We're time here, so we'll go ahead and get started.

We're very pleased to welcome Rural Parra, Chief Financial Officer of Merit Medical. I have a bunch of questions. Happy to open it up to the audience if there are questions as well. I was hoping to sort of start a little bit higher level and then go into some of the details. I mean, you've talked in a lot of different settings about this. Founder-led, founder-inspired. You just did this resegmentation. difference in reporting structure, change in the way of running the business. It seems like a lot of stuff happening at once. How are you keeping it all straight? Where are you in this transition? How should we just think about the operating dynamics going forward?

I think that's a great question. I think internally, from our perspective, it doesn't feel like a lot. Obviously, ever since Foundations for Growth, which was our previous LRP, we were preparing for a CEO transition. It was very clear that Fred was going to be retiring. We were setting up some foundational stuff under Foundations for Growth. Obviously, that accelerated and continued growth initiatives as we knew. The reporting changes, quite frankly, I've been wanting to do for a while. What you guys don't see is that the business internally talks how we currently, the new reporting style, right? And so, you know, there was this reconciliation process that kind of went in, you know, between the finance guys and the rest of the business as we reported out. And so when Martha came on, like, their first question she asked me, she's like, hey, Raul, like, help me make sense of this, right? Like, you know, we've got the internal reporting that says this, we've got our 10K that says this, you know, and we're telling investors this, like, how do I reconcile it? And I basically looked at her and said, like, don't, right? Like, we've got a few options for you. We've been waiting for the CEO transition. You know, give us a week or two, we'll present them to you, and then you kind of pick, you know, what feels kind of natural to you. And that's what she did. You know, she went with, you know, the foundational and therapeutic, which I thought was a great call. And it just makes it significantly easier for us, you know, as we kind of run the business. You know, one of the things that you guys haven't seen is internally, you know, under Foundations for Growth, we have set up these platforms. And so now we can hold the platforms more accountable. We're all kind of talking the same numbers and language.

And one of the things that we've seen across the whole industry has been, there's been a lot of changes in reporting structure. We've also seen a lot of changes in the way companies are running. They hear about verticalizing businesses, getting closer to the customer. Can you do that on this platform strategy? There's a lot of products within each of these segments. Like, does this structure allow you to have the same customer centricity as your competitors?

And again, it's not new, right? We've been running it essentially, I'll call it kind of baby stepping through it, right, since Foundations for Growth. So, you know, five years. You know, it's not something we turned on last month when the reporting changed. It's been, we've been gradually giving them more responsibility. And, you know, we're vertically integrated already. We're very close to the customer already. All these things just come naturally to us. It's really just the alignment of how the business is run. And I think Martha has given more responsibility to those platforms now, just given that she's due to the business. And obviously, I don't know what Fred could do, given that he built the place brick by brick. It's different than what Martha could do. So there's more responsibility to those platforms. I think the big change kind of this year is that our marketing and R&D head are very kind of tied at the hip and each of the platforms has a marketing and an R&D person that's tied to it so we're really focused on making sure that we deliver products to our sales force that they can sell in the spaces that they want to sell and that customer want. I think there's greater alignment from that standpoint.

It's actually going to get us closer to it. And do each of these platforms kind of operate as their own is similar like you have a product owner or what's sort of the autonomy of each of the platforms and they just roll up into these operating segments? How does it actually work on a day-to-day basis?

Yeah, well, they're not business units, right?

I mean, we're not of scale to have business units.

And so there is shared resources in certain cases. But, yeah, basically they're in charge of their products within their platforms.

Okay. And I know you gave multiple years of disclosures on an annual basis when you provided this updated outlook. As you go into each of those, there were a few that kind of stood out as OEM in the past couple of years kind of flattish, other businesses seeing bigger growth. As you look forward, which of those platforms do you expect to lead total company growth?

Yeah, I mean, I think that's the nice thing about the portfolio. I mean, you know, we generally think that it can all deliver, right? So when you look at kind of the foundational side of things, you know, the three-year CAGR on that was 6%. You look at the therapeutic, you know, that was 11%. You kind of start to kind of dig down and you look at, let's just talk about OEM. I think, you know, we're very confident that mid to high single digits is kind of where that business will run, you know, on a year-over-year basis. The nature of OEM is that it will ebb and flow.

