Well, thank you, everyone, for joining. I'm John Young. I'm one of Canaccord's MedTech analysts, and we're thrilled to host Merit Medical. With us today is CFO Raul Perra and Travis McDougall, Executive VP of Corporate Finance and Treasury. The company recently announced strong Q2 results and raised fiscal 2026 guidance. So let's jump into it. Raul, CGI, it wraps up the end of this year, and Merit's clearly tracking towards the 5% to 7% organic CAGR revenue, the 20 to 22 percent margin and the 400 million dollar plus of cumulative free cash flow especially the latter you pretty much already almost hit I know you said you're neck deep in the next strategic plan which I think investors are going to like knowing you're going to be issuing another one without pre-announcing numbers how should investors just think about the shape of the next plan and the timing when you'll share it yeah it's a you know great great question and thank you and I as you know as we mentioned on the earnings call obviously hyper focused on making sure that we execute on cgi right football seizes upon us you know we don't

want to drop the you know the football on the one yard line um and so just everybody's you know marching to to make sure we execute on those goals um and look i i think you know the the way the uh ceo transition happened i think it was done you know in a in a perfect way where you know martha had you know one year left on cgi essentially about a year and a half you know or a year and a quarter when she came on um that allowed her can you know to kind of get around you know visit all the sites and then um work with us you know on the on the strategic planning and so we're you know obviously you know going through that so I'd say it's a little premature right now to kind of tell you kind of what that looks like other than to say like you know we're super excited about executing on CGI and we think we've got a you know we've done a lot of great work uh with Martha and I think we'll have a good game plan you know for that next three years that you know we'll be excited to share as far as when we share it uh foundations for growth i think we did in november of you know the year right before we we started the program uh cgi we did it on our fourth quarter call um so you know i i think ideally we'd like to kind of stick to the fourth quarter call um but we're also asking those questions you know should we do it sooner or you know when should we do it but i think everybody right now is hyper focused on cgi got it yeah how should we think of the anchoring to the three targets that you previously used the past two LRPs do you think you're going to continue using those three targets for this next one that you're contemplating currently I again I you know not to be vague but we're you know we're we're focused

on that too right you know do those targets you know continue to make sense and you know they've worked well for us I don't think anybody's arguing that but you know it's a good time to just kind of question everything right and so that's what we're doing got it yeah the Q2 call a lot of it was spent on portfolio review you really went in depth there and talked about it leaving you know no stone unturned how should we think about what's core to merit today as the company evolves now with martha being at the helm um is could we see more meaningful divestitures in the future beyond what you guys have done so far as like dual cap for example yeah i mean look i i think uh it's the natural kind of planning process of when you're reviewing your strategic plan right and

obviously you guys are getting a lot more access to the platforms you know that's kind of how we're running the business and so really kind of just diving deep into each each platform and really understanding like you know where do we win you know what needs to be better what's executing you know at a very high level how do we want you know how do we keep that going and then what doesn't make sense you know as you guys know you know over time we've kind of put this portfolio together um if you see kind of where the acquisitions are are you know uh we're doing the the acquisitions you know from a platform level it's basically almost every single one of them right i mean we've uh invested in oncology um you know our endotech you know our endoscopy i guess i should say um renal therapies um access and so you know the list kind of goes on and so you know i think we've got a really good portfolio right now we're in really good markets um and procedures in call points and now it's just about finding the stuff that we're not really good at and you know what does that make sense I'm not sure that we have like a size or you know you know you know that we're looking at but there is definitely things that we can prune a lot of what you know very similar fashion to what you've seen under foundations for growth and CGI got right I mean I think it's really just very strategic and surgical in the way we get I know you know under the past two plans obviously once a long going a lot of it's been more skew rationalization yeah I know you've talked a lot at length about that does this signal though that this is going to be something beyond that where it's really like a sale of maybe a number of product lines or anything along those lines let's try and figure out how to read into it yeah I think it's early to tell right but I mean look I obviously we did the dual cap one right a smaller asset you know I think there's you know small assets like that and again I like to you know explain it more as a surgical kind of process right we're not talking large dollars we're talking kind of very strategic components and pieces that just are right outside our call point that maybe don't make sense. That makes sense. Yeah.

