Merit Medical Reports Earnings for Quarter Ended March 31, 2019 Nasdaq:MMSI


(MENAFN- GlobeNewsWire - Nasdaq) itemprop="articleBody">

  • Q1 2019 worldwide revenue of $238.3 million, up 17.4% as reported over Q1 2018
  • Q1 2019 core revenue on a comparable, constant currency basis* up 10.0% over Q1 2018
  • Q1 2019 GAAP EPS was $0.11, compared to $0.10 in Q1 2018
  • Q1 2019 non-GAAP EPS* was $0.37, compared to $0.31 in Q1 2018
  • * Core revenue on a constant currency basis, non-GAAP EPS, non-GAAP net income and non-GAAP gross margin are non-GAAP financial measures. A reconciliation of these and other non-GAAP financial measures used in this release to their most directly comparable GAAP financial measures is included under the heading 'Non-GAAP Financial Measures' below.

    SOUTH JORDAN, Utah, April 23, 2019 (GLOBE NEWSWIRE) -- Merit Medical Systems, Inc. (NASDAQ: MMSI), a leading manufacturer and marketer of proprietary disposable devices used in interventional, diagnostic and therapeutic procedures, particularly in cardiology, radiology, oncology, critical care and endoscopy, today announced revenue of $238.3 million for the quarter ended March 31, 2019, an increase of 17.4% over revenue of $203.0 million for the quarter ended March 31, 2018. Core revenue on a comparable, constant currency basis* for the first quarter of 2019 would have been up 10.0% when compared to the first quarter of 2018.

    Merit's GAAP net income for the first quarter of 2019 was $6.2 million, or $0.11 per share, compared to GAAP net income of $5.3 million, or $0.10 per share, for the first quarter of 2018. Merit's non-GAAP net income* for the quarter ended March 31, 2019 was $20.6 million, or $0.37 per share, compared to $15.9 million, or $0.31 per share, for the quarter ended March 31, 2018.

    Merit's GAAP gross margin for the first quarter of 2019 was 43.9%, compared to GAAP gross margin of 43.4% for the first quarter of 2018. Merit's non-GAAP gross margin* for the first quarter of 2019 was 49.2%, compared to non-GAAP gross margin* of 47.5% for the first quarter of 2018.

    Merit's revenue by category for the quarter ended March 31, 2019, compared to the corresponding period in 2018, was as follows (unaudited, in thousands, except for percentages):

    Three Months Ended March 31, % Change 2019 2018 Cardiovascular Stand-alone devices 14.6% $ 95,427 $ 83,246 Cianna Medical n/a 12,849 — Custom kits and procedure trays (1.0)% 32,943 33,272 Inflation devices (1.8)% 22,017 22,419 Catheters 27.1% 43,039 33,865 Embolization devices (6.0)% 11,827 12,587 CRM/EP 18.3% 12,378 10,466 Total 17.7% 230,480 195,855 Endoscopy Endoscopy devices 9.6% 7,869 7,180 Grand Total 17.4% $ 238,349 $ 203,035 'Our first quarter results fulfilled our goal of 8-10% core growth by landing on the top side of our projection,' said Fred P. Lampropoulos, Merit's Chairman and Chief Executive Officer. 'This is particularly pleasing when we consider the training, sales meeting and new-year startup expenses included in this quarter.'

    'Although there is substantial uncertainty as to the outcome of the Brexit negotiations, we have prepared for the potential outcomes with our newly operational distribution and training center in Reading, United Kingdom,' Lampropoulos continued. 'There are several new products scheduled for introduction in the second quarter that we believe will add to our growth and margins.'

    'Our transition of the Becton, Dickinson deal continues on schedule with some of the acquired products now being built in our facility in Tijuana, Mexico,' Lampropoulos said. 'The entire transition program is scheduled for completion later this year.'

    'The Cianna transition is complete and sales continue to grow according to our expectations,' Lampropoulos continued. 'Although the complications of Brexit, consolidation of notified bodies and the new European Medical Device Regulation (MDR) have slowed new product approvals, we anticipate receiving approval of the SAVI SCOUT® for sale in Europe in the near future.'

    CONFERENCE CALL
    Merit will hold its investor conference call (conference ID 9197687) today, Tuesday, April 23, 2019, at 5:00 p.m. Eastern (4:00 p.m. Central, 3:00 p.m. Mountain, and 2:00 p.m. Pacific). The domestic telephone number is (844) 578-9672 and the international number is (508) 637-5656. A live webcast and slide deck will also be available at merit.com.

