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Merit Medical Reports Earnings for Quarter Ended March 31, 2019
By: Nasdaq / GlobenewsWire - 23 Apr 2019Back to overview list

  • 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 devices14.6% $95,427  $83,246 
Cianna Medicaln/a 12,849   
Custom kits and procedure trays(1.0)% 32,943  33,272 
Inflation devices(1.8)% 22,017  22,419 
Catheters27.1% 43,039  33,865 
Embolization devices(6.0)% 11,827  12,587 
CRM/EP18.3% 12,378  10,466 
Total17.7% 230,480  195,855 
      
Endoscopy     
Endoscopy devices9.6% 7,869  7,180 
      
Grand Total17.4% $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, net146,488  137,174 
Other receivables10,694  11,879 
Inventories198,922  197,536 
Prepaid expenses and other assets11,220  11,326 
Prepaid income taxes3,620  3,627 
Income tax refund receivables1,317  933 
Total current assets421,783  429,834 
    
Property and equipment, net340,764  331,452 
Intangible assets, net448,707  462,713 
Goodwill334,951  335,433 
Deferred income tax assets3,083  3,001 
Operating lease right-of-use assets80,453   
Other assets60,052  57,579 
Total Assets$1,689,793  $1,620,012 
    
LIABILITIES AND STOCKHOLDERS' EQUITY   
Current Liabilities   
Trade payables$51,680  $54,024 
Accrued expenses91,310  96,173 
Current portion of long-term debt22,000  22,000 
Current operating lease liabilities11,825   
Income taxes payable1,644  3,146 
Total current liabilities178,459  175,343 
    
Long-term debt362,187  373,152 
Deferred income tax liabilities56,324  56,363 
Long-term income taxes payable392  392 
Liabilities related to unrecognized tax benefits3,013  3,013 
Deferred compensation payable12,480  11,219 
Deferred credits2,227  2,261 
Long-term operating lease liabilities72,243   
Other long-term obligations62,357  65,494 
Total liabilities749,682  687,237 
    
Stockholders' Equity   
Common stock574,946  571,383 
Retained earnings369,713  363,425 
Accumulated other comprehensive loss(4,548) (2,033)
Total stockholders' equity940,111  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 SALES133,713  114,979 
    
GROSS PROFIT104,636  88,056 
    
OPERATING EXPENSES   
Selling, general and administrative78,270  64,913 
Research and development16,043  14,322 
Acquired in-process research and development25   
Contingent consideration expense775  40 
Total95,113  79,275 
    
INCOME FROM OPERATIONS9,523  8,781 
    
OTHER INCOME (EXPENSE)   
Interest income357  146 
Interest expense(2,764) (2,398)
Other expense - net(270) (170)
Total other income (expense) - net(2,677) (2,422)
    
INCOME BEFORE INCOME TAXES6,846  6,359 
    
INCOME TAX EXPENSE651  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:   
Basic54,917  50,277 
    
Diluted56,490  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-TaxTax Impact (a)After-TaxPer Share Impact
GAAP net income$6,846 $(651)$6,195 $0.11 
     
Non-GAAP adjustments:    
Cost of Sales    
Amortization of intangibles11,978 (3,067)8,911 0.16 
Inventory mark-up related to acquisitions672 (173)499 0.01 
Operating Expenses    
Severance327 (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 development25 (7)18 0.00 
Amortization of intangibles2,809 (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 costs201 (52)
Related companies:Merit Medical Systems, Inc.
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