Merit Medical(MMSI) - 2025 Q2 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (Unaudited) Unaudited H1 2025 financials show asset growth, increased sales, and positive operating cash flow, with significant cash used for acquisitions Consolidated Balance Sheets The balance sheet as of June 30, 2025, reflects growth in total assets, liabilities, and stockholders' equity, primarily due to acquisitions Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Total Assets | $2,586,045 | $2,418,603 | | Total Current Assets | $923,072 | $923,774 | | Goodwill | $504,555 | $463,511 | | Total Liabilities | $1,097,997 | $1,039,244 | | Long-term debt | $731,795 | $729,551 | | Total Stockholders' Equity | $1,488,048 | $1,379,359 | Consolidated Statements of Income Net sales increased for both Q2 and H1 2025, while net income and diluted EPS experienced slight declines Six Months Ended June 30, (in thousands, except per share data) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net sales | $737,813 | $661,511 | | Gross profit | $356,507 | $312,815 | | Income from operations | $87,913 | $81,868 | | Net income | $62,728 | $63,966 | | Diluted EPS | $1.03 | $1.09 | Three Months Ended June 30, (in thousands, except per share data) | Metric | 2025 | 2024 | | :--- | :--- | :--- | | Net sales | $382,462 | $338,003 | | Gross profit | $184,487 | $161,100 | | Income from operations | $46,880 | $45,946 | | Net income | $32,581 | $35,726 | | Diluted EPS | $0.54 | $0.61 | Consolidated Statements of Cash Flows Operating cash flow increased, but significant cash was used in investing activities, primarily for acquisitions, resulting in a net decrease in cash Cash Flow Summary for Six Months Ended June 30, (in thousands) | Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash from operating activities | $123,879 | $104,722 | | Net cash used in investing activities | $(172,986) | $(38,538) | | Net cash from (used in) financing activities | $11,302 | $(14,866) | | Net (decrease) increase in cash | $(34,852) | $49,568 | | Cash at end of period | $343,915 | $638,712 | - Cash paid for acquisitions, net of cash acquired, was $122.6 million in the first six months of 2025, compared to only $4.9 million in the same period of 2024[19] Condensed Notes to Consolidated Financial Statements Notes detail accounting policies, segment revenue growth driven by acquisitions, increased goodwill, a higher tax rate, and significant debt with available borrowing capacity - On May 20, 2025, Merit acquired Biolife for an upfront payment of $120 million plus $6.3 million in adjustments. The acquisition added $92.7 million in developed technology and $38.3 million in goodwill[30] Revenue by Segment - Six Months Ended June 30, (in thousands) | Segment | 2025 | 2024 | % Change | | :--- | :--- | :--- | :--- | | Cardiovascular | $702,738 | $641,189 | +9.6% | | Endoscopy | $35,075 | $20,322 | +72.6% | | Total | $737,813 | $661,511 | +11.5% | - The company is cooperating with an SEC inquiry that began in January 2022 regarding its subsidiary's business activities in China. The outcome and potential loss cannot be reasonably estimated at this time[69] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses sales growth driven by segment and market demand, improved gross margin, increased operating expenses, a slight net income decline, and strong liquidity Results of Operations H1 2025 sales growth was driven by acquisitions and segment performance, with improved gross margin, but increased operating expenses led to a net income decline Sales Growth by Segment - Six Months Ended June 30, 2025 vs 2024 | Segment | % Change | | :--- | :--- | | Cardiovascular | +9.6% | | Endoscopy | +72.6% | | Total | +11.5% | - The 17.2% growth in Cardiac Intervention sales for H1 2025 was primarily driven by $19.4 million in sales from products acquired from Cook in November 2024[117] - The 72.6% growth in Endoscopy sales for H1 2025 was favorably affected by $14.7 million in sales of the EsophyX® Z+ device acquired from EGS in July 2024[116] - SG&A expenses for H1 2025 increased by 16.7% primarily due to higher labor-related costs from headcount additions, including those from the EGS, Cook, and Biolife acquisitions[124] Liquidity and Capital Resources The company maintains strong liquidity with substantial cash and available credit, despite significant cash usage for acquisitions and capital expenditures - The company holds $343.9 million in cash, cash equivalents, and restricted cash as of June 30, 2025, with $69.7 million held by foreign subsidiaries[134] - Capital expenditures are expected to be approximately $90 million to $100 million in 2025, partly for the construction of a new distribution facility in South Jordan, Utah[135] - As of June 30, 2025, the company had no outstanding borrowings under its revolving credit facility and had additional available borrowings of approximately $697 million[49][138] Quantitative and Qualitative Disclosures About Market Risk No material changes were reported in market risk disclosures concerning currency exchange rates and interest rates - No material changes to market risk disclosures regarding currency exchange and interest rates were reported for the first six months of 2025[148] Controls and Procedures Management concluded disclosure controls are effective, with ongoing integration of Biolife's internal controls not expected to cause material changes - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[149] - The company is in the process of integrating the internal controls of Biolife, acquired on May 20, 2025[151] PART II. OTHER INFORMATION Legal Proceedings An ongoing SEC inquiry regarding a China subsidiary is noted, with no other material legal proceedings expected - The company is involved in an ongoing SEC inquiry related to its subsidiary in China, as detailed in Note 10 of the financial statements[154][69] Risk Factors Updated risk factors include adverse impacts from changing trade policies and tariffs, alongside challenges associated with leadership succession - The company identifies significant risks from changes in U.S. trade policies, including increased tariffs on raw materials and finished products imported from Mexico, Ireland, and China, which could increase manufacturing costs[157] - A new President and CEO, Martha Aronson, has been appointed effective October 3, 2025. The company acknowledges that this leadership transition is inherently difficult and could negatively impact relationships with stakeholders or cause operational disruptions[162] Other Information No directors or officers reported adopting or terminating Rule 10b5-1 trading arrangements in Q2 2025 - No directors or officers adopted or terminated a Rule 10b5-1 trading plan in the second quarter of 2025[165] Exhibits This section lists exhibits filed with the Form 10-Q, including the Biolife merger agreement and CEO/CFO certifications - Key exhibits filed include the merger agreement for the Biolife acquisition and CEO/CFO certifications under Sarbanes-Oxley Sections 302 and 906[167]