Operating margin improvement. You've delivered 850 bps. You pointed close to 950 bps if you hit the high end of this year's guidance. We're very familiar with the Merrick kitchen sink. We've joked about that a little bit. Just, you know, pricing, mix, facility moves, freight, automation.

What does the next leg of margin expansion come from as the wins get incrementally harder yeah look uh you know i do joke about the kitchen sink because i have no better way of explaining it right so if anybody has you know a different you know you know name for it or you know or description i mean you know more than happy to because i'm also getting kind of sick of it to be honest but uh i i think it does describe it you know the best way because it we really are just hyper focused on everything right and i i i i like to say and i've started saying that i think we'll perpetually be in the seventh inning right so like you know obviously the heavy lifting you know those you know first six innings we kind of got through them under foundations for growth and to a certain extent cgi and now it's just about applying all the things we've learned and just you know kind of being consistent with them so you know when you look at the operating margin you know yeah look we still think you know um you know that we can have you know pricing right that we can still focus on mix um you know new product introduction acquisitions those also can help on the on the gross margin side operationally you can be you know better you can still continue to transfer stuff to lower cost areas like we've done for the last 10 years um you know you can continue to you know automate you can continue to be more efficient you know at the kind of the plant level so and you know and just the people level too so you know and uh you know raw materials you can attack you know you get more scale the bigger you get you know the better you are um so we really you know want to look at everything logistics you know what i mean modes and nodes yeah yeah exactly so and and that is what kind of one um prevents leakage right so you know historically we would say hey you know what today this year we're going to focus on price and so everybody does really good on price or mix and then you know you look back and you're like well wait a minute our operations group just gave it away because they weren't as efficient right or the opposite like hey you know our we moved something down to Tijuana and our sales force was like oh they just gave the you know the cost savings away so when you focus on the entire kind of piece it you see the kind of incremental gross margin improvements which obviously lead to operating margin improvements that you've seen from us but I think there's still more to be had again we'll perpetually be in that seventh ending just kind of you know finding you know the the areas to improve any updated thoughts on just capital allocation and M&A?

How should we think about the pipeline of tuck-in M&A and maybe what parts of the merit portfolio today you think could benefit from further tuck-ins?

Well, I think it's all dependent on what's out there, right? But I think if you look at the platforms that we currently have, I think we're really interested in any one of those, right? I mean, I think we have the right areas and we just want to make sure that we're, I guess, going deeper in the bags that we already play in so from a capital allocation standpoint i don't think you'll you'll see much of a change obviously stock buybacks are pretty you know big discussion point right now especially when medtech was down you know as much as it was you know say three months ago um you know the the discussions were definitely taking place and quite frankly they're just part of strategic planning right what is our capital allocation policy what's our capital strategy for the next you know few years uh we're just neck deep in understanding all that stuff got it um q2 was the strongest organic growth in three years at 9% and he had 22.6% non-GAAP operating margin.

You did call out some variables with the OEM rebound and also the Reno recall resolution, maybe some stocking as well. How should we think about the genuine demand or a clean run rate in the quarter versus some catch-up that may have happened?

Well, I mean, I think you just should look at our yearly guidance, right, and what we gave there. I mean, I think that's, you know, that's really what we're shooting for. I think when you look at Q1, we still felt it was a strong quarter, even though the revenue growth seemed a little bit light. But we did call out OEM. We did call out the recall. And when you adjusted for those items, the underlying business was doing great. And so the second quarter really didn't surprise us, especially as those things kind of the OEM rebounded, and then we got the recalls essentially behind us. So I would just point you to our revenue guidance. You know, I think that's a good, you know, barometer of where we think will end the year and hopefully we can do better than that.

Awesome. And maybe on got in. So you've lifted organic growth to 6.9% to 7.5%, EPS to 425 to 435, essentially the first half beat, but you left some of the back half unchanged. You look at it, you know, where do you think about setting the bar?

