Merit Medical Systems (MMSI) 22 Feb 232022 Q4 Earnings call transcript

Welcome to the Fourth Quarter of Fiscal Year 2022 Earnings Conference Call for Merit Medical Systems, Inc. At this time all participants have been placed in a listen-only mode. Please note that this conference call is being recorded and that the recording will be available on the company’s website for replay shortly.

I would now like to turn the call over to Mr. Fred Lampropoulos, Merit Medical Systems' Founder, Chairman and Chief Executive Officer. sir. ahead go Please

Chief welcome Secretary. Year Merit I XXXX call us Legal Safe Parra, on and Brian our Treasurer; Quarter our through would Lloyd am Systems' you of the Chief our Raul by Fiscal Earnings and today provision. Officer everyone you and Medical and Corporate to Officer Fourth joined Financial Brian, Thank Harbor Conference taking Call. mind

Safe contains would I everyone to protection forward-looking laws. statements securities like receive presentation Fred. Thanks, that that remind Harbor federal under this

Although, we reasonable to and believe these are based forward-looking unknown assumptions, upon statements uncertainties. subject they are risks

those realization extraordinary anticipated. these events The could risks as impacting transactions as from our company, well to of currently any or results cause or of actual uncertainties, materially differ

a our date. any our only could the any specifically information XX, to statements. refer important Statements of relied from forward-looking today, today’s February not with represent Please law. Forward-Looking other and representing in obligation upon required update as statements, addition, Cautionary any of We statements recent XXXX refer SEC of Regarding except that results these as should our as be Statement for filings the for entitled Please factors most such presentation to cause statements. such regarding by disclaim actual applicable section to as views also forward-looking views In discussion differ to

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

of period-over-period financial can certain measures. measures performance presentation discussed financial comparable directly section for comparisons our call. This SEC reconciliation to regarding on the non-GAAP underlying refer presentation and and Measures the certain useful of for regarding such contains Form furnished However, of information A also operations. financial the and included non-GAAP business entitled measures operations to information release important to Financial US non-GAAP provide non-GAAP X-K. financial GAAP the Please investors our of we Non-GAAP today’s under useful measures with is press presentation in believe measures ongoing most trends be this

measures not page non-GAAP financial financial accordance may website. Please consider these release our are titled reporting Both that measures and comparable calculations Investors in press presentation of the other similarly not note with should companies. with as available Readers substitute be addition GAAP. in measures for, of a prepared on today’s our to,

will the I now back to turn Fred. call

balance Well, revenue overview thank And I our brief you, cover will results And what strong opening during agenda remarks. Brian. we remarks, of the a prepared our for fourth with an Raul with start me will let my quarter. start of will after financial condition provide our in-depth review and and a of quarterly our well XXXX financial more introduced as XX, we as as a you guidance results summary in of December today's formal of for release press with the financial XXXX. that sheet

we call the that, for your open questions. will Following

beginning Now our fourth quarter, revenue year-over-year. fourth of $XXX GAAP in total X% up the reported of quarter revenue performance, we with million a review

sales. international driven growth and in Our by total the X% in X% revenue US was growth growth GAAP

basis Our compared rates X% in headwind increased the constant total organic an our year to to the on in prior revenue changes exchange related currency excluding revenue period. year-over-year to growth quarter fourth GAAP the

in results growth revenue discussed We delivered three we end quarter that constant our currency at high of call. our expectations the earnings

of for the in in X% the constant range to fourth expectations revenue our X% shared currency quarter. year-over-year we Specifically, growth

line that growth driven team the than our call. United international results currency with of more quarter in Quarter And were sales were expectations trend, from execution the anticipated favorable in EMEA outlined primarily third a four in was by region. particularly in and constant solid a States result revenue the we our demand

fourth the more growth rates detailed a results all our Note, each in me the stated, performance currency of otherwise with our and basis. are sales let provide on categories. reportable with Now, unless primary of revenue product quarter, approximated you beginning review in year-over-year our constant

included related item our release available press website. our from the results non-GAAP have GAAP presentation and to reported in reconciliations We on our

driven QX fourth our Now total X% segment. in X% by exceeded of a partially range and growth intervention Endoscopy of our Cardiovascular growth products came segment quarter our high-end four. offset Sales growth Cardiovascular decline revenue expectations growth was increased by our in our largest Endoscopy the quarter segment of X%, again expectations the this growth peripheral quarter. in driver of within total the cardiovascular representing in in

increased total sales PI four. product XX% PI XX% products our low and and the sales biopsy localization and increased in growth geography of and of and year-over-year roughly roughly and quarter the XX% access double-digits radar respectively, represented products together of total and Within represented XX% growth category, together in embolics each PI our of our our

