Merit Medical Reports Earnings for Fourth Quarter and Year Ended December 31, 2019, Gives FY 2020 Guidance
- Q4 2019 worldwide revenue of $257.9 million, up 10.6% as reported over Q4 2018
- Q4 2019 core revenue on a comparable, constant currency basis* up 8.5% over Q4 2018
- Q4 2019 GAAP loss per share was $(0.08), compared to GAAP EPS of $0.16 in Q4 2018
- Q4 2019 non-GAAP EPS* was $0.40, compared to $0.48 in Q4 2018
* Core revenue on a constant currency basis, non-GAAP EPS, non-GAAP net income, non-GAAP operating margin 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, Feb. 24, 2020 (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 $257.9 million for the quarter ended December 31, 2019, an increase of 10.6% over revenue of $233.2 million for the quarter ended December 31, 2018. Core revenue on a comparable, constant currency basis* for the fourth quarter of 2019 would have been up 8.5% over revenue for the comparable quarter of 2018. For the year ended December 31, 2019, Merit's revenue was $994.9 million, up 12.7% compared to revenue of $882.8 million for the year ended December 31, 2018. Core revenue on a comparable, constant currency basis* for the year ended December 31, 2019 would have been up 8.1% when compared to 2018.
Merit’s GAAP operating margin for the fourth quarter of 2019 was (1.3%), compared to GAAP operating margin of 5.9% for the fourth quarter of 2018. Merit’s non-GAAP operating margin* for the fourth quarter of 2019 was 12.7%, compared to non-GAAP operating margin* of 14.2% for the fourth quarter of 2018. Merit’s GAAP operating margin for the year ended December 31, 2019 was 1.6%, compared to GAAP operating margin of 6.6% for the year ended December 31, 2018. Merit’s non-GAAP operating margin* for the year ended December 31, 2019 was 11.8%, compared to non-GAAP operating margin* of 13.6% for the year ended December 31, 2018.
Merit’s GAAP net loss for the fourth quarter of 2019 was $(4.2) million, or $(0.08) per share, compared to GAAP net income of $9.2 million, or $0.16 per share, for the fourth quarter of 2018. Merit’s non-GAAP net income* for the quarter ended December 31, 2019 was $22.1 million, or $0.40 per share, compared to $27.0 million, or $0.48 per share, for the quarter ended December 31, 2018. For the year ended December 31, 2019, Merit's GAAP net income was $5.5 million, or $0.10 per share, compared to $42.0 million, or $0.78 per share, for 2018. Merit's non-GAAP net income* for the year ended December 31, 2019 was $82.1 million, or $1.46, compared to $91.3 million, or $1.69 per share, for 2018.
Merit’s GAAP gross margin for the fourth quarter of 2019 was 43.3%, compared to GAAP gross margin of 44.9% for the fourth quarter of 2018. Merit’s non-GAAP gross margin* for the fourth quarter of 2019 was 48.3%, compared to non-GAAP gross margin* of 49.4% for the fourth quarter of 2018. Merit's GAAP gross margin for the year ended December 31, 2019 was 43.5%, compared to 44.7% for 2018. Merit's non-GAAP gross margin* for the year ended December 31, 2019 was 48.6% compared to 48.9% for 2018.
“We are pleased with the strong performance across our business during the fourth quarter and that the integration of our most recent acquisitions is largely complete,” said Fred P. Lampropoulos, Merit’s Chairman and Chief Executive Officer. “As noted in our recent press release, we have received a number of important new regulatory approvals. These approvals, along with other internally developed products scheduled for release and a full pipeline of new products in the works, give us confidence in the future growth of the company.”
Merit continues to execute upon several initiatives aimed at driving increased shareholder value. These initiatives include consolidation of manufacturing facilities to drive operating expense reductions and the implementation of programs to incent Merit’s sales force to focus on products that will improve Merit’s financial performance. As it pertains to the manufacturing consolidation initiatives, Merit plans to move production of 14 products to its facilities in Tijuana, Mexico or Pearland, Texas, and expects to consolidate four facilities from 2020-2021. Merit projects that these initiatives will result in cost savings of approximately $6 million to $10 million annually. On the sales force incentive front, Merit specifically identified certain product lines, including biopsy, drainage and Cianna products, where it believes it can drive greater customer focus and ultimately increase revenue growth and margins.
Merit’s revenue by category for the three and twelve months ended December 31, 2019, compared to the corresponding periods in 2018, was as follows (unaudited, in thousands, except for percentages):
| Three Months Ended December 31, | Year Ended December 31, | |||||||||||||||||
| % Change | 2019 | 2018 | % Change | 2019 | 2018 | |||||||||||||
| Cardiovascular | ||||||||||||||||||
| Stand-alone devices | 11.9 | % | $ | 106,191 | $ | 94,896 | 11.0 | % | $ | 401,466 | $ | 361,613 | ||||||
| Cianna Medical | n/a | 13,813 | 6,292 | n/a | 49,536 | 6,292 | ||||||||||||
| Custom kits and procedure trays | 0.6 | % | 34,599 | 34,397 | 0.8 | % | 135,856 | 134,756 | ||||||||||
| Inflation devices | (2.8 | ) | % | 22,166 | 22,802 | (1.9 | ) | % | 90,681 | 92,419 | ||||||||
| Catheters | 8.1 | % | 45,067 | 41,695 | 14.4 | % | 177,876 | 155,525 | ||||||||||
| Embolization devices | 12.7 | % | 13,904 | 12,332 | 4.1 | % | 52,072 | 50,038 | ||||||||||
| CRM/EP | 7.9 | % | 13,671 | 12,672 | 9.5 | % | 53,494 | 48,834 | ||||||||||
| Total | 10.8 | % | 249,411 | 225,086 | 13.1 | % | 960,981 | 849,477 | ||||||||||
| Endoscopy | ||||||||||||||||||
| Endoscopy devices | 4.3 | % | 8,511 | 8,163 | 1.8 | % | 33,871 | 33,276 | ||||||||||
| Total | 10.6 | % | $ | 257,922 | $ | 233,249 | 12.7 | % | $ | 994,852 | $ | 882,753 | ||||||
In addition to the commercial, clinical and operational progress discussed above, Merit is also implementing a more simplified manner of characterizing its revenues to more closely reflect the commercial focus of its business by call point and end markets. “We recognize that our historical characterization of our revenues by certain product categories failed to adequately represent the scale of our business at these key call points. We believe this new approach will more clearly reflect how we sell our products to our customers in each of our focused end markets and more adequately reflect the underlying commercial momentum in the business,” said Lampropoulos. Merit plans to provide historical reconciliation of these categories in the future, but has provided a summary of the projected format in its accompanying investor presentation.
