Welcome to the Merit Medical Systems Fourth Quarter 2025 Earnings Conference Call. Please note that this conference call is being recorded and the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Martha Aronson, Merit Medical Systems' President and Chief Executive Officer.

Thank you, operator, and welcome, everyone. I'm joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer; and Brian Lloyd, our Chief Legal Officer and Corporate Secretary. Brian, would you please take us through the safe harbor statements, please?

Thank you, Martha. This presentation contains forward-looking statements that receive safe harbor protection under federal securities laws. Although we believe these forward-looking statements are based upon reasonable assumptions, they are subject to risks and uncertainties. The realization of any of these risks or uncertainties as well as extraordinary events or transactions impacting our company could cause actual results to differ materially from the expectations and projections expressed or implied by our forward-looking statements. In addition, any forward-looking statements represent our views only as of today, February 24, 2026, and should not be relied upon as representing our views as of any other date. We specifically disclaim any obligation to update such statements, except as required by applicable law. Please refer to the section entitled Cautionary Statement regarding Forward-Looking Statements in today's press release and presentation for important information regarding such statements. For a discussion of factors that could cause actual results to differ from these forward-looking statements, please also refer to our most recent filings with the SEC, which are available on our website. Our financial statements are prepared in accordance with accounting principles, which are generally accepted in the United States. However, we believe certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of our ongoing operations and can be useful for period-over-period comparisons of such operations. This presentation also contains certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in today's press release and presentation furnished to the SEC under Form 8-K. Please refer to the sections of our press release and presentation entitled non-GAAP Financial Measures for important information regarding non-GAAP financial measures discussed on this call. Readers should consider non-GAAP financial measures in addition to, not as a substitute for financial reporting measures prepared in accordance with GAAP. Please note that these calculations may not be comparable with similarly titled measures of other companies. Both today's press release and our presentation are available on the Investors page of our website. I will now turn the call back to Martha.

Thank you, Brian. Let me start with a brief agenda of what we plan to cover during our prepared remarks. I will begin with a brief summary of the fourth quarter and full year 2025 financial results. Then Raul will provide a more in-depth review of the quarterly and full year financial results as well as financial guidance for 2026, which we introduced in today's press release. I'll then provide some closing comments before opening the call for your questions. Beginning with a review of our fourth quarter results. We reported total revenue of $393.9 million, up 11% year-over-year on a GAAP basis and up 10% year-over-year on a constant currency basis. The constant currency revenue growth delivered in the fourth quarter exceeded the high end of the range of the growth expectations that we outlined on the Q3 2025 earnings call. Our constant currency growth in Q4 was driven by 6.6% organic constant currency growth in Q4, which modestly exceeded the high end of the range assumed in our guidance and contributions from our acquisitions, which also exceeded the high end of our expectations. With respect to the profitability performance in the fourth quarter, we delivered financial results that significantly exceeded expectations. Our non-GAAP operating margin increased 138 basis points year-over-year to 21%. The team delivered 12% growth in non-GAAP EPS, which exceeded the high end of expectations, and we generated $74 million of free cash flow, an increase of 13% year-over-year and a quarterly record for the company. The fourth quarter results reflect continued strong momentum in the business this year. I want to thank our 7,500 employees around the world for their commitment to achieving our annual goals in the midst of a meaningful leadership change during the second half of the year. For the full year 2025, the team delivered total constant currency revenue growth of 11%, a non-GAAP operating margin of 20.3%, representing a 131 basis point increase year-over-year and more than $215 million of free cash flow. These are impressive financial results on their own to be sure. But more importantly, each of these exceeded the high end of the original guidance range for 2025 provided on the fourth quarter 2024 call last February, despite the continued challenges related to the dynamic and uncertain global macro environment. Specifically, the high end of the original 2025 guidance called for constant currency revenue growth of 10%, non-GAAP operating margin of 19.7% and free cash flow of $150 million. This outstanding performance is a direct result of the team's strong execution and commitment to achieving the company's multiyear financial targets. We introduced financial guidance for 2026 in today's press release, which calls for solid constant currency growth, year-over-year non-GAAP operating margin expansion and strong free cash flow generation. The organization is aligned around our priorities for 2026, specifically, to drive strong execution around the globe and to successfully complete our continued growth initiatives program, which includes our previously disclosed financial targets for the 3-year period ending December 31, 2026. With that, I'll turn the call over to Raul for an in-depth review of our quarterly financial results and our financial guidance for 2026. Raul?

