Merit Medical Introduces “Continued Growth Initiatives” Program and Financial Targets for Three-Year Period Ending December 31, 2026
- Merit Medical Systems, Inc. unveils Continued Growth Initiatives Program with ambitious financial targets.
- The program aims for a compound annual growth rate of 5-7% in total revenue over three years.
- Merit targets a non-GAAP operating margin of 20-22% for the year ending December 31, 2026.
- The company anticipates generating at least $400 million in cumulative free cash flow by December 31, 2026.
- Merit's management believes non-GAAP financial measures offer valuable insights into the company's performance and trends.
- Investors can access a live webcast of the investor conference call on merit.com.
- None.
Insights
The announcement by Merit Medical Systems regarding its Continued Growth Initiatives Program presents an ambitious financial outlook, with targets including a 5% to 7% CAGR in total revenue, a non-GAAP operating margin of 20.0% to 22.0% and a cumulative free cash flow generation of at least $400 million over a three-year period. These targets are aggressive and suggest that the company is confident in its ability to scale operations and improve efficiency.
From a financial analysis perspective, the projected operating margin expansion is particularly noteworthy. The upper end of the target margin surpasses the industry average for medical device companies, which typically ranges from 15% to 20%. Achieving this would indicate a robust cost management strategy and operational excellence. Additionally, the substantial free cash flow target suggests that Merit is prioritizing liquidity and financial flexibility, which could fund future investments or shareholder returns.
However, the reliance on non-GAAP measures to set these targets warrants caution. While these measures can provide a clearer picture of a company's operational performance by excluding certain one-time costs and non-cash expenses, they can also obscure the true financial health of the company if used excessively. Investors should closely monitor how these non-GAAP results compare to GAAP measures over time to ensure that the company's underlying profitability and cash generation capabilities are as strong as management suggests.
Merit Medical Systems' focus on organic growth within the healthcare technology sector is a strategic move that aligns with current industry trends. The healthcare sector is experiencing significant innovation, with companies that provide advanced medical technologies being particularly well-positioned for growth. Merit's emphasis on organic, constant currency growth indicates a strategic focus on core business expansion without the noise of currency fluctuations and acquisitions.
As a market research analyst, it's important to highlight that Merit's growth initiatives will likely resonate with investors seeking stability in the volatile healthcare market. The company's commitment to growth and efficiency could position it favorably against competitors. However, the forecasted CAGR should be contextualized within the broader industry's performance. If the industry is growing at a similar or faster rate, Merit's targets may not translate to market share gains. Conversely, if the industry growth is slower, Merit's targets could be indicative of a strong competitive advantage and market share expansion.
Merit Medical Systems' Continued Growth Initiatives Program must be evaluated in the context of the healthcare technology industry's regulatory and competitive landscape. The company's inability to predict the financial impact of regulatory changes is a significant risk factor, as the healthcare industry is heavily regulated and changes can significantly affect profitability and operations.
Moreover, the company's decision not to provide a reconciliation of forward-looking non-GAAP financial measures to GAAP due to uncertainties highlights the complexity of forecasting in this sector. While these measures are common in the industry, the lack of transparency could be a concern for stakeholders who rely on GAAP measures for a more standardized and comparable financial assessment. Stakeholders should also be cognizant of the fact that non-GAAP measures can vary significantly between companies, making cross-company comparisons challenging.
It is also critical to note that the company's projections do not account for potential litigation or settlement expenses, which can be substantial in the healthcare industry due to product liability and patent infringement risks. Investors should consider the potential for such costs to impact future financial performance.
SOUTH JORDAN, Utah, Feb. 28, 2024 (GLOBE NEWSWIRE) -- Merit Medical Systems, Inc. (NASDAQ: MMSI), a leading global manufacturer and marketer of healthcare technology, today introduced its Continued Growth Initiatives Program and related financial targets for the three-year period ending December 31, 2026.
Merit’s new multi-year financial targets are:
- Total revenue increase at a compound annual growth rate (CAGR) of
5% to7% on an organic, constant currency, basis* for the three-year period ending December 31, 2026. - Non-GAAP operating margin* of
20.0% to22.0% for the year ending December 31, 2026. - Cumulative free cash flow* generation of at least
$400 million for the three-year period ending December 31, 2026.
* 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. Merit does not provide financial targets for GAAP reported financial measures (other than revenue) or a reconciliation of forward-looking Non-GAAP financial measures to the most directly comparable GAAP reported financial measures because Merit is unable to predict with reasonable certainty the financial impact of items such as expenses related to acquisitions or other extraordinary transactions, non-cash expenses related to amortization or write-off of previously acquired tangible and intangible assets, certain 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, and changes in governmental or industry regulations. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance period. For the same reasons, the Company is unable to address the significance of the unavailable information, which could be material to future results. Specifically, Merit is not, without unreasonable effort, able to reliably predict the impact of these items and Merit believes inclusion of a reconciliation of these forward-looking non-GAAP measures to their GAAP counterparts could be confusing to investors or cause undue reliance.
