Merit Medical targets $175M free cash flow in 2025 with updated guidance and new CEO at helm

Earnings Call Insights: Merit Medical Systems (MMSI) Q3 2025

MANAGEMENT VIEW

* Martha Aronson, recently appointed as President and CEO, opened with an introduction and outlined her transition priorities, emphasizing her "optimism about the future" and plans for a listening tour with employees and stakeholders. Aronson stated, "I've been heartened by the fact that these are not just words, rather the organization truly lives these guiding principles... I'm excited to join Merit and truly honored to take on this role."
* Aronson highlighted the succession plan, noting that Fred Lampropoulos is now Executive Chairman and will transition to non-Executive Chairman in 2026. She remarked, "Fred will continue to play a role in our evaluation of potential organic and inorganic opportunities."
* Aronson reported Q3 total revenue of $384.2 million, a 13% year-over-year increase on a GAAP basis, and constant currency revenue growth that "exceeded the high end of the range of the growth expectations that were outlined on the Q2 2025 earnings call."
* Aronson called out the launch and milestones for key products including the Prelude Wave hydrophilic sheath introducer and Embosphere Microspheres, as well as the worldwide use of Scout Radar localization technology for breast cancer.
* With respect to WRAPSODY CIE, Aronson said, "Our Renal Therapies group has been impressively executing the U.S. commercial strategy... and they continue to exceed our expectations." She detailed progress with reimbursement strategies in both inpatient and outpatient settings.
* The company announced an agreement to acquire the C2 CryoBalloon technology for $22 million, intended to "strengthen our position in the multibillion-dollar gastroenterology market."
* CFO Raul Parra stated, "Third quarter total revenue growth was driven primarily by 13% growth in our Cardiovascular segment and to a lesser extent, 4% growth in our Endoscopy segment."

OUTLOOK

* 2025 guidance was updated to reflect strong Q3 performance: GAAP net revenue growth is projected at 11% to 12% year-over-year, with constant currency revenue growth in the range of 10.3% to 11.2%.
* Aronson affirmed, "We remain focused on delivering continued strong execution, solid constant currency growth and strong free cash flow generation in 2025."
* Parra updated 2025 non-GAAP diluted EPS guidance to a range of $3.66 to $3.79, up from the prior range of $3.52 to $3.72. Free cash flow for 2025 is now expected to be at least $175 million.
* Fourth quarter 2025 guidance expects total revenue growth of approximately 7% to 10.6% on a GAAP basis and non-GAAP EPS in the range of $0.87 to $1.01.

FINANCIAL RESULTS

* Q3 revenue was $384.2 million.
* Non-GAAP operating margin reached 19.7%.
* Non-GAAP EPS for the third quarter was $0.92 per share.
* Free cash flow for Q3 was $52.5 million.
* Gross margin was 53.6%, the highest in the company's history.
* Cash and cash equivalents as of September 30, 2025, were $392.5 million, with a net leverage ratio of 1.7x.

Q&A

* Jason Bednar, Piper Sandler: Asked for more detail on WRAPSODY adoption and reimbursement. Aronson responded, "I think we're all really pleased with the initial market response as it pertains to WRAPSODY CIE... we believe we meet the required cost criteria. So our application for TPT included WRAPSODY’s list price of $8,000."
* Bednar also pressed on gross margin sustainability; Parra attributed the record gross margin to "the kitchen sink approach" and focus on mix, pricing, and operations.
* Lilia-Celine Lozada, JPMorgan: Sought high-level outlook for 2026 and M&A strategy. Aronson stated the company will "stay focused on closing out a strong 2025" before setting post-2026 goals. Parra noted, "We've generated almost $142 million in free cash flow this year with $57 million coming in Q3."
* Jayson Bedford, Raymond James: Queried about Cardiac Intervention growth and SG&A trends. Parra credited focused sales groups and integration of the Cook acquisition, adding SG&A increases were partly due to "variable bonus accrual, truing that up to kind of the year-to-date performance."
* Additional questions covered Endoscopy integration, China market softness, capital allocation, and regulatory developments. Management consistently addressed these with specific references to product integration, macro environment, and capital deployment priorities.

SENTIMENT ANALYSIS

* Analysts were positive, focusing on WRAPSODY adoption, margin outperformance, and M&A strategy. Questions were direct but constructive, with frequent congratulations and requests for clarity on growth levers and execution.
* Management maintained a confident and transparent tone throughout both prepared remarks and Q&A. Aronson's and Parra's responses were detailed, with Parra emphasizing, "we're really proud of those guys for all the hard work that they're doing" regarding gross margin gains.
* Compared to the previous quarter, management's tone was similarly upbeat but with greater emphasis on execution and forward momentum under new leadership. Analyst sentiment remained constructive, with some increased focus on integration and reimbursement questions.

QUARTER-OVER-QUARTER COMPARISON

* Guidance was raised for 2025, notably in revenue growth, non-GAAP EPS, and free cash flow targets.
* Management transitioned from Fred Lampropoulos to Martha Aronson as CEO, with a smooth succession plan and continued involvement from Lampropoulos in strategic areas.
* Gross margin and operating margin both improved versus Q2, with Q3 reporting the highest gross margin in company history.
* Analysts shifted focus from clarification on WRAPSODY reimbursement timing in Q2 to early adoption, integration, and margin sustainability in Q3.
* Confidence in hitting CGI goals through 2026 was reiterated, with a stated intent to revisit strategy beyond that timeline once 2025 concludes.

RISKS AND CONCERNS

* Management cited "the dynamic and uncertain global macro environment" as an ongoing challenge.
* Tariffs remain a material headwind, with updated assumptions for 2025 cost impacts and acknowledgment that "the tariff situation and potential retaliatory measures by other countries remains highly uncertain and dynamic."
* China market softness, particularly in OEM demand, was discussed as a continued but manageable challenge.
* Integration of recent acquisitions and product launches in Endoscopy present some near-term distraction but are expected to improve as salesforces adapt.

FINAL TAKEAWAY

Merit Medical Systems delivered a strong third quarter marked by record gross margins, increased revenue, and robust free cash flow, supporting a raised outlook for 2025. Under new CEO Martha Aronson, the company emphasizes execution, product innovation, and global expansion, while maintaining a disciplined approach to capital allocation and integration of recent acquisitions. Management remains confident in meeting and potentially exceeding its financial and strategic targets through the end of 2025 and into 2026, supported by ongoing progress in reimbursement strategies and operational improvements.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/mmsi/earnings/transcripts]

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* Merit Medical Systems, Inc. (MMSI) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4836060-merit-medical-systems-inc-mmsi-q3-2025-earnings-call-transcript]
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