Biegelsen, the Med Tech Analyst at Wells Fargo, and it's my pleasure to host this fireside chat with the management team from Merit Medical. With us, we have Martha Aronson, the President and CEO, and Raul Parra, the CFO. Martha and Raul, thanks for being here. Thanks for having us, Larry. Yeah. Thank you. I think this is your first one with us. It is with you. With Merit. Yes. Okay. Excited to be here. Yep. We are excited to have you. Martha, let's start with a couple of big-picture questions. You are almost a year into the CEO role. What has gone well during your tenure, and what areas would you like to improve going forward? Well, I think what has gone well is, as most of you know who have been following the Merit Medical story, we were founder-led for 38 years, and now we are in what we call our founder-inspired phase, with our founder having retired. I think what is gone well is that through the transition, the team has continued to deliver, and Merit has a history of delivering quarter after quarter, and the team stayed very focused on that despite the leadership transition. Very pleased about that. As you know, delivered a nice Q2 with about 9% growth, so very pleased about that. The story going forward is really what I call one of evolution, not revolution. Right? It is just we are evolving as we grow to be even more global and as we work to scale. The things to work on are really what I put in the maturation category. They are just some systems and processes that need to mature as we move forward. I would say those are the areas we are kind of working on. That is helpful. You have been going through a strategic planning process at Merit. I know you are going to disclose the results today. No. Where are you in the process, and when will you share the results? Yeah. I would probably say we are about, maybe we are at the seventh-inning stretch, so we are getting close. The teams have been doing a lot of work. I have really asked for a pretty rigorous review of trying to. As you know, we have a lot of products. We call on a lot of different medical specialties. I think it is really asking each platform to dig in and understand globally, right, where do we have the right to win? Where are the gaps in our product lines? Where might there be places that we have products that no longer make sense for us to have those products? Those are all the big questions we are really asking our teams to try to go out and answer. There has been a ton of work going on over the last several months. We are nearing the end of that, and then we will spend some time with our board of directors, reviewing that strategy with all of them. Then we will bring out a new long-range plan to our shareholders. The timing of that exactly, we do not know for sure. At the latest, certainly our Q4 call in February. Possibly sooner. Stay tuned on that. Okay. Possibly sooner. Possibly. 2026 is a possibility, or it is probably going to bleed into 2027? Probably bleed into 2027. Okay. Merit participates in, I think, eight different segments, which seems like a lot for a company of your size. You talked about a lot of different call points. Would you agree, and could we see changes to the segments? Well, again, yeah. The way we're currently organized is by these eight platforms as we talk about them. We're excited because again, we're now reporting that, right, very consistently with how we're managing the business. I think that actually drives increased ownership by our platform leaders. I'm very excited about that. Again, a little premature for us to say where each one is headed as we go into next year. But suffice it to say, as we said, every platform, I think it's fair to say sort of everything's on the table. There are no sacred cows. What I'm excited about is that the organization is really having, I'd say, a great amount of, I call it healthy debate. Good, vigorous discussion and back and forth on are there certain product lines that maybe don't make sense anymore, or we still need them, but maybe de-emphasized a bit because they are a part of a bigger procedure? Those are all the discussions that are happening, and I'm really pleased that they're happening globally. What are the metrics that you're going to use to evaluate product families? For example, what's the overarching goal? Is it to increase the weighted average market growth of the company? Yeah. I think the goals are as they've always been. Although I'd say maybe the new lens we're looking through is on various procedures. If you take embolizations as one example, that's an area where we do feel like we provide products throughout the entire procedure. That's something we really like. There may be other procedures where that's possible. At the same time, there are plenty of procedures where we're not the primary device in a procedure, but we are what we call the enablers or the supporting actors, and that's a really good lane for us to stay in. Sort of swimming alongside the really big fish, if you will, and filling a lot of holes in terms of many of the products that are really necessary for those procedures, but may not be the primary implant, for example. Again, we're looking at things strategically. We're looking financially. What's the margin profile of various products? We're looking at market