Merit Medical Systems, Inc. (NASDAQ: MMSI), a leading global
manufacturer and marketer of healthcare technology, today announced
revenue of $295.0 million for the quarter ended
June 30, 2022, an increase of 5.2% compared to the
quarter ended June 30, 2021. Constant currency revenue,
organic, for the second quarter of 2022 increased 7.4% compared to
the prior year period.
Merit’s revenue by operating segment and product
category for the three and six-month periods ended
June 30, 2022 and 2021 was as follows (unaudited; in
thousands, except for percentages):
|
|
|
|
Three Months Ended |
|
|
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
|
|
June 30, |
|
% Change |
|
|
2022 |
|
2021 |
|
% Change |
|
|
2022 |
|
2021 |
Cardiovascular |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Peripheral Intervention |
5.1 |
% |
|
$ |
110,955 |
|
|
$ |
105,600 |
|
|
9.2 |
% |
|
$ |
216,728 |
|
|
$ |
198,514 |
|
Cardiac Intervention |
4.6 |
% |
|
|
89,574 |
|
|
|
85,653 |
|
|
6.7 |
% |
|
|
171,061 |
|
|
|
160,390 |
|
Custom Procedural Solutions |
0.9 |
% |
|
|
49,093 |
|
|
|
48,636 |
|
|
1.4 |
% |
|
|
95,355 |
|
|
|
94,057 |
|
OEM |
14.3 |
% |
|
|
37,048 |
|
|
|
32,403 |
|
|
16.8 |
% |
|
|
70,462 |
|
|
|
60,337 |
|
Total |
5.3 |
% |
|
|
286,670 |
|
|
|
272,292 |
|
|
7.9 |
% |
|
|
553,606 |
|
|
|
513,298 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Endoscopy |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Endoscopy Devices |
3.4 |
% |
|
|
8,306 |
|
|
|
8,033 |
|
|
5.3 |
% |
|
|
16,785 |
|
|
|
15,940 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total |
5.2 |
% |
|
$ |
294,976 |
|
|
$ |
280,325 |
|
|
7.8 |
% |
|
$ |
570,391 |
|
|
$ |
529,238 |
|
Merit’s GAAP gross margin for the second quarter
of 2022 was 45.8%, compared to GAAP gross margin of 44.3% for the
prior year period. Merit’s non-GAAP gross margin* for the second
quarter of 2022 was 49.3%, compared to non-GAAP gross margin of
48.7% for the prior year period.
Merit’s GAAP net income for the second quarter
of 2022 was $15.3 million, or $0.27 per share, compared to GAAP net
income of $4.9 million, or $0.09 per share, for the second quarter
of 2021. Merit’s non-GAAP net income* for the second quarter of
2022 was $42.3 million, or $0.73 per share, compared to non-GAAP
net income of $35.3 million, or $0.62 per share, for the prior year
period.
“We delivered better-than-expected revenue
results for the second quarter of 2022, posting 7.4% constant
currency sales growth fueled by solid execution from our team and
more favorable than anticipated demand trends from customers in the
U.S., EMEA and “Rest of World” regions,” said Fred P. Lampropoulos,
Merit’s Chairman and Chief Executive Officer. “We also delivered
better-than-expected profitability in the quarter, with
year-over-year growth in non-GAAP net income and non-GAAP earnings
per share of 20% and 19%, respectively, driven by material
improvements in profitability resulting in a record non-GAAP
operating margin of 19.1%.”
Mr. Lampropoulos continued: “Our updated
guidance expectations for 2022 reflect continued confidence in our
ability to drive solid constant currency revenue growth, material
improvements in our profitability profile and strong free cash flow
generation in 2022. Overall, we continue to execute on our
multi-year strategic initiatives related to the Foundations for
Growth Program and are excited about the results we are seeing
across our business. We remain committed to the financial targets
that we outlined in the Foundations for Growth Program for the
three-year period ending December 31, 2023, which call for our
constant currency, organic revenue to increase at a CAGR of at
least 5%, non-GAAP operating margins of at least 18% and cumulative
free cash flow of more than $300 million. Our team continues to
execute well and remains focused on our strategic initiatives,
while standing ready to adapt quickly to changes in our
markets.”
As of June 30, 2022, Merit had cash,
cash equivalents and restricted cash of $65.2 million, long term
debt obligations of $246 million, and available borrowing capacity
of approximately $481 million, compared to cash, cash equivalents
and restricted cash of $68 million, long term debt obligations of
$243 million, and available borrowing capacity of approximately
$490 million as of December 31, 2021.
Updated Fiscal Year 2022 Financial Guidance
Based upon information currently available to
Merit’s management, for the year ending December 31,
2022, absent material acquisitions, non-recurring transactions or
other factors beyond Merit’s current expectations, Merit now
expects the following:
- Net revenue in the range of $1.123
billion to $1.135 billion, representing an increase of
approximately 5% to 6% year-over-year, as compared to net revenue
of $1.075 billion for the twelve months ended December 31, 2021.
The fiscal year 2022 revenue guidance range assumes:
- Net revenue from Merit’s
cardiovascular segment of between $1.093 billion and $1.102
billion, representing an increase of approximately 5% to 6%
year-over-year as compared to net revenue of $1.043 billion for the
twelve months ended December 31, 2021.
- Net revenue from Merit’s endoscopy
segment of between $30.0 million and $34.0 million, representing a
range of a 5% decline to an 8% increase year-over-year as compared
to net revenue of $31.5 million for the twelve months ended
December 31, 2021.