Within product of XX% invention of increased EP segment contributors products. fourth quarter business, largest of in growth and products, XX% in three year-over-year. the growth interventional largest sales Cardiac contributor our cardiovascular intervention CRM growth sales cardiac products, X% sales sales representing were the in in growth XX% second to the total angiography the QX in

strong strong was products inquired our PhD products for Snap products quarter sheath valve and of product growth driven and growth by our in growth CRM was growth guidewires. by by driven Angiography our HeartSpan driven our demand impressive hemostatic demand was diagnostic results Intervention EP another for sheath.

products in continued categories OEM including we XX% products. improving the expectations larger of our coatings, in multiple QX, merit customers increased attribute kits angiography our of Sales to which exceeding from and demand high-end

Endoscopy in and with assumptions supporting Finally, of sales growth range both our sales the line decreased expectations. our which QX revenue of segment X% largely were of products our CPS X% increased in

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

Sales of in our constant Our quarter. fourth the total quarter sales of increased our midpoint came customers represented company currency X% expectations growth year-over-year. in US at the growth and to XX% this US

macro challenging XX% regions environment increased in above our the growth the certain in quarter or strong sales high-end of posted fourth high-end the is All at performance the major QX. global in of International international our specifically. expectations in year-over-year, markets three of which light

increased world XX% respectively the regions Sales of in X% EMEA, XX%, APAC and the and rest year-over-year.

all three QX, driven demand Kingdom in by upside the Europe. Germany, expectations versus region the most and in from regions Eastern primarily strong United While we the France, were EMEA saw

also by purchasing. offsetting in was growth PI high growth driven seeing product, where to growth for to in growth which related APAC volume-based continued Low the in in China, CI primarily APAC and than headwinds demand QX. strong single-digit we is are more double-digit region Japan contributed strong the

in growth in and by growth we declines prior And Brazil offset in Mexico lastly in by Latin and region, world year-over-year, high was of compared XX% also Canada the partially mid-teens America growth year rest X% our ahead delivered which the period. expectations of single-digit to driven

growth the by strong despite trends our another and part encouraged in execution we're international of marked by quarter markets. particularly team's environment summary, In operating a solid challenging

call comment other to quarter. want to I a Now over items before Raul, noteworthy the in turning on the few

cash in First, we delivered another quarter and of flow profitability expansion generation improvement, QX. free margin

operating gross and non-GAAP net QX. profit non-GAAP XX% X% profit, year-over-year, and Our X%, increased income non-GAAP in respectively

points quarter. XXXX. a of we've flow that results quarter performance Our generated the non-GAAP financial year-over-year operating year believe continuation basis the We throughout delivered represent margin $XX.X increased million to fourth in XX.X% our in fiscal free the cash we of and strong XX

are Importantly, and growth enhancing this Merit's our we results we profitability financial believe long-term executing evidence towards of year goal our profile. represent clear that

$XX more a constant nearly generated we our than cash revenue profile of XX% fiscal margin, free flow year-over-year non-GAAP Specifically delivered in XXXX, X% we growth, year basis point currency with profitability strong million. improvement in a improvements operating XX and

We than three-year at least remain committed cumulative to XXXX we at the that for of currency margins XX% outlined at which ending flow the generated $XXX period cash December XX, increase and for financial constant Foundations CAGR way by of free reminder non-GAAP the the in least of a to program X%, revenue million. targets a Growth organic for more operating called

highlight execution FDA new Second, XXXX. a of breakthrough our proud the releases and clearance XXXX, specifically XXX team has via and FDA. where products. from the in and clearance development, fiscal strong commercialization one including a of continued the Throughout our of new product commercialization team's highlighted another eight I the progress in designation of new been to of to well products towards commitment strategic launches, I'm initiatives areas press our executing we development, clearance wanted key year the area

body Finally, the evidence we to also made our progress product. initiative of in recent expand clinical towards our months strategic for

circuits our continues the of to study WAVE WRAPSODY outflow investigational Stent the occlusion Specifically, for an Graft, clinical study, Endovascular progress. studied device of dialysis within or stenosis the treatment being

We the the as clinical sites actively the enrollment full of and have end quarter three quarter begin of enrollment first were cohort XX in enrolling targeting well. pleased to fourth we in are of We by XXXX. Brazil patients

patients already -- in selected XX the blockage design blood with these excuse The use with stenosis clinical Endoprosthesis WRAPSODY world. a benefits vessels me a or association in is of WRAP that patients half for hemodialysis or have around sites enrolling Roughly required sites in of receiving of underway evaluate to XX study narrowing experience dialysis. associated Cell-Impermeable the countries the study been

is a and guidance system registry through the diagnosing and the in this breast The to workflow centers towards months in study coming surgical utility the StreamLock demonstrate progressing Canadian treating SCOUT to intended working of for selection study phase site and Canadian start-up efficiency are we improve cancer.

