MERIT MEDICAL SYSTEMS INC 10-Q

ITEM 1. FINANCIAL STATEMENTS MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, ASSETS 2023 2022 ​ ​ ​ (unaudited) ​ ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 72,084 ​ $ 58,408 Trade receivables — net of allowance for credit losses — 2023 — $ 8,652 and 2022 — $ 8,423 ​ 170,990 ​ 164,677 Other receivables ​ 12,634 ​ 12,992 Inventories ​ 305,943 ​ 265,991 Prepaid expenses and other current assets ​ 24,971 ​ 22,324 Prepaid income taxes ​ 3,920 ​ 3,913 Income tax refund receivables ​ 4,365 ​ 779 Total current assets ​ 594,907 ​ 529,084 ​ ​ ​ ​ ​ ​ ​ Property and equipment: ​ ​ Land and land improvements ​ 26,017 ​ 25,940 Buildings ​ 189,900 ​ 189,148 Manufacturing equipment ​ 306,925 ​ 299,089 Furniture and fixtures ​ 66,046 ​ 61,128 Leasehold improvements ​ 52,604 ​ 49,673 Construction-in-progress ​ 62,374 ​ 61,269 Total property and equipment ​ 703,866 ​ 686,247 Less accumulated depreciation ​ ( 319,504 ) ​ ( 303,271 ) Property and equipment — net ​ 384,362 ​ ​ 382,976 ​ ​ ​ ​ ​ ​ ​ Other assets: ​ ​ Intangible assets: ​ ​ Developed technology — net of accumulated amortization — 2023 — $ 296,131 and 2022 — $ 274,570 ​ 309,228 ​ 237,522 Other — net of accumulated amortization — 2023 — $ 74,418 and 2022 — $ 69,780 ​ 45,884 ​ 38,350 Goodwill ​ 381,767 ​ 359,821 Deferred income tax assets ​ 6,492 ​ 6,599 Right-of-use operating lease assets ​ ​ 62,436 ​ ​ 65,262 Other assets ​ 52,492 ​ 44,352 Total other assets ​ 858,299 ​ 751,906 ​ ​ ​ ​ ​ ​ ​ Total assets ​ $ 1,837,568 ​ $ 1,663,966 ​ ​ ​ See condensed notes to consolidated financial statements. (continued) ​ ​ ​ 3 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, December 31, LIABILITIES AND STOCKHOLDERS’ EQUITY 2023 2022 ​ ​ ​ (unaudited) ​ ​ ​ Current liabilities: ​ ​ ​ Trade payables ​ $ 61,761 ​ $ 68,504 Accrued expenses ​ 110,662 ​ 123,189 Current portion of long-term debt ​ 3,750 ​ 11,250 Short-term operating lease liabilities ​ ​ 11,531 ​ ​ 11,005 Income taxes payable ​ 2,299 ​ 6,697 Total current liabilities ​ 190,003 ​ 220,645 ​ ​ ​ ​ ​ ​ ​ Long-term debt ​ 335,232 ​ 186,759 Deferred income tax liabilities ​ 18,477 ​ 18,462 Long-term income taxes payable ​ 347 ​ 347 Liabilities related to unrecognized tax benefits ​ 1,912 ​ 1,912 Deferred compensation payable ​ 16,418 ​ 15,264 Deferred credits ​ 1,657 ​ 1,708 Long-term operating lease liabilities ​ ​ 56,599 ​ 59,736 Other long-term obligations ​ 13,223 ​ 14,736 Total liabilities ​ 633,868 ​ 519,569 ​ ​ ​ ​ ​ ​ ​ Commitments and contingencies ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders' equity: ​ ​ Preferred stock — 5,000 shares authorized as of June 30, 2023 and December 31, 2022; no shares issued ​ — ​ — Common stock, no par value; 100,000 shares authorized; issued and outstanding as of June 30, 2023 - 57,634 and December 31, 2022 - 57,306 ​ 691,523 ​ 675,174 Retained earnings ​ 521,721 ​ 480,773 Accumulated other comprehensive loss ​ ( 9,544 ) ​ ( 11,550 ) Total stockholders’ equity ​ 1,203,700 ​ 1,144,397 ​ ​ ​ ​ ​ ​ ​ Total liabilities and stockholders’ equity ​ $ 1,837,568 ​ $ 1,663,966 ​ ​ ​ See condensed notes to consolidated financial statements. (concluded) ​ ​ ​ 4 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (In thousands, except per share amounts - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Six Months Ended ​ ​ ​ June 30, ​ June 30, ​ ​ 2023 2022 2023 2022 ​ Net sales ​ $ 320,056 ​ $ 294,976 ​ $ 617,621 ​ $ 570,391 ​ Cost of sales ​ 167,274 ​ 159,909 ​ 326,477 ​ 314,417 ​ Gross profit ​ 152,782 ​ 135,067 ​ 291,144 ​ 255,974 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating expenses: ​ ​ ​ ​ ​ Selling, general and administrative ​ 100,927 ​ 85,487 ​ 191,071 ​ 169,502 ​ Research and development ​ 20,129 ​ 18,466 ​ 41,443 ​ 35,853 ​ Impairment charges ​ 270 ​ — ​ 270 ​ 1,672 ​ Contingent consideration expense ​ 1,094 ​ 1,187 ​ 1,615 ​ 3,787 ​ Acquired in-process research and development ​ 1,550 ​ 6,671 ​ 1,550 ​ 6,671 ​ Total operating expenses ​ 123,970 ​ 111,811 ​ 235,949 ​ 217,485 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ 28,812 ​ 23,256 ​ 55,195 ​ 38,489 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other income (expense): ​ ​ ​ ​ ​ Interest income ​ 221 ​ 96 ​ 352 ​ 201 ​ Interest expense ​ ( 3,682 ) ​ ( 1,348 ) ​ ( 5,693 ) ​ ( 2,350 ) ​ Other income (expense) — net ​ ( 451 ) ​ ( 1,303 ) ​ 546 ​ ( 1,468 ) ​ Total other expense — net ​ ( 3,912 ) ​ ( 2,555 ) ​ ( 4,795 ) ​ ( 3,617 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income before income taxes ​ 24,900 ​ 20,701 ​ 50,400 ​ 34,872 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income tax expense ​ 4,655 ​ 5,403 ​ 9,452 ​ 9,029 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 20,245 ​ $ 15,298 ​ $ 40,948 ​ $ 25,843 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Earnings per common share ​ ​ ​ ​ ​ Basic ​ $ 0.35 ​ $ 0.27 ​ $ 0.71 ​ $ 0.46 ​ Diluted ​ $ 0.35 ​ $ 0.27 ​ $ 0.70 ​ $ 0.45 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares outstanding ​ ​ ​ ​ ​ Basic ​ 57,537 ​ 56,691 ​ 57,445 ​ 56,642 ​ Diluted ​ 58,473 ​ 57,600 ​ 58,329 ​ 57,565 ​ ​ See condensed notes to consolidated financial statements. ​ ​ 5 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Six Months Ended ​ ​ ​ June 30, ​ June 30, ​ ​ 2023 2022 2023 2022 ​ Net income ​ $ 20,245 ​ $ 15,298 ​ $ 40,948 ​ $ 25,843 ​ Other comprehensive income (loss): ​ ​ ​ ​ ​ Cash flow hedges ​ 3,422 ​ 6,425 ​ 1,731 ​ 9,332 ​ Income tax benefit (expense) ​ ( 821 ) ​ ( 1,572 ) ​ ( 415 ) ​ ( 2,284 ) ​ Foreign currency translation adjustment ​ ( 1,201 ) ​ ( 8,979 ) ​ 724 ​ ( 9,772 ) ​ Income tax benefit (expense) ​ ( 15 ) ​ 60 ​ ( 34 ) ​ ( 4 ) ​ Total other comprehensive income (loss) ​ 1,385 ​ ( 4,066 ) ​ 2,006 ​ ( 2,728 ) ​ Total comprehensive income ​ $ 21,630 ​ $ 11,232 ​ $ 42,954 ​ $ 23,115 ​ ​ See condensed notes to consolidated financial statements. ​ ​ 6 Table of Contents MERIT MEDICAL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Retained ​ Accumulated Other ​ ​ ​ ​ Shares Amount Earnings Comprehensive Loss Total ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance — January 1, 2023 57,306 ​ $ 675,174 ​ $ 480,773 ​ $ ( 11,550 ) ​ $ 1,144,397 Net income ​ ​ 20,703 ​ ​ 20,703 Other comprehensive income ​ ​ ​ 621 ​ 621 Stock-based compensation expense ​ 3,498 ​ ​ ​ 3,498 Options exercised 123 ​ 3,726 ​ ​ ​ 3,726 Issuance of common stock under Employee Stock Purchase Plan 4 ​ 302 ​ ​ ​ 302 Shares issued from time-vested restricted stock units ​ 61 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Shares surrendered in exchange for payment of payroll tax liabilities ( 22 ) ​ ( 1,592 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 1,592 ) Balance — March 31, 2023 57,472 ​ ​ 681,108 ​ ​ 501,476 ​ ​ ( 10,929 ) ​ ​ 1,171,655 Net income ​ ​ 20,245 ​ ​ 20,245 Other comprehensive income ​ ​ ​ 1,385 ​ 1,385 Stock-based compensation expense ​ 4,980 ​ ​ ​ 4,980 Options exercised 128 ​ 5,154 ​ ​ ​ 5,154 Issuance of common stock under Employee Stock Purchase Plan 4 ​ 281 ​ ​ ​ 281 Shares issued from time-vested restricted stock units ​ 30 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Balance — June 30, 2023 57,634 ​ $ 691,523 ​ $ 521,721 ​ $ ( 9,544 ) ​ $ 1,203,700 ​ See condensed notes to consolidated financial statements. (continued) ​ ​ 7 Table of Contents ​ ​ MERIT MEDICAL SYSTEMS, INC. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Common Stock ​ Retained ​ Accumulated Other ​ ​ ​ ​ Shares Amount Earnings Comprehensive Loss Total Balance — January 1, 2022 56,570 ​ $ 641,533 ​ $ 406,257 ​ $ ( 7,991 ) ​ $ 1,039,799 Net income ​ ​ 10,545 ​ ​ 10,545 Other comprehensive income ​ ​ ​ ​ ​ ​ 1,338 ​ 1,338 Stock-based compensation expense ​ ​ 4,212 ​ ​ ​ ​ ​ 4,212 Options exercised 52 ​ 1,320 ​ ​ ​ ​ ​ 1,320 Issuance of common stock under Employee Stock Purchase Plan 5 ​ 320 ​ ​ ​ ​ ​ 320 Shares issued from time-vested restricted stock units ​ 44 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Shares surrendered in exchange for payment of payroll tax liabilities ( 16 ) ​ ( 1,015 ) ​ ​ ​ ​ ​ ​ ​ ​ ( 1,015 ) Balance — March 31, 2022 56,655 ​ ​ 646,370 ​ ​ 416,802 ​ ​ ( 6,653 ) ​ ​ 1,056,519 Net income ​ ​ 15,298 ​ ​ 15,298 Other comprehensive loss ​ ​ ​ ( 4,066 ) ​ ( 4,066 ) Stock-based compensation expense ​ 3,952 ​ ​ ​ 3,952 Options exercised 58 ​ 1,303 ​ ​ ​ 1,303 Issuance of common stock under Employee Stock Purchase Plan 6 ​ 301 ​ ​ ​ 301 Shares issued from time-vested restricted stock units ​ 26 ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Balance — June 30, 2022 ​ 56,745 ​ $ 651,926 ​ $ 432,100 ​ $ ( 10,719 ) ​ $ 1,073,307 ​ ​ ​ See condensed notes to consolidated financial statements. (concluded) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 8 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ Net income ​ $ 40,948 ​ $ 25,843 Adjustments to reconcile net income to net cash provided by operating activities: ​ ​ Depreciation and amortization ​ 42,316 ​ 40,902 Loss on disposition of business ​ — ​ 1,254 Loss on sale or abandonment of property and equipment ​ 4,677 ​ 112 Write-off of certain intangible assets and other long-term assets ​ 328 ​ 1,733 