Thank you, Martha. I will start with a detailed review of our revenue results in the fourth quarter, beginning with the sales performance in each of our primary reportable product categories. Note, unless otherwise stated, all growth rates are approximated and presented on both year-over-year and constant currency basis. Fourth quarter total revenue growth of 10% was driven primarily by 9% growth in our Cardiovascular segment and, to a lesser extent, by 15% growth in our Endoscopy segment. Cardiovascular segment sales exceeded the high end of the expectations we outlined on our third quarter call, and Endoscopy sales came in at the midpoint of our expectations. Q4 total revenue results included approximately $10.8 million of inorganic revenue from our acquisitions of lead management products from Cook Medical, Biolife Delaware LLC and C2 CryoBalloon device from PENTAX of America. Excluding sales of acquired products, our total revenue growth on an organic constant currency basis was 6.6%, slightly better than the high end of our expectations in the fourth quarter. Turning to a review of our fourth quarter revenue results by product category. Cardiac Intervention product sales increased 21%, representing the largest driver of Cardiovascular segment growth in the period. CI sales increased 12%, excluding the contributions from the sale of acquired products. This performance was well above the high-end organic growth expectations we assumed for Q4. Organic growth in our CI business was driven primarily by strong sales in our EP, CRM, angiography and access products, which together represented more than 60% of our total CI organic growth year-over-year. Demand for our Prelude SNAP and our Ventrax Delivery System were the largest contributors to EP/CRM organic growth in Q4. High teens growth in sales of wires fueled our angiography product sales results and demand for our Prelude radial sheath and our Prelude wave hydrophilic sheath introducer with SNAP Fix technology were the largest drivers of our access products' organic growth in Q4. Peripheral intervention products sales increased 13% and represented the largest driver of organic cardiovascular segment growth in the period. PI sales exceeded the high end of our growth expectations in Q4. Growth in our PI business was driven primarily by strong sales in our radar localization and delivery systems categories, which together increased more than 25% year-over-year, representing 45% of our total PI growth year-over-year. Importantly, fourth quarter PI growth was driven primarily by broad-based strength across multiple categories, including embolotherapy, drainage, angiography, and access products, which together represent more than half of our total PI business and posted 10% growth in Q4. Rounding out the Q4 performance across the rest of our Cardio segment, sales of our Custom Procedural Solutions products increased 4%, above the high end of our expectations, driven primarily by high teens growth in kit sales, offset partially by high single-digit declines in sales of critical care products. CPS growth in Q4 was impacted in part due to the planned divestiture of our DualCap line, which I'll discuss in further detail shortly. Finally, sales of our OEM products decreased 15%, significantly lower than the low single-digit growth assumed in our guidance. The largest contributor to the softer-than-expected OEM performance in Q4 was sales to OEM customers outside the U.S., which continued to see demand trends impacted by the macro environment. Sales to OEM customers in the U.S. decreased in the high single digits year-over-year compared to low single-digit growth we had expected. We attribute the softer-than-expected U.S. OEM performance substantially to customer inventory destocking. While we were disappointed with where OEM sales landed in Q4, our OEM business increased 2% year-over-year on a constant currency basis in 2025. This performance is slightly better than what our original guidance assumed coming into 2025. Our OEM business remains healthy despite the quarter-to-quarter fluctuations in growth rates, and we continue to believe the appropriate normalized growth profile for our OEM business is in the mid- to high single digits annually. Turning to a brief summary of our sales performance on a geographic basis. Our fourth quarter sales in the U.S. increased 12% year-over-year and 8% on an organic constant currency basis. International sales increased 6% year-over-year and 4% on an organic constant currency basis. Q4 U.S. and international sales results were both at the high end of our organic growth expectations. Turning to a review of our P&L performance. For the avoidance of doubt, unless otherwise noted, my commentary will focus on the company's non-GAAP results during the fourth quarter of 2025. And all growth rates are approximated and presented on a year-over-year basis. We have included reconciliations from our GAAP reported results to the most directly comparable non-GAAP item in our press release and presentation available on our website. Gross profit increased approximately 13% in the fourth quarter. Our gross margin was 54.5%, up 103 basis points year-over-year and represents the highest quarterly gross margin in the company's history. The year-over-year improvement in gross margin was primarily driven by mix by product and by geography as well as improvements in pricing compared to the prior year period. As expected, tariffs were a material headwind to the year-over-year improvement in gross margin in Q4, representing a 112 basis point incremental impact year-over-year. Operating expense increased by 10%. The increase in operating expenses was driven primarily by a 10% increase in SG&A expense and an 8% increase in R&D expense compared to the prior year period. Total operating income in the fourth quarter increased $13 million or 19% from prior year period to $82.7 million. Our operating margin was 21% compared to 19.6% in the prior year period, an increase of 138 basis points year-over-year. Fourth quarter other expense net was $1.3 million compared to $1.1 million for the comparable period last year. The change in other expense net was driven primarily by lower interest income associated with lower average cash balances, offset partially by lower interest expense compared to the prior year period. Fourth quarter net income was $62.5 million or $1.04 per share compared to $56.3 million or $0.93 per share in the prior year period. Fourth quarter net income and EPS exceeded the high end of our guidance range by $1.8 million and $0.03, respectively. We generated $74 million of free cash flow in the fourth quarter of 2025, up 13% year-over-year. For the full year of 