The embolization represents that gelatin in patients to populations embolic designed diverse is and agents control step used four in to study XXX across of expanding portfolio our relate have or our enrolling key patient clinical to patients study sites multiple a bleeding critical France we and hemorrhage. Australia Finally centers worldwide. provide towards observational of EmboCube enroll prospective

which the will now Raul through With we our guidance, take that, fourth detailed financial to of a XXXX quarter and introduced release. turn Raul? results let financial in review our you me call press who today's over

Thank Fred. you

the the Given with of I our will of discussion results, of Fred's begin performance across a rest our revenue detailed financial review P&L.

of avoidance commentary the company's year fiscal non-GAAP the my will the doubt, of on during results quarter XXXX. otherwise focus noted fourth For unless

our available have and on our website. reported GAAP items We press to presentation from included non-GAAP related results release in the reconciliations our

Gross X% quarter. profit the increased fourth approximately year-over-year in

XX% the variances. XX.X% The to compared fourth year basis was margins XX gross Our due margin primarily unfavorable year-over-year decrease bases purchase for prior point was period. specifically gross the price manufacturing in in to quarter

the high expected deliver raw be challenging outlined were for the environment, of gross by headwinds to flat were Despite to gross impacted margin results continued pleased a gross the on points logistics, basis increase quarter-over-quarter operating XXX call, our which QX freight, the we up and labor in in on to materials. are fourth called we expectations margins end margins seeing quarter at inflationary As our basis. we

compared fourth a X% by expenses driven SG&A to increased by The the increase year-over-year compared offset was operating quarter operating period. of expense a year increase quarter in XXXX. partially the prior Fourth expenses XX% to decrease in R&D X% in expense

Our future with operating continued was expectations QX and support offset expense line growth in in partially reflects prudent investments initiatives. by expense continued largely our performance management, to

year-over-year the $XX.X increased in million, income to $X fourth operating Total or quarter million. X%

Our operating XX by basis driven point XXX was point compared margin decrease point for margin XX.X% in operating expense our the year non-GAAP prior non-GAAP year QX the in period. was prior margin. our gross compared period, increase The operating the in in offset XX margin partially basis basis the reduction to to XX.X% by

interest last higher realized quarter increased Fourth in the losses currency period rates expense compared to million year-over-year. prior primarily from year $X.X partially decreased foreign interest other net related year. to to was to unrealized expense expense expense net million The other compared effective change offset was by due and $X.X

compared or quarter in $XX.X $X.XX million the $XX per prior Fourth income share $X.XX to or period. share per net year was million

both diluted we and net low in where with quarter pleased the non-GAAP fourth growth our high profitability earnings of are in double-digit year-over-year our delivered per expectations. exceeding share income We performance the end

X% of was to a financial approximately XXst period, of fiscal ended or Gross the constant sales increased in compared representing XX.X% million year to X.X% the point million XX growth basis. a prior billion, for revenue sales year-over-year. basis $XXX profit Turning to currency year-over-year XXXX. year-over-year months up results Total decrease a $X.XX $XX.X XX of XX.X% for review on brief our year December

to in XXXX, have Note, freight headwinds we we early we raw of that our materials, are gross reasons work points The fiscal Foundations these to to estimate approximately the our offset of incremental the XXX benefits hard for headwinds the result pressures dedication fiscal year seeing logistics. to a primary XXXX. Growth margin compared managed majority margins and to and in are as inflationary our year program basis related we have experienced of to gross inflationary team's

prior year compared sales to of XX% in sales of Operating XX a year-over-year. profit increased point period, year-over-year million, XX% increase to representing $XXX.X the XX% basis

FFG profit operating strong driving in which are $X.XX year-over-year management share million, per million, notably or growth the We to expense or increased year in income fiscal per than XX% prior our $X.XX Net resulted revenue $XXX.X prudent growing to compared XXXX. faster leverage $XXX.X year operating program, in in through period. share,

balance review and sheet financial condition. Turning to of our a

As and available $XX.X cash of borrowing approximately million. $XXX capacity debt obligations cash had approximately December XX, equivalents XXXX, million, we of total $XXX million and of of

This hand on $XX.X of total and December capacity compares of cash million, obligations $XXX of as XX, debt approximately borrowing million million to available XXXX. $XXX approximately of

as XX an on times December of X.X Our net adjusted was leverage basis. ratio

quarter. flow combined performance the strategic of our our with fourth working to the flow respect in free million of resulted cash With $XX.X XXXX, the solid profitability quarter, in investments cash quarter generation capital in generation in fourth strong

to cash balances we build our the customer recent stock high invest in prior discussed strategy proactively As expected, of to use increased working period. year inventory and our capital have service requisite In our ensure compared the for levels. quarters, safety to

our We of build our challenges of demand disruptions generated continued year-over-year $XX customer the the balances higher $XX December proactive part in the to to free million, meet cash of modestly amidst as This supply cash below XX inventory target ongoing we and ensure safety to months investment during and XX, taxes strategy chain ended the stock flow XXXX. was due our can environment. global million requisite in

