'm going to spend a little time with you reviewing these portfolios with you. And in doing so, also I want to share two key themes with you. One is that you will see how with several of our platforms, we combine both foundational products and therapeutic offerings so that we can really be a full-line supplier to our various customer groups. In addition, you'll hear examples of how Merit supplements our internal product development with strategic mergers and acquisitions to improve our competitive position.

So diving deeper into our therapeutic portfolios, we think of these areas in our business of addressing two primary platforms: vascular and nonvascular. Within the vascular portfolio, we have three therapeutic platforms. We have Cardiac Therapies, we have Renal Therapies, and we have Vascular Interventional. We offer therapeutic devices and systems that address the oncology and endoscopy markets in our non-vascular platform. You will see that we participate in a wide variety of procedures across specialties in a number of very large markets that have significant growth potential.

Starting with Cardiac Therapies, it's one of our largest and fastest-growing segments with mid-teens growth over a 3-year CAGR. This growth has been both organic and inorganic and serves as a good example of this approach that I just mentioned. After purchasing the lead extraction technology portfolio from Cook Medical, we are seeing a nice uptake with that product offering and are excited about future new product opportunities that are under development by our team to serve this market.

In the Vascular and Interventional market, we've seen double-digit growth over the last 3 years, driven by sales of both foundational and therapeutic products. Our embolic portfolio is particularly strong, and we're proud that we have products that touch each part of these important embolization procedures. In addition to the embolics, we offer access products, microcatheters and closure devices, thus providing a full line of products for these procedures.

Moving on to our nonvascular platform of therapeutic products. We have our endoscopy portfolio where, again, we've been acquisitive and then applied our engineering expertise to improve the products. The EsophyX treatment for GERD is a good example of that. In addition, we announced the acquisition of the C2 CryoBalloon in October to expand our footprint in the multibillion-dollar GERD market with a cryoablation treatment for Barrett's esophagus.

On the oncology side, we focus on tumor localization for breast cancer, led by our SCOUT system. The SCOUT radar localization technology has demonstrated improved patient outcomes and SCOUT is proven to improve radiology workflow and significantly reduce operating room delays. Using SCOUT, surgeons can precisely target the affected tissue to pinpoint its location within 1 millimeter, which enhances the outcome for women undergoing breast cancer surgery. We just released our SCOUT MD device, a next-generation product that has improved markers. And last fall, we announced that our SCOUT technology has now been used to treat over 750,000 patients around the world, which is a significant milestone for breast cancer treatment.

Moving on to our renal therapies portfolio. We have a strong portfolio of dialysis products that address the entire end-stage renal disease continuum of care. This includes our HeRO Graft, our Surfacer Inside-Out Access Catheter System and our portfolio of acute, chronic and peritoneal dialysis catheters. We enhanced this offering with the company's first PMA-approved therapeutic product, WRAPSODY. WRAPSODY is a cell-impermeable endoprosthesis that's used to extend vessel patency in dialysis patients who experience venous outflow obstructions such as stenosis and occlusion. WRAPSODY's initial addressable market in the United States is the estimated 95,000 stent units implanted for dialysis access maintenance each year. The WRAPSODY technology is compelling and has impressive clinical performance that we expect will drive market share gains in the years to come. Specifically, WRAPSODY's TLPP is shown to be superior to PTA at both 12 and 24 months for both AV fistulas and AV grafts. We're really pleased with the global rollout so far and are excited for what this really means for patients' quality of life. It's important to note that this was Merit's first PMA effort and provides us with a platform for additional therapies down the road.

As we think about the future pipeline of products, it's important to note that we have a truly global footprint and infrastructure in place to execute on that. As you can see, we are well positioned with sales, R&D and manufacturing locations all over the world. And when we go to market, we do it in several ways. We're primarily direct, but we also leverage distributor partners in certain markets, and we use what we call modified direct in certain international markets such as Japan and China. We also have a very substantial OEM business. Now to be clear, we are not a contract manufacturer, but rather our OEM business leverages our vertical manufacturing expertise and capacity. Many of the largest medical device companies in the world are our OEM customers.

So when you combine our global cross-functional talent with a customer-focused organization, you see this incredibly strong track record of top line growth. Over the last 9 years, the revenue CAGR is 11%. The company has grown every single year since it was founded in 1987 with the exception of 2020, where revenue declined just 3% year-over-year due to the COVID pandemic. Importantly, this growth has been driven by continued new product development and contributions from strategic M&A.

In addition to the top line, the company has worked hard to improve its profitability and free cash flow. In 2019, the non-GAAP operating margin was in the low double digits, and now it approaches 20%. This significant improvement in the company's profitability profile has resulted in impressive free cash flow generation. We generated nearly $300 million in the 3 years ending 2023 as a result of the initiatives related to our Foundations for Growth program, and we are targeting cumulative free cash flow generation of more than $400 million in the 3 years ending in 2026 as a result of our continued growth initiatives program.

So if I can call your attention to the right-hand side of this slide, you will see that the previously stated 3-year financial targets that are part of continued growth initiatives. I'm pleased to say that the company is tracking nicely to these goals. Again, these goals from FY '23 through '26 are a compound annual growth rate of 5% to 7% in revenue, non-GAAP operating margin in the range of 20% to 22% and cumulative free cash flow generation of more than $400 million. As part of that, we preannounced last week our preliminary revenue for 2025. Merit Medical delivered another strong quarter on the top line with 8% to 10% constant currency growth compared to our guidance of 5.5% to 9%. And for the full year, we delivered $1.5 billion in revenues, up 11%. As a reminder, these results complete that second year of our continued growth initiatives program. I can tell you, we remain laser-focused in 2026 to deliver that third year of CGI.

So hopefully, you can appreciate why I was so excited by the opportunity to lead this great company. Merit is a company in a strong position, thanks to the hard work of our global team and the leadership of our founder, Fred Lampropoulos. And we are now transitioning from a founder-led organization to a founder-inspired organization. The company has a solid mission and set of values. This is one of the things that attracted me most to Merit Medical. Our mission is to understand, innovate, deliver. And we're guided by the Merit way, which Fred established. We express it as heart, health, excellence, agility, responsibility and teamwork.

In July, when the CEO transition was announced, I immediately began spending time with Fred, visiting sites and getting to know the organization. I'm still on my listening tour as I'm still just roughly 90 days into the job. But upon my official arrival in October, I did establish a new executive leadership team as well as a global operating committee. And in a few weeks, I'll have the opportunity to meet the rest of our global sales team as we gather all of our global commercial organization for the first time ever at a global sales meeting.

As we move into 2026, as I said earlier, we remain laser-focused on achieving our continued growth initiative commitments. At the same time, we will spend time developing our strategy for the period of 2027 through 2030. We will build this out based on the platforms that I shared with you today. We will think about this in terms of how we grow our foundational products as well as our therapeutic products. As you saw, we have a number of high-growth opportunities within our therapeutic portfolio. We will prioritize our research and development efforts through the lens of our customers, and we will actively engage in potential M&A in a very disciplined manner. We will also work to ensure that our infrastructure remains solid, while we continue to look for more efficiencies and productivity gains. This will enable us to scale the business even further all around the world.

So let me conclude my prepared remarks with why I believe Merit Medical is a compelling investment opportunity. We're diversified across a number of the high-growth end markets, serving as enablers for these procedures and surgeries. We have a strong research and development team working alongside our business development team as we seek to build out our high-growth platforms. The company has a strong track record of integrating acquisitions quickly and successfully. We're increasing our mix of therapeutic products and have the commercial teams and global manufacturing footprint to do so. I know I can speak on behalf of our 7,500 employees when I say how grateful we are to Fred Lampropoulos for his vision and leadership over 38 years. The team is ready and excited to build on his legacy. Thanks very much. And Raul and I would be happy to take your questions. Thanks.

Great. Well, Martha, welcome to your first JPMorgan as Merit's CEO. Maybe we could start with the fourth quarter preannounce. $389 million to $395 million, 8% to 10% constant currency growth, probably a little wider range than we're used to. What was the reason behind that? And also, any color on performance by business line that you're willing to share?

Yes. Look, a slightly wider range than normal. And really, it's a result of our announcement that we made earlier than normal, right? So we were probably about 5 days sooner than we would normally announce. We had a press release go out last week and just wanted to make sure that we were able to announce revenue along with it. And so we gave ourselves a little bit of wider range just to make the accounting team a little more comfortable just given that they had burned the midnight oil trying to get us the numbers. So -- but really happy with the performance.