2025 period, we delivered constant currency revenue growth of 11%, driven primarily by 7% organic growth and contributions from acquisitions of $62 million. We delivered non-GAAP operating profit growth of 19% year-over-year and non-GAAP net income and EPS growth of 13% and 11%, respectively, year-over-year. We generated nearly $216 million of free cash flow in 2025, up 16% year-over-year and well ahead of our guidance, which called for free cash flow generation of more than $150 million for the year. This strong free cash flow performance was driven primarily by the year-over-year increase in non-GAAP net income, along with improving use of cash for working capital. Notably, we delivered this free cash flow performance while continuing to invest in capital expenditures, both maintenance CapEx and growth-related CapEx, specifically $30 million invested in our new distribution center in Utah. Turning to a review of our balance sheet and financial condition. As of December 31, 2025, we had cash and cash equivalents of $446.4 million, total debt obligations of $747.5 million and available borrowing capacity of approximately $697 million, compared to cash and cash equivalents of $376.7 million, total debt obligations of $747.5 million and available borrowing capacity of approximately $697 million as of December 31, 2024. Our net leverage ratio as of December 31 was 1.6x on an adjusted basis. Turning to a review of our fiscal year 2026 financial guidance, which we introduced in today's press release. Our 2026 guidance assumes the following: total GAAP net revenue growth in the range of 6% to 8% year-over-year and 5% to 7% year-over-year on a constant currency basis, excluding an expected 80 basis point tailwind to GAAP growth from changes in foreign currency exchange rates. Among other factors to consider when evaluating our projected constant currency revenue growth range for 2026 are the following items: First, our total constant currency range of 5% to 7% assumes 6% to 7% growth in the U.S. and 5% to 6% growth outside the U.S. Second, our total net revenue guidance for fiscal year 2026 assumes inorganic revenue contributions from the BioLife and C2 acquisitions in the range of $13 million to $15 million in 2026. Excluding this inorganic revenue, our 2026 guidance reflects total net revenue growth on a constant currency organic basis in the range of approximately 4.5% to 6% year-over-year. Third, our total net revenue guidance for fiscal year 2026 assumes a U.S. revenue from the sales of Rhapsody CIE of approximately $7 million compared to $3 million in fiscal year 2025. Fourth, our total net revenue guidance for fiscal year 2026 reflects the decision to divest our DualCap product line. We sold the DualCap product line for $28 million effective February 17. The DualCap product line was part of our critical care offering, reported in our Custom Procedural Solutions revenue category. Product sales and royalty revenue for DualCap totaled approximately $20 million in 2025 and represent an estimated year-over-year headwind of approximately 140 basis points to our total constant currency revenue growth in 2026. These products are noncore to our business, and we believe the divestiture will create additional manufacturing capacity and free up sales and marketing resources to invest in higher-margin, higher-growth products. With respect to profitability guidance for 2026, we expect non-GAAP diluted earnings per share in the range of $4.01 to $4.15, up 5% to 8% year-over-year. Our 2026 non-GAAP diluted EPS growth is expected to be driven primarily by solid constant currency growth and non-GAAP operating margin expansion in the range of 36 to 76 basis points year-over-year, offset partially by the projected incremental impact of tariffs, trade policies and related actions implemented by the U.S. and other countries of approximately $0.07 and the estimated incremental dilution from our convertible debt facility of approximately $0.01. For avoidance of doubt, our 2026 non-GAAP EPS guidance assumes a 12-month tariff impact of approximately $15 million or $0.19 per share compared to $9 million or $0.12 per share realized during the last 8 months of 2025. The expected 12-month tariff impact assumed in our 2026 non-GAAP EPS range is based on tariff policies in place prior to the recent decision of the U.S. Supreme Court on February 20 and does not include any impact from new and/or additional tariffs or retaliatory actions or changes to tariff policy, which could change the anticipated impact to our non-GAAP EPS in 2026. The ultimate impact of the U.S. Supreme Court decision and subsequent new and/or additional tariffs or retaliatory actions or changes to tariffs on our business will depend on the timing, amount, scope and nature of such tariffs, among other factors, most of which are currently unknown. For modeling purposes, our fiscal year 2026 financial guidance assumes non-GAAP operating margins in the range of approximately 20.6% to 21% compared to 20.3% in 2025. Non-GAAP interest and other expense net of approximately $8 million compared to $7.7 million in 2025. Non-GAAP tax rate of approximately 23% and diluted shares outstanding of approximately 62.2 million. Note, our weighted average share count assumes an incremental dilution of approximately 500,000 shares related to our convertible debt facility. This represents an approximate impact of $0.04 to our non-GAAP EPS in 2026 compared to a $0.03 impact in 2025. Finally, we expect to generate free cash flow of at least $200 million in 2026, inclusive of the expectation that we will invest approximately $90 million in capital expenditures this year. We would also like to provide additional transparency related to our growth and profitability expectations for the first quarter of 2026. Specifically, we expect our total revenue in the range of $375 million to $380 million for the first quarter, representing growth of 6% to 7% year-over-year on a GAAP basis and approximately 3% to 5% on a constant currency basis. The midpoint of our fiscal quarter constant currency sales growth expectations assumes U.S. sales increased 6% and International sales increased 2% year-over-year. Note, our first quarter constant currency sales growth expectations include inorganic revenue in the range of approximately $6 million to $7 million. 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. With respect to our profitability expectations for the first quarter of 2026, we expect non-GAAP operating margins in the range of approximately 16.7% to 18.5% compared to 19.3% last year and non-GAAP EPS in the range of $0.77 to $0.87 compared to $0.86 last year. I'll now turn the call back to Martha for closing remarks.