XXXX our today's introduced which financial of review we in a to release. year press Turning fiscal guidance,

ended months expect X% of we approximately X% net XXXX, XX For GAAP year-over-year. XX, growth December revenue the to

revenue XX growth headwind year. to net to a a to GAAP currency million range this basis foreign GAAP from changes our in of rate assumes XXX This rates approximately of million, headwind the forecasted $XX points exchange representing approximately $XX

assumes cardiovascular growth approximately net The now our our to growth X% segment. approximately segment of X% in net endoscopy guidance and range GAAP XX% XX% net revenue in revenue of revenue to

our expectation OUS X% of markets. in XXXX approximately in the X% Note, approximately sales year-over-year growth midpoint assumes year-over-year and growth constant the US currency growth

non-GAAP range With guidance $XXX share diluted million for approximately million $XXX net the $X.XX approximately $XXX million respect diluted or or million $X.XX $X.XX $XXX and income net expect per $X.XX to profitability in to to range share. income to the GAAP of of XXXX, to we per in

XX% rate operating range to approximately assumes XX.X% margins non-GAAP million. our in range XX year XXXX non-GAAP margins approximately non-GAAP purposes, other of fiscal approximately and the to financial in and XX% million and of modeling approximately For guidance approximately gross diluted XX.X%; the of shares XX%; tax $X expense of GAAP non-GAAP of $X.X million respectively; outstanding

of CapEx $XXX expect cash to the million free range million in of $XX We flow approximately $XX and million.

growth of transparency the given global to for in environment, our would macro Lastly, continued additional expectations we provide uncertainty like first related to quarter the and the profitability XXXX.

to range year-over-year Specifically, constant X% X% approximately basis our GAAP approximately currency up to on in revenue the basis. increase to we expect total a X% year-over-year and X% a of on

assumes Note, in X% sales our US X% constant expectations of first OUS growth in growth growth approximately and approximately year-over-year the markets. the year-over-year midpoint currency quarter

see to expect profitability quarter, respect margins With of points XXX in gross expectations first our to we non-GAAP the the for range basis increase XX to year-over-year.

expect basis margin also see points range to in of year-over-year. We down to XX XX points operating up the basis non-GAAP

year-over-year drive to in EPS a X% non-GAAP our digits high down of with range range. low expectations, high to are net the end the both the income non-GAAP and year-over-year up margin the year-over-year combined interest assumptions on on end expected higher of expense These change single in

back to With that, call I'll Fred. turn the

focus and and capped In importantly, in great strategic results high of a end of performance profitability of team's quarter execution, at believe Raul. our year direct expectations growth in strong came off XXXX. relentless a continued Thanks, initiatives. our is the fourth this We our closing, our result on and

XXXX We to made the would possible. fiscal members all performance team the that thank year like around of in world, our

for our years XXXX. of three-year continued progress, reflects we team's ending during execution, the operating for We despite Foundation have the Our to first intend confidence our build XXXX outlined program, ability two to Growth that period to significant financial the financial remain world. upon XX, and committed around in made we guidance, we environment our targets the strong the the deliver December

open prepared now would up remarks. the -- line That wraps our turn We up to for like questions.

you, Thank from And [Operator Oppenheimer. come Steve Instruction] sir. our question first Lichtman will with

may You proceed.

cash. Thank you. I area one guess of the my I'll and follow-up around ask

conversion just that your beyond and in cash up CapEx. update see stepping dynamics like Fred, little like that wondering, sheet position XXXX. bit some follow-up just expansion, in looks on some could also views I'm step-up then as if nice confidence a the the aggressive of a us talk you're flow bit just guys. more getting I it we in given on parts position your And looks you Raul, So, overall. about guess, balance of I growth? front free you're there cash about was that, you the XXXX? And implying just can a Could talk margin M&A. there. little moving environment to of wondering, that sort you in on It a Thanks,

step Yes, up All the Yes. think capital Thanks, piece. Steve. is really I right. look working the around

happening, supply were also of as we in we the we seeing to the throughout bigger as issues the the beginning the back you And inventory we we at an year, brought normal saw investment meet commitment to the levels. inventory and logistics chain. a of year, made remember specifically, inventory, kind make you investment If to saw progress a demand then as in that also

to into which to expecting have we're So also investment. that. make going obviously, more made an we feeds profitable, will which this big to help. investment we as year, And be not wanted sure as that We're that

increase of the the things are free flow. driving those kind the So, cash in two

let the M&A. are been hurry. that margins in we're and in of to go our when complementary need I emphasize it's our growth, Steve, sales that it businesses, any we to where find And think, gross can we And really And patience to move I we've the it's sheet, strong. time, foundations for very heard of me terms growth. mean, the spending but of thing. you finding you meet foundations we've really point, be the And commitment has to And for looking. but kind been that are of balance our me matter see a we'll right it, not right

by I values little we've don't are a same mean rush, the we're time high. think the personally, I at ever been still way but There's best in the in. no position

time. we're So spending we're looking,

better and think I with Chris that in of, we're Joanne great and on working with organized all internal terms Alkire XD Durham.