I think just a couple of highlights. really happy with the organic growth performed ahead of plan. The inorganic or acquisition revenue came in at the high end of our range, which we're really excited about. Again, just an overall solid performance, pretty consistent with kind of the rest of the year. So no outliers. I would say that Endotek continued to show improvement from prior quarters, which is what we were expecting. OEM continued to be a little softer. Some of it still has to do with the coatings business in China that has been pretty -- has seen some -- a little bit of a slowdown with our OEM business. And also, if you remember, last year, we had a huge fourth quarter for OEM, almost 23%, 24% growth rate. And so there is a little bit of a comp issue. I don't really like bringing those comp issues up, but it was a reality in the fourth quarter for our OEM division. Other than that, pretty consistent with the rest of the year.

Great. Along with the preannouncement came Fred's resignation as Chairman of the Board, and you had F. Ann Millner, who was on the Board already moved into the Chairman role. Are you expecting any change in strategy or any differences from the Board now with the new leadership there?

No. So a couple of comments on that. First of all, Ann Millner has been on our Board for over 10 years, and Ann has been serving as our Lead Independent Director. So a very natural and smooth move as she slid over to the Chair role. I think -- I don't anticipate any -- seeing any major change in terms of the effort the Board is focused on. The Board started looking at succession over 2 years ago. So this has certainly been a process that's been ongoing for quite some time. I think it's fair to say the timing surprised us all a little bit. But at the same time, again, the Board has been planning for this. The team internally has been planning for this. And as I said, I think there's a great deal of confidence that the team is ready to take the baton and keep running fast.

Great. We just got fourth quarter '25. We're all now laser-focused on 2026. I'm sure we'll have to wait for the fourth quarter earnings to get the full guidance. But any early thoughts you're willing to put out there in 2026 and pluses or minuses we should be keeping in mind, whether it's on the top line or down the P&L?

No. I mean, look, I think, obviously, we'll give our guidance on our fourth quarter call here in about a month or so. Excited to do so. It will be the last year of our CGI financial or LRP. So excited about that. Really excited about kind of where we're at in year 2 of the 3-year program. Takes and puts, maybe I'll just call out kind of tariffs will be an impact somewhere in the $13 million to $15 million range is what we've said we think will be impacted. We continue to keep an eye on China, been dealing with volume-based purchasing. I think it's gotten better every year since 2024. We're looking for it to get a little bit better in '26, at least as of today, right? That can change by tomorrow. But yes, I'd say, obviously, keeping an eye on the geopolitical environment also. But other than that, I think the business has a lot of momentum in it and continue to be excited about what we can do for CGI here in the last year.

Do you think you'll have an Analyst Day to put out a 2027 to 2030 long-range plan or just during an earnings call? How are you thinking of communicating the next leg of growth?

Well, we're thinking through that right now. I'm not sure that we're ready to make a commitment. I think as I've always said, we're laser-focused on CGI. I think the last thing we want to do is drop the football on the one yard line before we finish. So we're going to finish that up. The lucky thing for us is that we've got Martha in the seat now. We've got our financial and strategic goals for '26 already outlined. That means that 2026, we can really spend a lot of time strategically planning on what we want to do after CGI.

So Martha, you said around 90 days, haven't quite hit the 100 milestone yet. But sort of what's been the early learnings? I'm sure you immersed yourself in the company and the learnings and the customers. What are some of the things that have really stood out to you on the positive side and some of the things you're looking that maybe needs a little work or effort?

Yes. I mean I think one of the things -- I mean, as I said, I mean, first of all, what's super exciting, right, is it just -- it's a company very grounded in the mission and as I said, in the values. And that just resonates with me entirely. I think the other thing that you see is that we are very broad, right? And so we really are quite diversified. And so when you think about all the various procedures that we are enabling, again, I'm kind of talking initially on our foundational product side of things. It's very diverse. It's very attached to significant procedures, as you saw, EP procedures, TAVR, a lot of high-growth procedures.

And then at the same time, we're in this process of really kind of building out and growing into thinking about some more therapeutic products that currently have some and thinking about some more down the road. So I think that's what makes us a very exciting place. And I think in terms of what needs to happen next, it's just a building story. It's an evolution kind of story, right, that people know this, what it takes to grow a business from start-up to $1 billion or $1.5 billion where we are is a little different from what you have to do to scale the business. So the focus is really just on thinking about what it's going to take for us to scale globally, building on the infrastructure that's already in place that's very solid, but making sure that's reinforced and then we kind of continue to grow up.

From my seat, I would say Merit is really good at listening to your customers, responding quicker than others, innovating faster than others and supplementing that innovation with outside technology. Do you expect any changes to that strategy? And did I sum that up?

No. Yes, you summed it up beautifully. I mean there are no changes in that regard, right? I mean we absolutely want to remain one of the most customer-focused organizations out there. And I think as you said, we'll do it both organically and inorganically, which again, has been part of the story historically and will continue to be part of the story going forward.

Maybe we could spend a couple of minutes on WRAPSODY. This is a product where, I would say, more the reimbursement side has had a bit of up and down over the course of 2025. You have NTAP approval for inpatient. That's about 20% of the market, 80% is outpatient. You did not get a new tech APC or a TPT, transitional pass-through, which would allow to payments to help with the higher price versus the reimbursement code. What's the next steps here? And is this a product that you can reapply for a TPT? Or has that ship sailed and we're now launching with a lower price point?

Yes. So we do not intend to pursue a TPT on this product. We did do a little pivot, and we are now -- we've broadened the pricing corridors for our sales team and have really sort of unleashed them to get out into the U.S. market into all the various sites of service, right? So I think as you said, we have the NTAP on the inpatient hospital side. So the team is working that. And of course, there's the ups and downs of getting through VAC and all the rest to do that piece. But then they're also really energized to go pursue hospital outpatient ASCs as well as OBLs. So that's really the strategy. Obviously, we're not going to talk about specific details of pricing, but we'll just share that we're still pricing at a place that is margin accretive for us.

I think it's more important to look forward versus look back, and we don't have to rehash everything that happened here in the mistakes. But what are some of the learnings you would take from this? Because you're generally less of a big innovative product company, a lot more 510(k) type of products, broad portfolio. So what were some of the learnings you took from WRAPSODY and this process that you could apply going forward?

Yes. I mean I think there's probably a couple. I mean, one is I will just share that there haven't been a lot of people changes in the organization yet. Again, I'm early, but I can tell you that in week 1, we hired a Vice President of Reimbursement. So that maybe explains a little bit about a learning. Secondly, I think you saw these platforms that we talked about, right? And when we think about these going forward, one of the things that we've done is organized a bit more around these platforms. And this work, by the way, was started before I got here. But I will tell you, the minute I saw it, I was extremely excited about it. And so we actually have paired up as kind of co-leads on each of these platforms, a research and development leader along with a marketing leader, okay? And then we're surrounding them with a truly cross-functional team.

So as we think about developing these -- thinking about these customer groups going forward, and of course, therapies will be part of it, but also the foundational products, it's just really all about getting all the parties sort of involved and engaged earlier on so that when we're thinking about the clinical trial, are we thinking about the clinical trial to get approvals around the world? Are we also thinking about it in terms of what else we need to do in terms of health economics or reimbursement, right? So it's kind of just bringing everything, I'd say, earlier into the process as we think about developing some of these therapies and ensuring that we really have global input, right? I mean you heard where 40% of our revenues are outside the U.S. And so you want to make sure, again, that the products we're developing or if it's various sizes that we need to think about along the way, we're just very strategic and thoughtful to say, you know what, if we're thinking about X, Y, Z market, we should go with these three variations first, right, to really capitalize on the opportunity. So those are some of the learnings.

How are you thinking about now with the updated pricing, a total addressable market? And how should we think about the margin benefits of WRAPSODY to Merit Medical?

Well, as I said, I mean, we continue to sell at a gross margin accretive price. So we're pleased about that. And as we said, the market that -- as we think about it in the U.S. is about 95,000-ish, give or take stents.

Got it. Maybe if we switch gears, cardiac intervention has accelerated pretty nicely over the past several quarters into the low double digits in second quarter and third quarter. We'll see what fourth quarter brings, but it sounds like it's probably not too different. What do you attribute the strength to? That's generally well above market growth. What's driving it? And how sustainable is it?