share. We're looking at who are we competing against. Again, do we have the right to win? That's really the framework we're using. It all makes sense. One last question on this. You talked about evolution, not revolution. The process you're going through, again, makes sense. It sounds like a lot. How do investors could be listening and say, "Wow, there could be some big changes coming, and that could be disruptive." How do you manage that as a public company? Yeah. Again, I think it can sound like a lot because we have such a broad portfolio, and that's why I think it really is important to break it down by each individual platform. If you start to do that, then you're talking about really, smaller chunks of, if you will, in some cases, maybe a $100 million platform today. In other cases, maybe it's up to half a billion is probably our biggest platform currently. You kind of have to think of those almost as individual strategic business units. Then I think it doesn't feel as vast in terms of, or as dramatic, if you will, in terms of change. If each portfolio does a little bit of tweaking here and there, again, I think as you look across the entire company, you won't see anything overly dramatic. Okay. That's helpful. So let's talk about CGI and what comes next. That's the Continuing Growth Initiative. Is that— That's right. Yeah. Okay. And before that, it was Foundations for Growth. And I know you're going to come up with a catchy new phrase for the next LRP. Yep. But I guess, but you won't share that today, unfortunately. We're not going to share that today. What are the metrics? Are the metrics going to be similar or different? I think both for Foundations for Growth, Raul, and CGI, they were the same. Yep. Revenue margins, I think, and maybe you added free cash flow. And free cash flow. Yeah, for both. It sounds like Martha from the last call, that the metrics might be different. Well, I think again, we're still finalizing that, so not ready to say. I think it's fair to say, though, that the metrics we've used, that the company's used in the last two have worked pretty well for us. So in some regard, there's a good argument that says there's no need to change. Again, we're not ready to say what it's going to be, but I think chances are you would still see the ones you've seen before. We may add something to it. Again, that's really a discussion that we're still having and that we would have with the board of directors as well. As you know too, Larry, there will be the metrics that we share externally, and then of course, there are many more that we use internally to drive the business. Okay. When we look, people are going to try to figure out, "Hey, what's the next LRP going to look like?" Top line's been pretty similar. Raul, what, 5% - 7% CAGR— 5% - 7% CAGR For both. Both of them were, right? Both of them. Yeah. Yeah. The Street's at like 6% CAGR the next three years. If I look at operating margin, 50 basis points a year, that kind of thing. An EPS growth of about 9% going forward. Any reaction to kind of consensus? Yeah. Well, we did 9% growth obviously for Q2, right? I think for the year we're at, let's say call it 7%-7.5% organic constant currency, right? No reaction. I think for the last five years, six years, we've been talking about 5%-7%. The fact that we haven't given any visibility to what 2027 and beyond looks like, having people be at around 6%, it's not surprising to us. And the operating margin, I think we've been very consistent in saying, look, we've added, by the time CGI is done, if we hit the high end of our goals, you're talking about 950 basis point improvement in operating margin. So seeing them out there at 50 basis points, not unreasonable given that we just added 950 basis points, or approximately. But yeah, we're not ready to tell you guys what we think we can do. I think at a high level, if everybody's expecting another 400 basis points or 500 basis points for the next LRP, I'd probably tell you to kind of take a step back based on the fact that we've added over 900 basis points. Having said that, there's a lot of things we're uncovering too and looking at under the strategic planning process that we're doing. I think it's yet to be determined how much we think we can do. There's nobody at Merit sitting around thinking like, "Hey, we're done. We've squeezed all that we can." We definitely think there's more to be had. The question is how much. Okay. All right. Helpful. Yeah. Let's move to 2026. You raised the full year guidance on the Q2 call by the amount of the beat, left the back half unchanged. Is that simple conservatism or are there risks or uncertainties that you're embedding in the second half outlook? Well, I think it's more the first one, right? I think that's just the way we've done it historically in the middle of the year. You also look at kind of what's going on in the macro and micro environment, right? You've got the Iran deal that's out there. You got oil prices fluctuating left and right or up and down, however you want to say it. There's just a lot of moving parts. Tariffs kind of come and go. I think from our perspective, we feel really confident about the guidance that we've put out. Again, 7%-7.5% organic constant currency. You're talking about 21%-21.5% operating margin, and