Merit Medical Systems, Inc. (NASDAQ: MMSI), a leading manufacturer
and marketer of proprietary disposable medical devices used in
interventional, diagnostic and therapeutic procedures, particularly
in cardiology, radiology, oncology, critical care and endoscopy,
will hold an investor call today to introduce its multi-year
financial targets for growth and improved profitability and will
host a question-and-answer session.
The Company’s new multi-year financial targets
for the period 2020 to 2023 are:
- Total revenue is expected to increase at a compound annual
growth rate (CAGR) of 5% to 7% - on an organic, constant currency,
basis*, for the three fiscal years ending December 31, 2023.
- GAAP operating margin of 13.7% to 17.0% and non-GAAP operating
margin* of 18% to 21% for the twelve months ending December 31,
2023.
- Cumulative free cash flow* generation of at least $300 million
for the three fiscal years ending December 31, 2023.
* Organic revenue, organic revenue on a constant currency
basis, non-GAAP operating margin and free cash flow are non-GAAP
financial measures. A reconciliation of these non-GAAP financial
measures to their most directly comparable GAAP financial measures
is included under the heading “Non-GAAP Financial Measures”
below.
The Company also reaffirmed its 2020 financial
guidance, as follows:
Based upon information currently available to
Merit’s management, Merit estimates for the year ending
December 31, 2020, absent material acquisitions, non-recurring
transactions or other factors beyond Merit’s control, the
following:
- Net revenue in the range of $950.0 million to $959.0 million,
representing a decrease of approximately 3.5% to 4.5% year over
year, as compared to net revenue of $994.9 million for the twelve
months ended December 31, 2019. The fiscal year 2020 revenue
guidance range assumes:
- Net revenue from the cardiovascular segment of between $921.0
million and $930.0 million, representing a decrease of
approximately 3% to 4% year-over-year as compared to net revenue of
$961.0 million for the twelve months ended December 31, 2019.
- Net revenue from the endoscopy segment of between $28.6 million
and $28.9 million, representing a decrease of approximately 14.5%
to 15.5% year-over-year as compared to net revenue of $33.9 million
for the twelve months ended December 31, 2019.
- GAAP net loss in the range of $(11.8) million to $(15.0)
million, or $(0.21) to $(0.27) per diluted share, compared to GAAP
net income of $5.5 million, or $0.10 per diluted share, for the
twelve months ended December 31, 2019.
- Non-GAAP net income in the range of $85.5 million to $88.5
million, or $1.52 to $1.57 per diluted share, compared to non-GAAP
net income of $82.1 million, or $1.46 per diluted share, for the
twelve months ended December 31, 2019.
Merit’s financial guidance for the year ending
December 31, 2020 is subject to risks and uncertainties
identified in this release and Merit’s public filings.
CONFERENCE CALL
Merit will hold its Foundations for Growth
investor conference call (conference ID 2887092) today, November
10, 2020, 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.
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:
- organic revenue,
- organic revenue on a constant currency basis,
- non-GAAP operating margin,
- free cash flow.
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
operating margin 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 or
administrative proceedings and resulting settlements, and corporate
transformation expenses. 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.
Organic Revenue and Organic Revenue on a Constant Currency
Basis
Merit’s organic revenue is defined as GAAP
revenue adjusted for revenue from acquisitions or divestitures.
Organic revenue on a constant currency basis is defined as organic
revenue adjusted to eliminate the foreign exchange impact related
to that organic revenue for the relevant period, using the
applicable average foreign exchange rates in effect for the
comparable prior-year periods presented. In the case of this
release, the comparable baseline year is the year ending December
31, 2020. The compound annual growth rate (CAGR) calculation
excludes a forecasted $4 million benefit from foreign exchange
fluctuations for the year ending December 31, 2021.
