Merit Medical Systems, Inc. (NASDAQ:MMSI) Q2 2019 Earnings Conference Call Transcript

Jul 25, 2019 • 05:30 pm ET

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Merit Medical Systems, Inc. (NASDAQ:MMSI) Q2 2019 Earnings Conference Call Transcript

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Presentation
Executive
Fred Lampropoulos

and to be reminded that Merit looks things at things on an annual basis. Now, I understand we have to look at all of the things when we report quarterly. So I don't want to be dismissive of that.

But I think the best thing to do right now would be to turn some time over to Raul Parra, our Chief Financial Officer to go through and talk about what some of the effects were that determined the outcome of the numbers. And then I will come back when he finished and talk to you about things that are in place or working that I think you'll find of interest. So let me turn the time over Raul to you.

Executive
Raul Parra

Thanks, Fred. So I'll start with revenue, and just walk through the different line items on the financial statements. Revenue for the second quarter was approximately $256 million as reported an approximate 13% increase over the comparable period of 2018, and approximately 10% on an organic constant currency basis. With the continued strength in the U.S. dollar, FX headwinds were approximately $5 million. The FX headwinds are mostly from the Euro, CNY and emerging markets. With the CNY having the most impact on both revenue and earnings with offsetting in the earnings amount for -- with the Euro.

Additionally, Aspira and define our behind our forecast by approximately $3 million, and $2.5 million behind the comparable period. Acquired products contributed revenue of $14 million with Cianna and ClariVein contributing $11.2 million and $1.7 million respectively. Cianna continues to be within our previously provided guidance, while ClariVein has fallen behind by approximately $2 million. The unexpected sales shortfall for ClariVein was the result of excess inventory of some of the distributors prior to our acquisition. We believe we have made it past that and sales are ramping to our expectations. Contributions from our sales divisions to our organic constant currency line were as follows. Worldwide dealers at 21%, sensors at 22%, EMEA at 10%, US Direct and OEM contributing 5% and Endotek coming in flat.

Moving down to the gross margin, gross margin on an adjusted basis was $48.7 million in the quarter. On a performance basis, gross margin was down 20 basis points compared to the comparable prior-year quarter, and up 70 basis points year-over-year. Both clearly behind our expectations, which we will address later in the call. This reflects an adjusted margin decline in the quarter, as compared to the prior year, which was negatively impacted by FX of 20 basis points due to the strengthening of the U.S. dollar, tariffs by 25 basis points and unfavorable product mix of 102 basis points. The two largest components of the unfavorable product mix where our IOS division and Aspira sales, which accounted for 33 and 29 basis points respectively. These unfavorable impacts were partially offset by 107 basis contribution from Cianna and ClariVein, and improvement in manufacturing branches over prior comparable period of 21 basis points.

On operating expenses, as