Thanks, Raul. On our third quarter earnings call, I provided a summary of the areas of focus since taking over as CEO on October 3, 2025, as well as where I intended to spend my time over the balance of my first 100 days. So I thought it would be helpful to provide an update on my progress since that call. As discussed, my listening tour has been a top priority for me during my first 4 months on the job, and I expect it to continue for several more. I have now visited the majority of our global sites and have enjoyed meeting the teams at these various locations, touring manufacturing facilities, spending time with our global R&D team, reviewing the business of local management and holding town halls at each location. I particularly enjoyed meeting with Merit employees around the world and have been inspired by their enthusiasm and commitment to Merit's mission to understand, to innovate and to deliver. And a few weeks ago, I had the opportunity to meet many of the rest of the members of our global commercial team as Merit's first-ever global sales meeting was held here in Salt Lake City. Many of our colleagues were able to tour our fantastic facility and meet the operators who work so hard to produce our high-quality products. Throughout the week, as I engage with this team, my belief in the Merit way that guides our entire organization was enhanced even further. I've spent considerable time learning about our products and understanding our processes and I remain quite optimistic about our future based on all that I've learned in recent months. My listening tour has provided me with valuable feedback from across the Merit organization. I've also had the opportunity to solicit feedback from constituents outside our organization. I've attended several key medical meetings as well as one of our physician advisory board meetings. I've also had the opportunity to engage with the investment community, and I've spent more time with our Board of Directors. All of these activities are centered around gathering as much feedback as possible and learning as much as I can. A tall task to be sure, but one that I remain extremely excited about. While the majority of my time as CEO has been filled with listening and learning, I have made several changes, which I believe will enhance the company's foundation for success going forward. Upon arrival in October, I established a new executive leadership team as well as a global operating committee. As discussed on our last earnings call, Merit is transitioning from a founder-led to a founder-inspired organization. I'm impressed with how our leaders across the globe are working more closely together across geographies and across functions. Next, we've solidified our platform structure by pairing up leaders from R&D with marketing and then surrounding them with the critical functions to develop a cohesive global business strategy and product pipeline road map. I just completed our first round of reviews of these platforms, and I'm excited about the progress of these teams. As the new executive leadership team and I have been analyzing the business, it became clear that we had an opportunity to streamline our internal planning and reporting processes with the goal of aligning how we think about, evaluate and plan each of our underlying businesses. Pursuant to this internal transition, we intend to streamline how we talk about the business externally as well. We believe this will allow us to not only align how we talk about the business, both internally and externally, but will also help the investment community and our shareholders better understand the underlying growth drivers of our business today and going forward. As I have dug into the business, I've developed even more appreciation for what Fred and the team have built since they developed Merit's first syringe to inject dye for angiography in 1987. Merit has grown to a $1.5 billion revenue company as of 2025 and this revenue is globally diversified with roughly 40% of our revenue coming from customers outside the United States. Today, we report our revenue in 2 segments: cardiovascular and endoscopy. And within each segment, we sell a large number of products that address multiple markets, procedure categories, sites of care and physician customers all around the world. As I learned about the business and have engaged with various stakeholders on my listening tour, the same question keeps popping up. What drives growth in this business? The simple answer is that Merit is really fortunate in that we have a very broad portfolio of products that contribute to our strong track record of growth, as seen by a 10% revenue CAGR over the last 3 years. This 10% CAGR has been driven by our portfolio of products that fall into 2 primary groups. The first group is what we call foundational products, which are the products that are used primarily for access or enabling in vascular and other procedures. Merit's foundational products comprise about 2/3 of our total revenue and had a 6% compound annual growth rate over the last 3 years. The second group is what we call our therapeutic products, which are devices and systems that treat disease in a number of very large markets that together represent significant growth potential. Merit's therapeutic products comprise about 1/3 of our total revenue and had a 19% compound annual growth rate over the last 3 years. On an organic basis, they had an 11% CAGR over that time period. We will be talking more about each of these product groups going forward. But in the interim, it's important to appreciate 2 key themes. First, that we have several platforms where we combine both foundational products and therapeutic products, making Merit a full-line supplier to several of our customer groups. And second, the track record of growth Merit has delivered has been fueled by the powerful combination of strong internally developed product innovation and strategic M&A to enhance our competitive position in key markets. With respect to internally developed product innovation, I think it's important to understand that Merit has a track record of consistent development and introduction of new products that represent important contributors to our growth each year. As an example, approximately 10% of the 2025 revenue growth in our 2 largest product categories, cardiac intervention and peripheral intervention came from new products introduced in 2025. As I referenced earlier, as we move into 2026, we remain laser-focused on achieving our continued growth initiative commitments, specifically for the 3-year period ending December 31, 2026, we are targeting an organic constant currency revenue CAGR of 5% to 7%, a non-GAAP operating margin in the range of 20% to 22% and cumulative free cash flow generation of more than $400 million. As our 2026 financial guidance indicates, we believe we are tracking nicely towards the CGI financial targets. During 2026, we will spend time developing our strategy for the period of 2027 through 2030. We will build this out based on the framework of key platforms where we offer our foundational and therapeutic products. We will prioritize our research and development efforts through the lens of our customers. We will actively engage in potential M&A transactions in a very disciplined manner while structuring our product portfolio to not only align with our financial goals but also support our commitment to providing patients with life-saving solutions that positively contribute to the health care communities we serve all around the world. We are looking critically at all parts of the business and where it makes strategic sense, we will take steps to optimize our offering like we did with the divestiture of the DualCap product line earlier this month. We will also work to ensure that our infrastructure remains solid while continuing to identify opportunities to enhance our operational efficiency and productivity. We believe the successful execution of our strategy will enable us to profitably scale the business around the world and drive compelling shareholder returns while we help patients in the years to come. I want to conclude my prepared remarks by again thanking our teammates all around the world. I'm honored to be part of Merit Medical, and I'm excited to work on continuing to help so many patients around the world with our products and therapies. Operator, we would now like to open up the line for questions.