almost 11%-14% EPS growth. So you're getting the leverage when you look at kind of the full year guidance that we've put out. So we felt like, look, let's just push through the first half beat, which is consistent with what we historically have done. That leaves us a little bit of room in case things get worse or something happens that we can't foresee. And we're covered, and we feel confident in the guidance. I think just generally speaking, it's our approach. I know it tends to be more on the conservative side. We don't like to call it that. We like to call it realistic and achievable guidance that you guys can rely on. And we feel good about it. All right. Thanks. We're almost halfway through, and you haven't used the term kitchen sink yet, but I— Well, I will. No. We're just waiting for it. No, you will. I might just say it as my closing comment. Okay. There's been a lot of talk about procedure volume. You don't have capital equipment, right? Pretty small. I think we're asking all the companies just about the procedure environment. You were just at a medical conference, I think, in Europe. What's your view on the procedure environment? It's mainly a U.S. concern, but global, I'd be happy to hear. Sure. Yeah. Again, we have not been hearing issues with procedure volumes. We've seen them. They've been robust from all the reports we get from our field in the U.S. Obviously, delivering 9% growth in the quarter would confirm that. We don't see signs of that. In Europe, as you said, having just been over there last week at one of the big interventional radiology meetings there, same thing. In particular, I think, embolics is growing pretty rapidly, particularly in Europe. We're seeing a lot of good growth there. As you know, it depends country by country, and reimbursement is different in the various countries, and some have a better reimbursement situation than others, obviously. But overall, currently, we're not seeing that as a major pinch point. Okay. Not a major pinch point. I just want to make sure people. It's like you're not seeing some softness. We're not. We're not— We're not seeing softness. Okay. As a matter of fact, we have a board member that runs a large hospital network. She says she's as busy as ever. We got invited to a Wells Fargo event last night. I think I had five different companies around the dinner table. None of us have seen any slowdown in procedures. Okay. That's good to hear. Yeah. One more big picture question. Cor, you've talked about identifying Merit's core competencies. We get asked about that a lot, too. Yeah. What would you say at this point are Merit's core competencies? Yeah. I think first, if I talk sort of technical core competencies, I would highlight things like sheath technology, introducer technology, wire, extrusion, molding, braiding. Those are some of our very top core competencies that you see in so many of our access devices. In some of the other areas, we're building and adding, I would say. That from sort of the technical side is probably where I would start. Then I think you have to really talk about, I'll call it the DNA of the organization, which I also think is a real core competency, which is being so customer focused. One of the things that's been so interesting for me as I've traveled the globe and met all of our employees around the world is everywhere I've gone, people will go to such great lengths for a customer. That's not something you can walk into a new organization and just say, "I'd like you all to do that now." It's kind of in people or it's not, and it really is in, I would say, the Merit DNA. Now, some of that gets done, as I often say, by brute force, which again, hats off to our team who's willing to go to such great lengths for a customer. But part of our evolution and part of our maturing is to say, could we have a better system in place? Could we provide better data to someone so that we don't get into that pinch, right? That we can just operate a little bit more efficiently. But that's what I'd say. Okay. That's helpful. That's probably some of Fred's legacy, I think it's safe to say, in terms of being very customer focused. Absolutely. Yeah. Yeah. Let's talk about the platforms. OEM, big turnaround. Down 14% Q1, up 15% Q2. I think there was a turnaround in both the foundational and the therapeutic areas. What's the outlook there? It seems like we're in the early innings. I know what you've said on 2026, but it seems like we're in the early innings of the Medtronic distribution agreement, which is public. It seems like you have a good runway there. Yeah. Again, what we've said is you should think about OEM. It is lumpy. You should think about it annually as being mid to high single-digit growth. We don't comment specifically on particular customers. What they choose to share publicly is obviously up to them. But suffice it to say, we're feeling optimistic about OEM, our current position there. Got it. Yeah. Do you want to add anything? No, she nailed it, not much to add there. Okay. It is helpful. What is driving the embolic growth in Europe? I got to tell you, as I said, came back from this. The meeting is called CIRSE. It is the Cardiovascular and Interventional Radiological Society of Europe. That is all people are talking about there. People are really