Medical device company Merit Medical Systems (NASDAQ:MMSI) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 9.8% year on year to $355.4 million. The company expects the full year’s revenue to be around $1.48 billion, close to analysts’ estimates. Its non-GAAP profit of $0.86 per share was 14.8% above analysts’ consensus estimates.
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Merit Medical Systems (MMSI) Q1 CY2025 Highlights:
- Revenue: $355.4 million vs analyst estimates of $352.7 million (9.8% year-on-year growth, 0.8% beat)
- Adjusted EPS: $0.86 vs analyst estimates of $0.75 (14.8% beat)
- Adjusted EBITDA: $83.83 million vs analyst estimates of $71.58 million (23.6% margin, 17.1% beat)
- The company reconfirmed its revenue guidance for the full year of $1.48 billion at the midpoint
- Management lowered its full-year Adjusted EPS guidance to $3.36 at the midpoint, a 7.8% decrease
- Operating Margin: 11.5%, in line with the same quarter last year
- Free Cash Flow Margin: 5.5%, down from 7.6% in the same quarter last year
- Organic Revenue rose 6% year on year (7% in the same quarter last year)
- Market Capitalization: $5.66 billion
StockStory’s Take
Merit Medical Systems delivered revenue and non-GAAP earnings per share ahead of Wall Street expectations in Q1, driven primarily by solid organic growth in the Cardiovascular segment and robust OEM product demand in the U.S. Management credited this performance to effective execution of operational initiatives and successful integration of recent acquisitions, with CEO Fred Lampropoulos highlighting the team’s continued focus on efficiency and product mix improvements.
Looking forward, management addressed the impact of newly implemented tariffs and trade policies, which prompted a reduction in full-year non-GAAP EPS guidance despite reconfirmed revenue targets. CFO Raul Parra stated that the company is deploying mitigation strategies—including supply chain adjustments and cost initiatives—but cautioned that most benefits from these efforts will not be realized until next year. The leadership team emphasized its commitment to long-term growth, with ongoing investments in R&D and operational efficiency programs aimed at offsetting external headwinds.
Key Insights from Management’s Remarks
Management’s remarks emphasized the interplay between operational execution, product mix, and external trade-related challenges in shaping Q1 performance and the outlook.
- Cardiovascular segment momentum: The Cardiovascular segment delivered above-expected growth, boosted by contributions from acquired product lines and ongoing demand for cardiac intervention devices. Management noted that integration efforts for these acquisitions remained on track and are expected to support future sales.
- OEM product surge: U.S. demand for OEM (original equipment manufacturer) products significantly exceeded expectations, driven by new account wins and established customer relationships. Management attributed this growth to the company’s longstanding reputation for quality and reliability in the OEM segment.
- Endoscopy segment integration: The Endoscopy business saw substantial growth, with management citing smoother-than-anticipated integration of acquired assets and an expectation for stronger performance in the second half of the year as sales teams fully ramp up.
- Gross margin improvements: Gross margin benefited from favorable product and geographic revenue mix, as well as operational efficiencies and pricing initiatives. Management described these improvements as the result of multi-year efforts under the company’s continued growth initiatives (CGI) program.
- Tariff and trade policy impacts: The company identified newly implemented tariffs—particularly those affecting China—as a major headwind for profitability. While mitigation strategies are underway, management acknowledged that much of the incremental cost will be realized in 2025, with full mitigation benefits unlikely until 2026.
Drivers of Future Performance
Management’s outlook for the remainder of the year is shaped by ongoing product demand, integration of acquisitions, and the need to address tariff-related cost increases.
- Tariff mitigation strategies: The company is prioritizing supply chain adjustments, such as shifting manufacturing and redirecting shipments, to offset increased costs from new tariffs. Management believes up to 45% of the annualized tariff impact can be mitigated, but most benefits are projected for 2026.
- Product and market expansion: Continued investment in R&D and the introduction of new products—especially in Cardiovascular and Endoscopy—are expected to support organic growth and competitive positioning.
- Operational efficiency focus: The ongoing CGI program, which targets cost reductions and productivity improvements, remains central to efforts to preserve margins and support free cash flow amid external headwinds.
Top Analyst Questions
- Jason Bednar (Piper Sandler): Asked for more detail on the pace and effectiveness of tariff mitigation efforts. Management outlined ongoing supply chain adjustments and clarified that most cost offset will be seen in 2026.
- Simran (Wells Fargo, for Larry Biegelsen): Inquired about the causes of softer demand in China and whether geopolitical tensions could worsen the outlook. Management attributed recent softness mainly to macroeconomic factors and maintained its full-year outlook for China.
- Steve Lichtman (Oppenheimer): Questioned what drove the step-up in gross margin performance. Management credited operational efficiency, product mix, and integration of acquisitions as key contributors, emphasizing that these initiatives are ongoing.
- Craig Bijou (Bank of America Securities): Asked about variability and drivers behind strong OEM growth, and whether inventory build or new accounts were responsible. Management pointed to new account wins and sustained demand, downplaying inventory effects.
- Jim Sidoti (Sidoti & Company): Sought clarification on M&A activity and integration progress of recent deals. Leadership reported that integration is progressing as planned and that the company continues to evaluate acquisition opportunities in a dynamic market.
Catalysts in Upcoming Quarters
Looking ahead, the StockStory team will be monitoring (1) the pace and effectiveness of tariff mitigation strategies and their impact on operating margins, (2) the continued integration and sales ramp-up of recently acquired product lines in Cardiovascular and Endoscopy, and (3) stabilization or improvement in China market demand. Additionally, progress on reimbursement decisions for WRAPSODY CIE and execution of cost reduction initiatives will be important signposts for tracking the company’s ability to navigate external challenges.
Merit Medical Systems currently trades at a forward P/E ratio of 25.6×. In the wake of earnings, is it a buy or sell? Find out in our free research report.
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