Our first question comes from Jason Bednar from Piper Sandler.

Congrats on another good quarter here. Just to start, I'm probably going to sound like a broken record, but the gross margin progress has just been really impressive here. It's somewhat unheard of to have the kind of improvement you've seen. I think it's expanded like 400 basis points here in a 2-year period. You've done it in spite of tariffs. I know you'll tell us not to extrapolate. So maybe I'll just ask the question where additional gross margin drivers exist for the company at this point? Are there core opportunities? Or does it need to come through actions like more M&A or more in like the therapeutic M&A or divestitures like what we're seeing with DualCap?

Yes. Look, I mean, I think it continues to be more of the same, right? And Jason, I'm just going to repeat what you said. I'm going to sound like a broken record, too, right? Look, I think first of all, just going to congratulate our sales force and our operations group for what they've done, I think, which is in a really tough environment and to overcome the tariffs in the way they did, I think, applause to them. It's just impressive to be able to do what we've done here in the last few years. And again, just thank you. I know they're listening, so I just want to thank them. But it's really just more of the same, right? 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. Just making sure that we continue our SKU rationalization process and just really throw the kitchen sink at the gross margin. I know you guys are getting sick of hearing that, but that's really what it takes to drive the gross margin in this environment. It's focused on pricing, focused on cost discipline, moving things to lower-cost areas, mix, our R&D department just focusing on launching the right products at the right price and our manufacturing department being able to manufacture those at the lowest cost possible while keeping our quality where it needs to be. So it's just more of the same for us.

Okay. All right. That's helpful. And I'll follow up with one on Rhapsody here. We're a few months into the commercial launch in the outpatient setting. The real genesis of the question is going to be, is the business where you thought it would be? So what's going well? What could go better? And then why is $7 million the right starting point for revenue expectations this year? And really, is that guide a reflection of what you're seeing today? Is it a conservative swipe at the outlook? Just trying to think about how to think about that guide in the context of what you're seeing real time here with Rhapsody?