than organized we doing at anything... meet, -- and our views, and look but Raul we'll we we're thing right discuss, have the I them more patients important is doing So

There's a deals of lot out there.

a are are lot because of creates there it them that early a many And deals and problematic conflicts. of -- somewhat

but So that, but is larger you opportunities, have -- just the get theme to can and to divestitures it's from There'll sure I be right I'm make I'm be be the on of that in there deals deal. and what will trying think say companies. on, going There'll opportunities. we

your answer best So, Thank to that's you. my way question.

helpful Thank Thanks color. guys. you. That's

you. Thanks

question next Raymond from Our Bedford James. Jayson comes with

You may proceed.

success Good year. afternoon, on Hi. congrats this and the

Thanks, Thanks. Jayson.

it keep just I'll the of to two. welcome. kind You’re

that China, of was strong what a was, you offset by also measures. growth pretty the high-single-digit talked But remember VBP about mentioned growth in I You comp.

VBP and So through that ongoing facing that and in fighting I your correctly you're I confirm just to heard business? wanted measures that

guidance. continue to color we way little purchasing a hopefully of early it it of The specifically. can it's we then we volume-based do to becomes through get of -- give kind now, the low here out looking get don't it. volume-based kind kind just end it XXXX that can of we're of impact see bulk at us. it the is, of of will through or have We past really -- Yes. call and Jayson, in kind bit as that purchasing and our But we

currency material driver the growth that We a APAC X% that expecting X% is region. of China to say we're big the in will in constant

And our so some force execution been be we But the there by to of in China. continue just offset by delivery sales high and we've that to and leadership. able growth

going or can products we of continue And an advantage that not but just produce if and pay forward. to continue do as time that add we and us register locally that that we takes part to give think we that that I strategy think will may exist our

other it Okay. The it And did hate waste I other on million notable. but seems my question you like step-up $X to a in like from kind big I feel XXXX. expense, pretty of other expense in what

walk step just us you up? can the through why So

up exchange A there. interest with Yes. interest of kind that some levels. of expecting through obviously expense not that big exchange to flow of year foreign -- rates rates. normalized is We're did a portion also the gains that as rate, benefit higher There's we this pick reset

those So, that line hit that things two the really item. are primary

keep go in I'll queue. to Okay. it the two and back

Okay. you. Hey Jason, thank

you, Thank Jason.

you. Thank

Matson Mike question next & Needham comes Company. from Our with

You proceed. may

guess Yes. I start -- for Rhapsody. the taking just my with question. Thanks on I'll

you have trials WAVE going on two the WRAP. and So

from FDA you potentially that? latest So is data what approval? WAVE could about the And And FDA the maybe see think expectation pivotal US for the timing think of the around just what's talk approval? -- we you when can I trial the

Yes.

the WAVE to continues study, I'm sorry, progress. study So the WAVE

As you a opportunity Mike, one of Any the will those cohorts. recall PMA. three file and trigger there's prepare to

to but the which going into way one have of specific get leading not one segment. have that's We I'm we kind cohort there.

that we'll we're think two completed. least possibly the one cohort, And XXXX a that will at if third it's -- using the of in that year have be I I recall end of at third quarter, we quarter, end of -- this the the is think

the and we're lot issues. coming sites So of contrast progress. we're making are But out think enrolled. just a mean I it I has accelerated COVID had there, we've all of getting from and

on PMA. fine. filed And data follow-up, think I correct. a Raul, a recall, And if I one-year think it's the think going just that's to it's I you then just I So be

And we the there that but to getting for to plum. we're product So of stick the we the of fourth pleased the began know, course, and in Brazil as we is going meantime, we're enrollment all where And that's you as the Mike. quarter. you'll we're in diligently big we And recall road. continue Europe are kind as in right US recall, just also sell down to will and locations. Brazil the all other in working get But now

that that's today. So update we're to going provide the

No, fine. that's

I So, just want to make sure that. I'm understanding

that completed year saying you would the this the third FDA you're you be you'd then quarter a So, enrollment like And be after the And year. in have period. to of able the follow-up submit have to PMA? -- then one that the

my the the be one -- finished those to not Interestingly, all that of centrals. cohort, study that have will we'll least but through in entire quarter-- not of competitive at at them the going in we'll understanding. least because quarter, and third have There's go reasons, That's other third one I'm for

mean finished say you not the the you enrollment when But just follow--

That's correct. That's correct.

