Skip to content
    MMSI
    Earnings call· Dec 2025(Q4 FY25)

    MERIT MEDICAL SYSTEMS Q4 FY25 earnings call MMSI

    Feb 24, 2026 Source

    Executive summary

    Merit Medical Systems Q4 FY25 — Record Gross Margin and Strong Free Cash Flow

    Merit Medical Systems delivered a strong Q4 FY25, surpassing revenue and profitability expectations with record gross margins and robust free cash flow generation. The company provided solid FY26 guidance, aligning with its multi-year growth initiatives, while navigating headwinds from OEM destocking, China's VBP, and tariff impacts. The new CEO is focused on strategic planning around product platforms and disciplined M&A to drive future growth.

    Highlights

    5

    • Total revenue of $393.9 million, up 11% YoY GAAP and 10% YoY constant currency, exceeding high end of expectations.

    • Non-GAAP operating margin increased 138 bps YoY to 21%, representing the highest quarterly gross margin in company's history.

    • Non-GAAP EPS grew 12% YoY, exceeding the high end of expectations.

    • Generated $74 million of free cash flow in Q4, a 13% increase YoY and a quarterly record.

    • Full-year 2025 constant currency revenue growth of 11%, non-GAAP operating margin of 20.3%, and free cash flow of $216 million, all exceeding original guidance.

    Concerns

    5

    • OEM product sales decreased 15% in Q4, significantly lower than expected, due to OUS macro environment and U.S. customer inventory destocking.

    • DualCap product line divestiture represents an estimated 140 bps headwind to total constant currency revenue growth in 2026.

    • Tariffs were a material headwind to gross margin in Q4, representing a 112 bps incremental impact YoY.

    • Q1 FY26 organic constant currency revenue growth expected to be 2% to 3%, impacted by continued OEM softness, China VBP, and supply chain challenges.

    • Q1 FY26 non-GAAP operating margins expected to be 16.7% to 18.5%, down from 19.3% last year, due to tariff impact and higher expense base on smaller revenue.

    Guidance & targets

    27
    CategoryTargetConfidence
    Total GAAP Net Revenue Growth
    6% to 8% year-over-year
    high materiality
    High
    Total Constant Currency Net Revenue Growth
    5% to 7% year-over-year
    high materiality
    High
    Total Constant Currency Organic Net Revenue Growth
    4.5% to 6% year-over-year
    high materiality
    High
    US Constant Currency Growth
    6% to 7%
    medium materiality
    High
    International Constant Currency Growth
    5% to 6%
    medium materiality
    High
    Inorganic Revenue Contributions (BioLife and C2)
    $13 million to $15 million
    medium materiality
    High
    Rhapsody CIE US Revenue
    $7 million
    medium materiality
    High
    DualCap Product Line Divestiture Revenue Headwind
    140 basis points
    medium materiality
    High
    Non-GAAP Diluted EPS
    $4.01 to $4.15
    high materiality
    High
    Non-GAAP Operating Margin Expansion
    36 to 76 basis points year-over-year
    high materiality
    High
    Tariff Impact on Non-GAAP EPS
    $0.07 incremental impact
    medium materiality
    High
    Convertible Debt Dilution on Non-GAAP EPS
    $0.01 incremental impact
    low materiality
    High
    Non-GAAP Operating Margins
    20.6% to 21%
    high materiality
    High
    Non-GAAP Interest and Other Expense Net
    $8 million
    low materiality
    High
    Non-GAAP Tax Rate
    23%
    medium materiality
    High
    Diluted Shares Outstanding
    62.2 million
    low materiality
    High
    Free Cash Flow
    at least $200 million
    high materiality
    High
    Q1 FY26 Total Revenue
    $375 million to $380 million
    medium materiality
    High
    Q1 FY26 US Sales Growth
    6%
    medium materiality
    High
    Q1 FY26 International Sales Growth
    2%
    medium materiality
    High
    Q1 FY26 Inorganic Revenue
    $6 million to $7 million
    low materiality
    High
    Q1 FY26 Organic Constant Currency Revenue Growth
    2% to 3%
    high materiality
    High
    Q1 FY26 Non-GAAP Operating Margins
    16.7% to 18.5%
    high materiality
    High
    Q1 FY26 Non-GAAP EPS
    $0.77 to $0.87
    high materiality
    High
    CGI Organic Constant Currency Revenue CAGR
    5% to 7%
    high materiality
    High
    CGI Non-GAAP Operating Margin
    20% to 22%
    high materiality
    High
    CGI Cumulative Free Cash Flow Generation
    more than $400 million
    high materiality
    High