Merit noted that during the fourth quarter of 2019, it recorded an impairment expense of approximately $20.5 million related to its arrangement with NinePoint Medical, Inc., in which Merit fully impaired its loan to NinePoint and its option to purchase the outstanding equity of NinePoint. In addition, Merit recorded a write-off of $1.6 million of accrued interest related to the loan to NinePoint.
2020 GUIDANCE
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:
| Financial Measure | 2020 Guidance (Pre-Coronavirus) | ||
| Net Sales | $1,044- $1,064 million | ||
| GAAP | |||
| Earnings per share | $0.62 - $0.72 | ||
| Operating margin | 6% - 7% | ||
| Non-GAAP | |||
| Earnings per share | $1.58 - $1.68 | ||
| Operating margin | 13% - 14% | ||
Not included in Merit’s guidance is any anticipated impact of the coronavirus outbreak on Merit’s business. While it is too early to adequately forecast the potential impact, or duration, of the outbreak on Merit’s 2020 financial performance, Merit currently estimates that a full quarter of a continued coronavirus outbreak at current levels could result in an impact in the range of $14 million to $19 million in net sales, and $0.08 to $0.12 in non-GAAP EPS. Merit does not have enough information to estimate any potential impact beyond that point, but intends to disseminate additional information as events unfold. Importantly, Merit has taken the precautions it believes are necessary to encourage the safety of its employees and its business. Adjustments in inventory and logistics are also being made as necessary.
Merit’s financial guidance for the year ending December 31, 2020 is subject to risks and uncertainties identified in Merit’s public filings.
CONFERENCE CALL
Merit will hold its investor conference call (conference ID 4079914) today, Monday, February 24, 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.
CONSOLIDATED BALANCE SHEETS
(In thousands)
| December 31, | ||||||||
| 2019 | December 31, | |||||||
| (unaudited) | 2018 | |||||||
| ASSETS | ||||||||
| Current Assets | ||||||||
| Cash and cash equivalents | $ | 44,320 | $ | 67,359 | ||||
| Trade receivables, net | 155,365 | 137,174 | ||||||
| Other receivables | 10,016 | 11,879 | ||||||
| Inventories | 225,698 | 197,536 | ||||||
| Prepaid expenses and current other assets | 12,497 | 11,326 | ||||||
| Prepaid income taxes | 3,491 | 3,627 | ||||||
| Income tax refund receivables | 3,151 | 933 | ||||||
| Total current assets | 454,538 | 429,834 | ||||||
| Property and equipment, net | 378,785 | 331,452 | ||||||
| Intangible assets, net | 445,312 | 462,713 | ||||||
| Goodwill | 353,193 | 335,433 | ||||||
| Deferred income tax assets | 3,788 | 3,001 | ||||||
| Right-of-use operating lease assets | 80,244 | — | ||||||
| Other assets | 41,461 | 57,579 | ||||||
| Total Assets | 1,757,321 | 1,620,012 | ||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | ||||||||
| Current Liabilities | ||||||||
| Trade payables | $ | 54,623 | $ | 54,024 | ||||
| Accrued expenses | 105,184 | 96,173 | ||||||
| Current portion of long-term debt | 7,500 | 22,000 | ||||||
| Short-term operating lease liabilities | 11,550 | — | ||||||
| Income taxes payable | 2,799 | 3,146 | ||||||
| Total current liabilities | 181,656 | 175,343 | ||||||
| Long-term debt | 431,984 | 373,152 | ||||||
| Deferred income tax liabilities | 45,236 | 56,363 | ||||||
| Long-term income taxes payable | 347 | 392 | ||||||
| Liabilities related to unrecognized tax benefits | 1,990 | 3,013 | ||||||
| Deferred compensation payable | 14,855 | 11,219 | ||||||
| Deferred credits | 2,122 | 2,261 | ||||||
| Long-term operating lease liabilities | 72,714 | — | ||||||
| Other long-term obligations | 56,473 | 65,494 | ||||||
| Total Liabilities | 807,377 | 687,237 | ||||||
| Stockholders' Equity | ||||||||
| Common stock | 587,017 | 571,383 | ||||||
| Retained earnings | 368,221 | 363,425 | ||||||
| Accumulated other comprehensive loss | (5,294 | ) | (2,033 | ) | ||||
| Total Liabilities and Stockholders' Equity | $ | 1,757,321 | $ | 1,620,012 | ||||
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited, in thousands except per share amounts)
| Three Months Ended December 31, | Year Ended December 31, | ||||||||||||||||
| 2019 | 2018 | 2019 | 2018 | ||||||||||||||
| NET SALES | $ | 257,922 | $ | 233,249 |
By: GlobeNewswire
- 24 Feb 2020
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