excited about our Embosphere and doing GAE procedures, PAE procedures, knees, prostate. Others are thinking about it in lots of other creative ways. I would just say it is a pretty hot topic there. And I think the question will be how that evolves into the U.S. market. Interesting. Yeah. Both GAE and PAE. Yeah. Yeah, PAE really, I think, as you know, was kind of a big topic maybe five years ago. Right And kind of maybe got a little bit slower start than people anticipated, but I think we're really seeing some growth there. And then you've got GAE, which everybody's talking about. And you're doing a study in GAE, or some companies are. Yeah. There's a lot of studies going on— Yeah. Across this whole space. I think it is a space to watch. I think there's a lot of excitement about it. There's a lot of activity going on, and again, stay tuned to see how it all plays out. How big is your embolic business? About 80 million. 80. Million, yeah. 80 million. Yeah. Okay. That is helpful. Okay, oncology is an area, Martha, that you expressed excitement about on the recent calls. You just did a deal with OneMark. How is SCOUT and OneMark complementary? I think you are just launching OneMark. Correct. Yeah. We are excited. On the oncology platform in the U.S., the challenge has been we have kind of been a one-product company with our SCOUT technology that uses radar technology for wire-free localization. What the OneMark adds is also wire-free localization using ultrasound technology. It can come down to both either physician preference, some just prefer one over the other, people are either more visual or not, and we also have two different price points. We think of it in terms of we have a better option and a best option, if you will. In some cases, people were hesitant to use the SCOUT technology because it is a higher price point. They would just reserve it for when they thought they really had a suspicious-looking lesion. What OneMark does is really adds and opens up the market dramatically by about 3x or 4x of what the SCOUT market is. Given that price point, which is lower than the SCOUT, people will opt to use the OneMark for far more procedures than just the highly suspicious lesions. We are excited because we are the only company that can offer this kind of technology at the time of biopsy, which makes a huge difference for women going through the breast cancer process, in that it can reduce one extra step. Also, with our technology, they can still have MRIs. Some of the other technologies out on the market will restrict you from being able to have an MRI at a later date, which many people, of course, would like that option. Are you concerned about cannibalization of SCOUT with OneMark? We are not. Again, many physicians either have a particular preference, or they are in a site of service where they have just said one price point or the other makes sense. So we do not see it as cannibalization. Could there be a teeny bit? Possible. But we really see it as a market expansion opportunity. I think in addition, the SCOUT price point was restricting us outside the United States. With OneMark, again, being at a lower price point, we think there is terrific opportunity for OUS expansion. We do not have CE mark yet, so we still have work to do on that, but again, in the future. You have guided to $14 million-$16 million in OneMark sales next year. How are you feeling about the launch and that number? Is that capital or consumables? That's both. Both. That's both the capital and consumables, and the launch is kind of just getting started, just getting rolling. Just finished training the entire sales force in the last month or so. Early days, but excited. Good. You have one big competitor there, Hologic, that has a broad portfolio too. They also sell some of the imaging. How do you compete effectively against them? Yeah. Again, different competitors. There are a number of competitors in the space. People offer various types of clips and things. Again, as I said, what makes our technology really unique is that it's wire-free, which, if you ask a patient going through that, means a lot to them, and that avoidance of a potential additional procedure and the MRI safety. We feel good about our position, and again, field checks give us a fair amount of optimism. Got it. Okay. China is always a big topic with Merit because you have a relatively large business there. China came in slightly up, I think, in Q2. That's right. With VBP a little bit lighter than you expected. What's the outlook for China, and could this be a growth contributor over the next LRP? Well, we hope so. We're neck deep in that work, and we'll let you guys know how we think about the APAC region going forward. I think China, we expect it to be flat year-over-year, I think, which is an improvement from last year, as you know, Larry, where we were down. I think generally speaking, we hope to continue to step out of VBP over time. That hasn't changed. But it is a moving. I think my comment's always been, kind of ask me in the next five minutes, and I'll probably have a different answer. But I think we're feeling optimistic about the opportunities that we have there. It's a great market, aging population. We're just neck deep in how we get better there and how we can compete and really