Acquired in-process research and development ​ 1,550 ​ 6,671 Amortization of right-of-use operating lease assets ​ ​ 5,935 ​ ​ 5,121 Adjustments related to contingent consideration liabilities ​ ​ 1,615 ​ ​ 1,999 Amortization of deferred credits ​ ( 52 ) ​ ( 54 ) Amortization of long-term debt issuance costs ​ 462 ​ 302 Stock-based compensation expense ​ 9,549 ​ 9,093 Changes in operating assets and liabilities, net of acquisitions and divestitures: ​ ​ ​ ​ Trade receivables ​ ( 5,980 ) ​ ( 9,472 ) Other receivables ​ 287 ​ 6,457 Inventories ​ ( 35,502 ) ​ ( 14,766 ) Prepaid expenses and other current assets ​ 78 ​ ( 2,155 ) Income tax refund receivables ​ ( 3,577 ) ​ ( 4 ) Other assets ​ ( 1,558 ) ​ 1,768 Trade payables ​ ( 7,253 ) ​ 3,713 Accrued expenses ​ ( 10,295 ) ​ ( 20,966 ) Income taxes payable ​ ( 4,896 ) ​ 1,114 Deferred compensation payable ​ 1,154 ​ ( 2,549 ) Operating lease liabilities ​ ​ ( 5,711 ) ​ ​ ( 5,609 ) Other long-term obligations ​ ( 2,244 ) ​ 287 Total adjustments ​ ( 9,117 ) ​ 24,951 Net cash, cash equivalents, and restricted cash provided by operating activities ​ 31,831 ​ 50,794 ​ ​ ​ ​ ​ ​ ​ CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ Capital expenditures for: ​ ​ Property and equipment ​ ( 18,556 ) ​ ( 16,763 ) Intangible assets ​ ( 1,047 ) ​ ( 912 ) Proceeds from the sale of property and equipment ​ 201 ​ 59 Payments from disposition of business ​ ​ — ​ ​ ( 971 ) Cash paid in acquisitions, net of cash acquired ​ ( 138,349 ) ​ ( 4,712 ) Net cash, cash equivalents, and restricted cash used in investing activities ​ $ ( 157,751 ) ​ $ ( 23,299 ) ​ ​ ​ See condensed notes to consolidated financial statements. (continued) ​ 9 Table of Contents ​ MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands - unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ ​ 2023 ​ 2022 CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ Proceeds from issuance of common stock ​ $ 9,463 ​ $ 3,244 Proceeds from issuance of long-term debt ​ 460,283 ​ 127,688 Payments on long-term debt ​ ​ ( 318,471 ) ​ ​ ( 124,563 ) Long-term debt issuance costs ​ ( 5,240 ) ​ — Contingent payments related to acquisitions ​ ( 3,434 ) ​ ( 32,798 ) Payment of taxes related to an exchange of common stock ​ ( 1,592 ) ​ ( 1,015 ) Net cash, cash equivalents, and restricted cash provided by (used in) financing activities ​ 141,009 ​ ( 27,444 ) Effect of exchange rates on cash, cash equivalents, and restricted cash ​ ( 1,497 ) ​ ( 2,564 ) Net increase (decrease) in cash, cash equivalents and restricted cash ​ 13,592 ​ ( 2,513 ) ​ ​ ​ ​ ​ ​ ​ CASH, CASH EQUIVALENTS AND RESTRICTED CASH: ​ ​ Beginning of period ​ ​ 60,558 ​ ​ 67,750 End of period ​ $ 74,150 ​ $ 65,237 ​ ​ ​ ​ ​ ​ ​ RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ 72,084 ​ ​ 63,003 Restricted cash reported in prepaid expenses and other current assets ​ ​ 2,066 ​ ​ 2,234 Total cash, cash equivalents and restricted cash ​ $ 74,150 ​ $ 65,237 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION ​ ​ Cash paid during the period for: ​ ​ Interest (net of capitalized interest of $ 597 and $ 302 , respectively) ​ $ 3,681 ​ $ 2,317 Income taxes ​ ​ 17,787 ​ ​ 7,863 ​ ​ ​ ​ ​ ​ ​ SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES ​ ​ Property and equipment purchases in accounts payable ​ $ 4,291 ​ $ 3,555 Acquisition purchases in accrued expenses and other long-term obligations ​ ​ 3,635 ​ ​ 3,526 Right-of-use operating lease assets obtained in exchange for operating lease liabilities ​ ​ 3,399 ​ ​ 4,746 ​ ​ ​ See condensed notes to consolidated financial statements. (concluded) ​ ​ ​ 10 Table of Contents MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. Basis of Presentation and Other Items. The interim consolidated financial statements of Merit Medical Systems, Inc. ("Merit," "we" or "us") for the three and six-month periods ended June 30, 2023 and 2022 are not audited. Our consolidated financial statements are prepared in accordance with the requirements for unaudited interim periods and, consequently, do not include all disclosures required to be made in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). In the opinion of our management, the accompanying consolidated financial statements contain all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of our financial position as of June 30, 2023 and December 31, 2022, and our results of operations and cash flows for the three and six-month periods ended June 30, 2023 and 2022. The results of operations for the three and six-month periods ended June 30, 2023 and 2022 are not necessarily indicative of the results for a full-year period. Amounts presented in this report are rounded, while percentages and earnings per share amounts presented are calculated from the underlying amounts. These interim consolidated financial statements should be read in conjunction with the financial statements and risk factors included in our Annual Report on Form 10-K for the year ended December 31, 2022 (the “2022 Annual Report on Form 10-K”) . ​ 2. Recently Adopted Financial Accounting Standards. In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting , which provides temporary optional expedients and exceptions in accounting for modifications of contracts that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met. In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848 , which defers the sunset date of the guidance in ASC 848 to December 31, 2024. During the quarter ended June 30, 2023, the Company transitioned our interest rate swap agreement to reference the Secured Overnight Financing Rate (“SOFR”) in connection with reference rate reform and adopted certain optional expedients provided in ASU 2020-04 in relation to contract modifications and hedge accounting that allowed us to continue hedge accounting for our interest rate swap cash flow hedges (see Note 9). The adoption of this guidance did not have a material impact on our consolidated financial statements. Recently Issued Accounting Standards. We currently believe there are no other issued and not yet effective accounting standards that are materially relevant to our financial statements. ​ 3. Revenue from Contracts with Customers. We recognize revenue when a customer obtains control of promised goods. The amount of revenue recognized reflects the consideration we expect to receive in exchange for these goods. Our revenue recognition policies have not changed from those disclosed in Note 1 to our consolidated financial statements in Item 8 of the 2022 Annual Report on Form 10-K. Disaggregation of Revenue Our revenue is disaggregated based on reporting segment, product category and geographical region. We design, develop, manufacture and market medical products for interventional and diagnostic procedures. For financial reporting purposes, we report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of four product categories: peripheral intervention, cardiac intervention, custom procedural solutions, and original equipment manufacturer (“OEM”). Within these product categories, we sell a variety of products, including cardiology and radiology devices (which assist in diagnosing and treating coronary arterial disease, peripheral vascular disease and other non-vascular diseases), as well as embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, breast cancer localization and guidance, biopsy, and interventional oncology and spine devices. Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors. 11 Table of Contents The following tables present revenue from contracts with customers by reporting segment, product category and geographical region for the three and six-month periods ended June 30, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Three Months Ended ​ ​ June 30, 2023 ​ June 30, 2022 ​ United States International Total United States International Total Cardiovascular ​ ​ ​ ​ ​ ​ ​ Peripheral Intervention ​ $ 71,973 ​ $ 53,936 ​ $ 125,909 ​ $ 65,795 ​ ​ 45,160 ​ $ 110,955 Cardiac Intervention ​ 35,690 ​ ​ 58,085 ​ 93,775 ​ 33,909 ​ ​ 55,665 ​ 89,574 Custom Procedural Solutions ​ 29,155 ​ ​ 20,229 ​ 49,384 ​ 27,318 ​ ​ 21,775 ​ 49,093 OEM ​ 34,570 ​ ​ 7,637 ​ 42,207 ​ 30,048 ​ ​ 7,000 ​ 37,048 Total ​ 171,388 ​ ​ 139,887 ​ 311,275 ​ 157,070 ​ 129,600 ​ 286,670 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy Devices ​ 8,194 ​ 587 ​ 8,781 ​ 7,604 ​ ​ 702 ​ 8,306 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 179,582 ​ $ 140,474 ​ $ 320,056 ​ $ 164,674 ​ $ 130,302 ​ $ 294,976 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ Six Months Ended ​ ​ June 30, 2023 ​ June 30, 2022 ​ United States International Total United States International Total Cardiovascular ​ ​ ​ ​ ​ ​ ​ ​ Peripheral Intervention ​ $ 140,640 ​ $ 99,052 ​ $ 239,692 ​ $ 127,895 ​ $ 88,833 ​ $ 216,728 Cardiac Intervention ​ 69,995 ​ ​ 109,108 ​ 179,103 ​ 62,458 ​ 108,603 ​ 171,061 Custom Procedural Solutions ​ 55,954 ​ ​ 41,131 ​ 97,085 ​ 53,873 ​ 41,482 ​ 95,355 OEM ​ 67,134 ​ ​ 16,237 ​ 83,371 ​ 57,844 ​ 12,618 ​ 70,462 Total ​ 333,723 ​ ​ 265,528 ​ 599,251 ​ 302,070 ​ 251,536 ​ 553,606 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Endoscopy Devices ​ 17,219 ​ 1,151 ​ 18,370 ​ 15,596 ​ 