It can be choppy business.

I remember, you know, a couple years ago when, you know, they were growing at 15%, 20%, everybody would ask me, hey, is this the new normal role? And I would say, absolutely not. Pump the brakes. Please, you know, put your model around 15 to, you know, mid to high single digits. That's really what you should think about it. You know, this business will slow down eventually. I was wrong for about three years in a row, you know, and then finally, you know, they kind of, you know, came back into that mid to high single digits where we kind of expect them to be. But if you look at the rest of the therapeutic, you know, platforms, I mean, you know, we just did an acquisition for our endoscopy segment, right? So I think, you know, they've got additional products to sell. We feel really optimistic about that. You look at our oncology platform. Again, we just did an acquisition there with Viewpoint. Scott was, you know, doing great already. We tack on Viewpoint. We're expecting growth out of there. Our cardiac platform, you know, has been doing really good. You know, those guys, you know, have some new products, you know, coming in the pipeline, we feel good about that. Obviously, OEM bouncing back will also help. You look at our vascular bag, again, doing very well. So I think, you know, and the foundational products are really just enablers for those therapeutic, you know, kind of, you know, so we feel overall pretty positive about the portfolio.

And how do you think about just sort of framing growth? I think one of the things investors always struggle with, stories like this, is there are a lot of moving everyone wants a thing. to grab onto. Then you're like, oh, it becomes Rhapsody because it's like a PMA product and it seems super identifiable, but it's like $7 million. It's like, okay, fine, whatever. How do you think about contextualizing the business and divorcing it from we're just a utilization-exposed company to we have some more discrete growth drivers?

Well, I think that's why we're excited about the reporting. I think over time you guys will start to see what procedures we plan and what areas we're in. So I think it'll make it easier for you guys to generally have a better understanding of where that growth is going. Because I think in our historical reporting, quite frankly, it was very hard to kind of understand, where the hell are these guys playing this? And people really struggled with it, which is why I think Rhapsody was such a highlighted product, right? Because it was easy for people to say, well, I know how many procedures are there, and I know what the ASP is, and I can really kind of assign value to that.

What we're trying to do with the new reporting is hopefully give you guys a little bit more colors to what And as you maybe deconstruct the growth a little bit further, how should we think about just pure volume growth, pure price, innovation-driven mix? How do you kind of break apart the PGI and maybe just the business going forward?

Well, most of our growth continues to be from volume. pricing has helped over the last few years and it'll continue to help but volume is the primary growth driver at Merit and obviously we're very consistent in launching new products which also helps and as you kind of describe the market when I look at the business it seems like you're playing sort of in the periphery of a lot of attractive categories you're hanging around the hoop You're not going to go head-to-head with super large, well-resourced competitors on the playing field.

How do you think about just the strategy and how you select what markets to play in and what products to go after?

I think it all starts with our foundational products. I think when you look at the therapeutic procedures that are out there, there's not much you can do without, you know, an access, a delivery device, and closure, right?

And those are all kind of the foundational products of the business.

And so when we look at it, you know, we feel like we're in a really good spot where, yeah, we get to play with some of the big guys, but we're not actually kind of, you know, competing directly.

And as you think about the portfolio, when I listen to kind of the narrative around the viewpoint that Martha described, I think one of the things she talked about was you have mammograms, then biopsies, and then within the biopsy population, sort of have your super high-end products, and then you sort of saw demand for, I don't know what to call it, down trading or other. Yeah, we call it good and best, right? Yeah, good and best. I know it's early, but maybe give us some sense of how that's playing out, and then maybe as a corollary, are there other pieces of your portfolio where you're selling best but good might be acceptable?

I mean, look, I think there is a little bit of cannibalization that we baked into our modeling, just naturally. But there is, you know, when there's a high-risk, you know, kind of, you know, outcome that the doctor's seen, they're going to use Scout. I mean, they're not going to cut. I think what we've seen is that maybe the cases that aren't as risky, there was hesitation from the doctor saying, well, man, you know, this is pretty expensive to, you know, to use on something that could or could not be an issue. And so that's the market that we really get to fill with viewpoint. And, you know, it takes it, you know, essentially kind of triples, you know, kind of the cam for us. You know, it gets it to 1.1, 1.2 billion. So, I mean, I think when you look at that, you know, then it starts to make sense. And, you know, I think our sales force is really excited about it. I think it's a little early to tell. There is a capital component, right, that takes time to kind of ramp that up and get through all the committees that you have to. which is kind of why you see the ramp from $2 million to $4 million this year and then $15 million at the midpoint next year. So as we work through that process, we'll start to get more momentum in that. But our sales force was really excited about it.

