Merit Medical Systems 2026 Q2 Earnings Call

Thank you, operator. 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 30th, 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 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.

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 investor's 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. I will discuss several areas of operating and strategic planning progress in Q2. 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 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 three 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 three-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 three-year period ending December 31st, 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 U.S. alone.

This acquisition expands our portfolio of therapeutic oncology products dedicated to 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. That is you can use OneMark for all biopsies, 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 healthcare 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 standalone 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-$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-$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 Rahul. 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.