Merit Medical Systems, Inc.

(Q3 2024 Earnings)

October 30, 2024

Corporate Speakers
• Fred Lampropoulos; Merit Medical Systems, Inc.; Chief Executive Officer
• Brian Lloyd; Merit Medical Systems, Inc.; Chief Legal Officer and Corporate
Secretary
• Joseph Wright; Merit Medical Systems, Inc.; President
• Raul Parra; Merit Medical Systems, Inc.; Chief Financial Officer and Treasurer

Participants
• John Young; Canaccord; Analyst
• Jayson Bedford; Raymond James; Analyst
• Gursimran Kaur; Wells Fargo; Analyst
• Jason Bednar; Piper Sandler; Analyst
• David Rescott; R. W. Baird.; Analyst
• Michael Matson; Needham; Analyst
• Craig Bijou; Bank of America Securities; Analyst
• James Sidoti; Sidoti & Company; Analyst
• Michael Petusky; Barrington Research; Analyst
• Steven Lichtman; Oppenheimer; Analyst

PRESENTATION
Operator^ Good day. And thank you for standing by. Welcome to the Merit Medical Q3
2024 Earnings Conference Call. (Operator Instructions)

Please be advised that today's conference is being recorded.

I would now like to turn the conference over to your speaker for today, Fred
Lampropoulos.

Please go ahead.

Fred Lampropoulos^ Thank you, Operator. And welcome, everyone.

I am joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer;
Joe Wright, our President; and Brian Lloyd, our Chief Legal Officer and Corporate
Secretary.

Brian, would you mind taking us through the safe harbor statements, please?

Brian Lloyd^ Thank you, Fred.

I would like to remind everyone that this presentation contains forward-looking
statements that receive safe harbor protection under federal securities laws.

Although we believe these forward-looking statements are based upon reasonable

assumptions, they are subject to risks and uncertainties.

The realization of any of these risks or uncertainties as well as extraordinary events or

transactions impacting our company could cause actual results to differ materially from
the expectations and projections expressed or implied by our forward-looking statements.

In addition, any forward-looking statements represent our views only as of today,

October 30, 2024, and should not be relied upon as representing our views as of any other
date.

We specifically disclaim any obligation to update such statements, except as required by

applicable law.

Please refer to the sections entitled cautionary statement regarding forward-looking

statements in today's press release and presentation for important information regarding
such statements.

For a discussion of factors which could cause actual results to differ from these forward-
looking statements, please also refer to our most recent filings with the SEC, which are
available on our website.

Our financial statements are prepared in accordance with accounting principles, which
are generally accepted in the United States.

However, we believe certain non-GAAP financial measures provide investors with useful
information regarding the underlying business trends and performance of our ongoing
operations and can be useful for period-over-period comparisons of such operations.

This presentation also contains certain non-GAAP financial measures.

A reconciliation of non-GAAP financial measures to the most directly comparable U.S.

GAAP measures is included in today's press release and presentation furnished to the
SEC under Form 8-K.

Please refer to the sections of our press release and presentation entitled non-GAAP
Financial Measures for important information regarding non-GAAP financial measures
discussed on this call.

Readers should consider non-GAAP financial measures in addition to, not as a substitute
for, financial reporting measures prepared in accordance with GAAP.
Please note that these calculations may not be comparable with similarly titled measures
of other companies.

Both today's press release and our presentation are available on the Investors page of our
website.

I will now turn the call back to Fred.

Fred Lampropoulos^ Thank you, Brian, and let me start with a brief agenda of what we
will cover during our prepared remarks.

I will start with an overview of our third quarter financial results and a discussion of the
strategic acquisition we announced on September 17. After my opening remarks, Joe
Wright will provide an update on the notable progress we have achieved in recent months
on our U.S. WRAPSODY program as well as a summary of our revenue results for the
third quarter. Then Raul will provide a more in-depth review of our quarterly financial
results and our financial guidance for 2024, which we updated today in the press release.

Then we will open the call for your questions.

Now beginning with a review of our third quarter results.

We reported total revenue of $339.8 million, up 7.8% year-over-year on a GAAP basis

and up 7.9% year-over-year on a constant currency basis. The constant currency revenue
growth we delivered in the third quarter modestly exceeded the high end of the range of
growth expectations that we outlined on our quarter two call.

Specifically, we expected constant currency revenue growth for the third quarter in the
range of 6.4% to 7.8% year-over-year.

Importantly, the 7.9% constant currency revenue growth in the third quarter was driven
by strong organic growth and contributions from acquired products, both of which came
in at the high end of our growth expectations. With respect to our profitability
performance in the third quarter, we delivered financial results that exceeded our
expectations.

We leveraged the solid revenue results to deliver non-GAAP operating profit growth of
19% and a non-GAAP operating margin of -- excuse me, 19.2% of sales, up
approximately 175 basis points year-over-year.

We also delivered 21% growth in our non-GAAP EPS, which exceeded the high end of
our expectations as well. Perhaps most notably, we generated $38 million of free cash
flow in the quarter and have generated more than $120 million of free cash flow over the
first nine months of 2024, representing an increase of 116% year-over-year.
We believe our third quarter results reflect continued strong momentum in the business,
and we remain confident in our team's ability to deliver the updated financial guidance
for 2024 that Raul will review later on the call.

We are focused on delivering continued strong execution, solid constant currency growth,
improving profitability and strong free cash flow in 2024 as well as continued progress in
our continued growth initiatives program and related financial targets for the 3-year
period ending December 31, 2026.

Now before turning the time over to Joe, I would like to take a few minutes to discuss the
important acquisition we announced on September 17.

We announced the signing of a definitive asset agreement to purchase Cook Medical's

lead management portfolio for a total cash consideration of approximately $210 million
and the assumption of certain liabilities.

We believe this acquisition represents multiple strategic and financial positives.

And importantly, this acquisition is consistent with and will not distract us from our
continued growth initiatives. This proposed transaction represents another example of
Merit's selectivity investing to expand our product portfolio in key strategic markets that
leverage our existing commercial footprint.

