What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-24 compared with 2025-02-25 · 51 added, 54 removed, 127 unchanged (45% of the section changed)

11 unchanged sentences

Our revenue results for the year ended December 31, 2025 were driven primarily by demand in the U.S.

and favorable international sales trends, particularly in Europe, the Middle East and Africa (“EMEA”) and in the “Rest of World” (“ROW”) regions.

and favorable international sales trends, particularly in Europe, the Middle East and Africa (“EMEA”) region.

Gross profit as a percentage of sales was 48.7% for the year ended December 31, 2025 as compared to 47.4% for the year ended December 31, 2024.

Net income for the year ended December 31, 2025 was $128.5 million, or $2.13 per share, as compared to $120.4 million, or $2.03 per share, for the year ended December 31, 2024.

In July 2024, we executed an asset purchase agreement with EndoGastric Solutions, Inc.

(“EGS”), acquiring the EsophyX® Z+ device which delivers a durable, minimally invasive non-pharmacological treatment option for patients suffering from GERD.

In November 2024, we completed the acquisition of a portfolio of Lead Management products from Cook Medical.

On February 28, 2024, we introduced our “Continued Growth initiatives” Program with muti-year financial targets for the three-year period ending December 31, 2026, which reflects our commitment to better-position Merit for long-term, sustainable growth and enhanced profitability.

On December 20, 2024, we announced that the WRAPSODY® Cell-Impermeable Endoprosthesis has received premarket approval from the US Food and Drug Administration (FDA).

With this approval, Merit can begin commercialization of the device in the U.S.

In May 2025, we completed a merger transaction with Biolife Delaware, L.L.C.

(“Biolife”), a manufacturer of unique patented hemostatic devices under the brand names StatSeal® and WoundSeal®.

In November 2025, pursuant to the terms of an asset purchase agreement between Merit and Pentax of America, Inc., we acquired the C2 CryoBalloon® device and related technology.

In February 2024, we introduced our “Continued Growth initiatives” Program with muti-year financial targets for the three-year period ending December 31, 2026, which reflects our commitment to better-position Merit for long-term, sustainable growth and enhanced profitability.

Results of Operations

2 unchanged sentences

Research and development expenses

Impairment charges

Contingent consideration expense

9 unchanged sentences

Endoscopy Devices

*Commencing January 1, 2025, we reorganized our sales teams and product categories to include revenues from the sale of our spine devices under our OEM product category.

Revenue figures for 2024 and 2023 have been recast to reflect this realignment of our portfolio of spine products, representing approximately $22.6 million and $22.4 million in revenue, respectively, within the OEM product category to provide comparability between the reported periods.

Cardiovascular Sales.

1 unchanged sentence

Sales for the year ended December 31, 2025 were favorably affected by increased sales of:

(a) Peripheral intervention products, which increased by $49.9 million, or 9.9%, from the corresponding period of 2023.

This increase was driven primarily by sales of our access, radar localization, delivery systems, and drainage products.

(b) Cardiac intervention products, which increased by $12.5 million, or 3.5%, from the corresponding period of 2023.

This increase was driven primarily by sales of our cardiac rhythm management/electrophysiology (“CRM/EP”), fluid management, and access products, partially offset by a decrease in sales of our hemostasis products.

(a) Cardiac intervention products, which increased by $80.0 million, or 21.7%, from the corresponding period of 2024.

This increase was driven primarily by $35.3 million in incremental sales associated with products acquired from Cook in November 2024, $11.9 million in sales associated with products acquired in connection with the Biolife Merger in May 2025 and increased sales of our intervention, cardiac rhythm management/electrophysiology (“CRM/EP”), angiography, access and fluid management products.

(b) Peripheral intervention products, which increased by $47.1 million, or 8.8%, from the corresponding period of 2024.

This increase was driven primarily by increased sales of our embolotherapy, radar localization, access, delivery systems and drainage products .

(c) Custom procedural solutions products, which increased by $9.3 million, or 4.6% from the corresponding period of 2024.

This increase was driven primarily by increased sales of our kits and critical care products , offset partially by decreased sales of trays.

This increase was driven primarily by increased sales of our kits, trays and critical care products .

(d) OEM products, which increased by $5.0 million, or 2.5% from the corresponding period of 2024.

This increase was driven primarily by sales of our access, vertebral compression fracture, and fluid management products as well as our kits, partially offset by a decrease in sales of our CRM/EP products.