1,189 ​ 16,785 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total ​ $ 350,942 ​ $ 266,679 ​ $ 617,621 ​ $ 317,666 ​ $ 252,725 ​ $ 570,391 12 Table of Contents ​ ​ ​ ​ ​ 4. Acquisitions. On June 8, 2023, we entered into an asset purchase agreement with AngioDynamics, Inc. (“AngioDynamics”) to acquire the assets associated with a portfolio of dialysis catheter products and the BioSentry® Biopsy Tract Sealant System for a purchase price of $ 100 million. We accounted for this acquisition as a business combination. The sales related to the acquisition have been included in our cardiovascular segment since the acquisition date and were approximately $ 0.9 million for each of the three and six-month periods ended June 30, 2023. It is not practical to separately report earnings related to the acquisition, as we cannot split out sales costs related solely to the products acquired, principally because our sales representatives sell multiple products within our cardiovascular business segment. Acquisition-related costs associated with the AngioDynamics acquisition, which are included in selling, general and administrative expenses in the accompanying consolidated statements of income, were approximately $ 4.8 million for each of the three and six-month periods ended June 30, 2023. The purchase price was preliminarily allocated as follows (in thousands): ​ ​ ​ ​ ​ Assets Acquired ​ Prepaid expenses ​ $ 2,000 Inventories ​ 5,254 Property and equipment ​ ​ 108 Intangible assets ​ ​ Developed technology ​ ​ 65,200 Trademarks ​ ​ 4,000 Customer list ​ ​ 5,800 Goodwill ​ ​ 17,638 Total net assets acquired ​ $ 100,000 ​ We are amortizing the AngioDynamics developed technology intangible assets over nine years , the trademark intangible assets over 11 years , and the customer list intangible asset on an accelerated basis over 10 years . We have estimated the weighted average life of the intangible assets acquired from AngioDynamics to be 10.5 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects to our consolidated results of operations of the AngioDynamics acquisition are not material. On May 4, 2023, we entered into an asset purchase agreement to acquire the assets associated with the Surfacer® Inside-Out® Access Catheter System from Bluegrass Vascular Technologies, Inc. (“Bluegrass”), for a purchase price of $ 32.7 million. Prior to the acquisition, Merit held an equity investment of 1,251,878 Bluegrass common shares representing approximately 19.5 % ownership in Bluegrass. The fair value of this previously-held equity investment of approximately $ 245,000 is included in the purchase price allocation. We accounted for this acquisition as a business combination. The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material. Acquisition-related costs associated with the Bluegrass acquisition, which were included in selling, general and administrative expenses in the accompanying consolidated statements of income, were not material. The purchase price was preliminarily allocated as follows (in thousands): ​ ​ ​ ​ ​ Assets Acquired ​ Inventories ​ $ 175 Intangible assets ​ ​ Developed technology ​ ​ 28,000 Trademarks ​ ​ 900 Goodwill ​ ​ 3,898 Total net assets acquired ​ $ 32,973 ​ We are amortizing the Bluegrass developed technology intangible asset over 15 years and the related trademarks over 13 years . We have estimated the weighted average life of the intangible assets acquired from Bluegrass to be 14.9 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects to our consolidated results of operations of the Bluegrass acquisition are not material. 13 Table of Contents ​ On May 1, 2023, we entered into an asset purchase agreement to acquire certain assets from Advanced Radiation Therapy, LLC (“ART”), related to intellectual property rights for soft tissue markers. The total purchase price of the ART assets included an up-front payment of $ 750,000 , a deferred payment of $ 750,000 payable upon the first to occur of (1) shipment and installation of two commercial production winders used in the manufacture of the product or (2) 30 days after delivery of the winders to Merit, and, a deferred payment of $ 500,000 payable upon regulatory approval from the U.S. Food and Drug Administration for Merit to commence commercialization, marketing and sale of the product in the United States. We have accounted for this transaction as an asset purchase and recorded $ 1.5 million of acquired in-process research and development expense associated with the upfront payment and completion of the milestone related to the installation of the commercial production winders. The payments are reported within operating expenses because the technological feasibility of the underlying research and development project has not yet been reached and such technology has no identified future alternative use as of the date of acquisition. ​ We entered into a stock purchase agreement on January 11, 2023, and an exclusive distribution agreement on April 5, 2023, with Solo Pace Inc. ("Solo Pace”), owner and developer of a temporary external pulse generator and grounding pad with associated remote control module. Pursuant to these agreements, we paid $ 4.0 million to acquire (a) shares of Series Seed-1 Preferred Stock of Solo Pace, (b) an option to purchase the outstanding equity of Solo Pace within the earlier of five years after product commercialization or within 120 days after the twelve-month period wherein sales exceed $ 6.0 million, and (c) exclusive rights to distribute the Solo Pace product upon commercialization. The shares of Solo Pace stock have been reflected within other assets in the accompanying consolidated balance sheets . Our investment in Solo Pace represents an ownership of approximately 19 % of its outstanding capital stock and has been recorded as an equity investment accounted for at cost because the equity interest does not have a readily determinable fair value and because we are not able to exercise significant influence over the operations of Solo Pace. ​ 5. Inventories. Inventories at June 30, 2023 and December 31, 2022 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 December 31, 2022 Finished goods ​ $ 155,934 ​ $ 147,051 Work-in-process ​ 33,780 ​ 29,534 Raw materials ​ 116,229 ​ 89,406 Total inventories ​ $ 305,943 ​ $ 265,991 ​ ​ ​ 6. Goodwill and Intangible Assets. The change in the carrying amount of goodwill for the six-month period ended June 30, 2023 is detailed as follows (in thousands): ​ ​ ​ ​ ​ ​ 2023 Goodwill balance at January 1 ​ $ 359,821 Effect of foreign exchange ​ 410 Additions and adjustments as the result of acquisitions ​ 21,536 Goodwill balance at June 30 ​ $ 381,767 ​ Total accumulated goodwill impairment losses aggregated $ 8.3 million as of June 30, 2023 and December 31, 2022. We did no t have any goodwill impairments for the six-month periods ended June 30, 2023 and 2022. The total goodwill balances as of June 30, 2023 and December 31, 2022 were related to our cardiovascular segment. ​ 14 Table of Contents Other intangible assets at June 30, 2023 and December 31, 2022 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 ​ ​ Gross Carrying ​ Accumulated ​ Net Carrying ​ Amount Amortization Amount Patents ​ $ 30,451 ​ $ ( 11,732 ) ​ $ 18,719 Distribution agreements ​ 3,250 ​ ( 2,817 ) ​ 433 License agreements ​ 11,139 ​ ( 7,832 ) ​ 3,307 Trademarks ​ 35,129 ​ ( 19,215 ) ​ 15,914 Customer lists ​ 40,333 ​ ( 32,822 ) ​ 7,511 Total ​ $ 120,302 ​ $ ( 74,418 ) ​ $ 45,884 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2022 ​ ​ Gross Carrying ​ Accumulated ​ Net Carrying ​ Amount Amortization Amount Patents ​ $ 29,445 ​ $ ( 10,203 ) ​ $ 19,242 Distribution agreements ​ 3,250 ​ ( 2,715 ) ​ 535 License agreements ​ 11,109 ​ ( 7,250 ) ​ 3,859 Trademarks ​ 30,221 ​ ( 17,863 ) ​ 12,358 Customer lists ​ 34,105 ​ ( 31,749 ) ​ 2,356 Total ​ $ 108,130 ​ $ ( 69,780 ) ​ $ 38,350 ​ Aggregate amortization expense for the three and six-month periods ended June 30, 2023 was $ 13.4 million and $ 25.7 million, respectively. Aggregate amortization expense for the three and six-month periods ended June 30, 2022 was $ 12.1 million and $ 24.2 million, respectively. ​ We evaluate long-lived assets, including amortizing intangible assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We perform the impairment analysis at the asset group for which the lowest level of identifiable cash flows is largely independent of the cash flows of other assets and liabilities. We determine the fair value of our amortizing assets based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities. During the three and six-month periods ended June 30, 2023, we did no t identify indicators of impairment in any intangible assets based on our qualitative assessment. ​ During the six-month period ended June 30, 2022, we identified indicators of impairment associated with certain acquired intangible assets based on our qualitative assessment, which led us to complete an interim quantitative impairment assessment. The primary indicator of impairment was our planned divestiture of the STD Pharmaceutical Products Limited (“STD Pharmaceutical”) business acquired in our August 2019 