Strategically, we believe the proposed acquisition will position Merit to offer clinicians
an increasingly comprehensive set of solutions to support cardiac intervention patients
from diagnosis to therapy and intervention to post-procedure care. Cook Medical's lead
management business has many years of operating history and provides a comprehensive
end-to-end product portfolio of medical devices and accessories used in the lead
management procedures for patients who need a pacemaker or an implantable
cardioverter defibrillator, an ICD, lead removed or replaced. The assets we propose to
acquire from Cook include a full portfolio of tools for complete case support including
hand-triggered rotating extraction devices, sheets and snares for manual extraction and
lead control tools for grasping and removing leads.

We believe these assets generated approximately $37 million of revenue over the 12-
month period ended December 31, 2023, with sales to customers in the U.S., EMEA,
APAC and Rest of World representing approximately 41%, 42%, 11% and 6%
respectively.

We believe this transaction will strengthen our fast-growing high-margin

electrophysiology and cardiac rhythm management or CRM business with the addition of
differentiated products and an established commercial infrastructure.

We believe the transaction will enhance our position in the cardiac intervention market,
particularly in Europe, which is strategically attractive and has our commercial team very
excited.
We estimate this transaction represents an annual addressable opportunity of more than
$900 million in the U.S., EMEA and APAC regions.

Specifically, we anticipate that beginning in fiscal year 2025, the addition of Cook's lead
management business will position Merit to represent more than $100 million in
combined annualized electrophysiology and CRM revenue serving the global cardiac
intervention market.

In addition to the strong strategic rationale, we believe the financial profile of the
proposed acquisition is extremely compelling. Rahul will share some additional color on
the favorable financial profile of the acquisition later on in the call.

In the interim, I'll share that we expect sales contributions from the acquisition post-
closing in the range of $4 million to $6 million over the balance of 2024, and we expect
this acquisition to add approximately $40 million of revenue on an annualized basis
beginning in fiscal year 2025.

Now with that said, let me turn the time over to Joe for an update on our U.S.
WRAPSODY program and a review of our third quarter revenue performance.

Joe?

Joseph Wright^ Thank you, Fred.

I share Fred's sentiments as it relates to the notable progress we have made on our U.S.
WRAPSODY program in recent months.

First, with respect to our progress in the areas of clinical validation and raising awareness
of the compelling safety and efficacy profile of WRAPSODY among clinicians.

On September 16, we announced positive six-month findings from the randomized

arteriovenous or AV fistula arm of our WRAPSODY WAVE pivotal trial.

The data were shown at the Cardiovascular and Interventional Radiological Society of
Europe, or CIRSI, annual congress in Lisbon, Portugal. Dr. Mahmood Razavi, the co-
principal investigator of the WAVE trial, presented the extremely compelling results.

Specifically, the primary efficacy endpoint was target lesion primary patency, which
represents the percentage of patients that did not need a clinical revascularization or have
thrombosis. And patients treated with WRAPSODY was 89.8%.

This was 27 percentage points higher than patients treated with the control percutaneous
transluminal angioplasty, or PTA, which is the current standard of care. With respect to
the primary safety endpoint in the pivotal study, there were fewer adverse events for
patients treated with WRAPSODY.
However, the difference in the proportion of patients who experienced an adverse event
was not statistically significant between the two cohorts. Dr. Razavi was quoted saying
the superiority of the six-month efficacy data is compelling and provides clinicians the
chance to evaluate how WRAPSODY can help us prolong the vascular access of our
patients.

WRAPSODY should be the new standard of care for these patients.

We were also pleased with the positive response and feedback from participants of the
2024 Controversies in Dialysis Access, or CiDA meeting in Washington, D.C. on
October five including positive commentary related to our WAVE trial for many
participants at the meeting.

We expect further increases in awareness of WRAPSODY's safety and efficacy among

clinicians including more clinical data results, and look forward to WRAPSODY being
featured in scientific sessions at the VEITH meeting on November 23 in New York City.

Second, we have made considerable progress in our U.S. regulatory and reimbursement
strategies, and in developing our post-approval commercial strategy for WRAPSODY.

As discussed on our last earnings call we completed the clinical study report and filed the
final module with the FDA for premarket approval, or PMA, by the end of the second
quarter of 2024 as expected.

We are ready and willing to engage with FDA during their review as they review our
PMA application for this innovative technology. The WRAPSODY Cell-Impermeable
Endoprosthesis is built to combat the challenges dialysis patients can often experience
due to stenosis and occlusions in the dialysis outflow circuit.

We believe this technology can extend long-term vessel patency rates and reduce the
complications associated with existing treatment options on the market today including
the need for repeated interventions, frequent trips to the hospital and inadequate dialysis
treatments.

Our Renal Therapies group has been working through intensive WRAPSODY training
covering a range of important areas including technical story, anatomy and physiology,
and deployment technique. Clinical data training and live hands-on training are scheduled
to increase in the coming months.

We are focused on ensuring we are ready to enter the U.S. market following PMA
approval. The team has completed a thorough evaluation of the U.S. market opportunity
and is developing a comprehensive U.S. commercial strategy.

Importantly, our plans for U.S. commercialization post PMA approval are part of a
broader commercial strategy for our Renal Therapies group.
We have an experienced, dedicated sales and customer support team offering a strong
portfolio of dialysis products that address the entire end-stage renal disease continuum of
care including our HeRO Graft, our Surfacer Inside-Out Access Catheter System and our
portfolio of acute, chronic and peritoneal dialysis catheters.

We are excited to add WRAPSODY to this offering following PMA approval. The team
is also focused on developing and executing our reimbursement strategy for
WRAPSODY. Earlier this month, we submitted our application requesting a new
technology APC assignment for Medicare's acute inpatient prospective payment system.
The new technology add-on payment or NTAP designation enables new medical service
or technology meeting certain eligibility criteria to receive additional reimbursement
payment for a period up to three years.

We believe that WRAPSODY meets the eligibility criteria, particularly as it relates to the
requirement that the technology represents an advance that substantially improves
relative to technologies previously available the treatment of Medicare beneficiaries.

