Merit Medical Systems Inc 2026 Q3 Earnings Call

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 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. Our actual results may differ materially from the expectations and projections expressed or implied by our forward-looking statements. 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. In addition, any forward-looking statements represent our views only as of today, October 29, 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. This presentation also contains certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to the most directly comparable US GAAP measures is included in today's press release and presentation furnished to the SEC under Form 8-K.

Please refer to the sections of our press release and presentation entitled "Non-GAAP Financial Measures" for important information regarding non-GAAP financial measures discussed on this call. 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 third quarter financial results. 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 third quarter results. For avoidance of doubt, all growth figures are on a constant currency basis unless otherwise noted. We reported total revenue of $416 million, up 8% year-over-year on both a GAAP and constant currency basis. Our total revenue results exceeded the high end of the expectations that we outlined on our Q2 earnings call.

Third quarter total constant currency growth was driven by 9% organic growth, which also exceeded the high end of our expectations and follows the 9% organic growth we delivered in Q2. By way of reminder, our organic growth excludes the contributions from acquisitions in the current year period and revenue from divested products in the prior year period. We saw strong growth trends in the U.S. in the third quarter and better than expected demand across both of our primary product categories, with 8% organic growth in sales of our foundational products and 11% organic growth in sales of our therapeutic products.

We were pleased to deliver strong organic growth that not only exceeded the high end of the expectations outlined on our Q2 earnings call, but also reflects an improvement in our organic growth trends for both our foundational and our therapeutic product categories on both a two-year and three-year basis. With respect to the profitability performance in Q3, we delivered financial results that significantly exceeded expectations. Our non-GAAP operating margin increased 160 basis points year-over-year to 21.3%. Our non-GAAP EPS increased 22% year-over-year, and we generated nearly $53 million of free cash flow. I want to congratulate our team members all around the world. The better than expected growth and profitability performance delivered over the first nine months of 2026 represents clear evidence of their commitment to our continued growth initiatives program and their unwavering focus on our customers each and every day.

We have updated our 2026 guidance to reflect the stronger than expected results in the third quarter, and we remain confident in our team's ability to execute, deliver attractive constant currency growth, improve profitability, and generate solid cash flow this year. Turning now to a brief update on several areas of operating progress in recent months. First, our integration of View Point Medical in our oncology platform continues to progress. The message that clinicians can mark a breast cancer lesion at the time of biopsy, which may reduce the need for a separate localization procedure before surgery, is resonating with both surgeons and radiologists. We are seeing a strong pipeline of evaluations to date, particularly with academic institutions, which we believe will drive new customer adoption.

Together with our next generation product, SCOUT MD, which we launched in late May, the OneMark gives us 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. Turning now to our recent clinical progress. In our Renal Therapies platform, we completed the formal analysis of the AVF and AVG cohorts in our WRAPSODY Global Registry, and the data from the AVF cohort will be presented this weekend at the Controversies in Dialysis Access, or CIDA, meeting.

Last month, I, along with members of our global team, attended the Cardiovascular and Interventional Radiological Society of Europe, or CIRSE, meeting in Copenhagen. Merit hosted well-attended symposia and conducted hands-on demonstrations with numerous clinicians at this year's meeting. Also while in Europe, I had the pleasure of attending the 10th anniversary celebration of our Think Education courses in Odense, Denmark. Educating physicians around the world continues to be a focus for us. Notably, we have doubled the number of Think Education courses hosted in the U.S. and international markets over the last two years. In our Endoscopy platform, we continue to see the clinical evidence strengthen around cTIF with our EsophyX device. At the recent American Foregut Society, or AFS, meeting, investigators presented randomized clinical data comparing cTIF with laparoscopic Nissen fundoplication, the traditional surgical approach to treat GERD.

The study demonstrated that cTIF was non-inferior in both GERD-related quality of life improvement and objective normalization of acid exposure, while also being associated with lower rates of new onset postoperative dysphagia or difficulty swallowing. We believe this is an important addition to the growing body of evidence supporting cTIF. I also want to update you on a transition in our executive leadership team that we announced during the quarter. On August 19th, we announced that Sheri Lewis joined Merit as Chief Operations Officer. Sheri brings three decades of experience across global operations, manufacturing, and supply chain. She previously held senior roles at SkinHealth Systems, Avantor, Medtronic, and Honeywell. She has led global manufacturing, distribution, logistics, supply chain, quality, regulatory, environmental health and safety, and operational excellence functions across these various organizations.

In her first weeks, she has identified opportunities to advance our core business processes for the benefit of our customers and our shareholders. Her early priorities include launching an integrated business planning process designed to align our portfolio strategy with demand and supply planning, improving working capital efficiency, and driving operational excellence at all of our sites around the world. I also want to thank Neil Peterson, who served as our Chief Operating Officer for the past four years and who has been a part of the Merit team for more than 32 years. Neil is serving as a Senior Advisor through March of next year to help ensure a smooth transition with Sheri. Neil truly lives the Merit way, embodying our values each and every day. He has given so much to Merit, but in particular, I want to highlight his leadership through COVID.

This company would not have come through the pandemic as successfully as it did without the leadership of Neil Peterson. His contributions to the organization can be felt all across the world. On behalf of all of our employees, I thank Neil for helping build Merit Medical to the company we are today. I also want to highlight two other noteworthy updates before turning the call over to Raul. First, 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. As outlined on our Q2 call, our strategic plan work in the third quarter included refining our global forecasts and prioritizing our investment opportunities in both our product pipeline and potential acquisitions for the next three years.

Within each platform, we are highlighting where we feel we have the right to win. We are focused on high-growth procedures where we offer foundational products, as well as entire clinical procedures, where we offer a suite of both foundational and therapeutic products. We are also focused on ensuring we have thoughtful plans to drive continued improvement in our organizational structure, productivity, and efficiency to support our multi-year goals for both growth and profitability. We are nearing completion of our planning work and look forward to sharing the key highlights of this strategic plan and new financial targets for the three-year period of 2027 to 2029. Importantly, we intend to host an investor event at our corporate headquarters on February 11, 2027.