acquisition of Fibrovein Holdings Limited. On April 30, 2022, we completed the divestiture of Fibrovein Holdings Limited, in exchange for the termination of our obligations arising from the acquisition transaction in August 2019 and the purchaser’s agreement to make potential future payments upon a qualifying disposition of the STD Pharmaceutical business. We recorded an impairment charge for the carrying value of $ 1.7 million of intangible assets during the six months ended June 30, 2022 , all of which pertained to our cardiovascular segment. ​ Estimated amortization expense for developed technology and other intangible assets for the next five years consisted of the following as of June 30, 2023 (in thousands): ​ ​ ​ ​ ​ Estimated Amortization Expense Remaining 2023 ​ $ 32,085 2024 ​ 59,732 2025 ​ 57,701 2026 ​ ​ 46,963 2027 ​ 43,768 ​ ​ ​ 15 Table of Contents 7. Income Taxes. Our provision for income taxes for the three-month periods ended June 30, 2023 and 2022 was a tax expense of $ 4.7 million and $ 5.4 million, respectively, which resulted in an effective tax rate of 18.7 % and 26.1 %, respectively. Our provision for income taxes for the six-month periods ended June 30, 2023 and 2022 was a tax expense of $ 9.5 million and $ 9.0 million, respectively, which resulted in an effective tax rate of 18.8 % and 25.9 %, respectively. The decrease in the effective income tax rate for the three and six-month period ended June 30, 2023, when compared to the prior-year period, was primarily due to increased benefit from discrete items such as share-based compensation and deferred compensation, as well as foreign tax credit utilization. The increase in the income tax expense for the six-month period ended June 30, 2023, when compared to the prior-year period, was primarily due to increased pre-tax book income. Our effective tax rate differs from the U.S. statutory rate primarily due to the impact of global intangible low-taxed income (“GILTI”) inclusions, state income taxes, foreign taxes, other non-deductible permanent items and discrete items (such as share-based compensation). The Organization for Economic Cooperation and Development (“OECD”) Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024. On February 2, 2023, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax. Under a transitional safe harbor released July 17, 2023, the undertaxed profits rule top-up tax in the jurisdiction of a company's ultimate parent entity will be zero for each fiscal year of the transition period, if that jurisdiction has a corporate tax rate of at least 20%. The safe harbor transition period will apply to fiscal years beginning on or before December 31, 2025 and ending before December 31, 2026. The Company is closely monitoring developments and evaluating the impact these new rules will have on our tax rate, including eligibility to qualify for these safe harbor rules. ​ 8. Revolving Credit Facility and Long-Term Debt. Principal balances outstanding under our long-term debt obligations as of June 30, 2023 and December 31, 2022 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2023 December 31, 2022 Term loans ​ $ 150,000 ​ $ 124,688 Revolving credit loans ​ 190,000 ​ 73,500 Less unamortized debt issuance costs ​ ( 1,018 ) ​ ( 179 ) Total long-term debt ​ 338,982 ​ 198,009 Less current portion ​ 3,750 ​ 11,250 Long-term portion ​ $ 335,232 ​ $ 186,759 ​ On June 6, 2023, we entered into a Fourth Amended and Restated Credit Agreement (the "Fourth Amended Credit Agreement"). The Fourth Amended Credit Agreement is a syndicated loan agreement with Wells Fargo Bank, National Association and other parties. The Fourth Amended Credit Agreement amended and restated in its entirety our previously outstanding Third Amended and Restated Credit Agreement and all amendments thereto. The Fourth Amended Credit Agreement provides for a term loan of $ 150 million and a revolving credit commitment of up to an aggregate amount of $ 700 million, inclusive of sub-facilities for multicurrency borrowings, standby letters of credit and swingline loans. On June 6, 2028, all principal, interest and other amounts outstanding under the Fourth Amended Credit Agreement are payable in full. At any time prior to the maturity date, we may repay any amounts owing under all term loans and revolving credit loans in whole or in part, without premium or penalty. ​ 16 Table of Contents Term loans made under the Fourth Amended Credit Agreement bear interest, at our election, at either (i) the Base Rate (as defined in the Fourth Amended Credit Agreement) plus the Applicable Margin (as defined in the Fourth Amended Credit Agreement) or, (ii) Adjusted Term SOFR (as defined in the Fourth Amended Credit Agreement) plus the Applicable Margin (as defined in the Fourth Amended Credit Agreement). Revolving credit loans bear interest, at our election, at either (a) the Base Rate plus the Applicable Margin, (b) Adjusted Term SOFR plus the Applicable Margin, (c) Adjusted Eurocurrency Rate plus the Applicable Margin and (d) Adjusted Daily Simple SONIA (as defined in the Fourth Amended Credit Agreement) plus the Applicable Margin. Swingline loans bear interest at the Base Rate plus the Applicable Margin. Interest on each loan featuring the Base Rate and each Daily Simple SONIA Loan is due and payable on the last business day of each calendar month; interest on each loan featuring the Eurocurrency Rate and each Term SOFR Loan is due and payable on the last day of each interest period applicable thereto, and if such interest period extends over three months, at the end of each three-month interval during such interest period. ​ The Fourth Amended Credit Agreement is collateralized by substantially all our assets. The Fourth Amended Credit Agreement contains affirmative and negative covenants, representations and warranties, events of default and other terms customary for loans of this nature. In particular, the Fourth Amended Credit Agreement requires that we maintain certain financial covenants, as follows: ​ ​ ​ ​ ​ ​ Covenant Requirement ​ Consolidated Total Leverage Ratio (1) ​ 4.0 to 1.0 ​ Consolidated Interest Coverage Ratio (2) ​ 3.0 to 1.0 ​ (1) Maximum Consolidated Total Net Leverage Ratio (as defined in the Fourth Amended Credit Agreement) as of any fiscal quarter end. (2) Minimum ratio of Consolidated EBITDA (as defined in the Fourth Amended Credit Agreement and adjusted for certain expenditures) to Consolidated Interest Expense (as defined in the Fourth Amended Credit Agreement) for any period of four consecutive fiscal quarters. ​ We believe we were in compliance with all covenants set forth in the Fourth Amended Credit Agreement as of June 30, 2023. As of June 30, 2023, we had outstanding borrowings of $ 340.0 million and issued letter of credit guarantees of $ 3.2 million under the Fourth Amended Credit Agreement, with additional available borrowings of approximately $ 507 million, based on the maximum net leverage ratio and the aggregate revolving credit commitment pursuant to the Fourth Amended Credit Agreement. Our interest rate as of June 30, 2023 was a fixed rate of 2.64 % with respect to $ 75 million of the principal amount, as a result of an interest rate swap (see Note 9), and a variable floating rate of 6.15 % with respect to $ 265.0 million of the principal amount. Our interest rate as of December 31, 2022 was a fixed rate of 2.71 % on $ 75 million as a result of an interest rate swap and a variable floating rate of 5.38 % on $ 123.2 million. The foregoing fixed rates do not reflect potential future changes in the applicable margin. Future minimum principal payments on our long-term debt, as of June 30, 2023, were as follows (in thousands): ​ ​ ​ ​ ​ Years Ending ​ Future Minimum December 31, Principal Payments Remaining 2023 $ 1,875 2024 ​ ​ 3,750 2025 ​ ​ 5,625 2026 ​ ​ 7,500 2027 ​ ​ 9,375 2028 ​ ​ 311,875 Total future minimum principal payments ​ $ 340,000 ​ ​ ​ ​ 17 Table of Contents 9. Derivatives. General. Our earnings and cash flows are subject to fluctuations due to changes in interest rates and foreign currency exchange rates, and we seek to mitigate a portion of the risks attributable to those fluctuations by entering into derivative contracts. The derivative instruments we use are interest rate swaps and foreign currency forward contracts. We recognize derivative instruments as either assets or liabilities at fair value in the accompanying consolidated balance sheets, regardless of whether or not hedge accounting is applied. We report cash flows arising from our hedging instruments consistent with the classification of cash flows from the underlying hedged items. Accordingly, cash flows associated with our derivative contracts are classified as operating activities in the accompanying consolidated statements of cash flows. ​ We formally document, designate and assess the effectiveness of transactions that receive hedge accounting treatment initially and on an ongoing basis. For qualifying hedges, the change in fair value is deferred in accumulated other comprehensive income, a component of stockholders’ equity in the accompanying consolidated balance sheets, and recognized in earnings at the same