Non-GAAP Operating Margin
Non-GAAP operating margin is calculated by
adjusting GAAP operating 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, performance-based stock
compensation expenses, corporate transformation expenses, expenses
resulting from non-ordinary course litigation or administrative
proceedings and resulting settlements, governmental proceedings or
changes in industry regulations, as well as other items that could
arise but which are not currently anticipated by management.
Free Cash Flow
Free cash flow is defined as cash flow from
operations calculated in accordance with GAAP less capital
expenditures calculated in accordance with GAAP, as set forth in
the consolidated statement of cash flows.
Reconciliation of GAAP Operating Margin
to Non-GAAP Operating Margin(Unaudited,
ss a percentage of forecasted sales)
|
|
Low End |
|
High End |
|
|
Year Ended |
|
Year Ended |
|
|
December 31, 2023 |
|
December 31, 2023 |
|
|
% Sales |
|
% Sales |
GAAP Operating Margin |
|
13.7 |
% |
|
17.0 |
% |
Cost of Sales |
|
|
|
|
|
|
Amortization of intangibles |
|
3.8 |
% |
|
3.6 |
% |
Operating Expenses |
|
|
|
|
|
|
Amortization of intangibles |
|
0.5 |
% |
|
0.4 |
% |
|
|
|
|
|
|
|
Non-GAAP Operating Margin |
|
18.0 |
% |
|
21.0 |
% |
ABOUT MERIT
Founded in 1987, Merit Medical
Systems, Inc. is a leading manufacturer and marketer 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 500
individuals. Merit employs approximately 6,000 people
worldwide with facilities in South Jordan, Utah; Pearland, Texas;
Richmond, Virginia; Malvern, Pennsylvania; Rockland, Massachusetts;
Aliso Viejo, California; Maastricht and Venlo, The Netherlands;
Paris, France; Galway, Ireland; Beijing, China; Tijuana, Mexico;
Joinville, Brazil; Ontario, Canada; Melbourne, Australia; Tokyo,
Japan; Reading, United Kingdom; Johannesburg, South Africa; and
Singapore.
CAUTIONARY STATEMENT REGARDING 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 or loss
(GAAP and non-GAAP), gross and operating margins (GAAP and
non-GAAP), earnings per share (GAAP and non-GAAP), free cash flow,
compound annual growth rate, effective tax rate and other financial
results, the potential impact, scope and duration of, and Merit’s
response to, the coronavirus (COVID-19) pandemic and the potential
for recovery from that pandemic, consolidation of Merit’s
facilities or other expense reduction initiatives, future growth
and profit expectations, or improvements in economic conditions,
are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended, 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, 2019 (as
amended by Amendment No. 1 to Annual Report on Form 10-K/A, the
“2019 Annual Report”), Merit’s subsequent Quarterly Reports on Form
10-Q and other filings with the Securities and Exchange Commission
(the “SEC”). Such risks and uncertainties include inherent risks
and uncertainties relating to Merit’s internal models or the
projections in this release; risks and uncertainties associated
with the COVID-19 pandemic and Merit’s response thereto; 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 developed internally or acquired through
completed, proposed or future transactions; negative changes in
economic and industry conditions in the United States or other
countries; 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; litigation and
other judicial proceedings affecting 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;
actions of activist shareholders; 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; increases in the prices of
commodity components; 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;
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; termination or interruption of
relationships with Merit’s suppliers, or failure of such suppliers
to perform; fluctuations in exchange rates; 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 or future 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 referenced in the 2019
Annual Report and other materials filed with the SEC. 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. Those
estimates and all other forward-looking statements included in this
document are made only as of the date of this document, and except
as otherwise required by applicable law, Merit assumes no
obligation to update or disclose revisions to estimates and all
other forward-looking statements.
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.
Contacts: |
|
PR/Media
Inquiries:Teresa Johnson Merit Medical |
Investor
Inquiries:Mike Piccinino, CFA, IRCWestwicke - ICR |
+1-801-208-4295 |
+1-443-213-0509 |
tjohnson@merit.com |
Mike.piccinino@westwicke.com |
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