start to win more effectively than we have in the past. I think volumes continue to be great. It is just about how do we stop the VBP stuff, which we do not really have visibility from the government as to when it stops. Generally, we have been doing better, and we have been able to overcome those pricing cuts in both of our LRPs. I think that, again, speaks to not only our APAC team for pushing other regions and other areas within the APAC umbrella, but also our EMEA and U.S. counterparts, making sure that they are being effective in pricing and growing the business. We have been able to overcome those price cuts pretty effectively, I would say. And maybe if I can just add one thing. I visited China last month, or maybe two months ago now. It is September. Two months ago now, and again, just super impressed with our team there, and we did make a bit of a leadership change in our total Asia region. My hope is that we are unleashing our Chinese team there to go even further, and it gave me a terrific view into really understanding some of the market dynamics that are going on in China that all medical device companies are facing. That has impacted how we are thinking about that strategy going forward. So question for you on China. The companies that have got 5% of sales or less have been de-emphasizing— Yeah. China the last five years, I would say. Yeah. You are about 10%. Right. Larger. Yep. It is hard to really de-emphasize it. Correct. Because it is a big part of your business. Yeah. How do you think about leaning in? Yeah. into a market that is so tough? Yeah. Yeah. I think the answer is you either decide to lean in or you really get out. I will just say my vote is we are leaning in. Again, we do not have all the details of that strategy ready to talk about, but that is the discussion we are having. Okay. That would be a little bit different, you know that. Yeah. Most companies that have a smaller presence, they are probably— I understand that. De-emphasizing it. Yeah. Over time, Larry, I think you guys know this. We've also emphasized other regions, or other countries within the APAC region. We've also redirected some investments to other markets where the growth is. I think there's a way that we can do both. Making sure that we are feeding the areas that are growing strongly, then also kind of leaning into the China— Okay. Which again, we think is a great market, and I think if done right, that you can get a lot of value out of it. Okay. But I heard your vote was lean in. We're leaning in. Yeah. You're probably in the minority right now among U.S.-based medical device companies, but that's fine. Yeah. Yeah. Yeah. I understand. We understand that, too. Absolutely. We've been in the minority our entire lives. Yeah. In the 39 years, Larry, that's where we like to be. I'm sure that you've had that debate with the management team and the board. Yeah. Once or twice. Yep. Yeah. Okay. Raul, we'll put you on the hot seat here a little bit. All right. Give you. I don't know. I got to find a chance to get you to say a kitchen sink. Oh, yeah. Yeah. I'll ask you a margin question. I wanted to ask about 2027. Just to start off the puts and takes next year on the top line, the Street's at about 6% organic revenue growth, which is about 100 basis point deceleration from this year. Any reaction? No reaction. Again, we haven't said anything about 2027. As you know, we're very disciplined in our comments about talking about outside of CGI, making sure we see that across the finish line. So we consistently talk about 5%-7%. That's what our two LRPs have been the last two times we've done it. The fact that people are at 6% doesn't surprise me, and I have no reaction to it other than to say it seems reasonable given that we've guided our last two LRPs at 5%-7%. That's fair. On margins, you have a tariff refund called $7 million. Yep. $6.9 million in 2026. It's about $0.09, 40 basis points to margins. The question is, can you grow margins next year, even on a reported basis, hurdling the tariff refund? Yes. I'm going to talk about operating margins. Look, to the extent of how much we grow them by, I think obviously you'll have to wait and see for that. But there's nobody at Merit Medical sitting around thinking that we can't grow our operating margins. Got it. Especially in light of the LRP, right? Again, we have committed to an LRP. It is going to be a three-year plan. Obviously, what every individual year looks like is yet to be determined. We will let you guys know. Tune in for that. There is nobody sitting around Merit thinking that we are done growing operating margin. Sorry, just to be clear, I might have missed it. On 2027, despite the 40 basis point headwind from the tariff refund, you still think you can grow margins next year? Again, we are not going to commit to anything. We are not going to talk about 2027 other than to say that there is nobody sitting at Merit thinking we cannot grow operating margins. Okay. Yeah. Raul, I have not asked you this in a long time, but the tax rate is relatively high. Yeah. For a company with the international exposure you have. Well, that's part of the new tax plan. I think you get taxed at a higher rate OUS, and I think one of the limiting factors, to be honest with you, is me. Do we want to make the