The application is currently under review, and we look forward to participating in the
New Technology Town Hall meeting on December 11, 2024, which is the annual meeting
held to provide a mechanism for public input on the eligibility criteria for NTAP
applications before final decisions are made.

We are targeting submission of an application for transitional pass-through payment

under the Medicare Hospital Outpatient Prospective Payment System or OPPS. The
Transitional Pass-Through payment or TPT program is intended to facilitate access for
Medicare beneficiaries to the advantages of new and innovative devices by allowing for
adequate payment for these new devices while the requisite cost data is collected.

We believe WRAPSODY meets the substantial clinical improvement threshold for new
category eligibility for a pass-through payment. Post PMA approval, if awarded pass-
through status, WRAPSODY would be eligible for this additional payment as early as Q3
2025 and will continue for at least two years thereafter.

It is fair to say that we have made significant progress in our WRAPSODY program this
year, and I applaud our team's efforts to ensure we are prepared and well positioned to
introduce WRAPSODY to the U.S. market following PMA approval.

For avoidance of doubt, we intend to continue providing updates as we achieve material

milestones in our WRAPSODY program going forward.

We also intend to host a WRAPSODY specific virtual investor event in advance of our
U.S. commercial introductions.

Details for this event will be shared once we secure PMA approval.
I will now provide a detailed review of our revenue results in the third quarter, beginning
with the sales performance in each of our primary reportable product categories. Note,
unless otherwise stated, all growth rates are approximated and presents on both a year-
over-year and constant currency basis. Third quarter total revenue growth was driven by
6% growth in our Cardiovascular segment and 86% growth in our Endoscopy segment,
both of which modestly exceeded the high end of the expectations we outlined on our
second quarter call.

Our total revenue results included approximately $6.8 million of revenue from our
acquisition of EndoGastric Solutions, Inc.

Excluding sales of acquired products, our total revenue growth in the third quarter was
5.7%, and our Endoscopy segment revenue growth was 11.5% on an organic constant
currency basis.

Sales of our peripheral intervention, or PI, products increased 7.7%, representing nearly
60% of total Cardiovascular segment growth in the period. Growth in the PI product
category was driven by sales of our radar localization products, which increased 17% and
sales of our drainage products, which increased 10%. Together, they represented more
than half of total PI sales growth in Q3.

Sales of our custom procedural solutions, or CPS, products increased 4%, which was
slightly better than the low single-digit increase we expected in Q3.

Growth was driven by strong sales of critical care products, offset partially by more
modest sales of kits and trays as expected due to the ongoing SKU rationalization efforts
discussed on prior calls. Cardiac intervention product sales increased 2%, slightly above
the high end of our growth expectations, driven primarily by strong sales of EP/CRM
products and to a lesser extent, growth in sales of fluid management products.

Sales of our OEM products increased 8.5% in Q3 and were the only area of our
Cardiovascular segment that came in softer than our growth expectations heading into the
quarter. Notably, demand trends from customers in the U.S. improved from Q2 as
expected.

Product sales to OEM customers outside the U.S., however, were significantly lower than
expected in Q3.

We had a discrete logistics-related issue that impacted our Q3 OEM results, but the
softer-than-expected product sales to OEM customers outside the U.S. is primarily related
to navigating a more challenging raw material and supply chain environment.

Our updated revenue guidance for 2024 reflects the softer-than-expected OEM sales in
Q3 and modestly lower OEM sales expectations in Q4 as compared to what our prior
guidance range assumed. Demand remains strong, but as a result of supply chain
challenges, we now expect OEM sales growth of approximately 7% in 2024 compared to
10% previously expected.

Turning to a brief summary of our sales performance on a geographic basis.

Our third quarter sales in the U.S. increased 10% on a constant currency basis and 7% on
an organic constant currency basis.

We were pleased to see improving trends in our U.S. business as we outlined on our
second quarter call.

We continue to expect to deliver approximately 6% organic growth in the U.S. at the

midpoint of our 2024 guidance range. Note, this growth assumption contemplates our
updated expectations for OEM growth in the second half of 2024, offset by stronger
organic growth in the non-OEM portions of our business, which, by way of reminder, are
expected to represent approximately 87% of our total organic constant currency revenue
in 2024.

International sales increased 4.5% year-over-year and increased 4.4% on an organic

constant currency basis, exceeding the low end of our growth expectations.

Sales results in Rest of World and APAC exceeded the high end of our expectations,
while sales in the EMEA region were softer than expected, largely related to the
aforementioned OEM challenges in the quarter.

With respect to China specifically, sales decreased 5.1%, modestly better than what our
guidance had assumed.

We continue to see quarter-to-quarter variability in growth trends related to volume-based

purchasing tenders as expected.

By way of reminder, while we are not providing country-specific growth assumptions in

our guidance messaging, the midpoint of our 2024 constant currency growth guidance
range now assumes our total international sales will increase 4.8% year-over-year, driven
by 2% growth in APAC, 6% growth in EMEA and 15% growth in the Rest of World
region compared to 0%, 7% and 11% respectively assumed in our prior guidance range.
The improving growth trends in APAC assumed in our updated guidance is driven by
better-than-expected results in China over the first nine months of 2024, driven primarily
by better-than-expected sales of units, which are now expected to modestly offset
continued pricing headwinds related to volume-based purchasing. With that, let me turn
the call over to Raul, who will take you through a detailed review of our third quarter
financial results, balance sheet and financial condition at September 30.

Raul Parra^ Thank you, Joe. Beginning with a review of our P&L performance, for the
avoidance of doubt, unless otherwise noted, my commentary will focus on the company's
non-GAAP results during the third quarter of fiscal year 2024, and all growth rates are
approximated and presented on a year-over-year basis.

We have included reconciliations from our GAAP reported results to the related non-
GAAP item in our press release and presentation available on our website. Gross profit
increased approximately 10% in the third quarter.

Our gross margin was 50.9%, up 108 basis points.