This increase was driven primarily by increased sales of our intervention, CRM/EP, kits and peripheral intervention products, offset partially by decreased sales of our access and coated tube and wire products.

Endoscopy Sales.

Our endoscopy sales for the year ended December 31, 2025 were $72.9 million, up 33.0%, when compared to sales for the year ended December 31, 2024 of $54.8 million.

Sales for the year ended December 31, 2024 were favorably affected by sales of our recently-acquired EsophyX® Z+ Device.

Sales for the year ended December 31, 2025 were favorably affected by increased sales of our EsophyX® Z+ device acquired from Endogastric Solutions, Inc.

in July 2024 .

Geographic Sales

5 unchanged sentences

The increase in our domestic sales in 2025 was driven primarily by our U.S.

direct, OEM and endoscopy businesses.

direct, endoscopy, and OEM businesses.

International Sales .

International sales for the year ended December 31, 2025 were $606.4 million, or 40.0% of net sales, up 9.1% when compared to 2024.

The increase in our international sales during 2024 was primarily a result of higher sales in EMEA, which increased $11.2 million or 4.8%, higher ROW sales which increased $8.9 million or 18.1%, and higher sales in our Asia Pacific region, which increased $5.3 million or 2.1%, compared to the corresponding period of 2023.

The increase in our international sales during 2025 was primarily a result of higher sales in EMEA, which increased $37.9 million or 15.3%, higher Rest of World (“ROW”) sales which increased $7.0 million or 12.2%, and higher sales in our Asia Pacific region, which increased $5.8 million or 2.3%, compared to the corresponding period of 2024.

Our international sales are subject to foreign currency exchange rate fluctuations between the natural currency of a foreign country and the U.S.

Foreign currency exchange rate fluctuations, calculated by using the applicable average foreign exchange rates for the prior year decreased sales (0.6)% for the year ended December 31, 2024 compared to 2023.

Foreign currency exchange rate fluctuations, calculated by using the applicable average foreign exchange rates for the prior year increased sales 0.3% for the year ended December 31, 2025 compared to 2024.

Our gross profit as a percentage of sales was 48.7%, 47.4%, and 46.4% for the years ended December 31, 2025, 2024 and 2023, respectively.

The increase in gross profit as a percentage of sales for 2024, as compared to 2023, was primarily due to increased sales combined with favorable changes in standard costs and product mix, partially offset by higher intangible amortization expense as a percentage of sales associated with acquisitions.

The increase in gross profit as a percentage of sales for 2025, as compared to 2024, was primarily due to favorable changes in pricing and product mix, partially offset by higher intangible amortization expense as a percentage of sales associated with acquisitions and unfavorable manufacturing variances.

Operating Expenses

2 unchanged sentences

SG&A expenses increased $55.5 million, or 13.9%, for the year ended December 31, 2025 compared to 2024.

The increase in SG&A expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to increased labor-related costs associated with an increase in headcount and higher variable compensation linked to company performance, an increase of stock-based compensation expense associated with new equity grants and variability in our stock price, and an increase in travel related costs associated with our sales and marketing activities, partially offset by a decrease in consulting costs primarily associated with our Foundations for Growth Program which ended in 2023.

The increase in SG&A expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily due to an increase in labor-related costs including (i) variable compensation associated with performance-based bonus programs, commissions associated with sales growth, as well as an increase in expense associated with both performance and non-performance based equity awards;

and (ii) headcount additions to support investment in the business and growth from acquisitions, including those in connection with the Cook Transaction and the Biolife Merger.

In addition, higher marketing, advertising, and travel expenditures contributed to the year‑over‑year increase in 2025.

Research and Development Expenses .

1 unchanged sentence

R&D expenses increased by $9.9 million or 11.3% to $97.4 million for the year ended December 31, 2025, compared to $87.5 million in 2024.

The increase in R&D expenses for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily related to labor-related costs consistent with an increase in headcount and an increase materials and scrap utilized in R&D, partially offset by lower regulatory costs related to Medical Device Rgulation in the E.U.

Impairment Charges .

During the year ended December 31, 2024, we recognized no impairment costs.

The increase in R&D expenses for the year ended December 31, 2025 compared to the year ended December 31, 2024 was primarily related to increased labor-related costs including variable compensation associated with bonus and equity award programs and increased consulting services and clinical trials.

Contingent Consideration Expense .

1 unchanged sentence

The expense in each fiscal year relates to changes in the probability and timing of achieving certain revenue and operational milestones, as well as expense for the passage of time.

Acquired In-process Research and Development .