- GAAP net income in the range of
$62.4 million to $68.3 million, or $1.08 to $1.18 per diluted
share, compared to GAAP net income of $48.5 million, or $0.84 per
diluted share, for the twelve months ended December 31, 2021.
- Non-GAAP net income in the range of
$139.6 million to $145.5 million, or $2.42 to $2.52 per diluted
share, compared to non-GAAP net income of $136.2 million, or $2.37
per diluted share, for the twelve months ended December 31,
2021.
Merit’s financial guidance for the year
ending December 31, 2022 is subject to risks and uncertainties
identified in this release and Merit’s filings with the U.S.
Securities and Exchange Commission (the “SEC”).
CONFERENCE CALL
Merit will hold its investor conference call
today, Wednesday, July 27, 2022, at 5:00 p.m. Eastern
(4:00 p.m. Central, 3:00 p.m. Mountain, and
2:00 p.m. Pacific). To access the conference call,
please pre-register using the following
link. Registrants will
receive confirmation with dial-in details. A live webcast
and slide deck will also be available at merit.com.
CONSOLIDATED BALANCE SHEETS(in
thousands)
|
June 30, |
|
|
|
|
2022 |
|
December 31, |
|
(Unaudited) |
|
2021 |
ASSETS |
|
|
|
|
|
Current Assets |
|
|
|
|
|
Cash and cash equivalents |
$ |
63,003 |
|
|
$ |
67,750 |
|
Trade receivables, net |
|
158,801 |
|
|
|
152,301 |
|
Other receivables |
|
10,627 |
|
|
|
17,763 |
|
Inventories |
|
233,154 |
|
|
|
221,922 |
|
Prepaid expenses and other assets |
|
23,050 |
|
|
|
16,149 |
|
Prepaid income taxes |
|
3,532 |
|
|
|
3,550 |
|
Income tax refund receivables |
|
464 |
|
|
|
2,777 |
|
Total current assets |
|
492,631 |
|
|
|
482,212 |
|
|
|
|
|
|
|
Property and equipment,
net |
|
371,451 |
|
|
|
371,658 |
|
Intangible assets, net |
|
294,228 |
|
|
|
319,269 |
|
Goodwill |
|
359,692 |
|
|
|
361,741 |
|
Deferred income tax
assets |
|
5,861 |
|
|
|
6,080 |
|
Operating lease right-of-use
assets |
|
64,353 |
|
|
|
65,913 |
|
Other assets |
|
43,303 |
|
|
|
41,421 |
|
Total Assets |
$ |
1,631,519 |
|
|
$ |
1,648,294 |
|
|
|
|
|
|
|
LIABILITIES AND
STOCKHOLDERS' EQUITY |
|
|
|
|
|
Current Liabilities |
|
|
|
|
|
Trade payables |
$ |
59,441 |
|
|
$ |
55,624 |
|
Accrued expenses |
|
111,955 |
|
|
|
159,014 |
|
Current portion of long-term debt |
|
10,313 |
|
|
|
8,438 |
|
Current operating lease liabilities |
|
10,444 |
|
|
|
10,668 |
|
Income taxes payable |
|
3,437 |
|
|
|
2,536 |
|
Total current liabilities |
|
195,590 |
|
|
|
236,280 |
|
|
|
|
|
|
|
Long-term debt |
|
235,703 |
|
|
|
234,397 |
|
Deferred income tax
liabilities |
|
31,195 |
|
|
|
31,503 |
|
Long-term income taxes
payable |
|
347 |
|
|
|
347 |
|
Liabilities related to
unrecognized tax benefits |
|
932 |
|
|
|
932 |
|
Deferred compensation
payable |
|
15,562 |
|
|
|
18,111 |
|
Deferred credits |
|
1,762 |
|
|
|
1,815 |
|
Long-term operating lease
liabilities |
|
59,646 |
|
|
|
61,526 |
|
Other long-term
obligations |
|
17,475 |
|
|
|
23,584 |
|
Total liabilities |
|
558,212 |
|
|
|
608,495 |
|
|
|
|
|
|
|
Stockholders' Equity |
|
|
|
|
|
Common stock |
|
651,926 |
|
|
|
641,533 |
|
Retained earnings |
|
432,100 |
|
|
|
406,257 |
|
Accumulated other comprehensive loss |
|
(10,719 |
) |
|
|
(7,991 |
) |
Total stockholders' equity |
|
1,073,307 |
|
|
|
1,039,799 |
|
Total Liabilities and
Stockholders' Equity |
$ |
1,631,519 |
|
|
$ |
1,648,294 |
|
CONSOLIDATED STATEMENTS OF
INCOME(Unaudited; in thousands except per share
amounts)
|
Three Months Ended |
|
Six Months Ended |
|
June 30, |
|
June 30, |
|
2022 |
|
2021 |
|
2022 |
|
2021 |
Net sales |
$ |
294,976 |
|
|
$ |
280,325 |
|
|
$ |
570,391 |
|
|
$ |
529,238 |
|
Cost of sales |
|
159,909 |
|
|
|
156,186 |
|
|
|
314,417 |
|
|
|
293,205 |
|
Gross profit |
|
135,067 |
|
|
|
124,139 |
|
|
|
255,974 |
|
|
|
236,033 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative |
|
85,487 |
|
|
|
91,563 |
|
|
|
169,502 |
|
|
|
172,587 |
|
Research and development |
|
18,466 |
|
|
|
17,593 |
|
|
|
35,853 |
|
|
|
33,867 |
|
Impairment charges |
|
— |
|
|
|
4,283 |
|
|
|
1,672 |
|
|
|
4,283 |
|
Contingent consideration expense |
|
1,187 |
|
|
|
1,805 |
|
|
|
3,787 |
|
|
|
2,207 |
|
Acquired in-process research and development |
|
6,671 |
|
|
|
— |
|
|
|
6,671 |
|
|
|
— |
|
Total operating expenses |
|
111,811 |
|
|
|
115,244 |
|
|
|
217,485 |
|
|
|
212,944 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from operations |
|
23,256 |
|
|
|
8,895 |
|
|
|
38,489 |
|
|
|
23,089 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense): |
|
|
|
|
|
|