The increase in gross margin year-over-year was driven by pricing uplift, favorable
product and geographic revenue mix, and improvement in freight and distribution costs,
offset partially by manufacturing variances compared to the prior year period.

Operating expenses increased 6% from the third quarter of 2023. The increase in
operating expenses was driven by a 5% increase in SG&A expense and an 8% increase in
R&D expense compared to the prior year period. Total operating income in the third
quarter increased $10.2 million or 19% from the third quarter of 2023 to $65.1 million.

Our operating margin was 19.2% compared to 17.4% in the prior year period.

The 175 basis point increase in operating margin was driven by a 108 basis point increase
in our non-GAAP gross margin and by a 67 basis point decrease in our non-GAAP OpEx
margin compared to the prior year period. Third quarter other expense net was a benefit
of $0.9 million compared to expense of $4.5 million last year. The change in other
expense net was driven by an increase in interest income associated with our higher cash
balances, partially offset by an increase in net interest expense associated with increased
borrowings. Third quarter net income was $51.2 million or $0.86 per share compared to
$41.4 million or $0.71 per share in the prior year period.

We are pleased with our profitability performance in the third quarter where we leveraged
stronger-than-expected revenue results to drive significant expansion in operating
margins and a strong growth in non-GAAP diluted earnings per share, both of which
exceeded the high end of our expectations.

Note, our third quarter non-GAAP EPS results included incremental dilution related to
our convertible debt that represented approximately $0.01 to Q3 EPS versus what our
guidance had assumed. Turning to a review of our balance sheet and financial condition.

As of September 30, 2024, we had cash and cash equivalents of $523.1 million, total debt
obligations of $770.5 million and available borrowing capacity of approximately $697
million compared to cash and cash equivalents of $587 million, total debt obligations of
$846.6 million and available borrowing capacity of approximately $626 million as of
December 31, 2023.

Our net leverage ratio as of September 30 was 2.08x on an adjusted basis.

We generated $38 million of free cash flow in the third quarter and have generated more
than $120 million of free cash flow over the first nine months of 2024, up 116%.

The improvement in free cash flow generation is a result of growth in net income and
significant improvement in cash used in working capital compared to the first nine
months of 2023.

We now expect to generate approximately $150 million of free cash flow in 2024
compared to our prior guidance of $130 million. And importantly, we continue to believe
our CGI program will generate more than $400 million of free cash flow in the 3-year
period ending December 31, 2026.

For reference, we have included a table in our earnings press release, which details each
of our updated formal financial guidance items and how those ranges compare to the
prior ranges as of September 17, 2024, when we updated our guidance to reflect the
projected impact of our proposed acquisition of lead management assets from Cook
Medical.

By way of a reminder, our updated financial guidance assumes that Cook Medical
transaction closes on November 1, 2024.

Our updated guidance ranges now assume the following: GAAP net revenue growth of
6.9% to 7.6%, net revenue growth of approximately 5% to 6% in our Cardiovascular
segment, and net revenue growth of approximately 49% to 52% in our Endoscopy
segment, and a headwind from changes in foreign currency exchange rates of
approximately $7 million or approximately 60 basis points in growth year-over-year.
Excluding the impact of changes in foreign currency exchange rates, we expect total net
revenue growth on a constant currency basis in the range of 7.4% to 8.1% in 2024. Note,
the increase in constant currency growth expectations at the low end of the guidance
range reflects the flow-through of the better-than-expected revenue results in Q3, $2
million lower FX headwind to GAAP revenue, and the contributions from our acquisition
of assets from Cook Medical from the expected closing date of November one to
December 31, offset partially by our revised expectations for our OEM business in the
fourth quarter. All other assumptions supporting our Q4 growth expectations remain
unchanged versus what our prior guidance had assumed.

Finally, our total net revenue guidance for the fiscal year 2024 now assumes inorganic
revenue contributions from the acquisitions announced on June 8, 2023, July 1, 2024, and
September 17, 2024, in the range of $29.5 million to $32.5 million in the aggregate.

For avoidance of doubt, this aggregate range consists of approximately $11.6 million of
inorganic revenue related to our acquisition of assets from AngioDynamics, Inc. in Q1
and Q2, plus the contributions from our acquisition of assets from EndoGastric Solutions
in Q3 and Q4 in the range of approximately $40 million to $50 million, plus the
contributions from our acquisition of assets from Cook Medical post-closing in the range
of approximately $4 million to $6 million. Excluding inorganic revenue, our updated
guidance reflects total net revenue growth on a constant currency organic basis in the
range of approximately 5.1% to 5.5%. With respect to our updated profitability guidance
for 2024, we now expect non-GAAP diluted earnings per share in the range of $3.33 to
$3.38, representing an increase of 17% to 19%. Note, this updated range reflects the
better-than-expected EPS results in Q3 and includes the expected dilution related to our
acquisition of assets from Cook Medical, which, as disclosed on September 17, is
expected to be in the range of $0.01 to $0.02.

As Fred discussed earlier, we believe the Cook Medical acquisition offers a very
attractive financial profile.

While we believe the proposed acquisition will be modestly dilutive to our full year 2024
non-GAAP profitability given the partial year contribution and the impact of
approximately $1.8 million of lower interest income on cash balances used for the total
purchase consideration, we expect the acquisition to be accretive to our non-GAAP gross
and operating margins in the first full year post closing.

We expect the acquisition to be accretive to our non-GAAP net income and non-GAAP
EPS in the second full year post closing.

For modeling purposes, our updated fiscal year 2024 financial guidance now assumes
non-GAAP operating margins in the range of approximately 18.5% to 18.8%, up 130 to
160 basis points, non-GAAP interest and other expense net of approximately $0.9 million
of income, non-GAAP tax rate of approximately 21.3%, diluted shares outstanding of
approximately 59.1 million compared to 58.8 million previously. And we now expect
CapEx of approximately $50 million and free cash flow of at least $150 million.

We would also like to provide additional transparency related to our growth and
profitability expectations for the fourth quarter of 2024.