    CONSOLIDATED BALANCE SHEETS (In thousands) March 31, December 31, 2019 2018 (Unaudited) ASSETS Current Assets Cash and cash equivalents $ 49,522 $ 67,359 Trade receivables, net 146,488 137,174 Other receivables 10,694 11,879 Inventories 198,922 197,536 Prepaid expenses and other assets 11,220 11,326 Prepaid income taxes 3,620 3,627 Income tax refund receivables 1,317 933 Total current assets 421,783 429,834 Property and equipment, net 340,764 331,452 Intangible assets, net 448,707 462,713 Goodwill 334,951 335,433 Deferred income tax assets 3,083 3,001 Operating lease right-of-use assets 80,453 — Other assets 60,052 57,579 Total Assets $ 1,689,793 $ 1,620,012 LIABILITIES AND STOCKHOLDERS' EQUITY Current Liabilities Trade payables $ 51,680 $ 54,024 Accrued expenses 91,310 96,173 Current portion of long-term debt 22,000 22,000 Current operating lease liabilities 11,825 — Income taxes payable 1,644 3,146 Total current liabilities 178,459 175,343 Long-term debt 362,187 373,152 Deferred income tax liabilities 56,324 56,363 Long-term income taxes payable 392 392 Liabilities related to unrecognized tax benefits 3,013 3,013 Deferred compensation payable 12,480 11,219 Deferred credits 2,227 2,261 Long-term operating lease liabilities 72,243 — Other long-term obligations 62,357 65,494 Total liabilities 749,682 687,237 Stockholders' Equity Common stock 574,946 571,383 Retained earnings 369,713 363,425 Accumulated other comprehensive loss (4,548 ) (2,033 ) Total stockholders' equity 940,111 932,775 Total Liabilities and Stockholders' Equity $ 1,689,793 $ 1,620,012


    CONSOLIDATED STATEMENTS OF INCOME (Unaudited, in thousands except per share amounts) Three Months Ended March 31, 2019 2018 NET SALES $ 238,349 $ 203,035 COST OF SALES 133,713 114,979 GROSS PROFIT 104,636 88,056 OPERATING EXPENSES Selling, general and administrative 78,270 64,913 Research and development 16,043 14,322 Acquired in-process research and development 25 — Contingent consideration expense 775 40 Total 95,113 79,275 INCOME FROM OPERATIONS 9,523 8,781 OTHER INCOME (EXPENSE) Interest income 357 146 Interest expense (2,764 ) (2,398 ) Other expense - net (270 ) (170 ) Total other income (expense) - net (2,677 ) (2,422 ) INCOME BEFORE INCOME TAXES 6,846 6,359 INCOME TAX EXPENSE 651 1,090 NET INCOME $ 6,195 $ 5,269 EARNINGS PER COMMON SHARE: Basic $ 0.11 $ 0.10 Diluted $ 0.11 $ 0.10 AVERAGE COMMON SHARES: Basic 54,917 50,277 Diluted 56,490 51,910


    Non-GAAP Financial Measures
    Although Merit's financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ('GAAP'), Merit's management believes that certain non-GAAP financial measures referenced in this release provide investors with useful information regarding the underlying business trends and performance of Merit's ongoing operations and can be useful for period-over-period comparisons of such operations. Non-GAAP financial measures used in this release include:

  • constant currency revenue,
  • core revenue,
  • core revenue on a constant currency basis,
  • non-GAAP gross margin,
  • non-GAAP net income, and
  • non-GAAP earnings per share.
  • Merit's management team uses these non-GAAP financial measures to evaluate Merit's profitability and efficiency, to compare operating results to prior periods, to evaluate changes in the operating results of its operating segments, and to measure and allocate financial resources internally. However, Merit's management does not consider such non-GAAP measures in isolation or as an alternative to measures determined in accordance with GAAP.