|
|
|
|
|
Interest income |
|
96 |
|
|
|
92 |
|
|
|
201 |
|
|
|
564 |
|
Interest expense |
|
(1,348 |
) |
|
|
(1,386 |
) |
|
|
(2,350 |
) |
|
|
(2,923 |
) |
Other expense — net |
|
(1,303 |
) |
|
|
(736 |
) |
|
|
(1,468 |
) |
|
|
(1,171 |
) |
Total other expense — net |
|
(2,555 |
) |
|
|
(2,030 |
) |
|
|
(3,617 |
) |
|
|
(3,530 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Income before income
taxes |
|
20,701 |
|
|
|
6,865 |
|
|
|
34,872 |
|
|
|
19,559 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax expense |
|
5,403 |
|
|
|
1,949 |
|
|
|
9,029 |
|
|
|
3,685 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income |
$ |
15,298 |
|
|
$ |
4,916 |
|
|
$ |
25,843 |
|
|
$ |
15,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per common share |
|
|
|
|
|
|
|
|
|
|
|
Basic |
$ |
0.27 |
|
|
$ |
0.09 |
|
|
$ |
0.46 |
|
|
$ |
0.28 |
|
Diluted |
$ |
0.27 |
|
|
$ |
0.09 |
|
|
$ |
0.45 |
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding |
|
|
|
|
|
|
|
|
|
|
|
Basic |
|
56,691 |
|
|
|
56,061 |
|
|
|
56,642 |
|
|
|
55,890 |
|
Diluted |
|
57,600 |
|
|
|
57,277 |
|
|
|
57,565 |
|
|
|
57,128 |
|
CONSOLIDATED STATEMENTS OF CASH
FLOWS(In thousands - unaudited)
|
Six Months Ended |
|
June 30, |
|
2022 |
|
2021 |
CASH FLOWS FROM OPERATING
ACTIVITIES: |
|
|
|
Net income |
$ |
25,843 |
|
|
$ |
15,874 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
40,902 |
|
|
|
42,417 |
|
Loss on disposition of business |
|
1,254 |
|
|
|
— |
|
Write-off of certain intangible assets and other long-term
assets |
|
1,733 |
|
|
|
4,368 |
|
Amortization of right-of-use operating lease assets |
|
5,121 |
|
|
|
6,074 |
|
Adjustments and payments related to contingent consideration
liability |
|
1,999 |
|
|
|
2,207 |
|
Acquired in-process research and development |
|
6,671 |
|
|
|
— |
|
Stock-based compensation expense |
|
9,093 |
|
|
|
6,732 |
|
Other adjustments |
|
360 |
|
|
|
490 |
|
Changes in operating assets and liabilities, net of acquisitions
and divestitures |
|
(42,182 |
) |
|
|
(1,722 |
) |
Total adjustments |
|
24,951 |
|
|
|
60,566 |
|
Net cash, cash equivalents,
and restricted cash provided by operating activities |
|
50,794 |
|
|
|
76,440 |
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES: |
|
|
|
|
|
Capital expenditures for property and equipment |
|
(16,763 |
) |
|
|
(12,817 |
) |
Cash paid in acquisitions, net of cash acquired |
|
(4,712 |
) |
|
|
(1,858 |
) |
Other investing, net |
|
(1,824 |
) |
|
|
(585 |
) |
Net cash, cash equivalents,
and restricted cash used in investing activities |
|
(23,299 |
) |
|
|
(15,260 |
) |
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES: |
|
|
|
Proceeds from issuance of common stock |
|
3,244 |
|
|
|
11,780 |
|
Proceeds from (payments on) long-term debt, net |
|
3,125 |
|
|
|
(58,878 |
) |
Contingent payments related to acquisitions |
|
(32,798 |
) |
|
|
(489 |
) |
Payment of taxes related to an exchange of common stock |
|
(1,015 |
) |
|
|
(488 |
) |
Net cash, cash equivalents,
and restricted cash used in financing activities |
|
(27,444 |
) |
|
|
(48,075 |
) |
Effect of exchange rates on
cash |
|
(2,564 |
) |
|
|
(349 |
) |
Net increase (decrease) in
cash, cash equivalents and restricted cash |
|
(2,513 |
) |
|
|
12,756 |
|
|
|
|
|
|
|
CASH, CASH EQUIVALENTS AND
RESTRICTED CASH: |
|
|
|
|
|
Beginning of period |
|
67,750 |
|
|
|
56,916 |
|
End of period |
$ |
65,237 |
|
|
$ |
69,672 |
|
|
|
|
|
|
|
RECONCILIATION OF CASH, CASH
EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE
SHEETS: |
|
|
|
|
|
Cash and cash equivalents |
|
63,003 |
|
|
|
69,672 |
|
Restricted cash reported in prepaid expenses and other current
assets |
|
2,234 |
|
|
|
— |
|
Total cash, cash equivalents
and restricted cash |
$ |
65,237 |
|
|
$ |
69,672 |
|
Non-GAAP Financial Measures
Although Merit’s financial statements are
prepared in accordance with accounting principles generally
accepted in the United States of America (“GAAP”), Merit’s
management believes that certain non-GAAP financial measures
referenced in this release provide investors with useful
information regarding the underlying business trends and
performance of Merit’s ongoing operations and can be useful for
period-over-period comparisons of such operations. Non-GAAP
financial measures used in this release include:
- constant
currency revenue;
- constant
currency revenue, organic;
- non-GAAP gross
margin;
- non-GAAP
operating income and margin;
- non-GAAP net
income;
- non-GAAP
earnings per share; and
- free cash
flow.
