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MM

MERIT MEDICAL SYSTEMS INC (MMSI)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered better-than-expected constant currency revenue growth (+10.1%) and a record non-GAAP operating margin (19.6%), with non-GAAP EPS rising 25.8% to $0.93; gross margin expanded ~304 bps to 53.5% on mix, pricing, and logistics efficiencies .
  • WRAPSODY received FDA PMA on Dec 20, 2024; 2025 guidance includes $7–$9M U.S. WRAPSODY revenue with heavier 2H weighting, supporting Endoscopy segment growth of 36–40% in 2025 .
  • FY 2025 guidance: revenue $1.470–$1.490B (+8–10%), non-GAAP EPS $3.58–$3.70 (+4–7%), non-GAAP op margin 19.4–19.7%; Q1 2025 EPS guided to $0.73–$0.76 and constant-currency revenue +8.8–10.3% .
  • Potential stock narrative catalysts: strength in gross margin execution and WRAPSODY approval vs caution on FY25 EPS guide below Street due to ~$0.11 convert dilution and ~$0.08 interest headwind (per management’s explanation) .

What Went Well and What Went Wrong

  • What Went Well

    • Record non-GAAP profitability: operating margin 19.6% (+305 bps YoY), EPS $0.93 (+25.8% YoY); gross margin “home run” as pricing/mix/logistics all hit simultaneously .
    • U.S. momentum and OEM recovery: U.S. constant-currency revenue +13.6%; OEM +22% reported YoY, ahead of guidance; better-than-expected orders despite OUS raw material constraints .
    • Strategic progress: WRAPSODY FDA approval; EGS and Cook portfolios integrated/advancing—EGS fully integrated; Cook TSA progressing with order-to-cash largely done; strong free cash flow ($65.3M in Q4; $185.7M FY) and debt paydown ($99.1M in 2024) .

  • What Went Wrong

    • EPS guide below Street: FY25 non-GAAP EPS growth +4–7% tempered by ~$5M higher net interest and ~$0.11 per-share convert dilution despite an economic hedge; Street surprised per Q&A .
    • EMEA softness and China VBP headwinds: EMEA softer; China still impacted by volume-based procurement (though unit growth offsets pricing) .
    • Elevated R&D spend in Q4 (+26% YoY) and Endoscopy integration learning curve may weigh near-term segment growth cadence; management framed R&D spike as not a new normal .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($USD Millions)$324.515 $339.845 $355.158
GAAP EPS ($)$0.47 $0.48 $0.46
Non-GAAP EPS ($)$0.74 $0.86 $0.93
GAAP Gross Margin %46.4% 46.4% 48.7%
Non-GAAP Gross Margin %50.4% 50.9% 53.5%
GAAP Operating Margin %10.4% 11.0% 10.3%
Non-GAAP Operating Margin %16.6% 19.2% 19.6%
Free Cash Flow ($USD Millions)N/A$38.0 $65.3

Segment Revenue (Reported)

CategoryQ4 2023 ($000s)Q4 2024 ($000s)
Peripheral Intervention134,143 140,363
Cardiac Intervention90,242 95,673
Custom Procedural Solutions49,624 51,223
OEM41,216 50,441
Total Cardiovascular315,225 337,700
Endoscopy Devices9,290 17,458
Total Revenue324,515 355,158

YoY Growth by Segment

CategoryReported YoY %Constant Currency YoY %
Peripheral Intervention+4.6% +5.5%
Cardiac Intervention+6.0% +6.9%
CPS+3.2% +3.5%
OEM+22.4% +22.5%
Endoscopy Devices+87.9% +88.1%
Total+9.4% +10.1%

Geographic Revenue

RegionQ4 2023 ($000s)Q4 2024 ($000s)CC % Change
U.S.188,542 213,530 +13.6%
APAC59,576 60,862 +2.8%
EMEA62,822 65,118 +3.5%
Rest of World13,575 15,648 +24.6%
Total International135,973 141,628 +5.3%

KPIs and Balance Sheet

MetricFY 2023 (Dec 31)FY 2024 (Dec 31)
Cash & Equivalents ($MM)$587.0 $376.7
Total Debt Obligations ($MM)$846.6 $747.5
Additional Borrowing Capacity ($MM)$626 $697
Net Leverage (Adjusted)N/A1.9x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net SalesFY 2025N/A$1.470B–$1.490B (+8–10%) Introduced
Cardiovascular Segment SalesFY 2025N/A$1.395B–$1.413B (+7–9%) Introduced
Endoscopy Segment SalesFY 2025N/A$74.6M–$76.7M (+36–40%) Introduced
Non-GAAP EPSFY 2025N/A$3.58–$3.70 (+4–7%) Introduced
Constant Currency Sales GrowthFY 2025N/A+8.6%–+10.1% Introduced
Non-GAAP Op MarginFY 2025N/A~19.4%–19.7% Introduced
Non-GAAP Interest & Other (net)FY 2025N/A~$(5)M Introduced
Non-GAAP Tax RateFY 2025N/A~21% Introduced
Diluted SharesFY 2025N/A~61.7M (incl. ~1.8M convert dilution; ~$0.11 EPS impact) Introduced
Free Cash FlowFY 2025N/A≥$150M Introduced
CapExFY 2025N/A$90–$100M (new distribution center) Introduced
Total Revenue (GAAP)Q1 2025N/A+8.2%–+9.7% YoY; CC +8.8%–+10.3% Introduced
Non-GAAP Op MarginQ1 2025N/A~16.7%–17.1% Introduced
Non-GAAP EPSQ1 2025N/A$0.73–$0.76 Introduced