    Readers should consider non-GAAP measures used in this release in addition to, not as a substitute for, financial reporting measures prepared in accordance with GAAP. These non-GAAP financial measures generally exclude some, but not all, items that may affect Merit's net income. In addition, they are subject to inherent limitations as they reflect the exercise of judgment by management about which items are excluded. Merit believes it is useful to exclude such items in the calculation of non-GAAP earnings per share, non-GAAP gross margin and non-GAAP net income (in each case, as further illustrated in the reconciliation tables below) because such amounts in any specific period may not directly correlate to the underlying performance of Merit's business operations and can vary significantly between periods as a result of factors such as acquisition transactions, non-cash expenses related to amortization or write-off of previously acquired tangible and intangible assets, severance expenses, expenses resulting from non-ordinary course litigation, governmental proceedings or changes in tax regulations, and debt issuance costs. Merit may incur similar types of expenses in the future, and the non-GAAP financial information included in this release should not be viewed as a statement or indication that these types of expenses will not recur. Additionally, the non-GAAP financial measures used in this release may not be comparable with similarly titled measures of other companies. Merit urges investors and potential investors to review the reconciliations of its non-GAAP financial measures to the comparable GAAP financial measures, and not to rely on any single financial measure to evaluate Merit's business or results of operations.

    Constant Currency Revenue
    Merit's revenue on a constant currency basis is prepared by translating the current-period reported revenue of subsidiaries whose functional currency is other than the U.S. dollar at the applicable foreign exchange rates in effect during the comparable prior-year period. The constant currency revenue adjustment of $4.8 million for the three months ended March 31, 2019, was calculated using the applicable average foreign exchange rates for the three months ended March 31, 2018.

    Core Revenue and Core Revenue on a Constant Currency Basis
    Merit's core revenue is defined (a) with respect to prior fiscal year periods, as GAAP revenue, and (b) with respect to current fiscal year periods, as GAAP revenue, less revenue from certain acquisitions and strategic transactions. For the three-month period ended March 31, 2019, Merit's core revenue excludes revenues attributable to (i) the acquisition of (1) certain divested assets of Becton, Dickinson and Company in February 2018 (excluded January 2019), (2) the assets of DirectACCESS Medical, LLC in May 2018, (3) Cianna Medical, Inc. in November 2018, and (4) the assets of Vascular Insights, LLC in December 2018, and (ii) distribution arrangements executed with NinePoint Medical, Inc. in April 2018 and QXMedical, LLC in May 2018. Core revenue on a constant currency basis is defined as core revenue (as described in the first sentence of this paragraph) adjusted to eliminate the foreign exchange impact related to those core revenues for the relevant period, using the applicable average foreign exchange rates in effect for the comparable prior-year periods presented.

    Non-GAAP Gross Margin
    Non-GAAP gross margin is calculated by reducing GAAP cost of sales by amounts recorded for amortization of intangible assets and inventory mark-up related to acquisitions.

    Non-GAAP Net Income
    Non-GAAP net income is calculated by adjusting GAAP net income for certain items which are deemed by Merit's management to be outside of core operations and vary in amount and frequency among periods, such as expenses related to new acquisitions, non-cash expenses related to amortization or write-off of previously acquired tangible and intangible assets, severance expenses, expenses resulting from non-ordinary course litigation, governmental proceedings or changes in tax regulations, and debt issuance costs, as well as other items set forth in the tables below.

    Non-GAAP EPS
    Non-GAAP EPS is defined as non-GAAP net income divided by the diluted shares outstanding for the corresponding period.

    Other Non-GAAP Financial Measure Reconciliation
    The tables in this release set forth supplemental financial data and corresponding reconciliations of non-GAAP net income and non-GAAP earnings per share to Merit's net income and earnings per share prepared in accordance with GAAP for the three-month periods ended March 31, 2019 and 2018. The non-GAAP income adjustments referenced in these tables do not reflect stock-based compensation expense of approximately $1.8 million and $1.3 million for the three-month periods ended March 31, 2019 and 2018, respectively.