Yes, Jason, thanks for the question. Let me make a couple of comments, if I could, about Rhapsody. I mean, first, I do think it is fair to say, right, our original 2025 Rhapsody revenue expectations missed the mark, that that's fair to say. So as we really thought about our guidance for 2026, I mean, I think as you said, we're only about 4 months into our newer strategy for the nonhospital locations, but we really tried to take a similar approach as we thought about our guidance for Rhapsody in a similar way to how we provide guidance for the whole company, right? So we have a high level of confidence in hitting the $7 million revenue number. I think, as you said, what are we seeing out there? We still feel very strongly that this is a fantastic option for the clinicians who really think about I want to treat patients with the best clinical data and Rhapsody has that, and it's a very high-performing product. So we're thrilled with that. And we believe this market does definitely support a third player. And I think our team is really energized, and they're working really hard each and every day out there. At the same time, we know we've entered a competitive space, and we know competitors don't stand still when they see an outstanding product come to market. So I'd say that's kind of how we're looking at things right now for Rhapsody.

Our next question comes from the line of Mike Matson from Needham.

This is Joseph on for Mike. Maybe just wanted to dive a little deeper into guidance. I guess maybe just on free cash flow. I understand you had the divestiture, but it looks like 2026 guiding down versus 2025. Is this more conservatism? Does this have to do with more of the divestiture or increased CapEx spend? Just wondering your thinking around the guidance there.

Yes. No, thank you. Thank you for the question. I'm going to take the time to take a small victory lap, right? I mean when we launched CGI, as you know, our target was a minimum of $400 million in free cash flow. We're obviously ahead of that. So super proud of the team for continued focus on that. I'm pleased to share a few thoughts. I'm very satisfied with the performance in Q4. Achieving $216 million in free cash flow for the year is quite impressive. We intend to maintain our focus on free cash flow, aiming for at least $200 million. We have a construction project across the street and several initiatives we want to pursue. However, it's important to note that free cash flow can be influenced by timing factors, which can be unpredictable and beyond our control. But I can say that we always kind of take a minimum approach. So our expectation is that we'll hit at least $200 million in free cash flow, which will set us up really nice for our CGI goals.

Okay. Of course, yes, that makes sense. And 2025, very strong year. Maybe just one on the M&A target list. I guess just what are the areas there that Merit is strategically looking at? Is this looking more at innovative technology or therapeutic products that have that higher growth potential? Is it more tuck-ins to leverage your current growth drivers, maybe Rhapsody? Yes, maybe just broadly, what areas are you looking at? Is it EP, dialysis, endoscopy? Any help there would be great. Congrats on the quarter.

Yes. Thanks, Joseph. So I think as you've heard us start to talk about, right, we're really organizing the company and the organization around these platforms, right? And so we have a number of platforms where we've really put a cross-functional team and cross-geographic team together that's really, frankly, thinking about all aspects of the business, including, right, what would be helpful from an acquisition standpoint. So we're really looking to those teams to come with sort of, I'll call it, their wish list, if you will. And so we want to try to be very strategic about how we think about some of those opportunities and where they'll make the most sense. So we definitely have sort of strategic criteria we think about as well as financial criteria when we're thinking about M&A. It will include both foundational products and therapeutic products because in some cases, the gap, if you will, or an area where we feel like we could fill a rep's bag out even more fully could be either on the therapeutic side or the foundational side. So that's really the way we're thinking about that as we continue to think about the growth drivers of the business going forward. But we very much intend to continue both internal development as well as inorganic M&A to drive growth.

Our next question comes from the line of Larry Biegelsen from Wells Fargo.

Could we just spend a minute on OEM? Was Q4 all inventory destocking in both the U.S. and OUS? And why would that happen in both geographies at the same time? And I just want to make sure the mid- to high single digit kind of underlying growth that you said on the call, is that what's baked into 2026?

Yes, Larry, great question, right? So just to maybe clarity, the U.S. component of OEM is really what we are talking about from a customer inventory destocking. I think when you look outside of the U.S., it's really kind of the macro environment, and it's really kind of centered around China and some of the impacts we're seeing there just related to the macro environment. So hopefully, that clarifies that. I believe I have been quite consistent in our messages. The OEM business can be somewhat unpredictable. However, we consider it an excellent addition to Merit as it drives significant volume growth since we are essentially selling capacity. Our OEM business remains strong, even with the fluctuations in growth rates from one quarter to another. We still believe that the appropriate normalized growth profile for our OEM business is in the mid- to high single digits.

So it was 2%? Sorry, it was 2%...?

Yes, looking at the previous year, I think they performed quite well.

Got it. And for my follow-up, Raul, let's focus on the Q1 guidance. Why is it only 2% to 3% organic growth? How much is the impact from the divestiture in Q1 and the lower operating margin? At the midpoint, the math indicates it's about 170 basis points down year-over-year. Could you explain how much of this is due to tariffs? I understand that tariffs were not a factor last year, but you grew operating margin by 140 basis points in Q4, which didn't have a tariff impact. It would be helpful to understand the Q1 guidance for organic growth and operating margin a little better.