And in All terms apologize there? I other Okay. inflation for went then kind you my of through you the guidance impact this assumed gross question just have around be currency guess XXXX I what if -- of would right. margin but

to that let going one you I'm Raul, Hey up. pick

Yes.

had basis up as as pricing points points. than a year. headwinds we low and XXX more the raw the basis it to expect about gross margin logistics. obviously we XXX many freight little robust in was materials XXXX at We're guidance So, last looking don't it's on of end is related the to this Obviously, the of

we And so, we some forward think can we headway as move make there.

also We're initiatives and costs. our pricing really focused on there FFG our fixed on leveraging

margin make some investments around we and can OpEx. initiatives gross lot really that a So, of so leveraging in operations line

We to also shipping will tailwinds get we're related FX. freight air. as And we to then and versus related ocean logistics have some to back the tailwinds expecting some

got Thank Okay, you. it.

Thanks Great. Mike.

you. Thank

with next & Company. Jim Our question Sidoti Sidoti from comes

You may proceed.

afternoon Good thanks the taking question. and for

Thanks Jimmy.

up you investments soon of that of the look gone costs, think do -- regulatory start at European last couple basis, if how the turn have over clinical R&D GAAP some a least you sales? Is expense those to fairly much substantially. And into how that trials? years So, primarily on

new about of there. the MDR the funny that's mean registering thing and I Well, expenses of Jim, lot the right? right being It's you're those products standard. absolutely reregistering But getting that are that's sold. them a currently up the you're products increase to

normalized those we just those to to I of down with and sold expect over to that that next here unfortunate would Obviously, are right years going There we'll the have upkeep really just now MDR the levels it's trickle But expense that absorb. parts. being say. forward. one is products sales couple comes to additional maintain It's of

think see to like down? shipping see as eight another the far as now, and to down come will freight costs to inflationary it costs things are then And you you come do start starting or that those you be six or months before

gradually it better get the will think through year. I

you. Thank Great.

Thanks Yes. Jimmy.

Thank you.

Lawrence Fargo. from Wells comes question next with Our Biegelsen

proceed. You may

Raul, question. for are Hey taking the Fred, hanks hey how you? T

Good.

XXXX your and please? Fred about in price what could a you talk expectations for XXXX bit little are

conversations, strategic do of FFG. by you Yes, that. our It's as experienced that as part well, listen I of hired to will one previous person from is -- price recall we our saying initiatives answer that an

have Some of this as accounts be will layered in national come we due.

So, will we up picked them but some be expiring. of some

doing look advantage And price coming extremely be terms of in terms of the think taking that we or out what the in they for the dramatically we're opportunities. whether at changing the business vigilant been of new products how and US we've way in I we

the were way know all you And I by we not as mean costs ourselves. guys immune inflationary to

program that pass-ons that doing continues. been we've So and

little a It just took beginning. a that So time was It started. one-year program. from it's not the something to started get

you had to add think very Raul? I we year. some want of that Do a positive

really the I pricing maturing or just than we to our foundations growth before. company at going level just Yeah. were is was to really initiative different about a say for

we better have tools. So

better what we're visibility, have We better transparency around doing.

As Fred mentioned, here we U.S. multiyear the approach through this contracts and both of a get globally. as is in kind

a lot work. there's So of

the to in we done pretty what were to we more year to be. year. there's think to be to with accomplish first get initiative we last work want happy I where able of And its were

a is There Yeah. lot of opportunity.

mean... I

A opportunities still lot are of here.

much? net you willing say you how to the positive pricing guys? Is for Are

We're it quantify Larry. not going to But we...

is real? But it positive …

positive, It's yes.

XXXX? Okay. XXXX. there? was Thank for the two And extremely acceleration And guidance the strong sustainability talk you the in businesses the about questions. Fred, Could taking in endoscopy what on my in drives of you. OEM Thanks

OEM, in away attribute business. So from starting it kits was sure a the we People everybody going demand have course includes to. It which they are to time. from we the improving the listen We coatings that high-end customers on products. geography. enough cutting of the and I'll know larger It's all merit just it, exceeded dynamic to make call

We I are -- out didn't we called we? think it next this year,

Yes. OEM for we're with I opportunity their is Its lot in seeing what think the XXXX, struggle of business supply as chain. logistics a high-single and Larry, digits especially people

able deliver think because vertical I very to becoming of our to be and we're integration. we've been fortunate customers our

again for to I of high-single we to opportunities that digits and continue there's, explore come I would for growth. mean, we But I so And a were be lot their are us customers what XXXX. temporary we're new expecting that us think to is supplier. say,

add it. So I to just

digit to go think has and high-single we I personally sustainability. that it at we've where of is the your that that sustainability to that at question historically think, I think been

year year from And is a what I if improving simple. will and That's three year. problem still full There's, for but chain we call dramatically endoscopy. we Let issues know you to think four. the the look it with at qualified was improve. it had quite -- out vendor. out me it's up you on go some supply of -- really mean, to last this We continue I the the

XX%... to XX%

the the versus Yeah. that about I that XX% script in significant that's mean, talks XX% to down.