    Segment performance

    11
    SegmentRevenueYoYQoQMargin
    Cardiovascular
    Primary driver of total revenue growth in Q4, exceeding high end of expectations.
    		—9%——
    Endoscopy
    Came in at the midpoint of expectations.
    		—15%——
    Cardiac Intervention
    Largest driver of Cardiovascular segment growth, well above high-end organic growth expectations.
    Organic growth (excluding acquired products): 12%Organic growth drivers: EP, CRM, angiography, and access products (60% of total CI organic growth)EP/CRM organic growth drivers: Prelude SNAP, Ventrax Delivery SystemAngiography growth driver: High teens growth in sales of wiresAccess products organic growth drivers: Prelude radial sheath, Prelude wave hydrophilic sheath introducer with SNAP Fix technology
    		—21%——
    Peripheral Intervention
    Largest driver of organic cardiovascular segment growth, exceeding high end of growth expectations.
    Growth drivers: Radar localization and delivery systems (increased >25% YoY, 45% of total PI growth)Broad-based strength categories: Embolotherapy, drainage, angiography, and access products (10% growth, >50% of total PI business)
    		—13%——
    Custom Procedural Solutions
    Above the high end of expectations.
    Growth drivers: High teens growth in kit salesOffset by: High single-digit declines in critical care products (impacted by DualCap divestiture)
    		—4%——
    OEM
    Significantly lower than expected low single-digit growth in Q4. Full-year 2025 performance was slightly better than original guidance.
    OUS sales: Impacted by macro environmentU.S. sales: High single-digit decrease YoY (vs low single-digit growth expected), due to customer inventory destockingFY25 constant currency growth: 2%
    		—-15%——
    US
    Sales results were at the high end of organic growth expectations.
    Organic constant currency growth: 8%
    		—12%——
    International
    Sales results were at the high end of organic growth expectations.
    Organic constant currency growth: 4%
    		—6%——
    APAC
    Constant currency growth: ~3%
    		————
    EMEA
    Constant currency growth: ~12%
    		————
    Rest of World
    Constant currency growth: ~4.5%
    		————

    Operational metrics

    32
    Non-GAAP Operating Margin
    21%Up 138 bps YoY
    Q4 FY25
    Gross Margin
    54.5%Up 103 bps YoY
    Q4 FY25
    Tariff Impact on Gross Margin
    112 bpsIncremental impact YoY
    Q4 FY25

    Tariffs were a material headwind to year-over-year improvement in gross margin.

    Non-GAAP Operating Income
    $82.7 millionUp 19% YoY
    Q4 FY25
    Non-GAAP Net Income
    $62.5 millionvs $56.3 million Q4 FY24
    Q4 FY25
    Non-GAAP EPS
    $1.04vs $0.93 Q4 FY24
    Q4 FY25
    Total Revenue
    $1.5 billion
    FY25
    Constant Currency Revenue Growth
    11%
    FY25

    Exceeded the high end of original guidance.

    Organic Growth
    7%
    FY25
    Inorganic Revenue from Acquisitions
    $62 million
    FY25
    Non-GAAP Operating Profit Growth
    19%YoY
    FY25
    Non-GAAP Net Income Growth
    13%YoY
    FY25
    Non-GAAP EPS Growth
    11%YoY
    FY25
    Capital Expenditures
    $30 million
    FY25
    Cash and Cash Equivalents
    $446.4 millionvs $376.7 million as of 2024-12-31
    2025-12-31
    Total Debt Obligations
    $747.5 millionvs $747.5 million as of 2024-12-31
    2025-12-31
    Available Borrowing Capacity
    $697 millionvs $697 million as of 2024-12-31
    2025-12-31
    Net Leverage Ratio
    1.6x
    2025-12-31
    Other Expense Net
    $1.3 millionvs $1.1 million Q4 FY24
    Q4 FY25

    Change driven primarily by lower interest income associated with lower average cash balances, offset partially by lower interest expense.