Yes, no problem. I’ll start by saying I appreciate the focus on the first quarter and I’ll provide some insights on that. However, I want to emphasize that we've assembled a strong year from a guidance standpoint, which aligns well with our CGI goals. I just wanted to make sure to highlight that because while I don't want to lose sight of the quarterly discussion, we have set ourselves up for a great year and are on our way to achieving our CGI objectives. When it comes to Q1, I think you do have to think about DualCap. Obviously, excluding that, you'd be up to 3% to 4%. There are some primary drivers of slower organic growth in Q1 that I'll highlight. And we talked about the first one, OEM, we do expect 2026 growth to be in the mid- to high single digits, consistent with our normalized annual growth profile for OEM. But Q1 revenue will be down year-over-year due to some continued OUS softness and a little bit of that inventory destocking that we've talked about. And also, I want to talk about China, softer in Q1, given really the weighting of full year expected VBP impact. And then we're also dealing with a few little supply chain-related challenges, that we expect to resolve as we move through 2026. As you know, I've been pretty frank about the supply chain issues that although they're a lot less than they have been post COVID, we are still dealing with them. There's vendor consolidations and things like that, that are happening. And so as they come, we deal with them. But our manufacturing group, our operations group does a really good job of getting this out of them as quickly as they can. So those would be the kind of the 3 primary drivers for that softer Q1 that you guys would expect. But I would urge everybody to kind of focus on the full year numbers that we put together because I think it's a really solid plan.

Our next question comes from the line of Jayson Bedford from Raymond James & Associates.

Congrats on the progress here. So I guess maybe just to piggyback on the last line of questioning. Can you comment on growth in China in '25 and then your assumption in '26?

We're not going to highlight the growth in China for 2026. I believe that China was down year-over-year. We continue to see the effects of volume-based purchasing on the business. Generally, the metric I use, which you all have heard me mention frequently, is that volume has remained up year-over-year, which I consider a positive indication for us.

Okay. And then as my second question or follow-up, you mentioned freeing up capacity from the DualCap sale. Just wondering you kind of framed the revenue impact. What does the sale do to margins in '26? And then is there an associated EPS impact?

There is a minimal EPS impact. I won't call it out. It's not worth mentioning. It's not material enough to worry about. I mean really we'll talk about gross margin and operating margin, it is a 140 basis point headwind to growth that everybody should consider as they look at the revenue guidance. And it's specifically with the U.S., that's about 240 basis point headwind to growth for the U.S. So it's very U.S.-centric. But again, it's still driving operating expansion in '26 despite the divestiture and tariffs. We've factored a $15 million impact into our guidance.

Our next question comes from the line of David Rescott from Baird.

I appreciate the comments on the near-term Rhapsody right, I think you're 4 months or so, I guess, 2 or 3, 3 or 4 months or so into this post reimbursement landscape rollout. And I heard some of the commentary just around how you're thinking about the contribution for this year. But maybe could you help us understand more of the longer-term vision here. Obviously, reimbursement plays a role. But when you think about just a longer-term story on what Rhapsody can be, is there any reason to think that longer term, this isn't a product that captures 20, 30-plus percent of the market?

Yes. Thanks, David. Appreciate the question. And look, again, I think it's fair to say, right, we're in early innings here, if you will, as you said, with kind of the new strategy. So we're pleased with where we are so far. I think as we've talked about, this is really the initial PMA product for this company. We do think about Rhapsody, I would say, is more of a platform than just a one-off product. We will spend time this year and in 2026 on strategic planning. We will focus on identifying some of our larger future opportunities and how we want to drive growth moving forward. We will continue to evaluate that, but we are not ready to share further specifics at this time.

But that is definitely how we're thinking about that opportunity as we move forward. Maybe I'll provide a bit more detail on the assumptions. We are cautious about making predictions beyond 2026 and do not disclose specific assumptions such as unit price and site of care. However, I want to remind you that market data providers like Clarivate, which we've mentioned in previous earnings calls, reported that 100,000 stents were implanted in about 77,000 procedures in 2023, averaging roughly 1.2 stents per procedure. An estimated 60,000 to 70,000 of the total 77,000 procedures occur in the non-hospital setting each year. Clarivate, now this is Clarivate's number, reported an average selling price for covered stents in the non-hospital setting of approximately $2,400. We will not comment on our pricing in either site of care specifically, but we want you guys, investors are free to model potential scenarios for each of these inputs and depending on a range of potential ASPs. It is fair, I think, to assume the $7 million estimate implies market penetration in the low to mid-single digits in the first full year of commercialization under the new strategy that we have for the U.S. Rhapsody. So hopefully, that gives you a little bit of color.

