Merit Medical's Q1 2025: Navigating Contradictions in Tariffs, China Sales, and Gross Margins

Tariff impact mitigation, China market performance, gross margin performance, OEM sales and growth expectations, and gross margin improvement strategy are the key contradictions discussed in Merit Medical Systems' latest 2025Q1 earnings call.



Strong Financial Performance:
- Merit Medical Systems reported total revenue of $355.4 million for Q1 2025, up 9.8% year-over-year on a GAAP basis and 10.9% year-over-year on a constant currency basis.
- The company delivered a 15% increase in non-GAAP EPS, exceeding high-end expectations, driven by a 6% constant currency organic growth and improved operating margin of 2.3%.

Cardiovascular Segment Growth:
- The Cardiovascular segment saw 9% growth in sales, with Cardiac Intervention product sales increasing 12% on an organic constant currency basis and Peripheral Intervention or PI products increasing 6.8%.
- This growth was driven by contributions from the acquisition of Cook Medical Products and strong demand from U.S. customers.

U.S. Sales and International Performance:
- Sales in the U.S. increased 14% on a constant currency basis, while international sales grew 6% year-over-year, with notable performance in the APAC and EMEA regions.
- The growth in the U.S. was due to strong customer demand, while international sales were slightly below expectations due to broader macroeconomic factors and trade-related impacts.

Impact of Tariffs and Trade Policies:
- The company estimates that tariffs will increase the cost of goods sold by $26.3 million, with 94% related to China, impacting non-GAAP EPS expectations for 2025.
- The tariffs were imposed on goods imported into the U.S. from various countries and on goods exported from the U.S. to China.

Future Revenue Guidance and CG Initiatives:
- For 2025, Merit anticipates total revenue growth on a GAAP basis of 8% to 10%, and on a constant currency basis, 8.7% to 10.2%, with a focus on executing continued strong execution and solid free cash flow generation.
- The company's Continued Growth Initiatives program aims to offset up to 45% of the expected tariff costs, with the potential benefits anticipated to be realized primarily in 2026.