Yes. Look, I think it was really kind of a strategic decision, right? We acquired the Cook lead management system. Along with that came a sales force. We knew we had some of our foundational products, specifically around cardiac intervention and peripheral intervention, products that weren't really getting the focus that they needed to within our vascular bag. So we created this -- brought over the sales force that was selling the lead management system that was very well versed in selling these type of products, brought those products into that portfolio. And we've seen a real benefit from it, right? So a lot of pull-through, and they've got the dedicated sales force that can really focus on those therapeutic devices. I would also say that we also saw a slight benefit in our vascular bag as they were able to focus more with less products in the bag.

Maybe just to pivot, you mentioned the Cook lead management deal. Your business is in a unique position where you don't have a ton of competitors of the same revenue base that you do. You're still small enough that you could be nimble and tuck-in deals of $10 million, $20 million, $30 million are still something that could impact your revenues and your profits where maybe the larger organizations would overlook them. So -- how do you think about acquisitions? And how much more runway is there to execute on the strategy of small consistent tuck-ins?

I mean, I'll say a couple of things, Raul, you should jump in, too. I mean, as I said, first of all, acquisitions will continue to be part of the growth story. I would say we're very active. There's a lot that comes at us, which is terrific. So we're happy to take a look at it. At the same time, as we focus in on these various platforms, our goal is to be even more strategic about thinking where do we want to proactively go out and think about acquisitions to fill a particular hole. In addition, we will have a great deal of financial discipline around each one of those. But we absolutely continue to think about that as being a key strategy.

The only other thing that I think is important to note is that, obviously, you start to move into the land of larger numbers, right? And so when you think about acquisitions, as you said, there's been a history of excellent tuck-in acquisitions. And we joke sometimes, I mean, the amount of work to do a small acquisition versus a larger one, not always so different. And so I think, too, as we think about that, as you continue to just grow your revenue base, we'll continue to think about possibly slightly larger things as well.

And how do you characterize larger? Because I don't want people thinking you're going to go and do something 20%, 30% of market cap here unless that is what you're thinking. So maybe you could just put some guardrails around what larger is.

I mean I would say at this point, I mean, we are not looking for a transformational deal here, right? Let's be clear about that. So I think we're not -- I'm not ready to put numbers on the guardrails. But suffice to say, perhaps a little bigger, but again, we're doing evolution here, not revolution.

And I was just going to say, I mean, our balance sheet is obviously very strong. We continue to generate free cash flow. That gives us the dry powder that we need to go out and do these deals. From a leverage standpoint, we're sitting in a pretty good spot, just under 2x levered. I think in this environment, we can take it up to 3 and feel comfortable. But we've got the capacity to go out and do deals of various sizes.

Is M&A still the primary use of cash? And how does share repurchase and other uses fit in?

Yes. I think at this point right now, we're focused on M&A, right? And we'll continue to stockpile cash and have a war chest ready for any acquisitions that may come our way.

You've made good progress on margins. Obviously, tariffs have been a little bit of a headwind here. How are you thinking about -- you have 1 year left in your long-range plan. But if you look out just maybe broad strokes, how are you thinking about gross margin versus R&D versus SG&A as key drivers of margin expansion?

Well, I think when you look at our operating margin targets, right, that Martha presented earlier, 20% to 22% operating margins is the goal for CGI. I think we've been incredibly lucky and worked really hard to get our operating margins up. We're going to be somewhere close to 20% operating margin coming out of 2025, which puts us in a really good spot as we head into 2026. I think as we look and when we announced CGI, really the primary driver of that operating margin expansion was really focused around gross margin on the low end. And on the high end, maybe a little bit more incremental gross margin and maybe some operating expense leverage. So when we look at it, at least for the next year, really, it's a gross margin story. We'll use a little bit of OpEx to invest in the business to the extent that, that gross margin is coming in, right? I think we do have leverage that we can find within the operating expenses if we need to, but we would also like to just continue to invest in the business. So I think we've got a really good opportunity in front of us. We've got a strong P&L and a lot of flexibility.

Historically, most of the products have been 510(k) products. WRAPSODY was unique in that regard. When you talk about investing in the business, are there any more innovative type of products, maybe PMA type of products? Or are you focused primarily on 510(k) and expanding the current portfolio?

So I mean, one of the great problems, if you will, that we're facing is that we have a ton of opportunities. And if you sit down with our R&D team, they will share a very, very, very long list of things they would love to do. And if you sit down with our marketing teams, they'd say there's a very long list. So we're lucky and that's sort of one of our challenges. So what we'll do in 2026 is really spend our time doing a lot of this deeper dive into the strategic work to really think about where do we really have the right to win? What does it take to win in those particular markets? And then how does that end up splitting out between whether it's PMA products or 510(k)s? But the answer is there's sort of a long list of things people would love to do in both categories, but we've got to spend some more time and ensure that we're being quite very strategic about it, and then we'll place the bets.

I think you bring up a good point, right? Because -- just because you're excellent at what you do today doesn't necessarily mean you'll be excellent at a near adjacency. So I guess maybe it takes some different people, some different investment to get there on the PMA side of the business. So it will be interesting to see what you come up with. Maybe just before we wrap, any questions in the room? No. Well, we're just about out of time. I think we could wrap it there. That was a fantastic discussion. Thank you very much. And everyone, thanks for coming, and have a great night.

Thank you.

Thank you for standing by, and welcome to the Merit Medical Systems Third Quarter 2025 Earnings Conference Call. [Operator Instructions] 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. Please go ahead.

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. Brian, can you please take us through the safe harbor statements?

Thank you, Martha. This presentation contains forward-looking statements that receive safe harbor protection under the 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, October 30, 2025, 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, 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 U.S. 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 our 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'll now turn the call back to Martha.

Thank you, Brian. Let me start with a brief agenda of what we will cover during our prepared remarks. As the recently appointed President and CEO of Merit, I'll begin my remarks with a brief introduction, thoughts on what attracted me to this opportunity and where I have been focused since joining the team. I will then provide a brief summary of the third quarter 2025 financial results, followed by a review of the team's progress in recent months in a few key operating areas. Then Raul will provide a more in-depth review of the quarterly financial results and the financial guidance for 2025, which we updated in today's press release. We will then open the call for your questions.

Before delving into our third quarter results, I would like to take a moment to introduce myself and provide a few summary points on my background and where I have focused my time since joining the team. I joined Merit on October 3 with over 28 years of experience in the global health care industry. My experience includes multiple general management and functional leadership roles at several global companies following a short time in management consulting. I spent almost 2 decades at Medtronic, including several years living and working overseas. After Medtronic, I led global health care businesses with notable scale, including serving as Senior Vice President and President of North America for Hill-Rom Holdings and Executive Vice President and President of Global Healthcare for Ecolab.

I've also served as a Board member at a number of companies, including CONMED, Methode Electronics, Clinical Innovations, Cardiovascular Systems, Beta Bionics, Hutchinson Technology, Bright Uro and Home Care. And in one instance, I served as Interim CEO. I believe my experience leading global businesses in the health care industry and advising companies across multiple sectors gives me the requisite background to lead Merit. I have admired the consistent track record of strong top line growth and profitability improvements that the employees and executive team here have achieved, particularly over the last 5 years. As I learned more about the company and in particular, the company's values, which we call the Merit way, these values resonated with me entirely. I've been heartened by the fact that these are not just words, rather the organization truly lives these guiding principles.

We focus on the health of our employees so they can better serve our customers and in turn, our health care professionals are better positioned to care for their patients. We focus on excellence. We focus on agility or being responsive to customer needs. We take responsibility for our actions, and we work as a team. An organization that is committed to the Merit way and aligned on a mission to understand, innovate, deliver represents a powerful combination. I appreciate that the mission includes a significant focus on innovation given the importance of R&D and new technology in our industry. Suffice it to say, I'm excited to join Merit and truly honored to take on this role.

While my official start date was just a few weeks ago, I have been actively engaging with external stakeholders, directors and members of Merit's executive and senior management teams since my appointment as the new President and CEO was announced on July 7. Since my official start, I've been spending time with our global leaders and their teams as I continue to learn the business. I'm inspired by their optimism about the future, and I'm impressed with the talent and passion of the employees that I've had the chance to meet. I see strong alignment in the shared purpose that this organization has in saving and improving lives each and every day. I've been fortunate to spend a lot of time with Fred Lampropoulos in recent months.