    Foundational Products Revenue Mix
    2/3
    Current

    Comprise about two-thirds of total revenue.

    Foundational Products CAGR
    6%
    Last 3 years
    Therapeutic Products Revenue Mix
    1/3
    Current

    Comprise about one-third of total revenue.

    Therapeutic Products CAGR
    19%
    Last 3 years
    New Products Contribution to Growth
    10%
    FY25

    Approximately 10% of 2025 revenue growth in CI and PI came from new products introduced in 2025.

    R&D Expense as % of Revenue
    6%
    FY26

    Expected to be about 6% for FY26.

    Rhapsody Market Penetration (Non-Hospital Setting)
    Low to mid-single digits
    First full year of commercialization (FY26)

    Implied by the $7 million revenue estimate for Rhapsody CIE in FY26.

    Rhapsody Market Data (Clarivate)
    100,000
    2023

    Market data providers like Clarivate have been referenced for Rhapsody market sizing.

    Rhapsody Average Selling Price (Clarivate)
    $2,400
    Current

    Company will not comment on its specific pricing but references Clarivate's reported ASP.

    PI Growth Drivers (Radar localization & delivery systems)
    >25%YoY
    Q4 FY25
    China Sales Growth
    -2%YoY
    FY25

    Came in right around expectations, impacted by volume-based purchasing.

    Q1 FY26 Tariff Impact on Gross Margin
    80 bps
    Q1 FY26

    Tariffs did not start until April last year, creating a comparative impact in Q1 FY26.

    OEM Business Normalized Growth Profile
    Mid-to-high single digits
    Annually

    Despite quarter-to-quarter fluctuations, this remains the appropriate normalized growth profile.

    Industry KPIs

    8
    MetricValueDetails
    Tariff impact112 bpsbps
    Pricing realized price—
    New product launch ramp$7 millionUSD
    Procedure volume growth—
    FCF conversion leverage guidance1.6x
    Segment franchise organic growth6.6%%
    Sales force commercial capacity build—
    Indicated addressable patient population77,000procedures

    Deals & partnerships

    1
    Not statedSale of the DualCap product line, which was non-core to the business.$28 million

    The DualCap product line was part of the critical care offering, reported in the Custom Procedural Solutions revenue category.

    Risks & headwinds

    7
    OEM Sales Decline and DestockingQ4 FY25, continuing into Q1 FY26

    Q4 OEM sales decreased 15% YoY; U.S. OEM sales decreased in high single digits YoY. FY25 OEM sales up 2% CC YoY.

    Mitigation: Management believes the OEM business remains healthy with a normalized mid-to-high single-digit annual growth profile, expecting resolution of destocking and OUS macro impacts over time.

    Tariff Impact and UncertaintyOngoing, FY26

    Material headwind to gross margin in Q4 FY25 (112 bps incremental impact YoY). Expected $15 million ($0.19 per share) impact in FY26, up from $9 million ($0.12 per share) in the last 8 months of FY25. Q1 FY26 gross margin impact of ~80 bps or $3 million.

    Mitigation: The FY26 guidance is based on tariff policies in place prior to the U.S. Supreme Court decision on February 20, with management acknowledging uncertainty regarding new/additional tariffs or retaliatory actions.

    DualCap Divestiture Revenue HeadwindFY26

    Estimated 140 basis point headwind to total constant currency revenue growth in 2026 (240 basis points for U.S.).

    Mitigation: The divestiture is strategic, aimed at freeing up manufacturing capacity and sales/marketing resources to invest in higher-margin, higher-growth products.

    China Macro Environment and Volume-Based Purchasing (VBP)Ongoing, particularly Q1 FY26

    China sales were down ~2% YoY in FY25. Expected to contribute to softer Q1 FY26 international sales growth (2% CC YoY).

    Mitigation: Management continues to deal with VBP impacts, noting that volume in China continued to be up year-over-year. Expects to navigate these challenges.

