Merit Medical Earnings Call Highlights Growth Amid Headwinds

Merit Medical ((MMSI)) has held its Q1 earnings call. Read on for the main highlights of the call.

Merit Medical’s latest earnings call struck a cautiously upbeat tone, as management highlighted record first‑quarter margins, solid revenue and EPS beats, and robust cash generation. Executives also emphasized the strategic importance of recent acquisitions while acknowledging OEM weakness, tariff uncertainty, and near‑term margin pressure that temper the otherwise positive outlook.

Revenue Beat and Broad-Based Growth

Merit reported Q1 revenue of $381.9 million, up 7% year over year on a GAAP basis and 5% in constant currency, exceeding the high end of prior expectations. The performance was driven by strength across core businesses, confirming that demand remains resilient despite regional pockets of softness.

Organic Expansion Despite Portfolio Pruning

Organic constant‑currency growth reached 2.7% in the quarter, reflecting the drag from past divestitures. Excluding the DualCap business, which was sold, organic constant‑currency growth improved to 3.7%, underscoring healthier underlying momentum in the ongoing portfolio.

Record Margins and Higher Operating Profits

Non‑GAAP operating margin rose to 19.7%, an improvement of 47 basis points versus last year and the highest first‑quarter margin in the company’s history. Operating income climbed about 10% to $75.3 million, showing that cost discipline and mix improvements are offsetting inflation and other pressures.

EPS Growth and Stronger Free Cash Flow

Non‑GAAP EPS increased roughly 9% to $0.94, with net income advancing to $56.7 million from $52.9 million a year earlier. Free cash flow jumped 26% to $24.7 million, giving Merit more flexibility to fund acquisitions, absorb tariff costs, and manage balance‑sheet needs.

Strategic Acquisitions Bolster Therapeutic Portfolio

Management continued to lean into M&A, closing the $140 million purchase of Viewpoint Medical on April 1 to expand its oncology localization offerings under the OneMark brand. Earlier buys BioLife and C2 Cryo Balloon are already contributing and exceeded internal expectations, reinforcing the company’s thesis around high‑growth therapeutic adjacencies.

Long-Term Guidance Lifted on 2026 Outlook

Merit updated its 2026 view to GAAP net revenue growth of 6.3% to 7.8%, equivalent to 5.6% to 7.0% in constant currency after an expected FX tailwind. Non‑GAAP diluted EPS is now pegged at $4.10 to $4.15, up 5% to 8% year over year even after factoring in about $0.05 of dilution from the Viewpoint deal.

New Platform Model and Revenue Buckets

The company introduced a fresh reporting lens that splits the business into foundational and therapeutic product groups and formalized an eight‑platform operating model. Foundational lines, projected to be about two‑thirds of 2025 sales, carry a three‑year CAGR near 6%, while therapeutic products at roughly one‑third of sales have grown about 11% organically.

OEM Segment Weakness Weighs on Top Line

OEM revenue fell 14% year over year in Q1, coming in below what management had assumed when issuing prior guidance. The shortfall was tied to macro softness in Asia‑Pacific and inventory destocking in the U.S. linked to product transfers, creating a near‑term drag on overall growth.

Tariffs Create Margin Headwinds and Uncertainty

Tariffs shaved about $4.6 million off Q1 results, equating to roughly 120 basis points of gross margin pressure. Management currently assumes a roughly $15 million tariff hit over the next 12 months, or about $0.19 per share, but stressed that the ultimate impact remains uncertain given evolving reimbursement processes.

Divestiture Headwind to Future Revenue Growth

The sale of the DualCap business removed roughly $20 million from the 2025 revenue base, which will mathematically weigh on growth rates. Management estimates the move creates about a 130‑basis‑point headwind to constant‑currency revenue growth in 2026, even though it is aligned with portfolio focus.

Q2 Margin and EPS Guidance Signals Pressure

For the second quarter, Merit forecast non‑GAAP operating margin of 18.7% to 20.4%, down from 21.2% in the prior year as tariffs, mix, and integration spending bite. Non‑GAAP EPS is expected to land between $0.90 and $1.00 versus $1.10 a year ago, pointing to short‑term compression before benefits from growth and efficiency re‑emerge.

Regulatory Recall Managed, Financial Impact Minimal

A supply‑chain issue escalated into a Class I recall for a renal and cardiac product, Merit’s first such event since 2017. Management expects the product back on the market and characterized the financial impact as immaterial to the 2026 outlook, suggesting limited long‑term damage.

Inventory Build and Regional Softness in APAC

Inventory rose by about $20 million in the quarter as the company supported new acquisitions and rebuilt safety stock, positioning for future demand. At the same time, Asia‑Pacific, particularly China, remains soft, with China growth expected only in the low single digits amid some order timing challenges.

Acquisition Dilution and Integration Investment

The Viewpoint transaction required a $90 million cash payment at closing, with two additional $25 million payments to follow. Management expects Viewpoint to contribute $2 million to $4 million of revenue in 2026 and to be about $0.05 dilutive to non‑GAAP EPS as integration and ramp‑up costs are absorbed.

Guidance and Forward-Looking Outlook

For 2026, Merit is guiding to 5.6% to 7.0% constant‑currency revenue growth, with roughly $17 million to $20 million from acquisitions including Viewpoint and Rhapsody CIE U.S. sales. Organic constant‑currency growth is projected at about 4.5% to 6.0%, with foundational products in the mid‑single digits and therapeutic lines in the high‑single digits, supported by non‑GAAP EPS of $4.10 to $4.15 despite a projected $15 million tariff headwind.

Merit’s earnings call painted a picture of a company balancing solid execution with realistic recognition of external pressures and portfolio shifts. While OEM weakness, tariffs, and acquisition‑related dilution will weigh on the near term, management’s confidence in its platform strategy, expanding therapeutic portfolio, and upgraded long‑term guidance underpins a constructive medium‑term investment narrative.