    Reconciliation of GAAP Net Income to Non-GAAP Net Income (Unaudited, in thousands except per share amounts) Three Months Ended March 31, 2019 Pre-Tax Tax Impact (a) After-Tax Per Share Impact GAAP net income $ 6,846 $ (651 ) $ 6,195 $ 0.11 Non-GAAP adjustments: Cost of Sales Amortization of intangibles 11,978 (3,067 ) 8,911 0.16 Inventory mark-up related to acquisitions 672 (173 ) 499 0.01 Operating Expenses Severance 327 (84 ) 243 0.00 Acquisition-related (b) 565 (145 ) 420 0.01 Fair value adjustment to contingent consideration (c) 775 (141 ) 634 0.01 Long-term asset impairment charge (d) 211 (54 ) 157 0.00 Acquired in-process research and development 25 (7 ) 18 0.00 Amortization of intangibles 2,809 (739 ) 2,070 0.04 Special legal expense (e) 1,663 (428 ) 1,235 0.02 Other (Income) Expense Amortization of long-term debt issuance costs 201 (52 ) 149 0.00 Tax expense related to restructuring (f) — 91 91 0.00 Non-GAAP net income $ 26,072 $ (5,450 ) $ 20,622 $ 0.37 Diluted shares 56,490 Three Months Ended March 31, 2018 Pre-Tax Tax Impact (a) After-Tax Per Share Impact GAAP net income $ 6,359 $ (1,090 ) $ 5,269 $ 0.10 Non-GAAP adjustments: Cost of Sales Amortization of intangibles 6,463 (1,606 ) 4,857 0.10 Inventory mark-up related to acquisitions 1,873 (481 ) 1,392 0.03 Operating Expenses Acquisition-related (b) 1,970 (506 ) 1,464 0.03 Fair value adjustment to contingent consideration (c) 40 (10 ) 30 0.00 Long-term asset impairment charge (d) 56 (14 ) 42 0.00 Amortization of intangibles 2,000 (532 ) 1,468 0.03 Special legal expense (e) 1,691 (435 ) 1,256 0.02 Other (Income) Expense Amortization of long-term debt issuance costs 201 (52 ) 149 0.00 Non-GAAP net income $ 20,653 $ (4,726 ) $ 15,927 $ 0.31 Diluted shares 51,910 (a) Reflects the tax effect associated with pre-tax income and the tax effect of non-GAAP adjustments based on statutory tax rates within the applicable markets with adjustments
    (b) Represents transaction costs and certain integration costs, including travel, related to acquisitions
    (c) Represents changes in the fair value of contingent consideration liabilities and contingent receivables associated with prior acquisitions
    (d) Represents abandoned patents and other long-term assets
    (e) Costs incurred in responding to an inquiry from the U.S. Department of Justice
    (f) Net tax expense related to non-recurring tax withholdings in connection with restructuring of certain international subsidiaries


    Reconciliation of Reported Revenue to Core Revenue (Non-GAAP), Constant Currency Revenue (Non-GAAP), and Core Revenue on a Constant Currency Basis (Non-GAAP) (Unaudited; in thousands except percentages) Three Months Ended March 31, % Change 2019 2018 Reported Revenue 17.4% $ 238,349 $ 203,035 Add: Impact of foreign exchange (a) 4,790 — Constant Currency Revenue 19.8% $ 243,139 $ 203,035 Three Months Ended March 31, % Change 2019 2018 Reported Revenue 17.4% $ 238,349 $ 203,035 Less: Revenue from certain acquisitions (b) (19,802 ) — Core Revenue 7.6% $ 218,547 $ 203,035 Add: Impact of foreign exchange (a) 4,790 — Core Revenue on a Constant Currency Basis 10.0% $ 223,337 $ 203,035 (a) The constant currency revenue adjustment of $4.8 million to reported revenue and to core revenue, for the three months ended March 31, 2019, was calculated using the applicable average foreign exchange rates for the three months ended March 31, 2018.

    (b) Merit's core revenue is defined (a) with respect to prior fiscal year periods, as GAAP revenue, and (b) with respect to current fiscal year periods, as GAAP revenue, less revenue from certain acquisitions and strategic transactions. For the three-month period ended March 31, 2019, Merit's core revenue excludes revenues attributable to (i) the acquisition of (1) certain divested assets of Becton, Dickinson and Company in February 2018 (excluded January 2019), (2) the assets of DirectACCESS Medical, LLC in May 2018, (3) Cianna Medical, Inc. in November 2018, and (4) the assets of Vascular Insights, LLC in December 2018, and (ii) distribution arrangements executed with NinePoint Medical, Inc. in April 2018 and QXMedical, LLC in May 2018. Core revenue on a constant currency basis is defined as core revenue (as described in the first sentence of this paragraph) adjusted to eliminate the foreign exchange impact related to those core revenues for the relevant period, using the applicable average foreign exchange rates in effect for the comparable prior-year periods presented.