And can you maybe just talk about any dynamics you're seeing now in Q3 beyond any usual summer seasonality that usually you guys experience yeah nothing out of the ordinary right I mean I think you know demand you know continues to be you know you know as expected you know we're not seeing any softness like you know I know certain you know you know some people were concerned about procedure volumes we're not seeing any of that we continually check with our our sales force and you know they're not seeing it so that's that's a positive sign so other than normal seasonality um i i wouldn't call anything out i i do want to double click on the softness too um i know

we've heard it from some of the hospital players really not you know a couple of med tech strategics but really more on the hospital side i know merit does a really good job of touching you know lots of avenues of health care yep um what do you expect there if hospitals continue to remain under pressure with acaa subsidies do you expect that to eventually hit the med tech sector overall um i know you guys have you know experiences in the past too so i just love to hear your views there yeah i mean i i'm not sure you know that everybody's going to be immune to it right i mean i i think when we look at kind of you know the value that we bring um and really the asp of the products that we sell right i mean it's pretty low uh we're not like the big you know

kind of therapeutic driver which which is i think where really you'll see a more of the impact um you know for us you know you're going to need access products you're going to need you know delivery devices you're going to need closure devices and you know i think when you look at our average asp which is what somewhere around nine nine bucks you know we're really not a that big of a cost factor in the whole system but um you know obviously um it is important for for us to prove our value to to the systems and i think uh given our broad product portfolio and our vertical integration and you know our quality i think we can you know our our sales force does does a really good job of selling that and making sure that the systems that we sell in to understand the value that we bring.

I think we may go move to some of the segments. Scout and then the recent OneMark acquisition, they've been a pretty exciting near-term catalyst. OneMark from viewpoint, the acquisition expands your TAN to about 1.3 by reaching lower risk biopsies. And you've also announced on the Q2 call about the Scout MD launch in late May. How is the commercial launch tracking How does the cross cell actually work in the field between the two technologies as you think about the ramp into next year?

Why not? We view this as the continuum of the patient pathway here, right? So what that 1.3 does is it allows us to engage with physicians earlier in the process. And so we're really happy with that. You know, the other thing that you consider is down the road in the MD space, that's more suspicious lesions, more technical cases and whatnot. So, yes, there is some cannibalization that we factored it in when we guided, but the reality is we view this as a continuum of care throughout the patient journey, and it's been very nice for us. We're very happy with it, and we look forward to the one mark going forward.

Yeah, I mean, our sales force is excited, right? You guys know they were a single kind of product, you know, sales force, and to have something else that they can sell, you know, earlier, as Travis said, in the process really helps. And if you kind of think about, you know, when, you know, what this product brings is we had essentially a punch list or, you know, of customers that had said, you know what, you know, in this procedure or, you know, or this, you know, kind of, you know, diagnosis probably doesn't make sense to use, you know, the scout system. You know, it might be too price, you know, you know, the price points might be a little high. And now we have something that's lower cost that they can get into. And that's why it increases the TAM. So, you know, so again, really excited about it. And, you know, I know our sales force is really, really excited about it, too. And integration is going great.

Is it really like a better best kind of like strategy and pricing point? Positions to positions? Are positions like the same position using both then essentially is how we should think about it?

Yeah, they could, right? They could be in a procedure where it just doesn't make sense, right? It's a low risk procedure. They don't really want to use the scout system because it might be a little bit, you know, too high of a price, you know, for that, you know. um and so you know that's where you know essentially viewpoint comes in and you know it makes a difference place it at the time of biopsy right yeah nice feature to it um endoscopy it grew 29 year over year is this acceleration um that we've been seeing durable or is this more of the integration um you know driving this still well i think look i think uh the hope is that it can be more durable right i mean look i i never promised you know those type of growth races you You know, but, you know, I would say that I think, you know, we're excited about how that, you know, how not only the acquired products are doing, but also, you know, you know, product introductions. And so, you know, I think we're seeing a combination of both kind of deliver the growth there. And as you guys know, like we've spent a long time trying to find the assets, you know, that made sense in our endoscopy segment. And, you know, finding, you know, a couple of, you know, solid assets that our sales forces are excited about. They're still kind of trying to integrate that, right, and really get the benefit of it. But we feel like we've made the right investments. We've acquired products. We've launched new R&D products. And I think, you know, hopefully we start to see the benefits of, you know, of those investments.

