MMSI

Merit Medical Systems, Inc. (MMSI)

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Merit Medical Systems, Inc. (MMSI)

Q2 2009 Earnings Call

July 28, 2009 5:00 pm ET

Executives

Fred Lampropoulos – Chief Executive Officer

Kent Stanger – Chief Financial Officer

Marty Stephens – Vice President of Business Development

Greg Barnett – Chief Accounting Officer

Analysts

Dave Turkaly - SIG

Christopher Warren – Caris & Company

Jayson Bedford – Raymond James

James Sidoti – Sidoti & Company

Ross Taylor – C.L. King & Associates

James Terwilliger – Duncan Williams Inc.

Presentation

Operator

Welcome to the Merit Medical second quarter 2009 earnings conference call. (Operator Instructions). This conference is being recorded today, Tuesday, July 28, 2009. I would now like to turn the conference over to Mr. Fred Lampropoulos, Chairman and CEO.

Fred Lampropoulos

Good afternoon, ladies and gentlemen. This is Fred Lampropoulos. We’re broadcasting from Salt Lake City, Utah, today. We’re delighted that you’ve joined us. I’m going to ask Ann Marie Wright if she would please read the safe harbour provision.

Ann Marie Wright

In the course of our discussion today, reference may be made to projections, anticipated events, or other information which is not purely historical. Please be aware that statements made in this call which are not purely historical, may be considered forward-looking statements. We caution you that all forward-looking statements involve risks, unanticipated events, uncertainties and other factors that could cause our actual results to differ materially from those anticipated in such statements. Many of these risks, events, uncertainties are discussed in our annual report on Form 10-K and other reports and filings with the Securities and Exchange Commission and which are also available on our website. To the extent any forward-looking statements are made in this call, such statements are made only as of today's date, and we do not assume any obligation to update any such statements.

Fred Lampropoulos

Ladies and gentlemen, we're delighted that you’ve joined us. I’m pleased to announce the results of our second quarter. As you can see from the headline, our sales were up 13% over the year-ago quarter, at a record level of $64.8. I think of significance, we should note that our core business was up 9% and change, and we continue to be very strong in our overall business. Our net income was $5.8 million or $0.21. I believe that is ahead of Wall Street consensus of $0.19 as well as I think the revenues themselves were slightly ahead of Wall Street consensus.

Just as a point of interest; they are record earnings, and I think we were able to do that with some headwinds that came from the cost that we have previously discussed with you regarding the acquisition and particularly of the Alveolus acquisition which came with a salesforce and the expense of that as well as more salespeople that we have hired since that time, and we have a full quarter of that expense. Additionally, we have been staffing up in Europe. We staffed other areas in our OEM sales, and so we’re building, we think, for the future and make sure that we have the horses out in the field to be able to take advantage of the opportunities that we see in the future.

All of the areas of the business grew except for the inflation devices. This was anticipated, and most of that decline comes from the issues of Kyphon, which is as you’re all aware an OEM customer, and we expect that pressure will continue to decline, even though that overall sector continues to be very important to us.

We will introduce a couple of a new inflation devices this year, and we’ve a couple of other business issues that we’re considering that we think will actually bring that sales grow back into a growth mode probably by the first of the year. I’m not going to discuss a lot of about that, other than to say that the product is very desirable and has other uses as we all know than just in cardiac and peripheral work, and we’ve had several inquiries and are now having dialogue with a number of potential customers which we think will help to enhance that business.

Overall, I think we’re very pleased with the growth of the various areas of the business. Gross margins were 43.4%. That’s up 70 basis points from the previous quarter, and we’re up 150 basis points year to date. You’ll recall that as Kent and I have had these discussions with many of you in the past, we had promised 150 basis points for the year. We’re there, and depending on how our proceeds the balance of the year, we hope that we’ll have an opportunity to exceed that.

Just as a reminder, we’re entering into what we call our slow season. It’s always a little unpredictable, and we don’t go by quarters, but we always caution at this time of the year. I’ll remind you that last year we cautioned on the revenue side, and I think it was our strongest quarter of the year, but nevertheless, the summer because of shutdowns in Europe and so on and so forth is always an area where we get a little cautious, even though we think that the business will still grow in the range of 13% or more for the overall year. Year to date, I think we’re up at around 11%, but we’ll have the balance of the products for the whole year.

Kent, you had a comment you’d like to make.

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