During the year ended December 31, 2024, we recognized no acquired in-process research and development costs.

Operating Income

5 unchanged sentences

Our cardiovascular operating income for the year ended December 31, 2025 was $166.1 million, compared to cardiovascular operating income of $150.2 million for the year ended December 31, 2024.

This increase in cardiovascular operating income was primarily related to higher sales and gross profit, decreased acquired in-process research and development charges, and decreased contingent consideration expense ($0.4 million in 2024 compared to $1.7 million in 2023), partially offset by higher SG&A and R&D expenses.

This increase in cardiovascular operating income was primarily related to increased sales and gross profit, partially offset by increased SG&A and R&D expenses.

Endoscopy Operating Income.

Our endoscopy operating income for the year ended December 31, 2025 was $18.6 million, compared to operating income of $5.5 million for the year ended December 31, 2024.

This decrease in endoscopy operating income relative to 2023 was primarily due to higher SG&A expense associated with the acquisition and integration of operations acquired from EGS and higher R&D expenses, partially offset by higher sales.

This increase in endoscopy operating income relative to 2024 was primarily due to increased sales and gross profit.

Other Income (Expense)

Our other expense for the years ended December 31, 2025, 2024 and 2023 was $13.8 million, $5.7 million, and $11.9 million, respectively.

The decrease in other expense for 2024 compared to 2023 was principally the result of an increase in interest income associated with and increased cash and cash equivalents and reduced borrowings under the Amended Fourth A&R Credit Agreement, partially offset by interest expense associated with outstanding convertible debt.

The increase in other expense for 2025 compared to 2024 was principally the result of a decrease in interest income associated with decreased average cash and cash equivalents during the period, partially offset by reduced interest expense associated with borrowings under the Amended Fourth A&R Credit Agreement.

Effective Tax Rate

Our provision for income taxes for the years ended December 31, 2025, 2024 and 2023 was a tax expense of $42.4 million, $29.6 million and $17.7 million, respectively, which resulted in an effective income tax rate of 24.8%, 19.8%, and 15.8%, respectively.

The increase in the effective income tax rate for 2024 compared to 2023 was primarily the result of decreased benefit from items such as stock-based compensation and foreign tax credit utilization.

The increase in the effective income tax rate for 2025 compared to 2024 was primarily the result of decreased benefit from discrete items such as share-based compensation and contingent liabilities and increased permanent tax differences in various jurisdictions and items related to the budget reconciliation package enacted during the period and retroactive to the beginning of the year.

Our net income for the years ended December 31, 2025, 2024 and 2023 was $128.5 million, $120.4 million, and $94.4 million, respectively.

The increase in net income for 2024, when compared to 2023, was primarily related to higher sales, higher gross margin as a percentage of sales, decreased contingent consideration expense ($0.4 million in 2024 compared to $1.7 million in 2023), decreased acquired in-process research and development expense ($0 in 2024 compared to $1.6 million in 2023) and decreased other expenses;

partially offset by higher SG&A, R&D, and income tax expense .

The increase in net income for 2025, when compared to 2024, was primarily related to higher sales and higher gross margin as a percentage of sales;

partially offset by higher SG&A, R&D, other expense and income tax expense .

Liquidity and Capital Resources

6 unchanged sentences

Cash held by our subsidiary in China is subject to local laws and regulations that require government approval for the transfer of such funds to entities located outside of China.

As of December 31, 2024 and 2023, we had cash and cash equivalents, including restricted cash, of $18.1 million and $17.6 million, respectively, held by our subsidiary in China.

As of December 31, 2025 and 2024, cash and cash equivalents, including restricted cash, held by our subsidiary in China was $20.0 million and $18.1 million, respectively.

Cash flows provided by operating activities.

3 unchanged sentences

● Net income was $128.5 million and $120.4 million for the years ended December 31, 2025 and 2024, respectively.

● Cash used for inventories was $2.3 million and $32.1 million for the years ended December 31, 2024 and 2023, respectively due primarily to efforts to normalize inventory levels following prior year investments to build bridge inventory for production line transfers and increases in safety stock due to vendor supply delays.

● Cash provided by (used for) accrued expenses was $9.7 million and $(2.5) million for the years ended December 31, 2024 and 2023, respectively, primarily due to an increase in accrued interest and the associated expense related to our convertible debt.

● Cash paid for income taxes was $45.0 million and $31.5 million for the years ended December 31, 2024 and 2023, respectively, primarily due to increases in income before tax.