We have visited a number of sites together, including Richmond, Dallas, Perland, Tijuana and Minneapolis, and I have spent time at our headquarters in South Jordan. I've also visited with each member of our Board of Directors individually to gather their thoughts and views on Merit, so I can better understand the things that we're doing well and what we can work to improve in the future. Fred and I have also spent time developing our transition plan with a keen focus on ensuring minimal disruption while establishing a process that enabled me to take over the day-to-day leadership of the company. I am confident we have a solid plan in place and importantly, alignment across the team as to key roles and responsibilities.

To that end, it is important to understand that as part of this succession plan, Fred is now serving as the Executive Chairman of the Board through the remainder of this year. As we begin 2026, he will transition to non-Executive Chairman. Fred will continue to play a role in our evaluation of potential organic and inorganic opportunities. I appreciate Fred's willingness to continue to partner with me and the team on such an important part of the company's growth strategy. We need to continue to leverage his knowledge, experience and substantial relationships with physicians and customers around the world to ensure Merit remains focused on the right product opportunities and investment areas to support our long-term growth and profitability.

With respect to where I'll be spending my time over the balance of my first 100 days, simply stated, I'll be continuing on my listening tour. I look forward to visiting our global sites, meeting the teams, seeing the operations at our manufacturing facilities and spending time with our global research and development team. I have a lot more to learn about our products, our people and our processes. But so far, all that I've learned gives me great optimism. I look forward to attending several key medical congresses, physician advisory boards and meeting as many of our key opinion leaders as possible. I also intend to dedicate a portion of my time in the coming months engaging with the investment community.

All of these activities are centered around gathering as much feedback as possible and learning as much as I can, a tall task, but one that I'm extremely excited about. I feel very privileged to have this opportunity. I'm grateful to Fred and the entire Board of Directors for the trust, support and confidence in me as the right leader for the company's next stage of growth and development.

Now turning to a review of our third quarter results. We reported total revenue of $384.2 million, up 13% year-over-year on a GAAP basis and up 12.5% year-over-year on a constant currency basis. The constant currency revenue growth delivered in the third quarter exceeded the high end of the range of the growth expectations that were outlined on the Q2 2025 earnings call. The better-than-expected constant currency revenue results were driven by 7.8% constant currency organic growth, which exceeded the 6% high end of the range, which was outlined on the second quarter call. With respect to the profitability performance in the third quarter, the company delivered financial results that significantly exceeded expectations. It was another quarter of notable year-over-year improvement in non-GAAP operating margin, which increased 51 basis points year-over-year to 19.7%. The team delivered nearly 7% growth in non-GAAP EPS, which exceeded the high end of expectations. And the company generated $53 million of free cash flow, an increase of 38% year-over-year.

The third quarter results reflect continued strong momentum in the business this year. Despite the continued challenges related to the dynamic and uncertain global macro environment, the team is executing well. Over the first 9 months of 2025, the team has delivered total constant currency revenue growth of 12%, a non-GAAP operating margin of 20%, representing a 129 basis point increase year-over-year, and the team generated more than $140 million of free cash flow. These are impressive financial results to say the least. We have updated our financial guidance for 2025 in today's press release to reflect the strong financial results in the third quarter and our updated expectations for Q4.

We remain focused on delivering continued strong execution, solid constant currency growth and strong free cash flow generation in 2025 as well as progress in our continued growth initiatives program and related financial targets for the 3-year period ending December 31, 2026. Turning now to a review of the company's progress in recent months in a few key operating areas. Let me begin with new product development, clearance and commercialization. In August, the company announced the U.S. commercial release of the Prelude Wave hydrophilic sheath introducer with SnapFix securement technology. The Prelude Wave is the latest innovation in Merit's comprehensive access portfolio, which includes a wide range of dilators, micro access systems, sheath introducers and guide sheath. Merit innovated the Prelude Wave, a next-generation sheath with a unique securement feature.

Compared to the leading competitor, the Prelude Wave offers twice the lubricity, twice the resistance to buckling and kinking and requires 40% less insertion force. A first of-its-kind SnapFix technology provides twice the adhesive strength with a number of physicians rating its performance and ease of use superior to the leading competitor. This new product introduction represents another advancement in Merit's access portfolio, built to improve radio procedures and to aid in minimizing common vascular challenges. In September, the company announced that Embosphere Microspheres received CE Mark and are indicated in the European Union for use in genicular artery embolization or GAE, to treat patients with knee osteoarthritis.

GAE is a nonsurgical option that provides fast and lasting pain relief in patients with mild to moderate knee OA. Data show that over 75% of patients treated with Embosphere for GAE achieved clinical success with significant reductions in knee pain sustained through 24 months. In addition to durable pain relief over time, Embosphere was associated with a decrease in pain medication use and improvements in quality of life measures. Compared to corticosteroid injections, GAE with Embosphere achieved consistently higher clinical success with greater improvements at 3 months in pain and quality of life. CE Mark of Embosphere for GAE presents an exciting opportunity to advance this treatment option and further interventionalists ability to offer the positive results they expect from the procedure. On October 1, the company announced that our Scout Radar localization technology has been used to treat 750,000 patients worldwide, a significant milestone for breast cancer treatment.

As a market leader in wire-free non-radioactive localization technology, Merit's mission every month, but especially this month, is to reduce the burden that cancer places on patients and their loved ones. Radar localization helps physicians surgically remove abnormal breast tissue while reducing trauma to surrounding healthy tissue. A trusted solution for breast cancer care, Scout has been mentioned in more than 100 clinical publications with nearly 8,500 patients referenced throughout. As it is being used in 50 countries, more than 500 cases are performed each day, totaling 10,000 cases per month. Over 1,100 facilities worldwide choose Scout as their preferred method of wire-free localization.

Every day, through products like Scout, we're able to help more patients become cancer-free, and we're proud to be a part of that. I would now like to provide an update on our recent progress towards our commercial and reimbursement strategies for the WRAPSODY CIE in the United States. Our Renal Therapies group has been impressively executing the U.S. commercial strategy for WRAPSODY CIE during the third quarter, and they continue to exceed our expectations with respect to leveraging the new access to customers from the early commercialization of WRAPSODY CIE to identify opportunities to drive adoption and utilization across the rest of our dialysis product portfolio.

The team remains focused on engaging with new and existing customers to work through the VAC approval processes as well as working with the largest GPOs and some of the largest IDNs across the country. Physician training events are being held at centers of excellence with physician partners who are passionate about the product and educating their peers on the benefits of the WRAPSODY CIE. The team has also worked to ensure we were prepared to maximize the opportunity presented by WRAPSODY CIE's new technology add-on payment, or NTAP, effective October 1, 2025. By way of reminder, this add-on payment applies to WRAPSODY CIE procedures conducted in the hospital inpatient setting.

We have conducted sales force trainings and prepared reference materials to support discussions with customers and prospects. Our RTG team is focused on ensuring hospitals have the requisite information and understand the process for submitting claims for hospital inpatient use when the WRAPSODY CIE procedure is provided to a patient. We have been pleased by the initial market response in terms of access, adoption and utilization for customers using WRAPSODY CIE in the hospital inpatient setting following the NTAP effective date. With respect to our progress towards securing incremental payment for procedures in the outpatient and ASC settings, as projected on the last earnings call, Merit completed the application for TPT incremental payment under Medicare's OPPS system and submitted the application by the September 1, 2025 deadline.

We continue to anticipate preliminary approval with an earliest effective date of January 1, 2026, and finalization in next year's rule cycle. Finally, we have made notable progress in expanding the body of clinical evidence for our WRAPSODY CIE in recent months. In August, we announced the successful enrollment of the first patient in the RAP North America registry study. Dr. Omar Davis, President and Medical Director at Bluff City Vascular, an investigator in the RAP North America Registry enrolled the first patient. The RAP North America Registry is designed to enroll up to 250 U.S. and Canadian patients on hemodialysis who experience obstructions such as stenosis or occlusion in the veins required for dialysis access.