It's something that they really wanted, and so we're happy we were able to do that for them. And what does the M&A pipeline look like?

I think, you know, look, I think it's been pretty active, you know, the last couple years. I mean, there's just a lot of things out there. I mean, I think the nice thing about us is that we don't have to do anything if we don't want to. You know, I think if you look at the acquisitions that we've done over the last few years, it gives you kind of a sense of what we're looking for, right? We want to get kind of deeper in the areas that we're already playing in as opposed to getting wider. And so I think we've done a really good job of finding areas that, you know, like our specific call points that our sales force is already there. and getting them the products that they really want. And so I think you'll probably see more of that. It is a very active market. There's also a lot of bad assets out there, so you've got to be careful. But we're not in a situation where we feel like we have to do something. Great spot to be.

So you wouldn't want investors interpreting, you're at the last year of your CGI, growth is slower, M&A needs to pick up to pad the next CGI?

No, we're not thinking about that. We're not doing acquisitions to hide any growth deficiencies at all. I mean, I think, you know, we've been very consistent in our acquisitions, you know, and acquisitions over the years, but it's definitely not something we have to do.

And maybe it's a good transition to talk a little bit about the LRP. I mean, assuming even add variances to the guidance that you provided, you will achieve your three-year plan, I think, probably putting you in a small list of companies, their LRPs. So that would be a good thing. But as you round out the CGI period and kind of reflect and get ready to set another one, what are some of the things that are kind of on your mind as you exit this three-year plan that might be different just from an operating environment perspective or competitive dynamic standpoint as you look forward?

It's a great question, and that's the type of questions that we're asking ourselves right now. right so I think one of the nice things of how the CEO transition happened is that I think the board was very thoughtful and how it kind of all worked you know so CGI runs which is our current LRP for those it ends at the end of 2026 obviously the CEO transition happened in October that gives Martha really kind of a year and a quarter to kind of you know dig in and look at the business, and one of the things that we are doing right now is asking those same questions and saying, hey, where do we have the right to win? What makes sense in the portfolio? Where do we want to go? We're spending the next year kind of really just hyper-focused on the portfolio and what we think we can do. And once we understand that, I think we'll have to make a decision on what we do, whether we put another LRP out. I know generally we do pretty good on them. I think people like them. I like them. But a decision hasn't been made one way or the other. And that's, by the way, very consistent. Our LRPs, you know, I'll take a minute here to plug that, you know, we also hit our foundations for growth, you know, targets. And it looks like we, you know, I'm not going to knock on wood, you know, it looks like we will be also hitting our CGI targets, which will be, you know, two LRPs in a row that we execute on. So I think we're being very thoughtful right now. Hey, you know, can we keep that going? and do we want to put another LRP up?

And maybe that's a good segue to dive into some of the operating dynamics specific to 2026, and I'm sure this is not an especially novel question, but one that you get a lot is just about the ramp for the rest of the year. You started below your full-year guidance. I believe the second quarter you're targeting a number sort of midpoint at the low end of your full-year guidance. Maybe just recontextualize for people now what Q1 and what you were seeing in the business when you gave the guidance, may I guess, and how we should think about the rest of the year.

I think really what I saw, and I generally believe that our guidance isn't significantly different than how we've guided before. There is a couple of things that are kind of creating a little bit of noise, and I want to talk about those because I think once you look at the underlying business, I truly believe it's doing well. And the issues that we're having, I think, are addressable and things that we have somewhat visibility to that we believe kind of come back and help us reach our guidance. So if you look at kind of the foundational kind of side of the business and you strip out the dual cap divestiture and the OEM impact, that business grew at 5.5% on an organic constant currency basis in the first quarter, which is essentially in line with a 6% three-year Similarly, if you look at therapeutic and you adjust for OEM again, which is kind of in both buckets, and then you adjust for the recall that we think we can be done with here by the end of the second quarter and start to see some back. that business grew at 12% in the first quarter on an organic constant currency basis, as opposed to the 11% three-year CAGR, right? So when you look at kind of the underlying business, outside of those kind of items we've called out, it's actually doing pretty well. And so as OEM comes back, we think it's going to do at least mid-single digits this quarter, and you get the recalls behind you. Obviously, dual-cap divestiture, you'll have to adjust for that all year long. we think the business is doing great or just fine and doesn't seem overwhelming in our numbers.