Specifically, we expect our total revenue to increase in the range of approximately 5.5%
to 8.2% on a GAAP basis and up approximately 6.1% to 8.8% on a constant currency
basis. The midpoint of our fourth quarter constant currency sales growth expectation
assumes approximately 12% growth in the U.S. and 2% growth in international markets.
Note, our fourth quarter constant currency sales growth expectations include inorganic
revenue in the range of $11 million to $14 million.

Excluding inorganic contributions, our fourth quarter total revenue is expected to increase
in the range of approximately 3% to 4% on an organic constant currency basis. With
respect to our profitability expectations for the fourth quarter of 2024, we expect non-
GAAP operating margins in the range of approximately 17.8% to 18.8%, and we expect
non-GAAP EPS in the range of $0.80 to $0.86. That wraps up our prepared remarks.

Operator, we would now like to open up the line for questions.

QUESTIONS AND ANSWERS

Operator^ (Operator Instructions) And the first question that we have for the day is
coming from John Young of Canaccord.

John Young^ First, with the Cook acquisition, I just wanted to ask a bit of a 2025
question. I'm not sure if you can totally answer it, but just are you expecting a halo effect
essentially with the other products in the CI segment?

Joseph Wright^ Yes. This is Joe. I think that's exactly the rationale behind the
acquisition. We have a number of very good EP/CRM-focused products but not really an
anchor portfolio.

So I think with this acquisition, it gives us the revenue, the gross margin profile, and
allows us to actually build out an EP-focused sales force that can drive not just the Cook
acquired product revenue, but also some of the products we have already, whether it be
transseptal crossing products or some that we have in our product roadmap.

So yes.

Fred Lampropoulos^ And Joe, can I add that just like RTG, we've seen success
inaligning and having the focus to get deeper into those specific products, John.

Raul Parra^ It will add about $40 million in annualized revenue starting in fiscal year
2025, John.

John Young^ That's all very helpful. And then just a point of clarification on
WRAPSODY for the add-on payment. Do you also expect NTAP to go live Q3 '25 if you
got that? Or is that just TPT? And also, when it comes to pricing the product, will you
price the product with NTAP in mind?

Joseph Wright^ The answer is we have submitted for NTAP. And yes, we will price as if
we are going to get that NTAP. But of course, we won't know for several months.

As far as the add-on payment, that will be submitted or that application will be submitted
after we receive FDA approval.

Operator^ And our next question will be coming from Jayson Bedford of Raymond
James.

Jayson Bedford^ Congrats on the progress. Maybe just two to keep it moving here. With
the WAVE results on WRAPSODY, has the data impacted traction in Europe at all?

Joseph Wright^ Yes. I think it's a little bit too early to say, Jayson.

Of course, we released the six-month data at the Lisbon conference -- or the Lisbon --
Fred Lampropoulos^ CIRSI.

Joseph Wright^ -- CIRSI. Thank you, Fred. And that was very well received.

Of course, there are a lot of European physicians there. But I think it will take some time
for that to really take hold.

We have made great progress though in pushing awareness of the product and
particularly that excellent data we released.

Jayson Bedford^ Okay. And then maybe for Raul or others. The 3% to 4% organic
growth guide for 4Q, I realize it's a tougher comp, but what's the expected weight on
growth to get to that level?

Raul Parra^ Yes. I mean I think generally, I'll start, Jayson, by just highlighting kind of
the overall performance that we're going to -- that we've guided to.

I think for the year, it's going to be a solid execution on the revenue front, operating
margin expansion and really strong earnings growth.

We called 17% to 19% growth on the EPS side.

But look, I think when we look at our guidance for the fourth quarter, it's really not
materially different than what we've been guiding to since Q3 or even before that.

It's right in line with kind of our expectations. Really, the delta that we're kind of
adjusting for is just the OEM expectations.

We had a little bit of a supply chain challenge that could impact the fourth quarter, which
we've accounted for.

Obviously everybody knows about the Baxter IV impacting procedures. And I think
we've tried to account for any disruption that may happen there.

But generally speaking, we feel really strong about the year that we're putting together.
And then obviously the fourth quarter is going to be strong too, just from a growth
perspective overall and just an earnings perspective.

Operator^ And our next question will be coming from Larry Biegelsen of Wells Fargo.

Gursimran Kaur^ This is Simran on for Larry. Maybe just to start off on WRAPSODY.
Congrats on the results there. The data looked really strong. And I appreciate all the color
on the reimbursement pathway.
I guess just to ask the question in a more pointed way, is it reasonable to assume
WRAPSODY will be priced at a significant premium to the competitive sense in order to
meet that cost criteria for the add-on payment?

Joseph Wright^ Yes. Typically, that's how it would work.

So we'll see as we get closer to launch and we'll give more detail at an Investor Day post
approval. But yes, that's a fair assumption.

Gursimran Kaur^ Okay. Great. And then just any additional color on the commercial
strategy? How are you positioning the sales force to add WRAPSODY to the bag? And
are you going to be able to launch the product right away after FDA approval?

Fred Lampropoulos^ So this is Fred.

Look, we are preparing on the clinical side, regulatory, reimbursement and the
commercial side, and we will follow all this up shortly after our approval.

We'll have a virtual meeting and go through all these details at that time when all these
things play out and come together, and we will share that publicly in a virtual meeting.

Operator^ And our next question will be coming from Jason Bednar of Piper Sandler.

Jason Bednar^ Fred, I'll preface this by saying please don't shoot me for asking this, but
I'll -- because I'm going to ask it anyways. The -- you've got the NTAP, the TPT, you're
pursuing on WRAPSODY. You sound confident in securing each. Both maybe could take
effect next year, TBD, I guess, on NTAP.

But you're launching next year presumably after approval.

I'll take a stab here. How should -- how do you want the analyst community thinking
about the volume and/or revenue opportunity for WRAPSODY in '25? You like taking a
prudent approach with setting guidance, setting expectations, but I think all of us are
trying to feel out how much this could actually add in '25 or the first full year of launch.
You've got a lot of different variables to consider.

So how do you want us thinking about that?

Fred Lampropoulos^ Well first of all, these are all good comments that we're receiving
today, and we're very excited about the product as we have been.