The RAP North America registry is intended to add to Merit's growing portfolio of clinical evidence supporting the WRAPSODY CIE. If completed as designed, it would represent the largest cohort of patients treated with an implantable device to restore vascular access for hemodialysis. On October 15, we completed enrollment in our RAP global registry study. This study was designed to enroll up to 500 patients outside of North America to evaluate real-world outcomes associated with the use of the WRAPSODY CIE. The primary endpoint of the study is 6-month patency, and we anticipate having data available in mid-2026. We look forward to one of the lead investigators in the study sharing the results at a medical meeting next year. Two other notable items I wanted to preview in the area of WRAPSODY-CIE clinical evidence and awareness. Tomorrow, October 31, Merit will be hosting an industry-sponsored breakfast symposium at the Controversies in Dialysis Access, or CiDA, Annual Meeting in Boston.

CiDA is a high-priority conference for our unique dialysis access portfolio. The meeting is solely focused on dialysis access across all specialties. We are expecting 75 to 100 attendees and are very excited about the faculty selected to lead the session. We are also excited to participate in this year's Vascular Interventional Advances or VIVA meeting in Las Vegas, November 2 through 5. VIVA is the premier multidisciplinary educational event for specialists treating patients with vascular disease. We plan to release 24-month data for both AVG and AVF from our WAVE study at the VIVA meetings. We completed the last patient visits in the third quarter, and we look forward to having this long-term data presented at VIVA next week.

Before I turn the call over to Raul, I want to discuss a strategic announcement we made subsequent to quarter end. On October 15, 2025, we announced that we had entered into an agreement to acquire the C2 CryoBalloon and related technology from Pentax of America, a subsidiary of Pentax Medical Inc., for a total purchase consideration of $22 million, $19 million of which would be paid in cash at closing.

The C2 CryoBalloon delivers controlled freezing treatments to drive targeted ablation and precise destruction of unwanted soft tissue. The C2 CryoBalloon treats Barrett's esophagus as well as a less common disorder, GAVE or Gastric Antral Vascular Ectasia. The device freezes and eliminates abnormal cells while still maintaining the integrity of surrounding tissue structures. This proposed acquisition is intended to strengthen our position in the multibillion-dollar gastroenterology market and to provide opportunities to treat more patients from the effects of chronic gastroesophageal reflux disease or GERD and other gastrointestinal tissue disorders. While the total transaction size is relatively small, we believe this will be an important strategic acquisition as it is expected to expand the portfolio of solutions our endoscopy sales team has to offer customers. We have invested in this part of our business, both organically and inorganically over the last few years and are nearing an inflection point in terms of completing our integration and sales force alignment activities.

We believe we are well positioned to accelerate growth and market share gain in the coming years. 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 2025. Raul?

Thank you, Martha. I will start with a detailed review of our revenue results in the third quarter, beginning with the sales performance in each of our primary reportable product categories. Note, unless otherwise stated, all growth rates are approximated and presented on both a year-over-year and constant currency basis. Third quarter total revenue growth was driven primarily by 13% growth in our Cardiovascular segment and to a lesser extent, 4% growth in our Endoscopy segment. Cardiovascular segment sales exceeded the high end of the expectations we outlined on our second quarter call and endoscopy sales came in at the low end of our expectations. Our total revenue results included approximately $16 million of revenue from our acquisition of products from Cook Medical and BioLife of approximately $10.7 million and $5.3 million, respectively.

Excluding sales of acquired products, our total revenue growth on an organic constant currency basis was 7.8% in the third quarter. Turning to a review of our third quarter revenue results by product category. Peripheral Intervention product sales increased 8% and represented the largest driver of organic Cardiovascular segment growth in the period. PI sales modestly exceeded the high end of our growth expectations in Q3. Growth in our PI business was driven by strong sales in our [ Ebola ] therapy, access and delivery systems categories, which together represented more than 75% of our total PI growth year-over-year. Demand of our Embosphere and QuadraSphere Microsphere products was notable in Q3. Access category growth was driven by demand for our WRAPSODY CIE and delivery system category growth was driven by demand for our SwiftNinja steerable microcatheter.

Cardiac Intervention product sales increased 29% and 10.9%, excluding the contribution from the sales of acquired products representing the second largest driver of Cardiovascular segment organic growth in the period. This performance was well above the high-end organic growth expectations we assumed for Q3. Organic growth in our CI business was driven by strong sales in our EP, CRM and intervention categories, which together represented more than 2/3 of our total CI growth year-over-year. Demand for our Prelude SNAP, HeartSpan steerable sheath and our Ventrax delivery system were the largest contributors to EP CRM organic growth in Q3. Demand for our mean arterial pressure products, our PHD hemostasis valves and our basic inflation devices were the largest contributors to organic growth in the intervention category in Q3.

Rounding out the Q3 performance across the rest of our Cardio segment, sales of our custom procedure solutions products increased 6%, above the high end of our expectations and sales of our OEM products increased 3%, modestly lower than our expectations. The softer-than-expected OEM performance in Q3 was entirely related to sales to OEM customers outside the U.S., which continues to see demand trends impacted by the macro environment. Sales to OEM U.S. customers increased in the high single digits year-over-year in Q3. Turning to a brief summary of our sales performance on a geographic basis. Our third quarter sales in the U.S. increased 12% on a constant currency basis and 7.6% on an organic constant currency basis, exceeding the high end of our organic growth expectations by 310 basis points.

We were pleased to see continued strong demand from our U.S. customers in the third quarter. International sales increased 13% year-over-year and increased 8% on an organic constant currency basis. Sales results in APAC, EMEA and the rest of the world regions each modestly exceeded the expectations supporting our Q3 guidance range. With respect to China specifically, sales decreased 1%, which was softer than expected. We attribute the softness to broader macro environment as the VBP impact was better than expected in Q3. Excluding the VBP impacts in both periods, China sales increased 2% year-over-year in Q3.

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 third quarter of 2025, and all growth rates are approximated and presented on a year-over-year basis. We have included reconciliations from our GAAP reported results to the related non-GAAP items in our press release and presentation available on our website. Gross profit increased approximately 19% in the third quarter. Our gross margin was 53.6%, up 267 basis points year-over-year and representing the highest gross margin in the company's history. The year-over-year improvement in gross margin was driven primarily by mix by product and by geography as well as improvements in pricing and freight and distribution expenses compared to the prior year period.

As expected, tariffs were a material headwind to the year-over-year improvement in gross margin in Q3, representing a nearly 90 basis point incremental impact year-over-year to third quarter gross margins. Operating expenses increased 21%. The increase in operating expenses was driven by a 21% increase in SG&A expense and a 20% increase in R&D expense compared to the prior year period. Total operating income in the third quarter increased $10.4 million or 16% to $75.6 million. Our operating margin was 19.7% compared to 19.2% in the prior year period, an increase of 51 basis points year-over-year. Third quarter other expense net was $2.4 million compared to income of $0.9 million last year. The change in other expense net was driven by lower interest income associated with lower cash balances, offset partially by lower interest expense compared to the prior year period. Third quarter net income was $54.9 million or $0.92 per share compared to $51.2 million or $0.86 per share in the prior year period.

Third quarter net income and EPS exceeded the high end of our guidance range by $3.2 million and $0.07, respectively. Turning to a review of our balance sheet and financial condition. We generated $52.5 million of free cash flow in the third quarter of 2025, up 38% year-over-year. As of September 30, 2025, Merit had cash and cash equivalents of $392.5 million, total debt obligations of $747.5 million and outstanding letter of credit guarantees of $3 million, with additional available borrowing capacity of approximately $697 million compared to cash and cash equivalents of $376.7 million, total debt obligations of $747.5 million and outstanding letter of credit guarantees of $2.9 million, with additional available borrowing capacity of approximately $697 million as of December 31, 2024.

Our net leverage ratio as of September 30 was 1.7x on an adjusted basis. Turning to a review of our fiscal year 2025 financial guidance, which we updated in today's press release. For reference, we have included a table in our earnings press release, which details each of our formal financial guide ranges and how those ranges compared to our updated guidance ranges issued as part of our second quarter earnings press release on July 30, 2025. Our updated 2025 guidance assumes the following: GAAP net revenue growth of 11% to 12% year-over-year, which we expect to result from net revenue growth of approximately 10% to 11% in our Cardiovascular segment and net revenue growth of approximately 32% to 34% in our Endoscopy segment and a tailwind from changes in foreign currency exchange rates of approximately $6 million or approximately 45 basis points to growth year-over-year.