And just to be clear, the dual cap divestiture is excluded from the four and a half to six or included?

It's excluded, right? So you have to adjust for it, yeah.

And any other, just those OEM normalization dual caps are already out, but OEM normalization sounds like the big thing that bridges you through the balance of the year. How about kind of the overall operating environment? I'm sure you've got a ton of questions on this. It's really not. And the data points are super mixed. Like you have the hospitals, generally we queue ones, but it's all going to be fine. The managed care companies are saying, oh, no, no, it's all going to be fine for us. Most recently we had Medtronic, obviously, a reporter said everything's fine. I mean, what's your perspective on kind of the operating environment?

I mean, I would agree with Medtronic, right? I mean, we're not seeing anything that would give us, you know, pause. The environment seems healthy. Yeah, I don't have anything else other than that. I think, you know, obviously, I've been an eye on things, but generally, the environment feels good.

And maybe this is not an update that you provide. Maybe you sort of give your stance on this, that one of the things that came out in first quarter earnings and I think subsequently for a lot of companies and in different surveys and other things that this year did start at a disproportionately sharp step down from the fourth quarter, whether it was weather or seasonality or deductible recess, whatever the dynamics might have been. But it does seem like the most recent set of facts investors are generally living with is that things have progressively gotten better throughout 2026. So what have you seen in your business?

You know, honestly, it's why I kind of highlighted the growth, you know, excluding kind of those, you know, I don't want to call them one-timers, right, but those issues that we kind of talked about on both foundational and therapeutic was because I think when you peel that back, the business did great, you know, had it not been for those couple things, you know, I think we would have been just kind of back to our kind of normal selves and, you know, I don't think anybody would have had any questions. Unfortunately, I think, you know, we got caught up in that noise, right, where, hey, you know, there was other companies that were a little bit slower. Merit was a little bit slower than normal. Once I get out there and kind of start, you know, helping people kind of understand the underlying business, and I think people get it. But, yeah, I mean, I think the business has been doing great. Our sales force is out there, you know, and doing what they're good at, and hopefully that can continue.

Are there any other areas that you want to call out that you feel like people aren't paying attention to, like the OEM dynamic where it's 50 or it's in the teens. You're like, no guy is going to be five to seven. And everyone's like, oh, no, they're just sandbagging. Are there other areas that are seeing a sort of outsized growth or even underrepresented growth right now that you don't know that people are fully digesting?

I mean, look, I think it was unfortunate that our OEM business happened to have issues at the same time as everybody else's OEM business, which means we kind of got caught up and kind of everybody thinking we all had the same issue. I think for us it was very unique to us. Again, we're not a contract manufacturer. I think most of you know that. We sell our OEM customers products that we sell every day to our own customers. It's just products that, you know, it's areas that we don't directly, as long as they don't directly compete with our sales force and or they're not strategic in nature, the best way I kind of can explain it is we essentially sell capacity, right? And so we had made some product line transfers to Tijuana. Customers stocked up in inventories. Some customers got acquired, so then they had inventory policy changes. Or people started looking at their working capital and saying, hey, I could probably use a little bit less inventory. And it just took a little bit longer for them to burn through that inventory that they had. But, you know, again, you know, heading into the first quarter and, you know, into the second quarter, I've been pretty vocal that, you know, the orders are back. You know, we have good visibility. We feel pretty comfortable that, you know, we can hit at least that mid-single digit in the second quarter.

And how do we put together the dynamic of de-stocking in some of those businesses who would seem like you'd only do that if you had an air pocket of demand on the other side? How do we square that with the commentary around the stability of the end market?

