Merit Medical ((MMSI)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Merit Medical’s recent earnings call showcased a robust financial performance, highlighted by significant revenue growth, record-setting gross margins, and a substantial increase in free cash flow. The company’s commitment to product innovation and strategic acquisitions suggests promising future prospects, although challenges persist, particularly in the Endoscopy segment and the Chinese market.
Strong Revenue Growth
Merit Medical reported total revenue of $384.2 million for the third quarter of 2025, marking a 13% increase year-over-year on a GAAP basis and 12.5% on a constant currency basis. This impressive growth exceeded market expectations and underscores the company’s strong market position.
Improvement in Operating Margin
The company’s non-GAAP operating margin saw a year-over-year increase of 51 basis points, reaching 19.7%. Additionally, there was nearly 7% growth in non-GAAP earnings per share (EPS), highlighting operational efficiency and effective cost management.
Record Gross Margin
Merit Medical achieved a record gross margin of 53.6%, up 267 basis points from the previous year. This milestone represents the highest gross margin in the company’s history, reflecting effective pricing strategies and cost controls.
Free Cash Flow Increase
The company generated $53 million in free cash flow during the third quarter, a 38% increase year-over-year. This significant rise in free cash flow indicates strong cash management and operational efficiency.
Product Innovation and Commercialization
Merit Medical continues to innovate with the introduction of the Prelude Wave hydrophilic sheath introducer and the receipt of a CE Mark for Embosphere Microspheres, aimed at treating knee osteoarthritis. These advancements highlight the company’s focus on expanding its product portfolio.
Strategic Acquisition
In a move to strengthen its presence in the gastroenterology market, Merit Medical announced an agreement to acquire the C2 CryoBalloon technology from Pentax of America for $22 million. This strategic acquisition is expected to enhance the company’s market offerings.
Endoscopy Segment Growth Lag
The Endoscopy segment reported a growth of 4%, which was at the lower end of expectations. This was attributed to the integration of new acquisitions and adjustments within the sales force, indicating potential areas for improvement.
China Market Challenges
Sales in China decreased by 1%, a decline attributed to the broader macroeconomic environment. Despite this, the impact of Volume-Based Procurement (VBP) was better than expected, suggesting resilience in a challenging market.
OEM Sales Softness
OEM product sales increased by only 3%, with international sales to OEM customers affected by the macroeconomic environment. This softness points to external challenges impacting sales growth.
Tariff Impacts
Tariffs posed a nearly 90 basis point headwind to the year-over-year improvement in gross margin for the third quarter, highlighting ongoing challenges in navigating international trade dynamics.
Forward-Looking Guidance
Merit Medical updated its financial guidance for the fiscal year 2025, projecting GAAP net revenue growth between 11% and 12%. The Cardiovascular segment is expected to grow by 10% to 11%, while the Endoscopy segment is anticipated to see substantial growth of 32% to 34%. On a constant currency basis, revenue growth is forecasted to range from 10.3% to 11.2%, with organic growth excluding inorganic contributions projected at 5.9% to 6.8%. The company also expects a non-GAAP diluted EPS between $3.66 and $3.79 and aims to generate at least $175 million in free cash flow, with operating margins ranging from 19.7% to 25%.
In conclusion, Merit Medical’s earnings call reflects a strong financial performance with impressive revenue growth and record gross margins. The company’s strategic focus on innovation and acquisitions positions it well for future growth, despite challenges in certain segments and markets. Investors can remain optimistic about Merit Medical’s potential, given its robust guidance and commitment to enhancing shareholder value.