Executive Summary

Q1 2025 delivered solid top-line and margin performance: revenue $355.4M (+9.8% YoY) and non-GAAP operating margin 19.3% (+229 bps YoY); non-GAAP EPS of $0.86 exceeded internal expectations and rose 14.8% YoY .
The company reaffirmed FY2025 revenue guidance ($1.47–$1.49B) but cut FY2025 non-GAAP EPS to $3.29–$3.42 (from $3.58–$3.70) to reflect the projected impact of newly implemented tariffs and trade actions; EPS headwind quantified at ~$26.3M COGS increase, largely China-related .
U.S. demand was strong (+14.8% YoY; +9% organic CC), while APAC was modestly softer with China weaker than planned due to macro factors (VBP in line); mix and pricing drove gross margin improvement to 53.4% non-GAAP .
Street comparison: MMSI beat S&P Global consensus on Q1 revenue ($355.35M vs $352.57M*) and EPS ($0.86 vs $0.75*), with 11 EPS and 10 revenue estimates in the sample; positive estimate revisions likely on the back of margin execution, tempered by tariff uncertainty. Values retrieved from S&P Global.
Key catalysts ahead: reimbursement milestones for WRAPSODY (NTAP proposed for FY26; outpatient add-on path clarified) and continued CGI margin initiatives; near-term investor focus remains on tariff trajectory and mitigation timing .

What Went Well and What Went Wrong

What Went Well

Non-GAAP margin execution: non-GAAP operating margin hit 19.3% (+229 bps YoY), a first-quarter record; drivers were favorable mix, pricing, and lower freight/distribution costs .
U.S. growth and portfolio contributions: U.S. revenue +14.8% (CC +14.4%); acquired products (Cook lead management, EGS) contributed ~$15.8M to CC revenue (organic CC +6.0%) .
Management confidence and execution: “constant currency revenue, organic… total revenue and non-GAAP EPS exceeding the high-end of our expectations” (CEO); CGI initiatives underpin ongoing margin improvement .

What Went Wrong

EPS guidance cut due to tariffs: FY2025 non-GAAP EPS lowered to $3.29–$3.42, reflecting ~$26.3M tariff-driven COGS increase (94% tied to China; majority U.S.-to-China export retaliation) .
APAC/China softness: China underperformed Q1 guidance (actual -10% vs low single-digit growth assumed) due to broader macro; VBP was “in line” but demand was weaker than planned .
Free cash flow declined YoY: Q1 FCF was $19.5M (-20.5% YoY) on higher CapEx and working capital investments, though full-year FCF guidance remains ≥$150M .

Financial Results

Metric	Q1 2024	Q3 2024	Q4 2024	Q1 2025
Revenue ($USD Millions)	$323.508	$339.8	$355.2	$355.351
GAAP EPS ($)	$0.48	—	—	$0.49
Non-GAAP EPS ($)	$0.75	$0.86	$0.93	$0.86
GAAP Gross Margin (%)	46.9%	—	—	48.4%
Non-GAAP Gross Margin (%)	50.9%	50.9%	53.5%	53.4%
GAAP Operating Margin (%)	11.1%	—	—	11.5%
Non-GAAP Operating Margin (%)	17.0%	19.2%	19.6%	19.3%
GAAP Net Income ($USD Millions)	$28.240	—	—	$30.147
Free Cash Flow ($USD Millions)	—	$38.0	$65.0	$19.5

Segment revenue (Q1 2025 vs Q1 2024):

Segment	Q1 2024 ($M)	Q1 2025 ($M)	YoY %	CC YoY %
Peripheral Intervention	$130.066	$137.279	5.5%	6.8%
Cardiac Intervention	$90.176	$99.741	10.6%	12.0%
Custom Procedural Solutions	$48.523	$47.942	-1.2%	-0.3%
OEM	$44.609	$53.751	20.5%	20.7%
Cardiovascular Total	$313.374	$338.713	8.1%	9.2%
Endoscopy Devices	$10.134	$16.638	64.2%	64.4%
Total Company	$323.508	$355.351	9.8%	10.9%