    Reconciliation of Reported Gross Margin to Non-GAAP Gross Margin (Non-GAAP) (Unaudited, as a percentage of reported revenue) Three months ended March 31, 2019 2018 Reported Gross Margin 43.9 % 43.4 % Add back impact of: Amortization of intangibles 5.0 % 3.2 % Inventory mark-up related to acquisitions 0.3 % 0.9 % Non-GAAP Gross Margin 49.2 % 47.5 %


    ABOUT MERIT
    Founded in 1987, Merit Medical Systems, Inc. is engaged in the development, manufacture and distribution of proprietary disposable medical devices used in interventional, diagnostic and therapeutic procedures, particularly in cardiology, radiology, oncology, critical care and endoscopy. Merit serves client hospitals worldwide with a domestic and international sales force and clinical support team totaling in excess of 300 individuals. Merit employs approximately 6,000 people worldwide with facilities in South Jordan, Utah; Pearland, Texas; Richmond, Virginia; Malvern, Pennsylvania; Rockland, Massachusetts; San Jose and Aliso Viejo, California; Maastricht and Venlo, The Netherlands; Paris, France; Galway, Ireland; Beijing, China; Tijuana, Mexico; Joinville, Brazil; Markham, Ontario, Canada; Melbourne, Australia; Tokyo, Japan; Reading, United Kingdom; Johannesburg, South Africa; and Singapore.

    FORWARD-LOOKING STATEMENTS
    Statements contained in this release which are not purely historical, including, without limitation, statements regarding Merit's forecasted plans, net sales, net income (GAAP and non-GAAP), gross margin (GAAP and non-GAAP), earnings per share (GAAP and non-GAAP), effective tax rate and other financial results, anticipated or completed acquisitions, or the introduction of new products, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties such as those described in Merit's Annual Report on Form 10-K for the year ended December 31, 2018 and subsequent filings with the Securities and Exchange Commission. Such risks and uncertainties include inherent risks and uncertainties relating to Merit's internal models or the projections in this release; risks relating to Merit's potential inability to successfully manage growth through acquisitions generally, including the inability to effectively integrate acquired operations or products or commercialize technology acquired through completed, proposed or future transactions; expenditures relating to research, development, testing and regulatory approval or clearance of Merit's products and risks that such products may not be developed successfully or approved for commercial use; governmental scrutiny and regulation of the medical device industry, including governmental inquiries, investigations and proceedings involving Merit; restrictions on Merit's liquidity or business operations resulting from its debt agreements; infringement of Merit's technology or the assertion that Merit's technology infringes the rights of other parties; product recalls and product liability claims; changes in customer purchasing patterns or the mix of products Merit sells; risks and uncertainties associated with Merit's information technology systems, including the potential for breaches of security and evolving regulations regarding privacy and data protection; the potential of fines, penalties or other adverse consequences if Merit's employees or agents violate the U.S. Foreign Corrupt Practices Act or other laws or regulations; the pending exit of the United Kingdom from the European Union and uncertainties about when, how or if such exit will occur; laws and regulations targeting fraud and abuse in the healthcare industry; potential for significant adverse changes in governing regulations, including reforms to the procedures for approval or clearance of Merit's products by the U.S. Food & Drug Administration or comparable regulatory authorities in other jurisdictions; changes in tax laws and regulations in the United States or other countries; increases in the prices of commodity components; negative changes in economic and industry conditions in the United States or other countries; termination or interruption of relationships with Merit's suppliers, or failure of such suppliers to perform; fluctuations in exchange rates; uncertainties relating to the LIBOR calculation method and the potential phasing out of LIBOR; concentration of a substantial portion of Merit's revenues among a few products and procedures; development of new products and technology that could render Merit's existing products obsolete; market acceptance of new products; volatility in the market price of Merit's common stock; modification or limitation of governmental or private insurance reimbursement policies; changes in healthcare policies or markets related to healthcare reform initiatives; failure to comply with applicable environmental laws; changes in key personnel; work stoppage or transportation risks; introduction of products in a timely fashion; price and product competition; availability of labor and materials; fluctuations in and obsolescence of inventory; and other factors referred to in Merit's Annual Report on Form 10-K for the year ended December 31, 2018 and other materials filed with the Securities and Exchange Commission. All subsequent forward-looking statements attributable to Merit or persons acting on its behalf are expressly qualified in their entirety by these cautionary statements. Actual results will likely differ, and may differ materially, from anticipated results. Financial estimates are subject to change and are not intended to be relied upon as predictions of future operating results, and Merit assumes no obligation to update or disclose revisions to those estimates.

    TRADEMARKS
    Unless noted otherwise, trademarks and registered trademarks used in this release are the property of Merit Medical Systems, Inc. and its subsidiaries in the United States and other jurisdictions.

    Contact: Anne-Marie Wright, Vice President, Corporate Communications
    Phone: (801) 208-4167 e-mail: Fax: (801) 253-1688

    MENAFN2304201900703653ID1098430369


    Legal Disclaimer:
    MENAFN provides the information “as is” without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the provider above.