Excluding the impact of changes in foreign currency exchange rates, we expect total net revenue growth on a constant currency basis in the range of 10.3% to 11.2% compared to 9.7% to 10.6% previously. Among other factors to consider when evaluating our projected constant currency revenue growth range for 2025 are the following items: First, the midpoint of our total constant currency growth range now assumes 13% growth in the U.S. compared to 12% previously and 8% growth outside the U.S., unchanged versus prior guidance. The 8% constant currency growth we expect outside the U.S. continues to assume low double-digit growth in EMEA, mid-teen growth in the rest of the world region and approximately 2% growth in the APAC region.

Second, our total net revenue guidance for fiscal year 2025 also assumes inorganic revenue contributions from the business and assets acquired from EndoGastric Solutions on July 1, 2024, Cook Medical on November 1, 2024, BioLife on May 20, 2025, and proposed to be acquired from Pentax on November 1, 2025. Together, we expect inorganic revenue in the range of $59.9 million to $60.5 million in 2025.

Excluding this inorganic revenue, our updated 2025 guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately 5.9% to 6.8% year-over-year compared to 5.6% to 6.4% previously. Third, for the full year 2025 period, we continue to forecast U.S. revenue from the sales of WRAPSODY CIE in the range of $2 million to $4 million. By way of reminder, this range is driven by the initial ramp in WRAPSODY CIE sales for procedures in the hospital setting following the NTAP add-on reimbursement, which went into effect on October 1, 2025.

With respect to profitability guidance for 2025, we now expect non-GAAP diluted earnings per share in the range of $3.66 to $3.79 compared to our prior guidance range of $3.52 to $3.72. The change in our non-GAAP EPS expectations for the 2025 year reflects the flow-through of the better-than-expected financial performance in the third quarter at both the low and high end of the non-GAAP EPS range, specifically $0.16 and $0.07, respectively. The low and high end of the updated non-GAAP EPS range also reflect the impact of a higher non-GAAP tax rate assumption and the previously announced expected dilution from the proposed acquisition of the C2 CryoBalloon, offset partially by lower expected dilution from our convertible debt. The high end of the non-GAAP EPS range also includes our updated projected impact of tariffs, trade policies and related actions recently implemented by the U.S. and other countries.

Specifically, the high end of our updated guidance range now assumes tariff-related manufacturing costs in our cost of goods line of approximately $7.6 million compared to $7 million previously. This updated assumption is driven by a higher tariff impact realized in Q3, while our assumption for tariff impact in Q4 remains unchanged versus our prior guidance assumption. Importantly, the $7.6 million figure is based on available information as of October 30, 2025, and does not include any impact from new and/or additional tariffs or retaliatory actions or changes to currently announced tariffs, which could change the anticipated impact to our non-GAAP EPS in 2025. The ultimate impact from new and/or additional tariffs or retaliatory actions or changes to currently announced tariffs on our business will depend on the timing, amount, scope and nature of such tariffs, among other factors, most of which are currently unknown.

The tariff situation and potential retaliatory measures by other countries remains highly uncertain and dynamic. As such, the low end of our guidance range continues to reflect additional tariff-related impact in 2025. Specifically, the low end of our EPS range now reflects a tariff-related impact on our 2025 cost of goods of $16 million compared to $26.3 million previously. This updated assumption for the low end of our guidance range reflects the actual tariff impact realized in Q2 and Q3 compared to the assumptions originally outlined on our Q1 earnings call in April. Our Q4 tariff expectation remains unchanged. Returning to a discussion of our updated 2025 financial guidance assumptions for modeling purposes. Our fiscal year 2025 financial guidance now assumes non-GAAP operating margins in the range of approximately 19.7% to 25% compared to 19% to 20% previously.

Note, the change in our 2025 non-GAAP operating margin expectations is primarily attributable to the flow-through of stronger-than-expected financial performance in the third quarter of 2025. Non-GAAP interest and other expense net of approximately $8.3 million compared to $8 million previously, non-GAAP tax rate of approximately 23% compared to 22.5% previously and diluted shares outstanding of approximately 60.5 million. Note, our weighted average share count now assumes incremental dilution of approximately 0.6 million shares related to our convertible debt facility compared to 0.9 million shares previously. We now estimate incremental share dilution related to our convertible debt facility represents an impact of approximately $0.04 to our non-GAAP EPS in 2025 compared to $0.05 previously.

Finally, we now expect to generate free cash flow of at least $175 million in 2025, inclusive of the expectation that we will invest approximately $90 million to $100 million in capital expenditures this year. We would also like to provide additional transparency related to our growth and profitability expectations for the fourth quarter of 2025. Specifically, we expect our total revenue to increase in the range of approximately 7% to 10.6% on a GAAP basis and up approximately 5.5% to 9.1% on a constant currency basis. The midpoint of our fourth quarter constant currency sales growth expectation assumes approximately 9% growth in the U.S. and 4% growth in international markets. Note, our fourth quarter constant currency sales growth expectations include inorganic revenue in the range of $8.5 million to $9.1 million. Excluding inorganic contributions, our fourth quarter total revenue is expected to increase in the range of approximately 3% to 7% on an organic constant currency basis.

With respect to our profitability expectations for the fourth quarter of 2025, we expect non-GAAP operating margins in the range of approximately 18.8% to 20.8% compared to 19.6% last year and non-GAAP EPS in the range of $0.87 to $1.01 compared to $0.93 last year. That wraps up our prepared remarks. Operator, we would now like to open up the line for questions.

[Operator Instructions] Our first question comes from the line of Jason Bednar with Piper Sandler.

Congrats, everyone, here on the strong results. And Martha, welcome and looking forward to working with you. I feel like got to start talking here about WRAPSODY to kick it off. You said you're pleased with the response so far on the inpatient side. You called it out as a notable contributor to PI growth. Can you give a bit more color here? It sounds like you're already tracking pretty well in that inpatient setting in the early days. And then maybe I'll just ask an open-ended question, if you could respond to questions that exist out there with respect to clearing the necessary criteria into secure TPT, particularly the cost criteria that requires a different price point than that [ 5,800 ] ASP that you've publicly discussed in past calls and which was used in the submission to secure NTAP.

Jason, thanks very much. Appreciate the question and look forward to working with you as well. Yes, let me make a few comments on this. First of all, let me just say, I think we're all really pleased with the initial market response as it pertains to WRAPSODY CIE, right? If we look at access, adoption and utilization in the in-hospital setting, right? And so in that setting, in the hospital setting, effective October 1 was the new add-on payment. So we're certainly excited about that and a big shout out, frankly, to our team who's done a great job training physicians. I think you may have heard on a previous call, the goal was to train and have about 250 physician advocates. At the end of the quarter, we're at 200, and that has actually led to a total of over 500 physicians who have been trained in WRAPSODY. So we're very excited about that, and there continues to be even more work being done around building awareness for WRAPSODY-CIE.

And you heard a little bit, there's going to be a symposium in Boston at the CETA meeting this week as well as next week at the VIVA meeting in Las Vegas, which I'm personally excited to attend. There will also be 24-month data shared. So I would just say stay tuned on that because you may see a press release or 2 coming out on some of that data next week. So I think it's also fair to say that I'm well aware there's been a considerable amount of discussion, if you will, out in the community about whether or not -- now I'm shifting gears, okay, from that -- we were just talking about the hospital setting, just so I'm really clear, right? We're talking about the hospital setting and the NTAP add-on payment that went into effect October 1. So now I'm going to switch gears to your second question, which I believe was about TPT, which pertains to the nonhospital outpatient and ASC settings, right? So as I said, I understand there's been a great deal of discussion on this. Let me try to be very clear and state quite simply, we believe we meet the required cost criteria. So our application for TPT included WRAPSODY’s list price of $8,000.

Okay. All right. That's helpful. And I'll let others follow up on that. But I wanted to switch over to -- we had a lot of impressive pieces in the quarter here. Hard to pick what was most impressive, but I'll settle on gross margin to ask here. I think you beat the Street by almost 300 basis points. You referenced it's a record for the company. Maybe, Raul, if you can unpack a bit more the source of that upside, whether there's durability there. And then bigger picture, and sorry, I'm packing a couple in here, but we're officially in mid-50s gross margins. I'm doing some generous rounding, but you're drifting into the margin range where some peers currently operate. Do you still see gross margin headroom beyond the mid-50s? Or when we think about the margin opportunity for Merit going forward, it's going to require more SG&A leverage?