Earnings Call Themes & Trends

TopicQ2 2024 (Previous Mentions)Q3 2024 (Previous Mentions)Q4 2024 (Current Period)Trend
Gross MarginNon-GAAP 51.5%; uplift from pricing/mix/logistics Non-GAAP 50.9%; continued expansion Non-GAAP 53.5%; “home run” execution across drivers Improving
Supply Chain/OEMOEM +5%; U.S. softer; visibility to stronger 2H OEM OUS impacted by raw materials/logistics; softer than expected OEM +22% YoY; U.S. demand strong; OUS materials challenging but improving Easing constraints
WRAPSODYPMA submitted; fall data plans Under FDA review; strong clinical reception; reimbursement path (NTAP/TPT) FDA PMA approval; 2025 U.S. revenue $7–$9M; heavier 2H Advancing to commercialization
Tariffs/MacroNot emphasizedLimited commentaryFY25 guidance excludes potential new/mod. tariffs; monitoring, will update as visibility improves Rising uncertainty
Regional Trends (China)-5% YoY vs worse expected; unit growth offsets VBP -5.1% YoY but better than expected; unit growth continues +4% YoY; variability persists; overall APAC modest growth Stabilizing baseline
R&D Execution+7% YoY; investment in therapeutics +8% YoY +26% YoY in Q4; management: not “new normal” Elevated but targeted

Management Commentary

  • “We reported total revenue of $355.2 million, up 9% YoY…and delivered non-GAAP operating margin of 19.6%…and 26% growth in our non-GAAP EPS” .
  • “Gross margin…we essentially kind of hit on everything…mix was great…operations executed at a really high level” .
  • FY25 EPS guide mechanics: “$5M higher interest expense…$0.08 headwind…and incremental 1.8M shares…~$0.11 EPS impact” .
  • WRAPSODY: “Initial market response is great…first couple of months have been very encouraging” .
  • Tariffs: “Assumes 2025 tariff structure remains substantially unchanged…situation is rapidly changing; will update when appropriate” .

Q&A Highlights

  • EPS guidance below Street driven by convert dilution ($0.11) and interest expense ($0.08); excluding these, EPS growth would be ~9–12% per management framing .
  • OEM outlook: strong demand and contracts; OUS raw materials improved; confidence embedded in numbers despite prior challenges .
  • Endoscopy (EGS) guidance: measured due to integrating two sales forces; EGS fully integrated operationally; combined sales force effective Jan 1 .
  • WRAPSODY commercialization: training, registry, reimbursement pathways (NTAP/TPT filed); pricing considerations consistent with add-on/payment criteria .
  • CapEx cadence: $90–$100M tied to new South Jordan distribution center; efficiencies in logistics and capacity; still targeting ≥$150M FCF in 2025 .

Estimates Context

  • Wall Street consensus (S&P Global) was unavailable at time of retrieval; therefore, explicit “vs. Street” comparisons could not be provided. Management indicated Q4 non-GAAP EPS exceeded the high end of internal expectations, while FY25 EPS guidance was lighter than Street due to convert dilution and higher interest costs .
  • Implications for models: incorporate 1.8M incremental diluted shares ($0.11 EPS impact) and ~$5M non-GAAP interest/other expense; Endoscopy growth trajectory reflects EGS/WRAPSODY integration and 2H weighting .
  • Note: S&P Global consensus data retrieval failed; consensus comparisons unavailable at this time.

Key Takeaways for Investors

  • Earnings quality strong: broad-based margin expansion and disciplined opex drove record non-GAAP profitability; OEM and U.S. demand underpin momentum .
  • WRAPSODY is now de-risked from a U.S. approval standpoint; 2025 revenue is modest but strategically significant with potential reimbursement tailwinds (NTAP/TPT) .
  • FY25 EPS guide below Street for mechanical reasons (convert, interest); focus on operating margin (19.4–19.7%) and FCF (≥$150M) targets rather than headline EPS .
  • Watch Endoscopy cadence: integration of two sales forces and training curve could pace near-term growth; management set achievable guidance .
  • Tariff policy is a swing factor not in guidance; company has mitigation levers but will update only as visibility improves—monitor macro headlines .
  • Capital deployment remains disciplined; distribution center capex supports logistics/productivity; continued deleveraging and M&A optionality preserved by strong FCF .
  • Near-term trading: strength in margins and WRAPSODY approval vs. cautious EPS guide dynamic; investor focus likely on execution against Q1 2025 targets and gross margin sustainability .