time the hedged item affects earnings. Changes in the fair value of derivative instruments not designated as hedging instruments are recorded in earnings throughout the term of the derivative. ​ Interest Rate Risk. Our debt bears interest at variable interest rates. Therefore, we are subject to variability in the cash payable for interest expense. In order to mitigate a portion of the risk attributable to such variability, we use a hedging strategy to reduce the variability of cash flows in the interest payments associated with a portion of the variable-rate debt outstanding under our Fourth Amended Credit Agreement that varies in accordance with changes in the benchmark interest rate. Derivative Instruments Designated as Cash Flow Hedges On December 23, 2019, we entered into a pay-fixed, receive-variable interest rate swap with a notional amount of $ 75 million with Wells Fargo. In June 2023, certain terms under the agreement were amended to reflect the transition from LIBOR to SOFR, an alternative reference rate. Under the interest rate swap agreement we fix the one-month SOFR rate on that portion of our borrowings under the Fourth Amended Credit Agreement at 1.64 % for the period from June 1, 2023 to July 31, 2024. The variable portion of the interest rate swap is tied to the one-month SOFR rate (the benchmark interest rate). On a monthly basis, the interest rates under both the interest rate swap and the underlying debt reset, the swap is settled with the counterparty, and interest is paid. On June 30, 2023 and December 31, 2022, our interest rate swap qualified as a cash flow hedge. The fair value of our interest rate swap on June 30, 2023 was an asset of $ 2.9 million, which was partially offset by $ 0.7 million in deferred taxes. The fair value of our interest rate swap on December 31, 2022 was an asset of $ 3.4 million, partially offset by $ 0.8 million in deferred taxes. Foreign Currency Risk. We operate on a global basis and are exposed to the risk that our financial condition, results of operations, and cash flows could be adversely affected by changes in foreign currency exchange rates. To reduce the potential effects of foreign currency exchange rate movements on net earnings, we enter into derivative financial instruments in the form of foreign currency exchange forward contracts with major financial institutions. Our policy is to enter into foreign currency derivative contracts with maturities of up to two years . We are exposed to foreign currency exchange rate risk with respect to transactions and balances denominated in various currencies, with our most significant exposure related to transactions and balances denominated in Chinese Renminbi and Euros, among others. We do not use derivative financial instruments for trading or speculative purposes. We do not believe we are subject to any credit risk contingent features related to our derivative contracts, and we seek to manage counterparty risk by allocating derivative contracts among several major financial institutions. 18 Table of Contents Derivative Instruments Designated as Cash Flow Hedges ​ For derivative instruments that are designated and qualify as cash flow hedges, the gain or loss on the derivative instrument is temporarily reported as a component of other comprehensive income and then reclassified into earnings in the same line item associated with the forecasted transaction and in the same period or periods during which the hedged transaction affects earnings. We entered into forward contracts on various foreign currencies to manage the risk associated with forecasted exchange rates which impact revenues, cost of sales, and operating expenses in various international markets. The objective of the hedges is to reduce the variability of cash flows associated with the forecasted purchase or sale of the foreign currencies. We enter into approximately 100 cash flow foreign currency hedges every month. As of June 30, 2023 and December 31, 2022, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $ 122.5 million and $ 87.8 million, respectively. Derivative Instruments Not Designated as Cash Flow Hedges ​ We forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. We enter into approximately 50 foreign currency fair value hedges every month. As of June 30, 2023 and December 31, 2022, we had entered into foreign currency forward contracts related to those balance sheet accounts with aggregate notional amounts of $ 116.9 million and $ 92.4 million, respectively. Balance Sheet Presentation of Derivative Instruments. As of June 30, 2023 and December 31, 2022, all derivative instruments, both those designated as hedging instruments and those that were not designated as hedging instruments, were recorded at fair value on a gross basis on our consolidated balance sheets. We are not subject to any master netting agreements. 19 Table of Contents The fair value of derivative instruments on a gross basis was as follows on the dates indicated (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value of Derivative Instruments Designated as Hedging Instruments Balance Sheet Location June 30, 2023 December 31, 2022 Assets ​ ​ Interest rate swaps Other assets (long-term) ​ $ 2,879 ​ $ 3,444 Foreign currency forward contracts Prepaid expenses and other assets ​ ​ 3,888 ​ ​ 3,215 Foreign currency forward contracts Other assets (long-term) ​ ​ 729 ​ 56 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Foreign currency forward contracts Accrued expenses ​ ( 994 ) ​ ( 1,509 ) Foreign currency forward contracts Other long-term obligations ​ ( 289 ) ​ ( 531 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value of Derivative Instruments Not Designated as Hedging Instruments Balance Sheet Location June 30, 2023 December 31, 2022 Assets ​ ​ Foreign currency forward contracts Prepaid expenses and other assets ​ $ 2,736 ​ $ 1,512 ​ ​ ​ ​ ​ ​ ​ ​ ​ (Liabilities) ​ ​ Foreign currency forward contracts Accrued expenses ​ ( 1,434 ) ​ ( 1,946 ) ​ Income Statement Presentation of Derivative Instruments. ​ Derivative Instruments Designated as Cash Flow Hedges ​ Derivative instruments designated as cash flow hedges had the following effects, before income taxes, on other comprehensive income (“OCI”), accumulated other comprehensive income (“AOCI”), and net earnings in our consolidated statements of income, consolidated statements of comprehensive income and consolidated balance sheets (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of Gain/(Loss) ​ ​ ​ Consolidated Statements ​ Amount of Gain/(Loss) ​ ​ Recognized in OCI ​ ​ ​ of Income ​ Reclassified from AOCI ​ ​ Three Months Ended June 30, ​ Three Months Ended June 30, ​ Three Months Ended June 30, Derivative instrument 2023 2022 Location in statements of income 2023 2022 2023 2022 Interest rate swaps ​ $ 719 ​ $ 689 ​ Interest expense ​ $ ( 3,682 ) ​ $ ( 1,348 ) ​ $ 631 ​ $ ( 179 ) Foreign currency forward contracts ​ 4,325 ​ 5,492 ​ Revenue ​ 320,056 ​ 294,976 ​ 658 ​ 198 ​ ​ ​ ​ ​ ​ ​ ​ Cost of sales ​ ( 167,274 ) ​ ( 159,909 ) ​ 333 ​ ( 263 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount of Gain/(Loss) ​ ​ Consolidated Statements ​ Amount of Gain/(Loss) ​ ​ ​ Recognized in OCI ​ ​ of Income ​ Reclassified from AOCI ​ ​ ​ Six Months Ended June 30, ​ ​ Six Months Ended June 30, ​ Six Months Ended June 30, Derivative instrument 2023 2022 Location in statements of income 2023 ​ 2022 2023 2022 Interest rate swaps ​ $ 600 ​ $ 3,003 ​ Interest expense ​ $ ( 5,693 ) ​ $ ( 2,350 ) ​ $ 1,165 ​ $ ( 473 ) ​ Foreign currency forward contracts ​ 4,564 ​ 5,222 ​ Revenue ​ 617,621 ​ 570,391 ​ 1,985 ​ ( 188 ) ​ ​ ​ ​ ​ Cost of sales ​ ( 326,477 ) ​ ( 314,417 ) ​ 283 ​ ( 446 ) ​ ​ As of June 30, 2023, $ 4.0 million, or $ 3.0 million after taxes, was expected to be reclassified from AOCI to earnings in revenue and cost of sales over the succeeding twelve months. As of June 30, 2023, $ 2.7 million, or $ 2.0 million after taxes, was expected to be reclassified from AOCI to earnings in interest expense over the succeeding twelve months. 