Geography (Q1 2025 vs Q1 2024):

Region	Q1 2024 ($000)	Q1 2025 ($000)	$ Change	YoY %	CC YoY %
U.S.	186,094	213,564	27,470	14.8%	14.4%
APAC	62,865	62,562	(303)	-0.5%	1.6%
EMEA	61,006	63,285	2,279	3.7%	5.6%
Rest of World	13,543	15,940	2,397	17.7%	29.3%
Total International	137,414	141,787	4,373	3.2%	6.1%
Total	323,508	355,351	31,843	9.8%	10.9%

KPIs and cash metrics:

KPI	Q1 2024	Q1 2025
Depreciation & Amortization ($M)	23.6	29.3
Stock Comp (performance-based) ($M)	2.1	4.8
Stock Comp (non-performance) ($M)	3.1	4.3
Operating Cash Flow ($M)	36.2	40.6
Capital Expenditures ($M)	11.7	21.1
Free Cash Flow ($M)	—	19.5
Cash & Equivalents ($M)	581.9	395.5
Total Debt ($M)	—	747.5

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Sales	FY 2025	$1.470–$1.490B (8–10% YoY)	$1.470–$1.490B (8–10% YoY)	Maintained
Cardiovascular Segment Sales	FY 2025	$1.395–$1.413B (7–9%)	$1.397–$1.415B (7–9%)	Slightly Raised
Endoscopy Segment Sales	FY 2025	$74.6–$76.7M (36–40%)	$73.0–$75.0M (34–37%)	Lowered
Non-GAAP EPS	FY 2025	$3.58–$3.70 (4–7% YoY)	$3.29–$3.42 (-5% to -1% YoY)	Lowered
Constant Currency Net Sales YoY (%)	FY 2025	8.6–10.1%	8.7–10.2%	Slightly Raised
Free Cash Flow	FY 2025	≥$150M	≥$150M	Maintained
Q2 Revenue Growth (GAAP)	Q2 2025	—	~8.6–11.1%	New Quarterly
Q2 Non-GAAP EPS	Q2 2025	—	$0.80–$0.90 (vs $0.92 LY)	New Quarterly

Management quantified tariff impact and associated modeling parameters: non-GAAP operating margin now ~17.6–18.0% (prior 19.4–19.7%); diluted shares ~61M; non-GAAP tax ~21%; non-GAAP interest & other expense net ~$4.8M .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024)	Previous Mentions (Q4 2024)	Current Period (Q1 2025)	Trend
Tariffs/Macro	No quantified headwind yet; FX hedging consistent; China VBP offset by unit growth	Initial FY25 guide excluded tariff changes; operating margin guide 19.4–19.7%	EPS guide cut; ~$26.3M COGS impact, 94% tied to China; mitigation roadmap (up to ~45% offset, timing into 2026)	Deteriorated (new headwind)
China Demand/VBP	China -5.1% YoY; VBP pricing headwind offset by volume	China +4% better than guidance; expecting modest APAC growth	China -10% vs low single-digit growth assumed; softness macro, VBP in line	Softer
Gross Margin/CGI	Non-GAAP GM 50.9%; CGI driving pricing/mix efficiencies	Non-GAAP GM 53.5%; “kitchen sink” approach; operating margin up 305 bps	Non-GAAP GM 53.4%; margin record for a first quarter; mix/pricing/freight efficiencies	Sustained strength
WRAPSODY Reimbursement	Filed NTAP; targeting TPT; clinical data awareness rising	PMA approval Dec 2024; U.S. commercialization began Jan 2025	NTAP proposed (max $3,770 add-on; effective 10/1/2025 if finalized); outpatient add-on path clarified; TPT application targeted by 9/1/2025	Clearer path; timing pushed
OEM Dynamics	Q3 OEM +8.5%; supply/logistics issues OUS; U.S. strong	Q4 OEM +22%; U.S. strong; OUS supply chain challenges	Q1 OEM +20.5%; U.S. demand strong; OUS variability; APAC macro softness	Solid; lumpy OUS