investment in a tax strategy where you have the politics that you have in Washington right now, where things kind of ebb and flow quarter to quarter, year to year, and administration to administration. Those tax strategies are not cheap. To invest a significant amount of dollars in that and have it be flipped from one administration to the other just doesn't seem like a good investment right now. I think there is small things that we're looking at that we can do. A little bit of strategic planning on that side. But as far as overhauling and doing big strategic investments in that area, I think I'd like to wait to see more stability in the political side of things before we make that investment. Okay, fair enough. Yeah. Capital allocation, Martha, what are your capital allocation priorities? Yeah. Traditionally, historically, Merit has invested a fair amount in acquisitions. That is still where I think that will be a place we will continue to look. So we are constantly looking at opportunities. I would categorize them very much as tuck-ins. Again, we have ongoing dialogue with each platform to say, as we said, "What do you feel is missing in your portfolio? What is the organic pipeline look like from an R&D perspective, or are there gaps we need to fill by going outside?" So I think the only shift is really we want to be very intentional as we think about acquisitions. We will be very disciplined. We would like them to be margin accretive. Perhaps not everything will be, but that is certainly a goal. So I think first and foremost would be, as I said, continued tuck-in acquisitions. Obviously, we have all seen the stock activity lately. We do discuss with our board from time to time, certainly, and in the last six months, more so probably, about whether or not we should consider a buyback. Currently, we do not have a share repurchase authorization in place. But that is certainly an ongoing discussion depending on where things are. Okay. Any questions in the audience? Got a couple minutes left here. What are you getting from investors that we did not ask? Raul, what other hot topics are there? Well, look, I think the big question is: what does the LRP look like, right? I think we're excited about the work that's being done right now. I think under Martha's leadership, we're neck deep in strategic planning. It's something, quite frankly, that the company has been craving for a long time. As many of you know, Fred was great at growing the business, but he was also a very dynamic guy. I think just kind of getting aligned on a strategic plan across the world, not just in the U.S., but across the world. I think there's a lot of value, I think, that's going to come out of it, and we're excited about putting that strategic plan together. We also have a new VP of Operations who started. I think she's going to do a great job. She comes from the outside, so she'll bring a new lens to look at things under, and I'm excited to see what she finds and what kind of value we can unlock there. So a lot of good things are happening. We're excited. One more question. Sure. On margins. The second half. I asked you the question on revenue. Yeah. In the second half. You answered that. But on the margins, also, don't imply much of an improvement in the second half. Why is that? Again, there is a level of seasonality to our business, Larry. I know in the third quarter, we typically step down a little bit from the second. The second and fourth quarter are usually our strongest quarters, not only from a revenue standpoint, but also from a profitability. So there's typically a step down in the third quarter that we account for. From our side, look, the business continues to see a lot of momentum. It's just our approach to just leave the back half of the guidance alone. Let's flow through the first half and we'll see how things shake out. All right. Great. Yeah. Martha, thanks for being here. I want to give you the last word, if there are any closing remarks you want to make before we wrap. Yeah, look, I think it's an exciting time at Merit Medical, right? There's no question it is a change to go from a founder-led organization with, as you said, a charismatic, passionate leader like Fred for 38 years. So it's a shift. But I'd say, A, I'm honored to be in the position. B, as I said earlier, the organization has continued to stay very focused on delivering each quarter. As we talked about, we are on track to meet the three-year Continued Growth Initiative targets. So there's a lot of excitement around that. Frankly, I've been enthusiastic and energized by how engaged people have been in this strategic plan process. I think, as Raul said, the organization was excited to do it. Sometimes people feel like they get dragged into work like this, but there's been a lot of energy. To see this cross-functional collaboration and cross-geographic collaboration, I think we are really going to be able to kind of unlock this organization, and enable a lot more growth going forward. So, very excited about the future. As we said, what it takes to start a business and bring it to this point is a little different from all that it takes to grow from $1.5 billion in revenue and up from there. But excited to go forward and do that. Perfect. Thanks so much for being here. Thank you.