20 Table of Contents Derivative Instruments Not Designated as Hedging Instruments ​ The following gains/(losses) from these derivative instruments were recognized in our consolidated statements of income for the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended June 30, Six Months Ended June 30, Derivative Instrument Location in statements of income 2023 2022 2023 2022 Foreign currency forward contracts Other income (expense) — net ​ $ 2,141 ​ $ 1,290 ​ $ 3,200 ​ $ 178 ​ ​ ​ 10. Commitments and Contingencies. Litigation. In the ordinary course of business, we are involved in various proceedings, legal actions and claims. These proceedings, actions and claims may involve product liability, intellectual property, contract disputes, employment, governmental inquiries, audits or proceedings, or other matters, including those more fully described below. The outcomes of these matters will generally not be known for prolonged periods of time. In certain proceedings, actions and claims, the claimants may seek damages as well as other compensatory and equitable relief that could result in the payment of significant amounts and settlements and/or the imposition of injunctions or other equitable relief. For legal matters for which our management had sufficient information to reasonably estimate our future obligations, a liability representing management’s best estimate of the probable loss, or the minimum of the range of probable losses when a best estimate within the range is not known, is recorded. The estimates are based on consultation with legal counsel, previous settlement experience, settlement strategies and the potential availability of insurance coverage. If actual outcomes are less favorable than those estimated by management, additional expense may be incurred, which could unfavorably affect our financial position, results of operations and cash flows. The ultimate cost to us with respect to such proceedings, actions and claims could be materially different than the amount of the current estimates and accruals and could have a material adverse effect on our financial position, results of operations and cash flows. ​ SEC Inquiry ​ We have received requests from the Division of Enforcement of the U.S. Securities and Exchange Commission (“SEC”) seeking the voluntary production of information relating to the business activities of Merit’s subsidiary in China, including interactions with hospitals and health care officials in China. We are cooperating with the requests and investigating the matter and, at this time, are unable to predict the scope, timing, significance or outcome of this matter. ​ It is possible that the ultimate resolution of the foregoing matter, or similar matters, if resolved in a manner unfavorable to us, may be materially adverse to our business, financial condition, results of operations or liquidity. Legal costs for these matters, such as outside counsel fees and expenses, are charged to expense in the period incurred. 21 Table of Contents ​ 11. Earnings Per Common Share (EPS). The computation of weighted average shares outstanding and the basic and diluted earnings per common share for the three and six-month periods ended June 30, 2023 and 2022 consisted of the following (in thousands, except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ ​ June 30, ​ June 30, ​ ​ ​ 2023 ​ 2022 ​ 2023 ​ 2022 ​ Net income ​ $ 20,245 ​ $ 15,298 ​ $ 40,948 ​ $ 25,843 ​ Average common shares outstanding ​ 57,537 ​ 56,691 ​ 57,445 ​ 56,642 ​ Basic EPS ​ $ 0.35 ​ $ 0.27 ​ $ 0.71 ​ $ 0.46 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average common shares outstanding ​ ​ 57,537 ​ ​ 56,691 ​ ​ 57,445 ​ ​ 56,642 ​ Effect of dilutive stock awards ​ ​ 936 ​ ​ 909 ​ ​ 884 ​ ​ 923 ​ Total potential shares outstanding ​ ​ 58,473 ​ ​ 57,600 ​ ​ 58,329 ​ ​ 57,565 ​ Diluted EPS ​ $ 0.35 ​ $ 0.27 ​ $ 0.70 ​ $ 0.45 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Equity awards excluded as the impact was anti-dilutive (1) ​ ​ 1,114 ​ ​ 1,641 ​ ​ 1,014 ​ ​ 1,597 ​ (1) Does not reflect the impact of incremental repurchases under the treasury stock method. ​ 12. Stock-Based Compensation Expense. Stock-based compensation expense before income tax expense for the three and six-month periods ended June 30, 2023 and 2022 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ 2023 2022 2023 2022 Cost of sales ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ $ 432 ​ $ 509 ​ $ 873 ​ $ 1,097 Research and development ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ 413 ​ 450 ​ ​ 841 ​ 936 Selling, general and administrative ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nonqualified stock options ​ ​ 1,851 ​ 1,207 ​ ​ 3,221 ​ 3,131 Performance-based restricted stock units ​ ​ 1,817 ​ ​ 1,257 ​ ​ 2,632 ​ ​ 2,072 Restricted stock units ​ ​ 467 ​ ​ 529 ​ ​ 911 ​ ​ 928 Cash-settled performance-based share-based awards ("Liability Awards") ​ ​ 600 ​ ​ 499 ​ ​ 1,071 ​ ​ 929 Total selling, general and administrative ​ ​ 4,735 ​ ​ 3,492 ​ ​ 7,835 ​ ​ 7,060 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock-based compensation expense before taxes ​ $ 5,580 ​ $ 4,451 ​ $ 9,549 ​ $ 9,093 ​ We recognize stock-based compensation expense (net of a forfeiture rate), for those awards which are expected to vest, on a straight-line basis over the requisite service period. We estimate the forfeiture rate based on our historical experience and expectations about future forfeitures. ​ 22 Table of Contents Nonqualified Stock Options During the six-month periods ended June 30, 2023 and 2022, we granted stock options representing 327,294 and 168,606 shares of our common stock, respectively. We use the Black-Scholes methodology to value the stock-based compensation expense for options. In applying the Black-Scholes methodology to the option grants, the fair value of our stock-based awards granted was estimated using the following assumptions for the periods indicated below: ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ ​ 2023 ​ 2022 Risk-free interest rate 3.6 % - 4.5 % 1.4 % - 3.0 % Expected option term 4.0 years 4.0 years Expected dividend yield — — Expected price volatility 46.7 % - 47.1 % 46.2 % - 47.0 % ​ The average risk-free interest rate is determined using the U.S. Treasury rate in effect as of the date of grant, based on the expected term of the stock award. We determine the expected term of stock options using the historical exercise behavior of employees. The expected price volatility was determined using a weighted average of daily historical volatility of our stock price over the corresponding expected option term and implied volatility based on recent trends of the daily historical volatility. For awards with a vesting period, compensation expense is recognized on a straight-line basis over the service period, which corresponds to the vesting period. ​ As of June 30, 2023, the total remaining unrecognized compensation cost related to non-vested stock options was $ 23.6 million, which was expected to be recognized over a weighted average period of 2.4 years. ​ Stock-Settled Performance-Based Restricted Stock Units (“Performance Stock Units”) ​ During the six-month periods ended June 30, 2023 and 2022, we granted performance stock units which represent up to 286,863 and 120,710 shares of our common stock, respectively. Conversion of the performance stock units occurs at the end of the relevant performance periods, or one year after the agreement date, whichever is later. The number of shares delivered upon vesting at the end of the performance periods are based upon performance against specified financial performance metrics and relative total shareholder return as compared to the Russell 2000 Index (“rTSR”), as defined in the award agreements. ​ We use Monte-Carlo simulations to estimate the grant-date fair value of the performance stock units linked to total shareholder return. The fair value of each performance stock unit was estimated as of the grant date using the following assumptions for awards granted in the periods indicated below: ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ ​ 2023 ​ 2022 Risk-free interest rate 3.9 % - 4.6 % 1.6 % Performance period 2.8 years 2.8 years Expected dividend yield — — Expected price volatility 31.4 % - 32.6 % 42.6 % ​ The risk-free interest rate of return was determined using the U.S. Treasury rate at the time of grant with a term equal to the expected term of the award. The expected volatility was based on the weighted average volatility of our stock price and the average volatility of our compensation peer group's stock price. The expected dividend yield was assumed to be zero because, at the time of the grant, we had no plans to declare a dividend. 23 Table of Contents Compensation expense is recognized using the grant-date fair value for the number of shares that are probable of being awarded based on the performance metrics. Each reporting period, this probability assessment is updated, and cumulative adjustments are recorded based on the financial performance metrics expected to be achieved. At the end of the performance period, cumulative expense is calculated based on the actual performance metrics achieved. As of June 30, 2023, the total remaining unrecognized compensation cost related to stock-settled performance stock units was $ 14.1 million, which is expected to be recognized over a weighted average period of 2.2 years. Liability Awards During the six-month periods ended June 30, 2023 and 2022, we granted liability awards to our Chief Executive Officer with total target cash incentives in the amount of $ 1.3 million and $ 1.0 million, respectively. These awards entitle him to a target cash payment based upon the Company’s relative shareholder return as compared to the rTSR and achievement of specified performance metrics, as defined in the award agreements. During the six-month period ended June 30, 2023, we granted additional performance stock units to certain employees that will be settled in cash. The cash paid upon vesting at the end of the service period is based upon performance against specified financial performance metrics and relative total shareholder return as compared to the rTSR, as defined in the award agreements. Compensation expense is recognized for the cash payment probable of being