We'll provide more at the appropriate time. We're going to hold steady to the course, as
we've said, and we'll be as conservative as always.

But again, you're going to have to wait, Jason.

I wish we could do it faster, but that's not what we're going to do. We've given you --
we've given you everything we have what we want you to have now. We'll look forward
to talking to that to you in the virtual meeting.

Jason Bednar^ Okay. All right. Fair enough.

Fred Lampropoulos^ Nice try. Nice try.

Jason Bednar^ It's all been very helpful today. So we do appreciate it.

Fred Lampropoulos^ I hope so. We hope so. We're working hard and we're progressing.
We're doing things that have to be done.

Raul Parra^ And Jason, as we've talked, our intent is to provide material updates every
quarter as they happen. So we provided a pretty good amount of color today and more to
come.

Jason Bednar^ No. you did and more than I think a lot of us were expecting.

So that's -- it's all been helpful. Maybe I'll shift over to the margin side. This has been
extremely successful and impressive here in the last few years.

Can you talk about whether you have additional SKU rationalization plans for the
businesses over the next few quarters or next year? Or maybe just bigger picture as we
start thinking about our models for next years, any other considerations that we should
think about in sustaining this margin improvement, not looking for specific guidance, of
course, big picture items that we should have in mind?

Raul Parra^ Yes. Look, I mean I'll take -- the question is pretty broad, Jason.

So I'm going to take just a minute to highlight the 108 basis point improvement year-
over-year. We hit 50.9%. Obviously the sales team is working really hard on pricing
uplift. They've been working really hard on the favorable kind of product and geography
revenue mix. And our operations group has been doing a great job on the freight and
distribution side.

So that's all driving the gross margin improvement. And as we talked about in CGI when
we laid out those goals for 2026, a significant portion of the improvement comes from
gross margin, right, on the low end. And as we get to the higher end, obviously there's an
incremental gross margin improvement there too with additional leverage to the operating
expense line.

So generally speaking, I think this gives us a big vote of confidence for us that we're
heading in the right direction.
We're making the right improvements. But it's progressing, I guess, as we planned, and
it's part of the CGI program to increase the gross margin and let it flow through to
operating margin. And maybe just one more thing, Jason.

I didn't hit on the SKU rationalization piece. So let me answer that here real quick.

But generally speaking, our commitment there hasn't changed. There's two aspects to the
SKU rationalization.

One is just replacing our legacy products with newer products that are the same, but just
improvements and also obviously lower cost to manufacture. And then the second piece,
the more material one that I think people generally ask about is whether we're going to
exit businesses or exit products.

And generally, we'll give color and we'll give people a heads up when those material kind
of items come up.

We don't anticipate anything for 2025. It will be more of the internal stuff that you guys
won't really notice or we hope you don't notice other than through the incremental margin
improvement.

Operator^ And our next question will be coming from David Rescott of R. W. Baird.

David Rescott^ Congrats on the quarter and I appreciate all the color on WRAPSODY.
Just a couple on WRAPSODY from us and maybe attacking some of the market
opportunity questions a little bit of a different way. You look at the, we'll call it percent
covered graft market out there where some of the physician feedback is obviously very
positive around the potential to transition toward a WRAPSODY product. The trial itself
obviously looked at use of the therapy versus PTA. And so I'm curious when you think
about the opportunities to enter these markets, is the stent covered graft kind of the lowest
hanging fruit out there and going after kind of what you looked at in the control arm is
more upside? Or do you think that both of those markets are kind of up for grabs with
WRAPSODY once you get out there?

Fred Lampropoulos^ Yes. David, first of all, a very thoughtful question, and we
appreciate why you're asking. And we look forward -- we're going to share all of the
thoughts on all of these issues in the future.

As everything plays out, we're focused on preparing for the commercial launch as we
speak, and then we will talk about all of this stuff at our virtual meeting.

I'm sorry to have to repeat that, and I appreciate you guys trying.

But listen, we are focused on CGI. We're focused on launching this product. We're
focused on operating margins, free cash flow, all the things we've talked about.
So the WRAPSODY is important to us, but we have a big business we have to run, and
we'll talk to you as soon as we get to that closing time and get ready -- in the meantime,
we're getting ready to go to the market.

David Rescott^ All right. And then just maybe as a follow-up on that and some of the
prior comments you made, you talked about, again, the out-year margin expansion story.
Just -- I'm not sure you're going to provide much on it, but just curious on the
assumptions around not the impact WRAPSODY would have, but assuming that the
WRAPSODY contribution on a margin perspective should be aligned with the expansion
story over the CGI?

Joseph Wright^ Yes. Again, thanks for the question, but we're obviously focused on the
PMA approval, getting through that process. And we're excited about the product just as
everybody is.

But clearly, we're focused on delivering at least 20% operating margins per CGI. That's
the goal. That's what everybody is focused on.

We're also focused on making sure that we get the WRAPSODY product line across the
finish line from a PMA approval. There's a lot of work that's being done internally.

We're just as excited as everybody, but we're just going to hold off on kind of the
financial modeling questions until we actually -- that post-approval meeting that we have.

So again, I appreciate the question.

Operator^ And our next question is coming from Mike Matson of Needham.

Michael Matson^ So just kind of a higher-level question. Merit has been sort of making
this move from more kind of basic accessory type products into these more physician
preference item, therapeutic products like WRAPSODY, the Cook lead management
devices and then the EndoGastric Solutions products.

So do you believe that your sales force has sort of the right skill set to sell these types of
products that are more kind of dictated by physician preference and physician
relationships as opposed to maybe kind of more of the purchasing or C-suite side of the
hospital?

Joseph Wright^ Yes. I think those are fair questions. I'm very confident in our sales
team. We have been selling a lot of more accessory type devices, that's for sure. But that's
really built the company to where it is today and has enabled us to make these select bets
on therapeutic products.