just a back of on forward. and bring it's contributor be big lot it working that So great got a going off the It's think end work solve that of challenge. and to onshore. Larry to We've it's going a I business.

you. right. All Thank

bet. You

you. Thank

Petusky from question next Our comes Barrington Research. Michael with

proceed. may You

Hey. Good you. Thank evening.

curious, be just second else? or the of you think I it little XXXX? free probably a bit it's over cadence flow half I consistent QX of sort jump don't do if touched but any half will anything more going I'm assume XXXX by The be you've around, to Raul, this. low, commentary on sort you So will or of was in sort relatively think it's in cash whether have all the board. first

Yeah. did but It a that the paced given calling by I job the be definitely for FFG very initiatives, I will think don't thank out Mike, year you of last cadence. because good

payments. just the will do reminder, as end. it's We have out that of tax a bonus go be Just QX payments kind low -- probably

additional And we expense. also have

that specifically years. we as through that on haven't sales up we year So the ramp had flows this meetings in two

So there be will a it. to cadence

QX be will cadence think but low the lineup point. our it for earnings I will typically with

tell I attention Well, target. we'll I a is if everybody's I committed calling million just Mike is we're mean full could And you and compensation. add to And got a also to out year And the that's it's we the what have $XXX do. And what tied big deal. impressive. that's it's that to finish it's again, to. focus

the and attention no So sure of people there's saying to a that paying trying make incentives discipline and of prioritize. are lot to

So job. the I at think there's we've a good day year. of But one more the done end

for a flow. reminder of million just would everybody And FFG in listening, free as deliver Yes. we minimum a $XXX said cash just

And so focused... we're what that's

Yes.

Over the three-year period

that mean listened ago years things were is. three improve. it whatever say calling did X.XX to like it or – I X.X I ratio. I leverage But And these said. you That people and out to we have continues are that just what to two

of you listened So we guys the because Mike to speaking it. one were that we're to you

a you. sake… Thank with lot heaven thank you voice for of So

credit I do take whatsoever. Thanks. about No you. creditors I'll thank But work. don't know that.

ask I sort played did sort was just that's of terms like sort practice. mean of picked have the guys have yes, to during were it want gone thought tried et cetera. sort years out I that you just been ROIs, and to. in few back feel feel and right projects, you've your worked like hey some maybe things curious eliminated there you in that I'm the of how we like I what in streamline highest last projects you – Fred, some initially do guess misses feel or of I potential and looking also the really focus on you So to now. of right at R&D And

Well them ideas, out let me plenty just availability there's there. the say that in of of terms of

had back they're team think sure up have I capital going. think those has been lot I out with of a down. we that was we have afford happened important. Mike, question and previous is lot it things and the recall made very down what the has prioritizing talked did can And may so a in and them about we a too that years It going we to slowed couple make sitting and of – and things budgeted spread for to many that fact, ago, you'll them afford pay

like I'd think has to more I be money always would money R&D. That to for earned. like have So to

our give everybody a has it's disciplined To more it's will more us much to budgeted And their got Joe think and priorities about things Officer, things Again that have think competitive the Wright, be that franchise, I've all and page. question not our But same to and fit the focused. I Commercial advantage. much the your I me we Jim into have talk nice our Alkire Matola the just because meet to you it's I who's We have there Chief nodding the for. that we head. think force. got that I've sit need, on it's we're don't buy-in. the And I sales and things go JoAnne

Thanks. Okay. Very XXXX. Well congratulations great good. on a

you, sir. Thank Great.

you. Thank

comes Our Jason from with next question Piper Bednar Sandler.

You may proceed.

results. other guys. Good the congratulate the for on questions Hey, Thanks and taking afternoon.

happened you be calls. maybe we're have sounds on covered follow-up does than as questions, other I'd faster you're versus have policy about we expecting side the advance any that confirm in if accelerate procedure grow question XXXX in that But year then year? in now contributions prior whether on to these And to what response curious this a Covid But here could China of volumes last Larry's that. presumably of way. a apologies point in talk saw XXXX It XXXX? related if that could maybe and kind you between zero been of some First price maybe the greater

let China and question. one Go the I'll to I'm other pick I'll the Okay. back come you – ahead. to going

China Yes. growth. growth. it perspective It's I a specific But contributor out mean our I a is the we're APAC to one contributors. think not of country largest from going to call the

Just APAC growth and region. about know excited is to currency that it is a organic material X% we're in to driver X% the contributing that constant what

the you that got I restate now him to Jason, question listen to And

Pricing?

we Hey, it Pricing. out. is spell of our and initiative It part don't is a key it compensation.

that answers the question. think I

Yes, very well.

It's attention. FFG of our our got it's a and attention it's lot got and

So it I'll way. that answer

it clarify to I to reason as it's good Maybe Yes. was not XXXX as think any mean in

question I asking Jason, Jason, I again. very answered Jason, you much the think thank for but

right. All Okay.

