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Merit Medical Systems, Inc. (MMSI)
Q2 2010 Earnings Conference Call
July 28, 2010 5:00 PM ET
Fred Lampropoulos – Chairman and CEO
Rashelle Perry – General Counsel
Kent Stanger – CFO
Martin Stephens – EVP, Marketing and Sales
Jayson Bedford – Raymond James & Associates
Larry Solow – CJS Securities
Shawn Fitz – Stephens Inc.
James Sidoti – Sidoti & Co.
Previous Statements by MMSI
» Merit Medical Systems Inc. Q1 2010 Earnings Call Transcript
» Merit Medical Systems, Inc. Q2 2009 Earnings Call Transcript
» Merit Medical Systems, Inc. Q1 2009 Earnings Call Transcript
I would now like to turn the conference over to Fred Lampropoulos, Chairman and CEO. Please go ahead sir.
Good afternoon, ladies and gentlemen. We are broadcasting from South Jordan, Utah. I want to express our appreciation for your attendance at our second quarter conference call.
We would like to start our meeting by having our disclaimer being read by our in-house Counsel, Rashelle Perry.
In the course of our discussion today, reference maybe 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 maybe 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 and other factors are discussed in our Annual Report on Form 10-K and other reports and filings with the Securities and Exchange Commission, 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.
We are excited to talk to you about our second quarter. We hope we have explained as clearly as we can the data that’s in here but we are going to drill down and I think provide you with some data that will help you – we hope to appreciate what we think was a terrific quarter.
Let me just go through a few of the numbers. As you can all see the revenues, we are $74.9 million, 16%. Of note is that our core growth for the second quarter as compared to the second quarter of 2009 was up 13%. Nevertheless I think we would all agree and I hope you would agree that 16% is an extraordinary quarter in terms of growth. As we look at the earnings for the quarter, we were at $0.20 per share but it’s important that I think point out that that number is net of $697,000 of expenses which were onetime and were related to the proposed acquisition of BioSphere.
Additionally there were some additional charges and expenses that we will talk about that we think enhanced the overall performance for the business. Just as a teaser, as part of that, in the month of June, the company operated at 44.8% gross margins and had an operating profit of 15.4%. Now I will come back in a minute and talk about June because I know we are here to talk about the quarter but we want to talk about what we think is an acceleration in the business going forward and the opportunities. You will note that in terms of gross margins, they were 43.3%, that was a sequential improvement of $110 basis points. I would like to also point out that from the fourth quarter, it was an improvement of 280 basis points and it was up 60 basis points from the third quarter of last year.
So our performance in the second quarter, in terms of gross margins was higher than both of the year ago or the fourth quarter as well as the third quarter. So it shows what we think our accelerating trends in terms of gross margins and I think another really important thing to point out is that the negative variances that were accumulated in the fourth quarter that last year because of the slowdown and carried on into the first quarter have been all resolved, they are gone and there are now positive variances on the books, we will then roll out assuming – we get the positive because we have the four-month, which we will explain or have dialog if you can decided to (inaudible) you attack on a month and drop off a month and the month that we drop off is going to be a positive variance.
So we continue to be very, very busy and in fact we had a scheduled plant shut down during the July 4th holiday and we had to modify that to make sure that we could meet the needs of our customers. So we are very, very active in that area.
If we take a look at the overall sales because I think there is some very interesting trends here as well, in the second quarter catheter sales increased 30%. The standalone devices rose 17%, inflation devices grew at 15% and we will discuss what’s going on there, we did have some contribution there both in terms of gross margin from some accelerated orders, some larger orders than we have seen in the past from Kyphon (ph). Nevertheless the core business (inaudible) is still growing at some of the highest levels that we have seen in a number of years and we expect that that’s going to continue on because of some difficulties that our competitors are having meeting the needs of their customers.
If we go to the SG&A expense, I think that’s another one because I know there is a lot of concern about that, for the second quarter it was 26.6% and most of that again was because of the cost of the pretax expenses of $1.1 million that were in BioSphere but we are also on the quarter, our SG&A expenses as compared to the previous quarter, I want to go to June, for June we are down for the June month to 23.4%. So the other point that I want to make here is that if we take a look gross margins and if we can continue the sales trends, you will see that we are going to get operating leverage all the way down the line and we think those opportunities are in place assuming that we have the reasonable or at least the market conditions that we have seen going forward.
A couple of other things that I think are important for you to know is that we have received the CE mark on our ASAP thrombus removal catheter and the product has been trialed and it’s being trialed as we speak. I had a phone call today on a very successful use of the product in Germany and the comment that I heard from our product manager, who was there as the physician stating that they thought this product was better than the current market leader.
So we are excited about the prospects, we are still in 510k process and we expect that we will introduce this product in the United States sometime in the first quarter but we expect that we would roll this product out in Europe in the next 30 days or so, and start to generate revenues from this product. It’s a tremendous product with a terrific market opportunity.