Well, and, Raul, that's also the same concept where it's the continuum of care, right? so the the acquisition we made several years ago with the esophagus product that's the tree GERD and then you go down the pathway then you get to the Barrett's esophagus that's the c2 product and then you get further down the pathway that's our legacy merit business so it's this concept that Ralph talked about about getting deeper into the call points and deeper into the procedures makes sense oh yeah it's been a bit of a focus too you know it rebounded both by new customer agreements and stocking what gives you confidence in the second half guidance of mid to high single digital growth for that segment?

Well, I think just the underlying business. I mean, I think the second quarter was a strong, you know, strong OEM results. You know, it was broad-based and balanced, I would say, not only with the new agreement that we had, you know, recently signed with a new customer. You know, we were able to deliver some product there. You know, as we look into the second half of the year, we know we have more product to deliver to that customer. And just given the broad-based kind of beat within OEM, you know, we feel pretty confident in that momentum that they have got it I do have to ask on Rhapsody contractually obligated I know you reiterated the seven million dollar target for this year what does the multi-year trajectory look for Rhapsody look like and you know will be carved out in the next LRP no no look I think if you remember when we launched CGI we weren't sure as to when the approval for the U.S. launch the Rhapsody would happen right and so obviously we we we made an effort to say look you know we know that you know as we stand today we can you know we feel confident in a five to seven percent CAGR when Rhapsody launches we will call out you know that you know what the US component is so that you guys can adjust for it and so once we get through CGI we just feel like it's kind of part of the business you know obviously if it you know if it's a growth driver you guys will hear it you You know, but, you know, other than that, it's really, it'll fall back into kind of the other, you know, the way we just typically talk about the business, you know, at the platform level.

And I know you've really described Rhapsody as a platform product. When could we see maybe some, like, you know, future R&D, you know, projects coming out based on this for, you know, other use cases or other areas?

Yeah, well, look, I think we're quick learners, right? I mean, I think we started talking about Rhapsody maybe a little bit too early. And I think, you know, from, I think it was a lesson learned. I think we'll wait until we have to talk about the products before we start talking about them but there is stuff being worked on and I think once we get closer to approval and we understand pricing and all the dynamics and things that we kind of tripped on we'll start talking more about it Great, I just want to see if there are any questions from the audience I know Bill's in the audience and loves a good heckle but no Maybe just as we close out then here Just as you finish CGI and you set up the next chapter for Merit, what's the one thing that you want this room to take away for where the company's headed over the next three years? Well, look, I think, you know, you know, I think the focus of the executive team and with Martha's leadership, you know, I think, you know, we're excited about what we can deliver. You know, I think it's very rare for a company to announce, at least that's what I tell myself. you know you guys can correct me but um you know to announce two lrps and execute on them um and we did it in the face of covid you know supply chain shortages you know conflict all sorts of you know you name it whatever happens in the you know whatever's happened in the last five and a half years um and we've we've been able to execute so i think as we um you know meet as an executive team um you know the martha's leadership style does you know you know you know come with some level of consensus obviously and and and input from the rest of the executive team i you know we know at merit you know the type of leadership and executives that we have we haven't done a good job of showcasing those i think people have historically just thought of merit as kind of fred but you know there's a whole team of people that are behind it and uh we're excited to kind of showcase what we can do um and own kind of the ultimate kind of strategic plan and so you know we're excited to show you know show you guys what we come up with and you know on and the goal is to execute on it, you know, if not beat it.

Well, Travis, thanks so much for joining us today.

Thank you, guys.