Yes. Great question, Jason. And thank you for highlighting the gross margin, right, and asking the question. I mean I think we're really proud of that. As you know, since Foundations for Growth and now CGI, we've really focused on expanding that gross margin and our approach of kind of throwing the kitchen sink at it has really worked. And so when we look at the compounding efforts from our sales force and our operations team to get to where we're at, we're really proud of those guys for all the hard work that they're doing. It's a tough job, but they've been able to really move the needle there. And so kudos to them.

As far as the gross margin for Q3, it was really driven kind of, again, by the kitchen sink approach, right? So our sales force did a really good job on focusing on mix. not only by product but also by geography. And also the focus on improvements in pricing has really helped us out. Our operations group has been doing everything they can to hold the line on what's a really tough environment. Freight and distribution expense compared to the prior year also helped us out. And I also kind of want to highlight that they overcame kind of a 90 basis point incremental impact year-over-year on the gross margin, which could have been better, right, had it not been for those tariffs. As far as kind of the long-term vision, I'm not going to get ahead of myself on CGI. When we launched CGI, we were pretty clear that most of the improvement in operating margin would come from gross margin. And on the higher end, it would be more gross margin with some OpEx leverage. So I think that's the goal is to continue to drive gross margin to hit our CGI goals.

And we're just -- we're focused on that. And we're not going to get beyond that. You've heard me say this before, we don't want to drop the football on the one yard line. So we're laser-focused on making sure that we stay within the CGI goals and focused on those.

Our next question comes from the line of Robbie Marcus with JP.

This is Lilly on for Robbie. Martha, congrats on the new role. I know it's still early, but I'm going to try my hand at a question on 2026. There's clearly a lot of momentum in the business, new product rollouts, a lot of nice tuck-ins recently. Could you share some high-level thoughts on how you're thinking about next year? And if not quantitative, then any qualitative color on headwinds and tailwinds we should be keeping in mind would be helpful.

Yes. Lilly, thanks for the question. And I think you're right. We're not going to really go into 2026 at this point, right? I mean, suffice to say, as you know, we've got CGI goals that are in place that go through the end of 2026. So my message here in month #1 has been really clear to the team that we want to just stay really focused on that. We want to stay focused on closing out a strong 2025. We've got CGI goals for 2026. And then frankly, as I'm just kind of getting in the seat here, I will then spend a lot of time with our newly structured executive leadership team and a newly structured operating committee, global operating committee to really do the work to start to think about our strategic goals beyond CGI. So that's really where our focus is at this time.

Got it. And then just as a follow-up, you've done a number of small tuck-ins over the last few quarters. So could you share your updated thoughts on M&A and cap allocation? Is this the cadence of deals that we should be expecting moving forward? And are there any areas that stand out to you as particularly interesting that you'll be focusing on?

Yes. Look, I mean, here's what I would say, right? I mean Merit has really focused historically on both organic and inorganic growth, right? They really have used both very effectively, I think, to grow the business. So again, really early for me to say a whole lot on this topic other than I think we'll continue to look at the opportunities that come our way. We'll continue to think more about each kind of platform that we're in and where the strategic opportunities might be, again, to focus our R&D efforts, again, both internally and externally. So I don't see a major shift in terms of capital allocation strategy. I think this has been a company that's invested in R&D to grow the business. And again, I anticipate continuing to do that.

Yes. One thing I'll add is, obviously, free cash flow continues to be very strong. which helps us as part of these acquisitions and investments internally, like the distribution center and our R&D projects, as Martha was talking about. So we've generated almost $142 million in free cash flow this year with $57 million coming in Q3. So we're definitely driving free cash flow. That will help with the investments, capital allocation that we want to do, and we just got to stay focused on it. And we're -- we've got a minimum of $400 million of free cash flow to hit for CGI. We're well on our way to do that and excited about how strong our free cash flow continues to be.

Our next question comes from the line of Jayson Bedford with Raymond James & Associates.

Welcome, Martha congrats to both of you on the progress here. Maybe a product line question. Cardiac Intervention has seen a real acceleration here in the last couple of quarters. I think you've called out EP and CRM as a driver. Are you just riding what is a faster growing end market? Or is there a unique kind of share capture dynamic going on?

Well, there's a couple of things going on. I think one of the things that's really helped is the focused sales groups. So having a more focused approach to our bags has really driven a lot of growth. You look at the Cook acquisition, part of the reason we did that was to allow more focus on our EP and CRM products. And we're clearly seeing those guys do a really good job of driving growth. So when you look at the performance in Q3, our Cardiac Therapies group did -- is just doing really good from an integration standpoint, not only selling the Cook products that we acquired, but also the products that Merit had, which is what we were hoping for. And then you look at our Vascular Therapies group, now that they don't have those products in their bag, they're allowed to focus more on the PI side of things, specifically kind of the biopsy drainage and embolic portfolio, which are -- some of those high-margin products that we really want our groups kind of pushing. And then lastly, you look at our Renal Therapies group, again, I know they're kind of tasked with selling reps through CIE, but they're also really focused on the rest of the portfolio that we have for them. And again, I think it's a team effort, and they've all been executing at a really good high level to deliver the growth rate that we've seen. I mean to look at our U.S. organic growth at 7.6% in Q3, and that's outstanding.

Okay. Fair enough. Maybe just a different type of margin question. SG&A was a bit higher than it's been in the past or at least higher than our model. Anything notable there in terms of either new reps? Is it integration or just simply a function of the gross margin is stronger, which allows you to invest a bit more in the business?

Yes, there's definitely some of that going on, Jason, right? I think we've talked about that. But there was a couple of kind of what I'll call kind of one-timers that we were obviously looking at. Obviously, with the higher sales than expected, we [ had ] commissions. So also, if you look at the performance of the company, a majority of -- a big chunk of the increase, I'll say, was the variable bonus accrual, truing that up to kind of the year-to-date performance of where the team is at. And then we also had a distributor buyout in Europe that came in earlier than anticipated. So rest assured, we're keeping an eye on the operating expenses and the amount we're investing. But we have been kind of candid and clear, I would say, and transparent about making sure that you guys understand that as the gross margin come in, there is a level of investment that we're making, but we're also very conscious about making sure that we're keeping an eye on it.

Our next question is going to come from the line of Mike Matson with Needham & Company.

So I know it's still kind of early days with WRAPSODY, but I was wondering if you were seeing any of the expected benefit to the other dialysis products, kind of that portfolio strategy that you have there in that business?

Yes. I mean I'd say we are, yes. I mean I think as Raul was just sharing, I mean, having these slightly more focused sales organizations, right, does enable the group to not only be focusing on WRAPSODY, but all the wraparound -- no pun intended, right, but all the wraparound products, all the additional products that we have in that bag. So I think we're really encouraged by that in the early days here.

Okay. And then just on the CryoBalloon, the C2 product, I'm familiar with Barrett's esophagus and the ablation procedure. But wondering if you could tell us how big that market is or the TAM there? Yes. I don't have that handy here, but I can get it for you. Obviously excited what the product can do. Yes. But just at a higher level, obviously excited that we continue to find products that we can drop in our endoscopy bag. This is the second acquisition here within the year. We've been looking for things to add to the endoscopy bag, quite frankly, for a long time and just finding assets that we can drop into that sales force is really exciting. I know they're excited about it. This product was really driven by our sales force. They really wanted this. They're really excited about what it can do for the rest of the portfolio. So we'll get to that TAM, but continue to be excited about the opportunity there.

Our next question will come from the line of John Young with Canaccord.

Martha, [indiscernible] sentiment and look forward to working with you. And maybe just starting on that, too, just what have you identified so far in terms of company excellence versus possible areas of improvement?

Yes. Thanks, John, and I look forward to working with you as well. The first thing I have to say is having spent some time both leading up to my official start date and since then, I just have to say the passion that I've seen out of the employees here, everybody I've had the chance to visit with amongst the various sites and here in Salt Lake City, there's just so much dedication to taking care of our customers who we know are then helping patients. And I mean, we all -- when you're in this industry, right, everybody kind of says, "Oh, this is a great industry. We're helping people. But I have to say, you really feel it here. It's very genuine. I think the Merit way, which is the values of this company, it comes through loud and clear. And as I think I said in my prepared remarks, these aren't just words on a page. This is really how people feel. It is. It's health, it's excellence, it's agility, it's responsibility, it's teamwork.