awarded based on the performance metrics. The fair value of these liability awards is measured at each reporting period until the awards are settled. These awards are classified as liabilities and reported in accrued expenses and other long-term obligations within our consolidated balance sheet. As of June 30, 2023, the total remaining unrecognized compensation cost related to cash-settled performance-based share-based awards was $ 4.3 million, which is expected to be recognized over a weighted average period of 2.1 years. ​ Restricted Stock Units During the three-month periods ended June 30, 2023 and 2022, we granted restricted stock units to our non-employee directors representing 20,358 and 30,500 shares of our common stock, respectively. The expense recognized for restricted stock units is equal to the closing stock price on the date of grant, which is recognized over the vesting period. Restricted stock units granted to each director are subject to such director’s continued service through the vesting date, which is one year from the date of grant. As of June 30, 2023, the total remaining unrecognized compensation cost related to restricted stock units was $ 1.5 million, which will be recognized over the remaining vesting period. ​ ​ 13. Segment Reporting. We report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of four product categories: peripheral intervention, cardiac intervention, custom procedural solutions, and OEM. Within these product categories, we sell a variety of products, including cardiology and radiology devices (which assist in diagnosing and treating coronary arterial disease, peripheral vascular disease and other non-vascular diseases), as well as embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, breast cancer localization and guidance, biopsy, and interventional oncology and spine devices. Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors. We evaluate the performance of our operating segments based on net sales and income from operations. 24 Table of Contents Financial information relating to our reportable operating segments and reconciliations to the consolidated totals for the three and six-month periods ended June 30, 2023 and 2022, were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Six Months Ended ​ June 30, June 30, ​ 2023 2022 2023 2022 Net sales ​ ​ ​ ​ Cardiovascular ​ $ 311,275 ​ $ 286,670 ​ $ 599,251 ​ $ 553,606 Endoscopy ​ 8,781 ​ 8,306 ​ 18,370 ​ 16,785 Total net sales ​ 320,056 ​ 294,976 ​ 617,621 ​ 570,391 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income from operations ​ ​ ​ ​ Cardiovascular ​ 26,464 ​ 21,275 ​ 50,398 ​ 34,401 Endoscopy ​ 2,348 ​ 1,981 ​ 4,797 ​ 4,088 Total income from operations ​ 28,812 ​ 23,256 ​ 55,195 ​ 38,489 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total other expense — net ​ ( 3,912 ) ​ ( 2,555 ) ​ ( 4,795 ) ​ ( 3,617 ) Income tax expense ​ 4,655 ​ 5,403 ​ 9,452 ​ 9,029 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income ​ $ 20,245 ​ $ 15,298 ​ $ 40,948 ​ $ 25,843 ​ ​ 14. Fair Value Measurements. Assets (Liabilities) Measured at Fair Value on a Recurring Basis Our financial assets and (liabilities) carried at fair value and measured on a recurring basis as of June 30, 2023 and December 31, 2022 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ Total Fair ​ Quoted prices in ​ Significant other ​ Significant ​ ​ Value at ​ active markets ​ observable inputs ​ unobservable inputs ​ June 30, 2023 (Level 1) (Level 2) (Level 3) Marketable securities (1) ​ $ 104 ​ $ 104 ​ $ — ​ $ — Interest rate contract asset, long-term (2) ​ $ 2,879 ​ $ — ​ $ 2,879 ​ $ — Foreign currency contract assets, current and long-term (3) ​ $ 7,353 ​ $ — ​ $ 7,353 ​ $ — Foreign currency contract liabilities, current and long-term (4) ​ $ ( 2,717 ) ​ $ — ​ $ ( 2,717 ) ​ $ — Contingent consideration liabilities ​ $ ( 3,581 ) ​ $ — ​ $ — ​ $ ( 3,581 ) ​ ​ ​ ​ ​ 25 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Measurements Using ​ ​ Total Fair ​ Quoted prices in ​ Significant other ​ Significant ​ ​ Value at ​ active markets ​ observable inputs ​ unobservable inputs ​ December 31, 2022 (Level 1) (Level 2) (Level 3) Marketable securities (1) ​ $ 138 ​ $ 138 ​ $ — ​ ​ — Interest rate contract asset, long-term (2) ​ $ 3,444 ​ $ — ​ $ 3,444 ​ $ — Foreign currency contract assets, current and long-term (3) ​ $ 4,783 ​ $ — ​ $ 4,783 ​ $ — Foreign currency contract liabilities, current and long-term (4) ​ $ ( 3,986 ) ​ $ — ​ $ ( 3,986 ) ​ $ — Contingent consideration liabilities ​ $ ( 18,073 ) ​ $ — ​ $ — ​ $ ( 18,073 ) (1) Our marketable securities, which consist entirely of available-for-sale equity securities, are valued using market prices in active markets. Level 1 instrument valuations are obtained from real-time quotes for transactions in active exchange markets involving identical assets. (2) The fair value of the interest rate contract is determined using Level 2 fair value inputs and is reported with other long-term assets in the consolidated balance sheets. (3) The fair value of the foreign currency contract assets (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as prepaid expenses and other current assets or other long-term assets in the consolidated balance sheets. (4) The fair value of the foreign currency contract liabilities (including those designated as hedging instruments and those not designated as hedging instruments) is determined using Level 2 fair value inputs and is recorded as accrued expenses or other long-term obligations in the consolidated balance sheets. ​ Certain of our past business combinations involve the potential for the payment of future contingent consideration, generally based on a percentage of future product sales or upon attaining specified future revenue or other milestones. The contingent consideration liability is re-measured at the estimated fair value at the end of each reporting period with the change in fair value recognized within operating expenses in the accompanying consolidated statements of income for such period. We measure the initial liability and re-measure the liability on a recurring basis using Level 3 inputs as defined under authoritative guidance for fair value measurements. Changes in the fair value of our contingent consideration liabilities during the three and six-month periods ended June 30, 2023 and 2022 consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Six Months Ended ​ June 30, June 30, ​ 2023 2022 2023 2022 Beginning balance ​ $ 16,000 ​ $ 26,333 ​ $ 18,073 ​ $ 48,234 ​ Contingent consideration expense ​ 1,094 ​ 1,187 ​ 1,615 ​ 3,787 ​ Contingent payments made ​ ( 13,513 ) ​ ( 10,094 ) ​ ( 16,107 ) ​ ( 34,585 ) ​ Effect of foreign exchange ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 10 ) ​ Ending balance ​ $ 3,581 ​ $ 17,426 ​ $ 3,581 ​ $ 17,426 ​ ​ As of June 30, 2023, $ 3.2 million in contingent consideration liability was included in other long-term obligations and $ 0.4 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet. As of December 31, 2022, $ 2.3 million in contingent consideration liability was included in other long-term obligations and $ 15.8 million in contingent consideration liability was included in accrued expenses in our consolidated balance sheet. Payments related to the settlement of the contingent consideration liability recognized at fair value as of the applicable acquisition date of $ 3.4 million and $ 32.8 million for the six-month periods ended June 30, 2023 and 2022, respectively, have been reflected as a cash outflow from financing activities in the accompanying consolidated statements of cash flows. Payments related to increases in the contingent consideration liability subsequent to the date of acquisition of $ 12.7 million and $ 1.8 million for the six-month periods ended June 30, 2023 and 2022, respectively, are reflected as operating cash flows. 