You know, I mean, it's a good question. I'm not sure that I have a good answer for you. Other than I think, you know, generally speaking, people will look at their working capital and see, you know, they'll forget, you know, hey, you know, what happened under COVID, right? Like, hey, I maybe should have had, you know, more inventory or, you know, there was a supply chain issues after COVID, you know, where people just were not, you know, maybe stopped. up on inventory. And I think over time, you know, as you get more comfortable with the supply chain, you say, well, maybe I don't have to hold that much, right? And I think, I mean, I think those are all things that kind of ebb and flow, which is why our inventory, you know, and, or sometimes, you know, the customers just say, hey, you know what, I think I can go get the product a little bit cheaper over here. And, you know, inevitably what happens is, you know, we never really lose a customer at Merritt. What happens is they go and they try and then, you know, that other product and they usually boomerang back. And so that's why our business is a little bit choppy. You know, Again, I've been pretty straightforward about that. But consistently, I think if you look at it over time, we're going to be in that five to high single degree.

I know like many of your peers and other companies you follow, there's a heavy focus on the U.S., but you do have a pretty strong business internationally. And maybe just talk to what you're seeing in markets outside the U.S. And obviously, China always has its own set of specific criteria, operating factors like DVP and otherwise. What are you seeing OUS, and how does that factor into your kind of growth algorithm?

Again, I think when we look at our international markets, we think they're doing just fine. I mean, I think if you look at the European markets, you know, we delivered growth there. You know, maybe it's kind of right in line with our guidance. You know, you look at China, that's essentially been a headwind for us the last few years, you know, with the creative revenue. It's actually contributing. Not much, but it's at least positive. You know, we hope over time and, you know, that we're kind of on the path to kind of delivering growth out of there. But I think it's too early to tell, right? I'd kind of like to get this year behind me and specifically in China and see kind of how that market is doing. But it's trending in the right direction, right? It's not holding this back like it did the last few years.

And as part of your kind of next round of whether you do an LRP or a strategic plan that Martha really owns, how are you thinking about, if you ever want to talk about acquisitions, but there's the other side of it too, either portfolio pruning or market exits. Does any of the markets outside the U.S. rise to the level of discussion?

Look, I think it's maybe the natural progression for us, right? I mean, I think we were very poor at product lifecycle management, quite frankly. It's something we started to pick up under Foundations for Growth. You guys saw us divest of two PAC businesses, one in our European market and the other one in Australia. This year you saw us divest of dual cap. I mean, I think it's just kind of the – and there was a bunch of skew rationalization that happened too, or more like skew consolidation that's happened over the years. And so I think it's a natural thing to kind of look at. It's expensive to be in a lot of countries, and there's a lot of regulatory requirements and statutory things that you have to do. And so we'll do like we've done every other year, right, when we're launching RRPs. Hey, let's look at the markets that we're in. Do they make sense financially? Do we think we can get the growth, or should we be investing dollars in other areas? And same with the portfolios. We'll look at the portfolios. But you also just heard me kind of talk about our therapeutic side of things. We've essentially done acquisitions in just about every single one of them, and we think we've got the product.

Is that something we want to divest?

But I think things will pop up as a natural thing that happens, but I'm not – size or things like that, I don't know yet. That's all the work that we're doing right now. But I consider it more product lifecycle management.

Great. Let's maybe turn to the P&L. I mean, this is sort of a very, a lot of moving parts in this year's earnings outlook, but you are stepping over and absorbing a lot of headwinds while still growing earnings this year. I think you have tariffs, you have viewpoint, convert dilution, but you're still going to grow earnings, in fact, you know, slightly faster than what you're planning to grow revenues, take midpoint to midpoint, I think. So what are some of the puts intakes in the P&L for this year?