So I think I'm super excited about that. As I said, I'm also excited to really kind of dig in and get going with, as I said, a newly structured executive leadership team and kind of a newly formed global operations committee, right, which is sort of our top leaders all around the globe. And I do think we do have an opportunity as we continue to grow and scale globally, right, to really think about how are we ensuring really tight cross-functional collaboration and I would say, cross geographic collaboration. So those are kind of the things I'm looking at so far. And as I said, really excited to kind of dig in and we'll have 2026 while we're staying focused on CGI to really think about kind of what's next beyond '26.

Great. And then just as a follow-up to Endoscopy, the softness in Q3 that you called out, I didn't hear any reasoning behind that, Raul. Was that seasonality? Or is there another factor going on there?

Yes. I mean there's always a level of seasonality. But honestly, the way we forecasted for our Endotek division, they're integrating an acquisition. We expected kind of -- it always -- when you're trying to combine 2 portfolios, there's always a level of distraction as you're learning to sell the new products. And so we really anticipated that to happen. And essentially, the Q3 sales trend was improved as expected. It was better than the first half of the year. And I think it will continue to accelerate from here as the sales force kind of starts to understand how to combine and sell these products. But they're hanging in there. Every month seems to get a little bit better, and that's kind of what our expectation was.

Our next question is going to come from the line of David Rescott with Baird.

Congrats on a good quarter here. A few questions from us, and I'll ask them both upfront. First, on China. I heard the call out around softer growth than expected, only down 1%, though not too terrible. But I'm just curious on what some of the dynamics are in that market that have played out so far in the second half of the year relative to what your expectations were heading into the second half, how you're feeling about the dynamics in that market over the next 12 to 18 months? That's the first question. And then second one on WRAPSODY. I know we'll probably find out around the TPT update in the coming days or weeks. So just curious if you could walk us through what the next day steps are, meaning that once you find out what the update is on reimbursement, where you go from there as you start to progress through or into, I guess, 2026?

I'll take China and then Martha, I think, is going to take the WRAPSODY question. So look, I think, first of all, I'll start with the highlight, right? I mean I think China has been a market that hasn't grown like we wanted to kind of from a reported or organic basis. I think the encouraging thing is that volume continues to be strong. I'll highlight that I'll point out, VBP was better than expected in Q3. I think we've seen that happen routinely in China. I think that's a positive sign for us. But really, it's -- the softness is coming just from the broader macro environment. And when we say that, we're really kind of talking about kind of OEM in China specifically being softer than anticipated. So I think as we look at the core business, which is China, excluding OEM, I think they're doing really well given the environment. And it's really just kind of the OEM component that kind of continues to drag it down a little bit. But overall, I think we -- just the China market overall, I think we're excited about what we can do there in the future. Other than that, I think it's no other things to kind of point out.

Yes. And let me comment then on -- again, on WRAPSODY. So I think as I mentioned earlier, we are very confident we meet the required cost criteria. As I said, our application for TPT included our list price at $8,000. So as you said, we do expect to hear sometime in December with the earliest than possible effective date of January 1, 2026, and then a finalization during next year's [indiscernible]. Now I mean we know the U.S. government is in shutdown. So far, we haven't heard anything there that changes our expectations. Obviously, if we hear something, we'll let you know. But otherwise, we'll proceed from there.

Our next question will come from the line of Michael Petusky with Barrington Research.

I just wanted to real quickly drill down both on endoscopy and China, which have been sort of called out as maybe areas of relative weakness. Raul, have there been any key customer losses in either business, say, over the last 6 to 12 months?

Like I said, endoscopy, it's really just driven of the integration of the sales forces, Mike. So again, I wouldn't -- I've got nothing else to say other than the performance of endoscopy kind of continues to improve as they learn how to sell these products. So I think on a go-forward basis, we're excited about what they can do. And like I highlighted earlier, they're really excited about C2 and what it can do for not only our newly acquired products, but also kind of our legacy portfolio. So I think that will be a something that can hopefully generate additional growth to the core business and obviously deliver some additional growth on the noncore stuff.

As far as China, I mean, it really -- there isn't anything that -- any red flags that I would call out. Again, I think when you kind of strip out the OEM piece, which, as you guys all know, I have been pretty adamant about OEM, just being a business that's very variable, right? I know when we were growing at 20%, 15%, I kind of told everybody, hey, don't get excited, right? I think a high single-digit business is kind of what we expect from OEM. You will have some quarter-to-quarter variability, some year-to-year variability. That's just the nature of OEM. So we don't have any concerns. I think when you look at the OEM business, year-to-date, they've grown at 9%, which is right in that high single digit. And when you look at China business, kind of the core business itself, again, I'll highlight that VBP was better than expected. Volume continues to be strong. So yes, I wouldn't call anything else out. I mean I think we're doing just fine.

Okay. Great. And then a quick one for Martha. In terms of this next, I guess, at this point, roughly 60 days where Fred is the Executive Chair versus next year when he'll be nonexecutive Chair. I mean, what are the primary ways you're sort of utilizing them? Is it mostly just introductions to team and customers? Or are there other areas where you hope to utilize Fred over the next 60 days?

Yes. So yes, Fred and I are, of course, in pretty regular communication. And I think one of the primary areas, as you all know, because you know him well, Fred is very, very knowledgeable in what technologies are around, right? And so he's really helpful as we think about, again, whether it's organic or inorganic technology opportunities. So that's really one of the primary areas where we are leveraging his expertise and experience.

Our next question comes from the line of Jim Sidoti with Sidoti & Company.

Another question on the Pentax acquisition. How does that product differ from the product you acquired last year from EndoGastric Solutions? Is it the same treatment? Is it complementary? And is it approved in Europe as well as in the U.S.?

Well, I mean, it is a different -- it's in the same call point, Jim, which is why the sales force is excited about it. I think it allows the sales force to highlight the C2 Balloon while also talking about EGS, right? And so as you -- as they think about the full portfolio of products, now it allows them to be talking about multiple devices within the same call point that they're in. And so it really is a different product, but it's within the same call points.

So Jim, it really -- yes, it really is different, right, in terms of, it's cryo, right? So it's using very, very cold. If you will, think of it, it's almost making ice, right? So you're delivering a frozen treatment, if you will, to drive a targeted ablation. So it is different. It destructs unwanted soft tissue. So I think the other thing that's exciting that could be some possibilities for us in the future is to see whether or not there are other applications of soft tissue beyond the current one that it's got approval for, right, which is in the gastroenterology space.

And in terms of approvals, is it just a U.S. product? Or do you expect it to be sold overseas as well?

It's sold overseas, too. Not materially, but it is.

Okay. Is that something that you think you could expand? Or do you think you'll focus on the U.S. market?

Jim, I think our approach is that we think we can take products just given our global footprint, our sales force, obviously, that's an opportunity that we think we can exploit. Obviously, it takes time now with MDR and all the regulatory kind of hurdles. We'll make the assessment as to what markets make sense. But we're always looking to take things internationally when we can.

And speaking of MDR, that expense has come down the past few quarters. Is there a light at the end of the tunnel for that? Or do you think it kind of levels out where it is spending right now?

I hope there is. I mean I think it's a long process. As you guys know, you guys have heard us complain about it, right? I mean I think to reregister products that have been in those countries for 10-plus years with no serious impact. As a matter of fact, helping patients has been really frustrating. But I think there is a light at the end of the tunnel. I think there's rumors of positive changes to MDR, how those play out is yet to be decided. But I think that the regulatory burden for Medtech devices is really hard. And I think Europe has seen the impact of those changes. And so hopefully, they come to some common sense there and they make some changes. But for now, the Merit way is just to be prepared and play by the rules. And so that's what we'll do.

All right. And then the last one for me, $140 million of free cash flow in the year-to-date, I assume you'll generate another chunk in the fourth quarter. Is that all going to go to debt pay down? Or do you have any other plans right now?

Yes. Well, we've got to convert, right? So there's really no debt to pay down, right? I mean I think for now, we'll continue to hang the cash on the balance sheet and look for acquisitions or investments here within Merit to deploy that capital. But we are calling for a minimum of $175 million of free cash flow for the year. So there is additional free cash flow that we think we can get. But yes, super excited about how strong it's been, given that we're also building the distribution center across the street, so.

Thank you. And I would now like to hand the conference back over to Martha Aronson for closing remarks.

Thanks very much. And just a huge thank you to all of our employees for all their hard work, and thank you all for joining us today on the call and for your interest in Merit Medical.

This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a great day.