Merit’s management team uses these non-GAAP
financial measures to evaluate Merit’s profitability and
efficiency, to compare operating and financial results to prior
periods, to evaluate changes in the results of its operating
segments, and to measure and allocate financial resources
internally. However, Merit’s management does not consider such
non-GAAP measures in isolation or as an alternative to measures
determined in accordance with GAAP.
Readers should consider non-GAAP measures used
in this release in addition to, not as a substitute for, financial
reporting measures prepared in accordance with GAAP. These non-GAAP
financial measures generally exclude some, but not all, items that
may affect Merit’s net income. In addition, they are subject to
inherent limitations as they reflect the exercise of judgment by
management about which items are excluded. Merit believes it is
useful to exclude such items in the calculation of non-GAAP
earnings per share, non-GAAP gross margin, non-GAAP operating
income and margin, and non-GAAP net income (in each case, as
further illustrated in the reconciliation tables below) because
such amounts in any specific period may not directly correlate to
the underlying performance of Merit’s business operations and can
vary significantly between periods as a result of factors such as
acquisition or other extraordinary transactions, non-cash expenses
related to amortization or write-off of previously acquired
tangible and intangible assets, certain severance expenses,
expenses resulting from non-ordinary course litigation or
administrative proceedings and resulting settlements, corporate
transformation expenses, governmental proceedings or changes in tax
or industry regulations, gains or losses on disposal of certain
assets, and debt issuance costs. Merit may incur similar types of
expenses in the future, and the non-GAAP financial information
included in this release should not be viewed as a statement or
indication that these types of expenses will not recur.
Additionally, the non-GAAP financial measures used in this release
may not be comparable with similarly titled measures of other
companies. Merit urges readers to review the reconciliations of its
non-GAAP financial measures to the comparable GAAP financial
measures, and not to rely on any single financial measure to
evaluate Merit’s business or results of operations.
Constant Currency Revenue
Merit’s constant currency revenue is prepared by
converting the current-period reported revenue of subsidiaries
whose functional currency is a currency other than the U.S. dollar
at the applicable foreign exchange rates in effect during the
comparable prior-year period, and adjusting for the effects of
hedging transactions on reported revenue, which are recorded in the
U.S. The constant currency revenue adjustments of $6.0 million and
$7.8 million to reported revenue for the three and six-month
periods ended June 30, 2022 were calculated using the
applicable average foreign exchange rates for the three and
six-month periods ended June 30, 2021.
Constant Currency Revenue, Organic
Merit’s constant currency revenue, organic, is
defined, with respect to prior fiscal year periods, as GAAP
revenue. With respect to current fiscal year periods, constant
currency revenue, organic, is defined as constant currency revenue
(as defined above), less revenue from certain acquisitions. For the
three and six-month periods ended June 30, 2022, there were no
revenues from acquisitions excluded in the calculation of Merit’s
constant currency revenue, organic.
Non-GAAP Gross Margin
Non-GAAP gross margin is calculated by reducing
GAAP cost of sales by amounts recorded for amortization of
intangible assets and certain inventory write-offs, divided by
reported net sales.
Non-GAAP Operating Income and Margin
Non-GAAP operating income is calculated by
adjusting GAAP operating income for certain items which are deemed
by Merit’s management to be outside of core operations and vary in
amount and frequency among periods, such as expenses related to
acquisitions or other extraordinary transactions, non-cash expenses
related to amortization or write-off of previously acquired
tangible and intangible assets, certain severance expenses,
performance-based stock compensation expenses, corporate
transformation expenses, expenses resulting from non-ordinary
course litigation or administrative proceedings and resulting
settlements, governmental proceedings or changes in industry
regulations, as well as other items referenced in the tables below.
Non-GAAP operating margin is calculated by dividing non-GAAP
operating income by reported net sales.
Non-GAAP Net Income
Non-GAAP net income is calculated by adjusting
GAAP net income for the items set forth in the definition of
non-GAAP operating income above, as well as for expenses related to
debt issuance costs, gains or losses on disposal of certain assets,
changes in tax regulations, and other items set forth in the tables
below.
Non-GAAP EPS
Non-GAAP EPS is defined as non-GAAP net income
divided by the diluted shares outstanding for the corresponding
period.