There's clearly a change in selling, I'll be clear about that. But we're confident that we can
get our -- attract and retain top sales talent that know how to sell therapeutics.
We're -- already this year, we've been training up our renal therapies group in preparation
for WRAPSODY. They're already selling physician preference products in that portfolio,
and we're confident they can take on WRAPSODY. And listen, we'll do the same with
the Cardiac Therapies group really anchored by Cook's lead management business.

Brian Lloyd^ And our EGS, our endoscopy group, too. Yes.

Michael Matson^ Okay. Got it. And then just one more -- I got to try one more on
WRAPSODY. I know you may not answer this, but one more stab at the market
opportunity here. I mean can you just tell us like what the kind of TAM is for the
indications you're expecting to get here?

So in other words, covered stents used specifically for AVGs or AVFs. I mean I've
ballparked it kind of in the $300 million to $600 million range, but it's not very scientific.
So I don't -- is that reasonable? And sorry, that's a U.S. number specifically.

Fred Lampropoulos^ Yes. Mike, we are not going to confirm or deny anything.

What we are going to say is, yes, we can provide it at the virtual meeting right after we
get approved.

Operator^ And our next question will be coming from Craig Bijou of Bank of America
Securities.

Craig Bijou^ I wanted to start with the OEM business. And maybe just -- I guess the
question is any of these logistical challenges, can that bleed into '25? And I guess that's
the first part. And then -- just how to think about that business going forward in terms of
a growth rate? Obviously over the last couple of years, it's been a pretty strong grower for
you. Maybe it slowed down a little bit this year. But would love any thoughts you had on
that business and any potential disruption kind of bleeding into early '25.?

Raul Parra^ Yes. No, great question.

First of all, I think just to highlight, right, I mean I think Q3 revenue came in above the
high end of our guidance.

So generally speaking, even though we did have a little bit -- we weren't as high on the
revenue growth in OEM as we expected.

We were still able to beat the high end of our guidance.

And also, I just -- I want to make sure that it's clear, like we're not concerned here
internally about OEM. I mean if you look at Q1, they were down 5%. They were up 5%
in Q2, and they were up 8.5% in Q3.
So the demand is there. The logistics issue was kind of is really isolated to Q3, is a
customer that couldn't arrange pickup for Q3.

Then you ran into kind of the Chinese New Year that led to some delays. So it was really
kind of a discrete item.

Fred Lampropoulos^ It's Golden Week, just for clarification.

Raul Parra^ Yes, Golden Week. Thank you. And so we can put that one kind of behind
us. I think what we've tried to accommodate for is really the supply chain. That's
something that kind of -- that we don't really have control over.

As we've talked before in multiple quarters, there are still some areas of -- that haven't
recovered from a supply chain standpoint. And this just happens to be one of the areas
that's limiting us to be able to deliver on the demand that we're seeing from customers. So
the demand is there.

We have visibility to that. We continue to be excited about OEM. And again, we're still
talking about 7% growth in 2024 for OEM, which is at the high end of our CGI guidance.
So again, we have good visibility into the business.

We're confident in the expectations. We're not going to provide anything for 2025.

But I want to make sure that everybody understands that the kind of the impacts that we
were seeing in Q1 and coming out of into Q2 are really different from what we're seeing
heading into Q4.

They're discrete. So again, super confident in the overall business.

I think if you look at the U.S. growth on a constant currency basis, organic, we are
approaching almost 7%, really solid number for the U.S. The rest of our U.S. business is
almost 86%, 87%.

So we're really talking about a small portion of our business, but continue to be excited
about the demand we're seeing in OEM.

Craig Bijou^ Got it. And maybe for Fred or Joe, obviously we're all excited about
WRAPSODY.

I'm going to spare you a question on WRAPSODY specifically. And I don't mean to look
past it, but you guys have talked about the Cook deal, the product roadmap.

Fred, I think in past quarters, you've even teased that there's -- you have other pipeline
products beyond WRAPSODY.
So maybe just help us understand when we may hear about some of these new products
or what the pipeline looks like or when you would disclose that to us? Or just how we
should think about the pipeline other than WRAPSODY over the next couple of years?

Fred Lampropoulos^ Yes. Well listen, it's -- again, these have all been really good
questions, which we appreciate.

Look, we're not revealing the details. I will say that we're focused on this CGI as we've
been talking about on the call.

I think in terms of new product development, it continues to be a priority at Merit.

We have certain technologies here that we developed over the last several years. And
when appropriate, we'll bring it forward. So we just want to keep focused on the things
that are in front of us. But in the meantime, there's ongoing product development.

Operator^ Our next question will be coming from James Sidoti of Sidoti & Company.

James Sidoti^ Can you talk a little bit more about the integration of the Cook Medical
products? Are you bringing on any of their sales folks? And will you move the
manufacturing to your facilities?

Joseph Wright^ Yes. We are planning on taking on some sales professionals in the
transaction. And yes, we will be transferring the manufacturing of that product to a Merit
facility. In the meantime, however, we will have a TSA to bridge the time between close
and transfer to a Merit site.

James Sidoti^ So once that transfer is complete, what will the impact be on gross
margins?

Fred Lampropoulos^ Well we'll talk about that, Jim, when it's complete.

Raul Parra^ Yes. I mean again, I think if you look at our original guidance that we gave
out when the acquisition came out, we said it was going to be accretive to non-GAAP
gross margins, accretive to non-GAAP operating margins in the first full year post close.

James Sidoti^ Okay. And if you look at the business now compared to where you were 7,
eight years ago, I mean the cash flow has just improved dramatically.

What's the plan long term with the cash? Do you anticipate continuing to use cash for
acquisitions? Or would you ever consider -- are there other options out there for it?

Fred Lampropoulos^ Well Jim, as you can see, we've made acquisitions because we have
not only a line, that line comes from our ability to generate cash.
I think we've done a great job. You can see the numbers that we're talking about for this
year. And as someone told me that lives in New York City, cash is king. And you might
know that guy quite well.

Raul Parra^ Yes. Thank you for the question, first of all.

We're working really hard to make those improvements. I think it's obviously shown in
the performance that we've generated.