    Supply Chain ChallengesQ1 FY26, expected to resolve through 2026

    Not quantified, but cited as a primary driver of softer Q1 FY26 organic growth.

    Mitigation: Manufacturing and operations groups are working to resolve issues as quickly as possible, including vendor consolidations.

    Competitive Market for RhapsodyOngoing

    Not quantified.

    Mitigation: Management acknowledges Rhapsody operates in a competitive space and competitors do not stand still, but believes the product is high-performing and the market supports a third player.

    Convertible Debt DilutionFY26

    Estimated incremental dilution of $0.01 per share on non-GAAP EPS in FY26 (total $0.04 per share) due to approximately 500,000 incremental diluted shares.

    Mitigation: Factored into FY26 EPS guidance.

    What to watch in Q1 FY26

    5

    Q1 FY26 Organic Constant Currency Revenue Growth

    Q1 FY26
    Current6.6% (Q4 FY25)
    Target2-3%

    Why it matters

    This metric will indicate the immediate impact of OEM softness, China VBP, and supply chain issues on the company's underlying business momentum.

    Excluding inorganic contributions, our first quarter total revenue is expected to increase in the range of approximately 2% to 3% on an organic constant currency basis.

    Q&A highlights

    6

    What are the additional drivers for gross margin improvement, given the significant progress despite tariffs?

    Management attributes continued gross margin improvement to a focus on product and geographic mix, new R&D projects, strategic acquisitions, SKU rationalization (including divestitures like DualCap), pricing discipline, cost management, and efficient manufacturing in lower-cost areas.

    “It's just more of the same for us. So continue to be focused on mix, whether that's new R&D projects or acquisitions, pushing the geography kind of areas too. I think you saw the divestiture of DualCap. That was a low-margin product.”

    asked by Jason Bednar · answered by Raul Parra

    2 min read6 chapters

    Detailed Narrative

    01

    Q4 FY25 Performance Highlights

    Merit Medical reported strong Q4 FY25 results, with total revenue of $393.9 million, an 11% GAAP and 10% constant currency increase year-over-year, exceeding expectations. Non-GAAP operating margin reached a record 21%, up 138 basis points, and non-GAAP EPS grew 12%. The company also generated a record $74 million in free cash flow, up 13% year-over-year.

    02

    Full Year 2025 Achievements

    For the full year 2025, Merit delivered 11% constant currency revenue growth, a 20.3% non-GAAP operating margin (up 131 bps), and nearly $216 million in free cash flow, all surpassing the high end of original guidance despite a dynamic global macro environment. This performance reflects strong execution towards multi-year financial targets.

    03

    Strategic Direction Under New CEO

    CEO Martha Aronson, 4 months into her role, has focused on a global listening tour, establishing a new executive leadership team and global operating committee, and solidifying a platform structure. The company is streamlining internal planning and reporting to align with external communication, aiming to clarify growth drivers for investors.

    04

    Product Portfolio Segmentation

    Merit's $1.5 billion revenue is globally diversified, with roughly 40% from outside the U.S. The portfolio is now categorized into "foundational products" (approximately two-thirds of total revenue, 6% compound annual growth rate over the last 3 years) and "therapeutic products" (approximately one-third of total revenue, 19% compound annual growth rate over the last 3 years, with 11% organic CAGR). This new segmentation will guide future strategy and R&D efforts.

    05

    Divestiture and Operational Efficiency

    The company divested its non-core DualCap product line for $28 million, effective February 17, 2026. This move is expected to free up manufacturing capacity and sales/marketing resources for higher-margin, higher-growth products, despite creating a 140 basis point headwind to 2026 total constant currency revenue growth.

    06

    Rhapsody Commercialization and Outlook

    The Rhapsody CIE product is now 4 months into its new commercial strategy for non-hospital locations. While 2025 revenue expectations for Rhapsody were missed, the company has high confidence in achieving $7 million in U.S. Rhapsody revenue for FY26, implying low to mid-single-digit market penetration in the first full year under the new strategy.

    AI-generated summary of the company’s earnings call. Not investment advice.