Free Cash Flow
Free cash flow is defined as cash flow from
operations calculated in accordance with GAAP, less capital
expenditures for property and equipment calculated in accordance
with GAAP, as set forth in the consolidated statement of cash
flows.
Non-GAAP Financial Measure Reconciliations
The following tables set forth supplemental
financial data and corresponding reconciliations of non-GAAP
financial measures to Merit’s corresponding financial measures
prepared in accordance with GAAP, in each case, for the three and
six-month periods ended June 30, 2022 and 2021. The
non-GAAP income adjustments referenced in the following tables do
not reflect non-performance-based stock compensation expense of
approximately $2.7 million and $1.8 million for the three-month
periods ended June 30, 2022 and 2021, respectively and
$6.1 million and $4.4 million for the six-month periods ended June
30, 2022 and 2021, respectively.
Reconciliation of GAAP Net Income to
Non-GAAP Net Income(Unaudited; in thousands except per
share amounts)
|
Three Months Ended |
|
June 30, 2022 |
|
Pre-Tax |
|
Tax Impact |
|
After-Tax |
|
Per Share Impact |
GAAP net income |
$ |
20,701 |
|
|
$ |
(5,403 |
) |
|
$ |
15,298 |
|
|
$ |
0.27 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles |
|
10,500 |
|
|
|
(2,575 |
) |
|
|
7,925 |
|
|
|
0.14 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration expense |
|
1,187 |
|
|
|
(9 |
) |
|
|
1,178 |
|
|
|
0.02 |
|
Amortization of intangibles |
|
1,588 |
|
|
|
(394 |
) |
|
|
1,194 |
|
|
|
0.02 |
|
Performance-based share-based compensation (b) |
|
1,756 |
|
|
|
(219 |
) |
|
|
1,537 |
|
|
|
0.03 |
|
Corporate transformation and restructuring (c) |
|
6,819 |
|
|
|
(1,664 |
) |
|
|
5,155 |
|
|
|
0.09 |
|
Acquisition-related |
|
1,006 |
|
|
|
(246 |
) |
|
|
760 |
|
|
|
0.01 |
|
Medical Device Regulation expenses (d) |
|
2,659 |
|
|
|
(651 |
) |
|
|
2,008 |
|
|
|
0.03 |
|
Other (e) |
|
7,645 |
|
|
|
(1,814 |
) |
|
|
5,831 |
|
|
|
0.10 |
|
Other (Income) Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of long-term debt issuance costs |
|
151 |
|
|
|
(37 |
) |
|
|
114 |
|
|
|
0.00 |
|
Loss on disposal of business unit |
|
1,255 |
|
|
|
— |
|
|
|
1,255 |
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income |
$ |
55,267 |
|
|
$ |
(13,012 |
) |
|
$ |
42,255 |
|
|
$ |
0.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares |
|
|
|
|
|
|
|
|
|
|
|
|
57,600 |
|
|
Three Months Ended |
|
June 30, 2021 |
|
Pre-Tax |
|
Tax Impact |
|
After-Tax |
|
Per Share Impact |
GAAP net income |
$ |
6,865 |
|
|
$ |
(1,949 |
) |
|
$ |
4,916 |
|
|
$ |
0.09 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles |
|
10,631 |
|
|
|
(2,640 |
) |
|
|
7,991 |
|
|
|
0.14 |
|
Inventory write-off (a) |
|
1,620 |
|
|
|
(202 |
) |
|
|
1,418 |
|
|
|
0.02 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration expense |
|
1,805 |
|
|
|
6 |
|
|
|
1,811 |
|
|
|
0.03 |
|
Impairment charges |
|
4,283 |
|
|
|
(481 |
) |
|
|
3,802 |
|
|
|
0.07 |
|
Amortization of intangibles |
|
1,788 |
|
|
|
(448 |
) |
|
|
1,340 |
|
|
|
0.02 |
|
Performance-based share-based compensation (b) |
|
1,343 |
|
|
|
(168 |
) |
|
|
1,175 |
|
|
|
0.02 |
|
Corporate transformation and restructuring (c) |
|
7,316 |
|
|
|
(1,816 |
) |
|
|
5,500 |
|
|
|
0.10 |
|
Acquisition-related |
|
826 |
|
|
|
(205 |
) |
|
|
621 |
|
|
|
0.01 |
|
Medical Device Regulation expenses (d) |
|
1,013 |
|
|
|
(251 |
) |
|
|
762 |
|
|
|
0.01 |
|
Other (e) |
|
6,236 |
|
|
|
(355 |
) |
|
|
5,881 |
|
|
|
0.10 |
|
Other (Income) Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of long-term debt issuance costs |
|
151 |
|
|
|
(37 |
) |
|
|
114 |
|
|
|
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income |
$ |
43,877 |
|
|
$ |
(8,546 |
) |
|
$ |
35,331 |
|
|
$ |
0.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares |
|
|
|
|
|
|
|
|
|
|
|
|
57,277 |
|
_________________________ |
Note: Certain per share impacts may not sum to totals due to
rounding. |
|
Reconciliation of GAAP Net Income to
Non-GAAP Net Income(Unaudited; in thousands except per
share amounts)
|
Six Months Ended |
|
June 30, 2022 |
|
Pre-Tax |
|
Tax Impact |
|
After-Tax |
|
Per Share Impact |
GAAP net income |
$ |
34,872 |
|
|
$ |
(9,029 |
) |
|
$ |
25,843 |
|
|
$ |
0.45 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles |
|
21,052 |
|
|
|
(5,162 |
) |
|
|
15,890 |
|
|
|
0.28 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration expense |
|
3,787 |
|
|
|
(17 |
) |
|
|
3,770 |
|
|
|
0.07 |
|
Impairment charges |
|
1,672 |
|
|
|
(318 |
) |
|
|
1,354 |
|
|
|
0.02 |
|
Amortization of intangibles |
|
3,195 |
|
|
|
(792 |
) |
|
|
2,403 |
|
|
|
0.04 |
|
Performance-based share-based compensation (b) |
