Merit Medical(US:MMSI)2023-10-27 01:16Financial Data and Key Metrics Changes - The company reported a third quarter net income of $43.5 million or $0.75 per share, compared to $37 million or $0.64 per share in the prior year period, reflecting an 18% growth in non-GAAP net income and a 16% growth in non-GAAP diluted earnings per share [25][26][70] - Non-GAAP gross profit and operating profit grew by 13% and 25% respectively in the third quarter, with non-GAAP gross margin at 49.8%, up 140 basis points year-over-year [15][49] - Operating expenses increased by 7% year-over-year, driven by a 6% increase in SG&A and a 12% increase in R&D expenses [24][70] Business Line Data and Key Metrics Changes - Sales of Peripheral Intervention (PI) products increased by 16%, with organic growth of 9% excluding acquired products, driven by radar localization and drainage products [11] - Cardiac Intervention products saw a 20% increase in sales for both access products and angiography and hemostasis products, while custom procedure solutions (CPS) products increased by 6% [12] - The Endoscopy segment reported an 11% increase in sales, with expectations of mid-teens growth in the second half of 2023 [13] Market Data and Key Metrics Changes - International sales increased by 3.5% on a constant currency basis, with growth driven by low-single digit growth in APAC and high-teens growth in the Rest of the World region, while EMEA growth was flat [14] - U.S. sales increased by 14% on a constant currency basis, exceeding growth expectations by over 400 basis points [40] Company Strategy and Development Direction - The company is focused on its Foundations for Growth program, aiming for significant improvements in profitability while maintaining a market-leading growth profile [20][48] - The company plans to continue investing in its people and building new capabilities to meet evolving healthcare market needs [21] - The integration of acquired businesses, particularly from AngioDynamics, is progressing well, with expectations of revenue generation ahead of plan [61] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving financial guidance for fiscal year 2023, driven by strong execution and commitment to the Foundations for Growth program [42] - The company anticipates generating more than $300 million in cumulative free cash flow by year-end 2023, despite potential working capital impacts [22] - Management acknowledged the impact of volume-based purchasing tenders in China but indicated that performance was in line with expectations [15][56] Other Important Information - The company completed enrollment in the WRAPSODY pivotal study and expects to file for FDA approval by the end of the second quarter of 2024 [16][43] - The company is transitioning product SKUs to Merit branded packaging and launching related marketing materials [44] Q&A Session Summary Question: How did the performance in China shape up in Q3? - Management indicated that the performance was as expected and factored into year-end numbers, with ongoing monitoring of the situation [56] Question: Can you provide an update on the WRAPSODY product and market opportunity? - Management expressed excitement about the product but preferred to wait for the February update to discuss market opportunities in detail [63] Question: What are the expectations for M&A activity moving forward? - Management noted that while there are many opportunities, they are disciplined and will only pursue acquisitions that fit their strategic requirements [64] Question: Was Russia a headwind to growth in Q3? - Management confirmed that they received license approvals in late August and began shipments in September, indicating a small benefit but expecting more impact in Q4 [95] Question: What is the outlook for the Endoscopy business? - Management stated that they are nearing the end of supply chain issues and expect continued growth in the Endoscopy segment moving forward [126]