CONFERENCE CALL
Merit will discuss the Continued Growth Initiatives Program as part of its fourth quarter and full year 2023 financial results investor conference call today, Wednesday, February 28, 2024, at 5:00 p.m. Eastern (4:00 p.m. Central, 3:00 p.m. Mountain, and 2:00 p.m. Pacific). To access the conference call, please pre-register using the following link. A live webcast 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 the 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;
- constant currency revenue, organic;
- non-GAAP operating margin; and
- free cash flow.
Merit’s management team uses these non-GAAP financial measures to evaluate Merit’s profitability and efficiency, to compare operating and financial results to prior periods, to evaluate changes in the 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 (as further illustrated in the descriptions 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 or other extraordinary transactions, non-cash expenses related to amortization or write-off of previously acquired tangible and intangible assets, certain severance expenses, expenses resulting from non-ordinary course litigation or administrative proceedings and resulting settlements, corporate transformation expenses, governmental proceedings or changes in tax or industry regulations, and gains or losses on disposal of certain assets. 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 readers to review the definitions of its non-GAAP financial measures in relation to their most directly comparable GAAP financial measures included herein, and not to rely on any single financial measure to evaluate Merit’s business or results of operations.
Constant Currency Revenue
Merit’s constant currency revenue is prepared by converting the current-period reported revenue of subsidiaries whose functional currency is a currency other than the U.S. dollar at the applicable foreign exchange rates in effect during the comparable prior-year period and adjusting for the effects of hedging transactions on reported revenue, which are recorded in the U.S. dollar.
Constant Currency Revenue, Organic
Merit’s constant currency revenue, organic, is defined as constant currency revenue (as defined above), less revenue from certain acquisitions.
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 acquisitions or other extraordinary transactions, non-cash expenses related to amortization or write-off of previously acquired tangible and intangible assets, certain 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, and changes in governmental or industry regulations, as well as other items. Non-GAAP operating margin is calculated by dividing non-GAAP operating income by forecasted net sales.
Free Cash Flow
Free cash flow is defined as cash flow from operations calculated in accordance with GAAP, less capital expenditures for property and equipment calculated in accordance with GAAP, as set forth in the consolidated statement of cash flows.
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 more than 700 individuals. Merit employs approximately 7,000 people worldwide.
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, revenues, operating income and margin (GAAP and non-GAAP), free cash flow and other financial measures, future growth and profit expectations or forecasted economic conditions, or the implementation of, and results which may be achieved through, Merit’s Continued Growth Initiatives Program or other expense reduction initiatives, 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, 2023 (the “2023 Annual Report”) and other filings with the SEC. Such risks and uncertainties include inherent risks and uncertainties associated with Merit’s integration of products acquired from AngioDynamics, Inc. (“AngioDynamincs”) and its ability to achieve anticipated financial results, product development and other anticipated benefits of the AngioDynamics acquisition; uncertainties as to whether Merit will achieve sales, gross and operating margins, net income and earnings per share performance consistent with its forecasts associated with that acquisition; disruptions in Merit’s supply chain, manufacturing or sterilization processes; reduced availability of, and price increases associated with, commodity components and other raw materials; adverse changes in freight, shipping and transportation expenses; negative changes in economic and industry conditions in the United States or other countries, including inflation; 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; risks associated with Merit’s ongoing or prospective manufacturing transfers and facility consolidations; fluctuations in interest or foreign currency exchange rates; 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; governmental scrutiny and regulation of the medical device industry, including governmental inquiries, investigations and proceedings involving Merit; consequences associated with a Corporate Integrity Agreement executed between Merit and the U.S. Office of Inspector General; difficulties, delays and expenditures relating to development, testing and regulatory approval or clearance of Merit’s products, including the pursuit of approvals under the E.U. Medical Device Regulation, and risks that such products may not be developed successfully or approved for commercial use; litigation and other judicial proceedings affecting Merit; 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; 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; 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 jurisdictions; termination of relationships with Merit’s suppliers, or failure of such suppliers to perform; 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; dependance on distributors to commercialize Merit’s products in various jurisdictions outside the United States; 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; failure to introduce products in a timely fashion; price and product competition; fluctuations in and obsolescence of inventory; and other factors referenced in the 2023 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., its subsidiaries, or its licensors.
| Contacts: | |
| PR/Media Inquiries: Teresa Johnson Merit Medical | Investor Inquiries: Mike Piccinino, CFA, IRC Westwicke - ICR |
| +1-801-208-4295 | +1-443-213-0509 |
| tjohnson@merit.com | Mike.piccinino@westwicke.com |
FAQ
What are Merit Medical Systems, Inc.'s financial targets for the three-year period ending December 31, 2026?
What are the non-GAAP financial measures used by Merit Medical Systems, Inc.?
How does Merit Medical Systems, Inc. use non-GAAP financial measures?
When will Merit Medical Systems, Inc. discuss the Continued Growth Initiatives Program?
Where can investors access a live webcast of the investor conference call?