|
3,001 |
|
|
|
(343 |
) |
|
|
2,658 |
|
|
|
0.05 |
|
Corporate transformation and restructuring (c) |
|
11,897 |
|
|
|
(2,906 |
) |
|
|
8,991 |
|
|
|
0.16 |
|
Acquisition-related |
|
1,234 |
|
|
|
(302 |
) |
|
|
932 |
|
|
|
0.02 |
|
Medical Device Regulation expenses (d) |
|
4,578 |
|
|
|
(1,121 |
) |
|
|
3,457 |
|
|
|
0.06 |
|
Other (e) |
|
7,729 |
|
|
|
(1,835 |
) |
|
|
5,894 |
|
|
|
0.10 |
|
Other (Income) Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of long-term debt issuance costs |
|
302 |
|
|
|
(74 |
) |
|
|
228 |
|
|
|
0.00 |
|
Loss on disposal of business unit |
|
1,255 |
|
|
|
— |
|
|
|
1,255 |
|
|
|
0.02 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income |
$ |
94,574 |
|
|
$ |
(21,899 |
) |
|
$ |
72,675 |
|
|
$ |
1.26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares |
|
|
|
|
|
|
|
|
|
|
|
|
57,565 |
|
|
Six Months Ended |
|
June 30, 2021 |
|
Pre-Tax |
|
Tax Impact |
|
After-Tax |
|
Per Share Impact |
GAAP net income |
$ |
19,559 |
|
|
$ |
(3,685 |
) |
|
$ |
15,874 |
|
|
$ |
0.28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles |
|
21,310 |
|
|
|
(5,292 |
) |
|
|
16,018 |
|
|
|
0.28 |
|
Inventory write-off (a) |
|
1,620 |
|
|
|
(202 |
) |
|
|
1,418 |
|
|
|
0.02 |
|
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration expense |
|
2,207 |
|
|
|
14 |
|
|
|
2,221 |
|
|
|
0.04 |
|
Impairment charges |
|
4,283 |
|
|
|
(481 |
) |
|
|
3,802 |
|
|
|
0.07 |
|
Amortization of intangibles |
|
3,604 |
|
|
|
(902 |
) |
|
|
2,702 |
|
|
|
0.05 |
|
Performance-based share-based compensation (b) |
|
2,359 |
|
|
|
(287 |
) |
|
|
2,072 |
|
|
|
0.04 |
|
Corporate transformation and restructuring (c) |
|
12,761 |
|
|
|
(3,162 |
) |
|
|
9,599 |
|
|
|
0.17 |
|
Acquisition-related |
|
5,608 |
|
|
|
(1,390 |
) |
|
|
4,218 |
|
|
|
0.07 |
|
Medical Device Regulation expenses (d) |
|
1,394 |
|
|
|
(346 |
) |
|
|
1,048 |
|
|
|
0.02 |
|
Other (e) |
|
6,375 |
|
|
|
(389 |
) |
|
|
5,986 |
|
|
|
0.10 |
|
Other (Income) Expense |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of long-term debt issuance costs |
|
302 |
|
|
|
(75 |
) |
|
|
227 |
|
|
|
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP net income |
$ |
81,382 |
|
|
$ |
(16,197 |
) |
|
$ |
65,185 |
|
|
$ |
1.14 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted shares |
|
|
|
|
|
|
|
|
|
|
|
|
57,128 |
|
_________________________ |
Note: Certain per share impacts may not sum to totals due to
rounding. |
|
Reconciliation of Reported Operating Income to Non-GAAP
Operating Income(Unaudited; in thousands except
percentages)
|
Three Months Ended |
|
Three Months Ended |
|
Six Months Ended |
|
Six Months Ended |
|
June 30, 2022 |
|
June 30, 2021 |
|
June 30, 2022 |
|
June 30, 2021 |
|
Amounts |
|
% Sales |
|
Amounts |
|
% Sales |
|
Amounts |
|
% Sales |
|
Amounts |
|
% Sales |
Net Sales as Reported |
$ |
294,976 |
|
|
|
|
|
$ |
280,325 |
|
|
|
|
|
$ |
570,391 |
|
|
|
|
|
$ |
529,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP Operating Income |
|
23,256 |
|
|
7.9 |
% |
|
|
8,895 |
|
|
3.2 |
% |
|
|
38,489 |
|
|
6.7 |
% |
|
|
23,089 |
|
|
4.4 |
% |
Cost of Sales |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles |
|
10,500 |
|
|
3.6 |
% |
|
|
10,631 |
|
|
3.8 |
% |
|
|
21,052 |
|
|
3.7 |
% |
|
|
21,310 |
|
|
4.0 |
% |
Inventory write-off (a) |
|
— |
|
|
— |
|
|
|
1,620 |
|
|
0.6 |
% |
|
|
— |
|
|
— |
|
|
|
1,620 |
|
|
0.3 |
% |
Operating Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contingent consideration expense |
|
1,187 |
|
|
0.4 |
% |
|
|
1,805 |
|
|
0.6 |
% |
|
|
3,787 |
|
|
0.7 |
% |
|
|
2,207 |
|
|
0.4 |
% |
Impairment charges |
|
— |
|
|
— |
|
|
|
4,283 |
|
|
1.5 |
% |
|
|
1,672 |
|
|
0.3 |
% |
|
|
4,283 |
|
|
0.8 |
% |
Amortization of intangibles |
|
1,588 |
|
|
0.5 |
% |
|
|
1,788 |
|
|
0.6 |
% |
|
|
3,195 |
|
|
0.6 |
% |
|
|
3,604 |
|
|
0.7 |
% |
Performance-based share-based compensation (b) |
|
1,756 |
|
|
0.6 |
% |
|
|
1,343 |
|
|
0.5 |
% |
|
|
3,001 |
|
|
0.5 |
% |
|
|
2,359 |
|
|
0.4 |
% |
Corporate transformation and restructuring (c) |
|
6,819 |
|
|
2.3 |
% |
|
|
7,316 |
|
|
2.6 |
% |
|
|
11,897 |
|
|
2.1 |
% |
|
|
12,761 |
|
|
2.4 |
% |
Acquisition-related |
|
1,006 |
|
|
0.3 |
% |
|
|
826 |
|
|
0.3 |
% |
|
|
1,234 |
|
|
0.2 |
% |
|
|
5,608 |
|
|
1.1 |
% |
Medical Device Regulation expenses (d) |
|
2,659 |
|
|
0.9 |
% |
|
|
1,013 |
|
|
0.4 |
% |
|
|
4,578 |
|
|
0.8 |
% |
|
|
1,394 |
|
|
0.3 |
% |
Other (e) |
|
7,645 |
|
|
2.6 |
% |
|
|
6,236 |
|
|
2.2 |
% |
|
|
7,729 |
|
|
1.4 |
% |
|
|
6,375 |
|
|
1.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Operating Income |
$ |
56,416 |
|
|
19.1 |
% |
|
$ |
45,756 |
|
|
16.3 |
% |
|
$ |
96,634 |
|
|
16.9 |