Yeah, I'll take the easy one first. Obviously, the convert dilution is probably not going to happen, right? I mean, just given where the stock price is. But, look, I think tariffs is the tricky one. You know, I think everybody, at least, you know, I felt like it was probably prepared to, you know, book some sort of receivable, you know, based on, you know, the tariff refunds. Obviously, over the last few days, you know, the government DOJ has decided that they're going to challenge, you know, what people can get. I will say that we have started to get some reimbursements, not a material amount, but some. And so I think that'll be the kind of one thing that we'll kind of look at. And those are obviously the historical tariffs that we paid, right? Do we get a credit for that or not? That would be a one-time benefit. And then there's the tariffs that are ongoing this year. Obviously, I think we think those will start to get better. than what we initially guided to. I think, you know, how much better? I think we'll adjust everything, you know, after our second quarter numbers, you know, as we finalize the quarter, we'll take a deep dive at the tariffs and what makes sense adjusting. But I think we have a pretty good game plan, you know, to overcome the things that are happening. I mean, you know, luckily we haven't seen any significant input costs increases. We're seeing fuel start charges. We're pretty used to those. I think, you know, I kind of feel like those happen every year. But yeah, we're keeping an eye on things. And I think our guidance is not a significant jump from our operating margin from last year. I think we tried to be realistic. And again, our guidance is usually set to be kind of realistic and achievable. We'll check it out at the end of the second quarter and see where we're at and adjust it if necessary.

Sometimes I feel like when companies experience these headwinds, everyone says, oh, they're all going to go away next year. So you're going to have this giant outsized earnings growth here, but it never seems to – there's always other stuff that comes into the mix with capitalized variances or flow-through timing of inventory or cost increases. How are you kind of framing normalized ETS growth with these headwinds, or do you not kind of want people doing this math? If it weren't for the $0.12 of headwind, earnings would have grown this amount, so it should just grow low teens next year.

Yeah, I mean, honestly, I think it's – You know, obviously, that's why we set up, you know, the LRPs. I think that's, you know, hopefully gives people some visibility. Obviously, we don't call it EPS out, but we do call out, you know, operative margin. You know, that hopefully gives you guys a sense of where we think we'll end up, at least for this year. You know, we'll decide what we go forward basis. But, yeah, no, I mean, I think, look, there's always something every year that I feel you've got to overcome. I mean, that's just the nature of the business. That's what the executive team, you know, gets paid to do is, you know, whatever challenge comes our way, hey, we've got to figure out how we're going to make the commitments that we made. I think that also helps from a guidance perspective. People sometimes want to call me a sandbagger. I'll take it all day because I know what the alternative is. I lived it and don't want to go back to that. I think what we try and do is set realistic and achievable guidance. We're not going to try and wow you with some guidance that we think is unrealistic.

That's not our nature. so that I think helps too so nothing's changed from that perspective and I was trying to sort of obviously as I always do, read through Martha's comments and be a way around forward margin trajectory but if you look at your low to mid 50s gross margin business low 20s operating margin is pretty good if you look across the pure set you don't see companies do superiorly better than that at those types of gross margins. It sounded like the forward trajectory of margins was probably a little more balanced, and you were sort of a trade-off discussion to have between margin expansion and growth reinvestment.

I don't think so, right? I mean, I think we think we can continue to drive profitability and continue to expand our operating margin. I will be very transparent. don't expect what we've done the last five years. I mean, we did almost 700, 800 basis point improvement. That's just not doable. But we do think that we can find leverage in the business. We think we can continue to expand gross margins a little bit slower. Hopefully, we're going to go through our strategic planning. Hopefully, we'll give you guys some good color on what we think we can hit and get you guys comfortable with that. But I think, generally speaking, there's nobody at Merritt that doesn't think we standard operating margin.

Maybe just in the brief time we've left here, I'll turn it back to you just to close your remarks. Sort of start to the year, stocks and volatile. What do you want people to walk away from this presentation, those on the webcast, and also from your one-on-one meetings? How do you want people to leave this conference as probably your last public appearance before Q2?

I mean, look, I think we're feeling pretty confident. I think, you know, maybe the one thing we haven't really discussed is, you know, kind of the CEO change, right? You know, with Martha coming on, I feel like she's a great cultural fit. I think, you know, she's doing all the right things. I, you know, there hasn't been any significant, you know, changes in the executive team. Actually, none, really, other than a couple people that we've brought on for some holes that we wanted to fill. But, yeah, I think, you know, we're doing all the right things this year, I think, you know, as we kind of look forward to the next few years. And so, you know, my confidence level is pretty positive. And I think, you know, it seems like a very challenging environment out there, but the business continues to do well. So we'll see how it all shakes out.

Excellent. Well, thank you. Appreciate you making it.

Thank you for having us. I appreciate it. I look forward to the next update. Great. Thank you.