Good good - he's really at this.

to initiative freight, a you follow couple transition this think the where on structure of transition that some I'll out XQ, normalized Maybe to at margin as dart XX% normal XQ, it's – if year? this of up discuss mean, can maybe XX% does ocean you back see Just happen figure air reasonable more can year? on error with getting trying with then Mexico. to we then, structure margin that a at you're to to efforts down and your XQ? back benefits you'd should where do you And logistics a throw anticipate from I ocean side.

to an Jason. think it the we there. much. too for foundations I are of just we're part year got an how our focus of going for initiative, of our our the But as this it's initiative, is on and I – share cadence to specifics confuses just it going on initiative it. it expansion margin gross growth things and is just So, get not its

it's I stuff to five it say we moved just last have I there's we've behind the spent years plan a plan. way would mean, mean, one-year – As initiative, that the been things not moving I far at Mexico, and continue works. of that's ahead as Mexico. right? that, plan

down make and business analyze our continue move there We so stuff for to we'll continue do to sense, years. over to things the continue that

And a going our focus perfect. conclusion overall particularly but forward. in in this again through comments, There's you're to that going thought great But those and just transfer, been yeah, pointed were parts continue Cohort have as difficult. not very – to early the it's out when it's that on Rob success

there, about particularly there be to the have I had think out board was same from little to But time. time has in to three cases. ago. and smoothed things well. we months But time, board most And down up the that at impressive as there a actually pop it meeting

speaks board the place whenever that's think I some So goes volumes.

Yeah.

end one should try is normalizing Okay. mean, Ocean Air, here. I'll it this more maybe that that year? that complete the clarifying Definitely. a I have follow-up the with to we And structure, by right on think time, of But

is it for margin. Well, an initiative our gross

our margin looking we're out, Ocean. called to points percentage XXX for increase tailwind basis definitely the get we will be as we to it As to XXX towards gross a and year,

Okay. you. Thank

Thanks Jason. good. He's

Instruction] next with [Operator you. comes Thank from Genuity. Canaccord Our Plovanic William question

Hey, Fred. squeezing Raul. for me. Hey, Thanks Great.

organically, you've So growth that question as the into XXXX you've earlier. and of tremendous done think folds beyond original X% do line and that we you a job targeted of that you've growing that on to M&A top kind in But Is this definitely you augment a need X% exceed and been or something you the can growing basis beyond what to help or have? M&A longer-term that. meet maintain

understand we've FFG focused we're isn't Street Yeah. for what and focusing we targets across the we've doing Again, we the what line. that. stubborn been and Listen, little to as a said listen kept what up is next seeing is and over and our have bit commitments but growth the in may we the be the those what – on with race profitability. on would made we – we you XXX% And we do

this course if that you'll I'll you about look terms of years. that numbers And and given for within you work many, the that we what do that done we've Bill, when talk that's at In updated if let you have year. but it's well history, history organic, the look see we've many the of many, you all at

something. you if I better think been back want a to a look just long back that growth And that and time. for at But at quickly So company I rate. growing have look say tuned you that has finely

been growing You line. top said doing we've the great at

over two we've improved and line done bottom look fine. to we've the at extraordinary take But years think last well. three I there is as that that a what and

talking one it So have about other. the without I part can't of just

Yes. that think honest goes not be been and just hard you an... think I margin there's years, the from at call the I have it operating lot into of of the a has mean to but work I years couple impressive. anything, look that to you And I I done mean, employees. that hate over few we've last last if the expansion our

to. five at I -- -- the again take look had seven. that's if I you to a and objectives. Yes mean The growth

flow If to you look and speak take they a cash operating free and top at the the margin bottom.

Yes.

XXXX. a And sure It's solid can lot more too We of have the do I think lose of we've XXXX. but of a want Bill, game to promised. there's got do -- make still I want do we but focus FFG. work beyond just sight to final we've don't what lot work deliver But a plan. know a we on lastly to have in people that to we we we to want case... that, of And got year

operating my margin You margin. outside the took from leverage of which second really does incremental the gross question half where of come is,

years leverage spent do OpEx in Where line? mean on Is you've the it? from? of So, scale improvements the couple just I you optimizing driving if about it see the organization. how standpoint is do a it terms the real think about leverage a really or more R&D, talk incremental we really we OpEx G&A of of in of

ahead the I want back focused just we this but to understand income of been to XXXX it's that to bring aspect just of it discuss wait We're we're going a attention. your I great it, just we question. we XXXX. And were I goal. not delivering -- I always to reasoning could. want FFG. and we And get to great a said every And statement. going That's to on finished go and But that say the when ourselves. I behind and do that it's if to think, the question get leverage question that I can't And is back

Thanks Great. taking questions. my for

for I'd you. Lampropoulos Q&A remarks. over like turn closing any the concludes session. Mr. our to to Thank Fred back now That call

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