% |
|
$ |
84,610 |
|
|
16.0 |
% |
_________________________ |
Note: Certain percentages may not sum to totals due to
rounding |
|
|
a) |
Represents the write-off of inventory related to the divestiture or
exit of certain businesses or product lines. |
b) |
Represents performance-based share-based compensation expense,
including stock-settled and cash-settled awards. |
c) |
Includes consulting expenses related to the Foundations for Growth
Program and other transformation costs, including severance related
to corporate initiatives. |
d) |
Represents incremental expenses incurred to comply with the Medical
Device Regulation (“MDR”) in Europe. |
e) |
The 2022 periods include acquired in-process research and
development charges of $6.7 million and legal costs associated with
a shareholder derivative proceeding. The 2021 periods include
accrued contract termination costs of $6.1 million to renegotiate
certain terms of an acquisition agreement and costs to comply with
Merit’s corporate integrity agreement with the U.S. Department of
Justice. |
|
|
Reconciliation of Reported Revenue to
Constant Currency Revenue (Non-GAAP), and Constant Currency
Revenue, Organic (Non-GAAP)(Unaudited; in thousands
except percentages)
|
|
|
|
Three Months Ended |
|
|
|
|
Six Months Ended |
|
|
|
|
June 30, |
|
|
|
|
June 30, |
|
% Change |
|
|
2022 |
|
2021 |
|
% Change |
|
|
2022 |
|
2021 |
Reported Revenue |
5.2 |
% |
|
$ |
294,976 |
|
|
$ |
280,325 |
|
|
7.8 |
% |
|
$ |
570,391 |
|
|
$ |
529,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Add: Impact of foreign
exchange |
|
|
|
|
6,071 |
|
|
|
— |
|
|
|
|
|
|
7,788 |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Revenue
(a) |
7.4 |
% |
|
$ |
301,047 |
|
|
$ |
280,325 |
|
|
9.2 |
% |
|
$ |
578,179 |
|
|
$ |
529,238 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Less: Revenue from certain
acquisitions |
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Constant Currency Revenue,
Organic (a) |
7.4 |
% |
|
$ |
301,047 |
|
|
$ |
280,325 |
|
|
9.2 |
% |
|
$ |
578,179 |
|
|
$ |
529,238 |
|
_________________________ |
(a) |
A non-GAAP financial measure. For a definition of this and other
non-GAAP financial measures, see the section of this release
entitled “Non-GAAP Financial Measures.” |
|
|
Reconciliation of Reported Gross Margin
to Non-GAAP Gross Margin (Non-GAAP)(Unaudited; as
a percentage of reported revenue)
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
|
|
Six Months Ended |
|
|
June 30, |
|
|
June 30, |
|
|
2022 |
|
|
2021 |
|
|
2022 |
|
|
2021 |
|
Reported Gross Margin |
45.8 |
% |
|
44.3 |
% |
|
44.9 |
% |
|
44.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Add back impact of: |
|
|
|
|
|
|
|
|
|
|
|
Amortization of intangibles |
3.6 |
% |
|
3.8 |
% |
|
3.7 |
% |
|
4.0 |
% |
Inventory write-off (a) |
— |
|
|
0.6 |
% |
|
— |
% |
|
0.3 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Gross Margin |
49.3 |
% |
|
48.7 |
% |
|
48.6 |
% |
|
48.9 |
% |
_________________________ |
Note: Certain percentages may not sum to totals due to
rounding |
|
|
|
|
(a) |
Represents the write-off of inventory related to the divestiture or
exit of certain businesses or product lines. |
|
|
|
ABOUT MERIT
Founded in 1987, Merit Medical
Systems, Inc. is a leading global manufacturer and marketer of
healthcare technology. Merit serves client hospitals worldwide
with a domestic and international sales force and clinical support
team of approximately 600 individuals. Merit employs
approximately 6,500 people worldwide with facilities in South
Jordan, Utah; Pearland, Texas; Richmond, Virginia; Aliso Viejo,
California; Maastricht and Venlo, The Netherlands; Paris, France;
Galway, Ireland; Beijing, China; Tijuana, Mexico; Joinville,
Brazil; Ontario, Canada; Melbourne, Australia; Tokyo, Japan;
Reading, United Kingdom; Johannesburg, South Africa; and
Singapore.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
Statements contained in this release which are
not purely historical, including, without limitation, statements
regarding Merit’s forecasted plans, net sales, net income (GAAP and
non-GAAP), operating income and margin (GAAP and non-GAAP), gross
margin (GAAP and non-GAAP), earnings per share (GAAP and non-GAAP),
free cash flow, and other financial measures, future growth and
profit expectations or forecasted economic conditions, or the
implementation of, and results achieved through, Merit’s
Foundations for Growth Program or other expense reduction
initiatives, or the development and commercialization of new
products, are forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, and are
subject to risks and uncertainties such as those described in