26 Table of Contents The recurring Level 3 measurement of our contingent consideration liabilities included the following significant unobservable inputs at June 30, 2023 and December 31, 2022 (amounts in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value at ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ Valuation ​ ​ ​ ​ ​ Weighted Contingent consideration liability 2023 technique Unobservable inputs Range ​ Average (1) Revenue-based royalty payments contingent liability ​ $ 3,085 Discounted cash flow Discount rate ​ 12 % - 16 % ​ 14.8 % ​ ​ ​ Projected year of payments ​ 2023-2034 ​ 2028 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue milestones contingent liability ​ $ 95 Monte Carlo simulation Discount rate ​ 14.0 % ​ ​ ​ ​ ​ Projected year of payments ​ 2023-2039 ​ 2039 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regulatory approval contingent liability ​ $ 401 ​ Scenario-based method ​ Discount rate ​ 5.5 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Probability of milestone payment ​ 50.0 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Projected year of payment ​ 2023-2030 ​ 2030 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair value at ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ Valuation ​ ​ ​ ​ ​ Weighted Contingent consideration liability 2022 technique Unobservable inputs Range ​ Average (1) Revenue-based royalty payments contingent liability ​ $ 2,097 Discounted cash flow Discount rate ​ 14 % - 17 % ​ 15.7 % ​ ​ ​ Projected year of payments ​ 2023-2034 ​ 2026 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue milestones contingent liability ​ $ 13,064 Monte Carlo simulation Discount rate ​ 5.1 % - 14.0 % ​ 5.2 % ​ ​ ​ Projected year of payments ​ 2023-2033 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Regulatory approval contingent liability ​ $ 2,912 ​ Scenario-based method ​ Discount rate ​ 5.7 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Probability of milestone payment ​ 90 % ​ ​ ​ ​ ​ ​ ​ ​ ​ Projected year of payment ​ 2023-2030 ​ 2024 (1) Unobservable inputs were weighted by the relative fair value of the instruments. No weighted average is reported for contingent consideration liabilities without a range of unobservable inputs. ​ The contingent consideration liability is re-measured to fair value each reporting period. Significant increases or decreases in projected revenues, based on our most recent internal operational budgets and long-range strategic plans, discount rates or the time until payment is made would have resulted in a significantly lower or higher fair value measurement. Our determination of the fair value of the contingent consideration liability could change in future periods based upon our ongoing evaluation of these significant unobservable inputs. We intend to record any such change in fair value to operating expenses in our consolidated statements of income. 27 Table of Contents Contingent Payments to Related Parties As a former shareholder of Cianna Medical Inc. (“Cianna Medical”), a former Merit director was eligible for payments for the achievement of sales milestones specified in our merger agreement with Cianna Medical completed in 2018. The terms of the acquisition, including contingent consideration payments, were determined prior to the appointment of the former Cianna Medical shareholder as a Merit director. During the six-month period ended June 30, 2023, we made the final contingent payment to Cianna Medical shareholders, including $ 0.9 million paid to the former Merit director who is a former Cianna Medical shareholder. During the six-month period ended June 30, 2022, we made a contingent payment of $ 1.6 million. ​ Fair Value of Other Assets (Liabilities) ​ The carrying amount of cash and cash equivalents, receivables, and trade payables approximate fair value because of the immediate, short-term maturity of these financial instruments. Our long-term debt re-prices frequently due to variable rates and entails no significant changes in credit risk and, as a result, we believe the fair value of long-term debt approximates carrying value. The fair value of assets and liabilities whose carrying value approximates fair value is determined using Level 2 inputs, with the exception of cash and cash equivalents, which use Level 1 inputs. ​ We analyze our investments in privately-held companies to determine if they should be accounted for using the equity method based on our ability to exercise significant influence over operating and financial policies of the company in which we have invested. Investments not accounted for under the equity method of accounting are accounted for at cost minus impairment, if applicable, plus or minus changes in valuation resulting from observable transactions for identical or similar investments. ​ Impairment Charges ​ We recognize or disclose the fair value of certain assets, such as non-financial assets, primarily property and equipment, right-of-use operating lease assets, equity investments, intangible assets and goodwill in connection with impairment evaluations. Such assets are reported at carrying value and are not subject to recurring fair value measurements. We review our long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Fair value is generally determined based on discounted future cash flow. All our nonrecurring valuations use significant unobservable inputs and therefore fall under Level 3 of the fair value hierarchy. ​ Equity Investments. During the six-month period ended June 30, 2023, we recorded impairment charges of $ 270,000 associated with our previously-held equity investment in Bluegrass in connection with the asset acquisition completed on May 4, 2023 (see Note 4). Intangible Assets. During the six-month period ended June 30, 2023, we had no losses related to acquired intangible assets. During the six-month period ended June 30, 2022, we recorded an impairment charge of $ 1.7 million related to the acquired intangible assets from our August 2019 acquisition of STD Pharmaceutical (see Note 6). In addition to the intangible asset impairment, during the three-month period ended June 30, 2022, we recorded a loss within other expense – net of $ 1.3 million primarily associated with the transfer of net assets of the divested entity including approximately $ 1.0 million of cash and $ 1.2 million of inventory, partially offset by a gain of $ 1.0 million from reclassification of foreign currency translation gains. Current Expected Credit Losses ​ Our outstanding long-term notes receivable, including accrued interest and an allowance for current expected credit losses, were $ 2.4 million and $ 2.4 million as of June 30, 2023 and December 31, 2022, respectively. As of June 30, 2023 and December 31, 2022, we had an allowance for current expected credit losses of $ 296,000 and $ 281,000 , respectively, associated with these notes receivable. We assess the allowance for current expected credit losses on an individual security basis, due to the limited number of securities, using a probability of default model, which is based on relevant information about past events, including historical experience, current conditions and reasonable and supportable forecasts that affect the expected collectability of securities, and other security specific factors. 28 Table of Contents ​ The table below presents a rollforward of the allowance for current expected credit losses on our notes receivable for the three and six-month periods ended June 30, 2023 and 2022 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ ​ 2023 2022 ​ 2023 2022 Beginning balance ​ $ 290 ​ $ 199 ​ $ 281 ​ $ 199 Provision for credit loss expense ​ ​ 6 ​ ​ ( 7 ) ​ ​ 15 ​ ​ ( 7 ) Ending balance ​ $ 296 ​ $ 192 ​ $ 296 ​ $ 192 ​ ​ 15. Accumulated Other Comprehensive Income (Loss). The changes in each component of accumulated other comprehensive income (loss) for the three and six-month periods ended June 30, 2023 and 2022 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of April 1, 2023 $ 3,081 ​ $ ( 14,010 ) ​ $ ( 10,929 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 5,044 ​ ​ ( 1,201 ) ​ ​ 3,843 Income taxes ( 821 ) ​ ​ ( 15 ) ​ ​ ( 836 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ ( 658 ) ​ ​ ​ ​ ​ ( 658 ) Cost of sales ​ ( 333 ) ​ ​ ​ ​ ​ ( 333 ) Interest expense ​ ( 631 ) ​ ​ ​ ​ ​ ( 631 ) Net other comprehensive income (loss) ​ 2,601 ​ ​ ( 1,216 ) ​ ​ 1,385 ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of June 30, 2023 $ 5,682 ​ $ ( 15,226 ) ​ $ ( 9,544 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of April 1, 2022 $ ( 269 ) ​ $ ( 6,384 ) ​ $ ( 6,653 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 6,181 ​ ​ ( 7,943 ) ​ ​ ( 1,762 ) Income taxes ( 1,572 ) ​ ​ 60 ​ ​ ( 1,512 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ ( 198 ) ​ ​ ​ ​ ​ ( 198 ) Cost of sales ​ 263 ​ ​ ​ ​ ​ 263 Interest expense ​ 179 ​ ​ ​ ​ ​ 179 Other expense - net ​ ​ ​ ​ ( 1,036 ) ​ ​ ( 1,036 ) Net other comprehensive income (loss) ​ 4,853 ​ ​ ( 8,919 ) ​ ​ ( 4,066 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of June 30, 2022 $ 4,584 ​ $ ( 15,303 ) ​ $ ( 10,719 ) ​ 29 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of January 1, 2023 $ 4,366 ​ $ ( 15,916 ) ​ $ ( 11,550 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 5,164 ​ ​ 724 ​ ​ 5,888 Income taxes ( 415 ) ​ ​ ( 34 ) ​ ​ ( 449 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ ( 1,985 ) ​ ​ ​ ​ ​ ( 1,985 ) Cost of sales ​ ( 283 ) ​ ​ ​ ​ ​ ( 283 ) Interest expense ​ ( 1,165 ) ​ ​ ​ ​ ​ ( 1,165 ) Other expense — net ​ ​ ​ ​ ​ ​ ​ — Net other comprehensive income (loss) ​ 1,316 ​ ​ 690 ​ ​ 2,006 ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of June 30, 2023 $ 5,682 ​ $ ( 15,226 ) ​ $ ( 9,544 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash Flow Hedges Foreign Currency Translation Total Balance as of January 1, 2022 $ ( 2,464 ) ​ $ ( 5,527 ) ​ $ ( 7,991 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) 8,225 ​ ​ ( 8,736 ) ​ ​ ( 511 ) Income taxes ( 2,284 ) ​ ​ ( 4 ) ​ ​ ( 2,288 ) Reclassifications to: ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ 188 ​ ​ ​ ​ ​ 188 Cost of sales ​ 446 ​ ​ ​ ​ ​ 446 Interest expense ​ 473 ​ ​ ​ ​ ​ 473 Other expense - net ​ ​ ​ ​ ( 1,036 ) ​ ​ ( 1,036 ) Net other comprehensive income (loss) ​ 7,048 ​ ​ ( 9,776 ) ​ ​ ( 2,728 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance as of June 30, 2022 $ 4,584 ​ $ ( 15,303 ) ​ $ ( 10,719 ) ​ ​ ​ ​ ​ 30 Table of Contents