Obviously we're off to a really good start under our CGI program, Jim. We're at $120
million of free cash flow for the year. We're going to do a minimum of $400 million
under the CGI program. So we're off to a good start.

We've got plenty of capacity, our balance sheet is strong, and we continue to work on our
working capital. So all solid points that are generating that free cash flow.

James Sidoti^ All right. And then with WRAPSODY, I know you don't want to answer a
lot of questions. But when it does get approved, is this something that you think you can
get in the market with relatively quickly? Or do you think there'll be a significant amount
of training involved to launch the product?

Joseph Wright^ Yes, great question. The training has started this year.

So we've had ongoing training sessions with our sales groups, and we'll be ready to go
from that perspective.

As far as adoption out of the gate, keep in mind, this is a -- this, like most new medical
devices, will require a VAC committee in most cases. So that takes time.

But I don't think it's any greater than any other product. And of course, with the data we
have, we expect that process to be certainly not easy, but easier than it would be without
such great data.

Operator^ The next question will be coming from Michael Petusky of Barrington
Research.

Michael Petusky^ I've challenged myself to try to ask WRAPSODY question you guys
can't answer. So let's see if it's -- how it works. I'm just curious, in terms of your
communication with the FDA, have there been -- have there -- I guess, the clock started
at the end -- maybe the end of June or the 1st of July. Have there been any stoppages
during your -- any communication with the FDA since then?

Fred Lampropoulos^ Yes. So as you know Mike, we promised or we indicated that we

would file by the end of the second quarter, which we did. There's 180 FDA days and we
have had no stoppages. So we'll leave it at that.
Michael Petusky^ All right. I'm going to try my luck with a second one.

In terms of just website traffic or inquiries, have you guys noticed any pickup just in
people clicking around and trying to learn about WRAPSODY since the day in Portugal?

Fred Lampropoulos^ Yes. I haven't. I haven't candidly looked at it. But guys, do you
want to speak to that, Joe?

Joseph Wright^ Yes. I mean look, I think it continues to track well in multiple markets
where it's available commercially.

Obviously there's a lot of positive feedback from clinicians, and there continues to be a
lot of data release in the coming months, Mike.

So I mean I think that's all generating a buzz, generally speaking, as you saw just today
alone, just with the questions we're getting. So that's probably the best way to answer it.

Michael Petusky^ Absolutely. All right. Last one real quickly.

In terms of M&A, you guys for a few years there were pretty quiet. You've picked up a
little bit, not doing anything huge, but doing some deals that seem meaningful, both
strategically and even financially.

Just curious, in terms of comfort with leverage, I mean is there a number -- and forgive
me if you put this out either tonight or recently, but I'm just not sure I heard it. Is there
sort of a leverage ratio you guys are comfortable with going up to?

Raul Parra^ Yes, Mike, I think had you asked me this year -- this question three years
ago when the interest rates were low, we'd probably say a higher number, right? We'd
probably go up to 4x.

I think, generally speaking, in this interest rate environment, we're probably somewhere
around three unless we can delever really quick, right? But look, I think we're -- our
discipline on the transactions that we're showing right now I think they're real, right? I
mean I think you're looking at the transactions.

You can pick up on the theme pretty easily. We're looking at areas that we can go deeper
into the bag that we can make investments in sales forces to make sure that they can get
deeper into the bags that we already have including the new products that we're bringing
on with these acquisitions. And we're sitting right now at 2.08x levered.

We've got plenty of cash on the balance sheet. We have a strong balance sheet and we've
got plenty of firepower, but we're going to continue to remain disciplined.
We've got our crosshairs on the CGI program. And that's our goal is to execute to the CGI
program that we've promised. And everything that falls under that scope, I guess, we're
making sure that any transaction that we do generally meets or exceeds those targets.

Operator^ And our next question will be coming from Steven Lichtman of Oppenheimer.

Steven Lichtman^ I guess, first on Cook, where do you see the biggest sales synergy
opportunities with your legacy CRM franchise, whether is it cross-sell in the U.S., store
opening in other countries? Any thoughts on that would be helpful.

Joseph Wright^ Yes. One of the nice things about these assets are they truly are global
unlike a lot of the acquisition candidates we evaluate. They have about as much revenue
in the U.S. as they do in Europe.

I guess I should have said that the other way around.

But also some exciting opportunities in APAC, we think. So globally, it really helps our
global franchises.

As far as products we have, we have the Worley, we have the SNAP Splittable Sheath.
We have the Ventrax, which will be coming out soon. We have transseptal crossing
catheters, both steerable and fixed curve. We have the PTA balloon.

So we have a number of products that really haven't had the attention they deserve. And
we're confident in the products we already have that if we put the folks behind them, we
will get more adoption. And with more dedicated feet on the street, we're confident that
will happen.

Steven Lichtman^ And then just a follow-up on China. Good to see growth continuing to
hold up for you guys there.

Can you talk about the environment overall there? How much VBP are you absorbing,
your confidence on procedure volume growth? Thoughts there would be great as well.

Raul Parra^ Yes. Look, I think -- Steve, look, I think it's -- for us, first of all, volume-
based purchasing has kind of come in as expected.

I think the nice thing that we've seen is we've seen a strong demand and an increase in
units, which is why you're seeing the better-than-expected results in China.

So I think for us, the business continues to be strong or stronger than we anticipated. And
we're dealing with volume-based purchasing, which is, as you know continues to be from
quarter-to-quarter, pretty volatile, I would say.
But generally speaking, we're outpacing it with the unit growth. And so I think we
continue to be excited about the performance of our Chinese team. And generally
speaking, just the APAC region.

Operator^ And this does conclude the Q&A session for today.

I would now like to turn the call back over to Fred for closing remarks. Please go ahead.

Fred Lampropoulos^ Well listen, it's been a long call.

We appreciate all the questions. Rahul and I and Joe will be around for the next couple of
hours. Best wishes.

It's cold out in Salt Lake City. Warm us up with your questions. Thanks again for taking
the time.

We appreciate it. And good evening from Salt Lake City. Good night.

Operator^ Thank you for participating in today's conference call. You may all
disconnect.