Merit’s Annual Report on Form 10-K for the year ended December 31,
2021 (the “2021 Annual Report”) and other filings with the SEC.
Such risks and uncertainties include inherent risks and
uncertainties relating to Merit’s internal models or the
projections in this release; disruptions in Merit’s supply chain,
manufacturing or sterilization processes; reduced availability of,
and price increases associated with, commodity components; adverse
changes in freight, shipping and transportation expenses; risks
relating to Merit’s potential inability to successfully manage
growth through acquisitions generally, including the inability to
effectively integrate acquired operations or products or
commercialize technology developed internally or acquired through
completed, proposed or future transactions; negative changes in
economic and industry conditions in the United States or other
countries, including inflation; fluctuations in interest or foreign
currency exchange rates; risks and uncertainties associated with
Merit’s information technology systems, including the potential for
breaches of security and evolving regulations regarding privacy and
data protection; governmental scrutiny and regulation of the
medical device industry, including governmental inquiries,
investigations and proceedings involving Merit; litigation and
other judicial proceedings affecting Merit; restrictions on Merit’s
liquidity or business operations resulting from its debt
agreements; infringement of Merit’s technology or the assertion
that Merit’s technology infringes the rights of other parties;
product recalls and product liability claims; changes in customer
purchasing patterns or the mix of products Merit sells;
expenditures relating to research, development, testing and
regulatory approval or clearance of Merit’s products and risks that
such products may not be developed successfully or approved for
commercial use; the potential of fines, penalties or other adverse
consequences if Merit’s employees or agents violate the U.S.
Foreign Corrupt Practices Act or other laws or regulations; laws
and regulations targeting fraud and abuse in the healthcare
industry; potential for significant adverse changes in governing
regulations, including reforms to the procedures for approval or
clearance of Merit’s products by the U.S. Food & Drug
Administration or comparable regulatory authorities in other
jurisdictions; changes in tax laws and regulations in the United
States or other countries; termination of relationships with
Merit’s suppliers, or failure of such suppliers to perform; risks
and uncertainties associated with the COVID-19 pandemic and Merit’s
response thereto; concentration of a substantial portion of Merit’s
revenues among a few products and procedures; development of new
products and technology that could render Merit’s existing or
future products obsolete; market acceptance of new products;
volatility in the market price of Merit’s common stock;
modification or limitation of governmental or private insurance
reimbursement policies; changes in healthcare policies or markets
related to healthcare reform initiatives; failure to comply with
applicable environmental laws; changes in key personnel; work
stoppage or transportation risks; failure to introduce products in
a timely fashion; price and product competition; availability of
labor and materials; fluctuations in and obsolescence of inventory;
and other factors referenced in the 2021 Annual Report and other
materials filed with the SEC. All subsequent forward-looking
statements attributable to Merit or persons acting on its behalf
are expressly qualified in their entirety by these cautionary
statements. Actual results will likely differ, and may differ
materially, from anticipated results. Financial estimates are
subject to change and are not intended to be relied upon as
predictions of future operating results. Those estimates and all
other forward-looking statements included in this document are made
only as of the date of this document, and except as otherwise
required by applicable law, Merit assumes no obligation to update
or disclose revisions to estimates and all other forward-looking
statements.
TRADEMARKS
Unless noted otherwise, trademarks and
registered trademarks used in this release are the property of
Merit Medical Systems, Inc. and its subsidiaries in the United
States and other jurisdictions.
Contacts: |
|
|
|
PR/Media Inquiries: |
Investor Inquiries: |
Teresa Johnson |
Mike Piccinino, CFA, IRC |
Merit Medical |
Westwicke - ICR |
+1-801-208-4295 |
+1-443-213-0509 |
tjohnson@merit.com |
mike.piccinino@westwicke.com |
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