Management Commentary

“We delivered better-than-expected financial performance in the first quarter, with our constant currency revenue, organic, our constant currency total revenue and our non-GAAP EPS exceeding the high-end of our expectations.” — Fred P. Lampropoulos (CEO) .
“Our gross margin was 53.4%, up 251 basis points… driven by favorable product and geographic revenue mix and improvements in pricing, freight and distribution costs.” — Raul Parra (CFO) .
“Our updated non-GAAP EPS expectations now reflect an incremental $26.3 million of tariff-related manufacturing costs… roughly 94%… related to retaliatory tariffs on goods exported from the U.S. into China.” — Raul Parra (CFO) .
“CMS is proposing to approve the WRAPSODY CIE for new technology add-on payments in fiscal year 2026... maximum add-on payment… $3,770.” — Fred P. Lampropoulos (CEO) .

Q&A Highlights

Tariffs mitigation: Management aims to offset up to ~45% of annualized tariffs via CGI initiatives (product line efficiencies, logistics, country-of-origin routing, Mexico inventory build); benefits largely in 2026 due to timing .
China: Demand softness attributed to macro; VBP consistent with expectations; full-year China outlook unchanged, with APAC growth modest .
Margin drivers: Gross margin strength from mix, pricing, operational efficiencies; CFO reiterated “kitchen sink” approach under CGI .
WRAPSODY reimbursement: NTAP proposed for inpatient; outpatient path clarified—APC assignment not awarded in proposed rule; using comment period and pursuing TPT by 9/1/2025 (effective 1/1/2026 if awarded) .
OEM cadence: Strong U.S. OEM; OUS variability tied to macro; FY view remains high single-digit OEM growth, acknowledging quarterly lumpiness .

Estimates Context

How Q1 results compared to S&P Global consensus:

Revenue: $355.351M actual vs $352.569M* consensus; beat by ~$2.8M. Values retrieved from S&P Global.
Primary EPS (non-GAAP): $0.86 actual vs $0.75* consensus; beat by ~$$0.11. Values retrieved from S&P Global.
Estimate sample: Revenue estimates: 11; EPS estimates: 10*. Values retrieved from S&P Global.

Metric	Q1 2025 Consensus	Q1 2025 Actual
Revenue ($USD Millions)	352.57*	355.35
EPS ($)	0.75*	0.86
# of Estimates (Revenue / EPS)	11 / 10*	—

Values retrieved from S&P Global.

Implications: MMSI delivered a clean beat on both revenue and EPS, driven by margin expansion and U.S. strength; however, the EPS guide cut tied to tariffs tempers forward EPS trajectories and could cap multiple expansion near term .

Key Takeaways for Investors

Strong quarter operationally: non-GAAP margins and EPS beat internal expectations; U.S. growth broad-based; continued CGI execution supports structural margin expansion .
Tariff overhang is the near-term swing factor: FY EPS guidance reset embeds $26.3M tariff COGS impact; mitigation likely in 2026; watch policy headlines and management updates each quarter .
WRAPSODY reimbursement path clearer: NTAP proposed for FY26; outpatient add-on pursued via APC comment and TPT by 9/1/2025; expect FY25 contributions of $2–$4M as mix skews to inpatient; upside from FY26 add-ons .
Portfolio synergy and M&A: Cardiac/EP additions (Cook lead management) and Endoscopy (EGS) driving segment growth; synergies should aid mix and margin; monitor BioLife integration from Q2 .
FCF intact despite Q1 dip: Full-year ≥$150M FCF reiterated; CapEx step-up (new distribution center) near-term drag but efficiency benefits expected; net leverage manageable (~1.8x) .
Trading stance: Near-term stock reaction tied to tariff news flow vs sustained margin execution; constructive medium-term on CGI-driven margins, WRAPSODY adoption with add-on reimbursement, and portfolio leverage, but expect volatility around policy developments .

MERIT MEDICAL SYSTEMS INC (MMSI)·Q1 2025 Earnings Summary