That's helpful. Can you provide some insight on the margin contribution from the product? While it's a smaller figure compared to the overall portfolio, how are you viewing its contribution to margins not only in the guidance but also in the long term within the portfolio?

I appreciate your question, but I may not respond exactly as you expect. I want to highlight that our total constant currency growth expectations for 2026 are between 5% and 7%. This is quite promising, and most of this growth is anticipated to come from our globally diversified business. We have a wide product portfolio, and while Rhapsody is important, specifically, U.S. Rhapsody sales are projected to add approximately 25 basis points to this constant currency growth range. So we are excited about the product. We're excited about what it can do. I think Martha covered it nicely. I can't add anything there. But I just want to kind of focus everybody on the entire portfolio.

Our next question comes from the line of Michael Petusky from Barrington Research.

Well, I'm just curious, the incremental growth or the growth in PI from '24 to '25 in terms of just the 3 months, roughly about $20 million. How much of that was related to that SCOUT system?

I won't specifically comment on it, but it was a significant growth driver. When considering radar localization and the delivery systems category, they both saw an increase of over 25% year-over-year. Together, radar localization and our delivery systems contributed to nearly 45% of our total PI growth year-over-year.

Okay. So it was roughly half then of the $20 million was attributable to SCOUT. Is it correct?

Well, it's 2 different product categories, right, just to be clear. But yes.

And Mike, this is Martha here. Just if I could just add. I mean I think we shared on the last call, SCOUT hit a really significant milestone too in terms of the number of procedures it's been used in. So again, we're very pleased with how that business is doing, and it's one of those that just makes an enormous difference in patients' lives.

What explains that level of growth? I mean, were there just big contract wins? Like what's happened there?

I don't think it's been a huge number, but it's certainly a nice growth figure. We have a top-notch sales organization with excellent relationships with key physicians in this field. People recognize the clinical value of the product and its benefits. Additionally, we experienced a brief slowdown in supply, but we have since addressed that, which can create some fluctuations. Overall, the team is working well together across operations, clinical, and sales.

Okay. Great. And just one more. I don't think I missed this, but maybe I did. Did you guys give sort of by region sort of performance? Usually, you guys give like EMEA and APAC and sort of make some commentary, obviously, around China. I don't feel like I've heard that tonight or did I miss it?

Yes. I mean I think we can say, right, so at least for the fourth quarter, U.S. sales increased about 12% year-over-year. They were up roughly 8% on an organic constant currency basis. When you look at the international side of the business, it increased about 6% year-over-year, up 4% on an organic constant currency basis. I would highlight that both were at the high end of our organic growth expectations. APAC, roughly up 3% constant currency, EMEA up 12% constant currency, Rest of world, 4.5% constant currency.

Okay. You mentioned earlier that China was down as expected. Can you remind me of what your expectations were? I don’t recall what you stated at the beginning of the year regarding China.

I think it came in right around where we thought it would be right about 2% perhaps so. Down, yes.

Our next question comes from the line of John Young from Canaccord.

Congrats on the quarter. I want to ask on Rhapsody. I know you're giving somewhat limited information, but try to get a little bit more here. Martha, I know you said you just held a national sales meeting. I would love to hear what you're hearing from the sales force so far in selling the products with the new strategy. Are you focusing the sales force on opening new accounts versus going deep in accounts? And can you remind me, too, is there any stocking revenue as they go and open these accounts?

Yes. So first of all, I would tell you, we have an extremely energized group. I guess I would call it small yet mighty. I think if you compare to perhaps some of the competitors in this area. So as I said, really inspiring for me, frankly, to spend some time with this group and see how motivated they are. Heard a lot of really moving patient stories about when a physician would use Rhapsody and the difference that they would see pretty immediately with it. I find it very exciting that the team has detailed plans regarding their targeting and direction. As we've discussed, the market is mainly non-hospital settings, accounting for about 85% to 90%, compared to hospitals. Additionally, with the NTAP, there's been a slight increase in pricing on the hospital side, and we had significant work in progress last year. This effort continues, although it often comes with challenges in navigating VAC committees and similar processes. So simultaneously, they're also pursuing non-hospital sites of service. The answer is that they're looking everywhere, as much as our small and mighty team can manage. That's how we spent some time better understanding the situation and developed our guidance for this year in the U.S. That's our current thinking. I just want to remind everyone, as Raul pointed out, that Rhapsody is a critical product for us and one among many in our $1.5 billion portfolio.

Thank you. At this time, I would now like to turn the conference back over to Martha Aronson for closing remarks.

Thanks very much. Again, I just want to thank all of our hard-working employees all around the world and thank our shareholders and our investors for your interest in Merit Medical. So have a great day.

This concludes our conference call for today. Thank you for your participation. You may now disconnect.