Merit Medical Systems (MMSI) Q2 FY26 earnings call: guidance and Q&A

Has Merit Medical observed any slowdown in procedure volumes due to ACA subsidy changes, or does it anticipate any moderation in the second half of the year?

Management has not seen any slowdown in procedures based on regular checks with the field, and the strong Q2 results corroborate this observation.

“But we've been doing very regular checks with our field. And at this point, we have not seen a slowdown in procedures.”

asked by Jason Bednar · answered by Martha Aronson

Why is the Q3 EPS guidance range wider than typical, given the strong Q2 performance and the usual step-down from Q2 to Q3?

The wider range is primarily due to the ever-evolving and unpredictable nature of tariffs, which introduces significant variables. The company remains confident in the back half of the year but opted for a wider range for coverage.

“It's just so hard to kind of predict what's going to happen with that and when they're going to be in place, with the Section 122 still out there, obviously, with NAFTA -- USMCA, sorry. There's just a lot of variables. And we thought just in this environment, with that being out there, let's just go a little wider.”

asked by Jason Bednar · answered by Raul Parra

What drove the 9% organic growth in Q2, and is this level of growth sustainable? Was it catch-up from Q1 or true underlying demand?

The growth was broad-based, driven by a 15% uplift in the OEM business, strong performance in Vascular Intervention, Access, Cardiac Therapies, and Endoscopy platforms. It reflects true underlying demand, with OEM expected to normalize to mid-to-high single digits annually.

“So that was certainly one of the drivers. I think we also saw our Access platform as well as our VI or Vascular Intervention platforms on the Foundational side, along with Cardiac Therapies and Endoscopy having very strong quarters on the Therapeutic side. So really pretty broad-based results for the second quarter.”

asked by Lilia-Celine Lozada · answered by Martha Aronson

Given previous expectations for continued organic growth ramp in H2, why is Q3 organic growth guided to step down? Is it conservatism or have improvements already been seen?

The step-down in Q3 guidance is primarily due to typical seasonality, where Q3 is usually a softer quarter for revenue as doctors and patients take time off. It is not due to a lack of confidence in business performance.

“There is a level of seasonality in our business with Q3 usually having a step down. Now that wasn't true last year, but most years it is. I'll always just highlight that Q1 and Q3 are typically our softer quarters from a revenue standpoint. Q2 and Q4 are our strongest.”

asked by Lilia-Celine Lozada · answered by Raul Parra

Despite tariffs, View Point dilution, and convert dilution, EPS is growing faster than the top line. What is driving this operating leverage?

Operating leverage is broad-based, stemming from strong sales execution, progress on the CGI program (especially gross margin improvement), and operational efficiencies. These include strategic manufacturing transfers, automation, labor efficiencies, and supply chain optimization to reduce freight costs. The company is hyper-focused on protecting gross margin and making controlled investments.

“I mean it's obviously broad-based, just like our revenue beat, if I'm just being honest. I think when you look at, obviously, the performance that our sales team has put up, it's excellent. I mean, these guys have been delivering for a better part of 30-plus years.”

asked by Lei Huang · answered by Raul Parra

What are the clinical benefits of SCOUT MD, and are there price or margin benefits?

The main clinical benefit of SCOUT MD is its 4 distinct reflector shapes, making them easily visible on x-ray. Combined with OneMark, it offers a comprehensive breast care solution. OneMark expands the market to lower-risk biopsies, while SCOUT MD is for advanced localization. There is price differentiation, and the sales team leverages their customer knowledge for optimal placement.

“So the main clinical benefit of SCOUT MD is that you have these 4 distinct shapes of the reflectors. So it makes it super easy to see these on x-ray. So that's really the primary advantage of SCOUT MD.”

asked by Aidan Lahey · answered by Martha Aronson

Why was guidance only raised by the beat, rather than more, if the underlying operating environment is strong?

The company's typical approach is to flow through the first-half beat and leave the back-half guidance unchanged. This is a consistent strategy, and they remain confident in their full-year guidance and CGI program completion.

“I mean that's just not our style, right? I mean I think we typically will take what we did this quarter, which is we take the first half beat, flow it through. And we typically just leave our back half unchanged and that's essentially what we did.”

asked by Aidan Lahey · answered by Raul Parra

As the company plans for 2027-2029, are there different or additional key metrics beyond revenue growth, operating margin, and free cash flow that management considers important for investors?

The management team is actively debating and discussing various metrics internally and with the Board, considering possibilities for the company's evolution. While it's too early to list specific new metrics, it's a very important part of the strategic discussion.

“We are talking about various metrics, right? We are in debate and discussion. And I'd say healthy debate and discussion within the management team. We have these discussions with our Board of Directors as well as we do think about what are the possibilities and what makes the most sense just given where we are in our evolution as a company.”

asked by Michael Petusky · answered by Martha Aronson