● Depreciation and amortization was $123.2 million and $102.7 million for the years ended December 31, 2025 and 2024, respectively, primarily due to an increase in intangible assets as a result of acquisitions.

● Cash paid for income taxes was $31.4 million and $45.0 million for the years ended December 31, 2025 and 2024, respectively, primarily as the result of increased taxes payable and an increased portion of our total tax expense relating to deferred tax expense.

● Stock-based compensation expense was $43.5 million and $28.5 million for the years ended December 31, 2025 and 2024, respectively.

The increase in stock-based compensation expense during 2025 is primarily associated with the increase in the Company’s stock price and grants of restricted stock units.

● Cash used for inventories was $21.6 million and $2.3 million for the years ended December 31, 2025 and 2024, respectively.

The increase in inventories during 2025 was principally associated with our strategy to proactively invest in our inventory balances to encourage high customer service levels, as well as to build bridge inventory for production line transfers and increases in safety stock due to vendor supply delays.

Cash flows used in investing activities.

1 unchanged sentence

We invested in capital expenditures for property and equipment of $81.7 million, $35.1 million, and $34.3 million for the years ended December 31, 2025, 2024 and 2023, respectively.

Capital expenditures in each period were primarily related to investment in property and equipment to support development and production of our products.

Capital expenditures in each period were primarily related to investment in property and equipment to support development and production of our products and in 2025 includes costs for the construction of a new distribution facility in South Jordan, Utah.

Historically, we have incurred significant expenses in connection with facility construction, production automation, product development and the introduction of new products.

We anticipate that we will spend approximately $80 to $100 million in 2026 for property and equipment.

Cash outflows invested in acquisitions and other equity investments for the year ended December 31, 2024 were $320.2 million and were primarily related to payments required by our asset purchase agreements with Cook Medical Holdings LLC ($210.0 million), Endogastric Solutions, Inc.

Cash outflows invested in acquisitions for the year ended December 31, 2025 were $144.8 million and were primarily related to payments required by our merger agreement with Biolife LLC ($120.0 million) and our asset purchase agreement with Pentax of America, Inc.

($19 million).

Cash outlfows invested in acquisitions for the year ended December 31, 2024 were $320.2 million and were primarily related to payments required by our asset purchase agreements with Cook Medical Holdings LLC ($210.0 million), Endogastric Solutions, Inc.

($105.0 million) and Scholten Surgical Instruments, Inc.

3 unchanged sentences

($32.7 million) and ART ($1.5 million).

Cash outflows invested in acquisitions for the year ended December 31, 2022 were $6.9 million and were primarily related to our $3.0 million upfront payment in our purchase of Restore Endosystems LLC and our $2.5 million payment in our purchase of BioTrace Medical, Inc.

Cash flows provided by (used in) financing activities.

Cash (used in) provided by financing activities for the years ended December 31, 2024, 2023 and 2022 was $(60.0) million, $559.3 million, and $(60.3) million, respectively.

Cash provided by (used in) financing activities for the years ended December 31, 2025, 2024 and 2023 was $16.0 million, $(60.0) million, and $559.3 million, respectively.

In 2025 we had cash proceeds from the issuance of common stock of $28.2 million.

In 2024 we decreased our net borrowings under our Amended Fourth A&R Credit Agreement by $99.1 million and had cash proceeds from the issuance of common stock of $40.9 million.

In 2023 we issued convertible debt of $747.5 million, paid $66.5 million for the purchase of capped call options, and decreased our net borrowings under our Amended Fourth A&R Credit Agreement by $99.1 million.

In 2022 we decreased our net borrowings under our Third Amended Credit Agreement by $44.9 million and paid contingent consideration of $32.9 million, which is classified as a financing activity, principally related to our acquisitions of Cianna Medical Inc.

(“Cianna Medical”) and Vascular Insights LLC (“Vascular Insights”).

As of December 31, 2025, we had outstanding borrowings of $747.5 million and issued letter of credit guarantees of $2.8 million, with additional available borrowings of approximately $697 million under the Amended Fourth A&R Credit Agreement, based on the leverage ratio required pursuant to the Amended Fourth A&R Credit Agreement.

Our interest rate as of December 31, 2024 was a fixed rate of 3.0% on our Convertible Notes.

Our interest rate as of December 31, 2023 was a fixed rate of 3.0% on our Convertible Notes, a fixed rate of 3.39% on $75 million as a result of an interest rate swap, and a variable floating rate of 7.21%% on $24.1 million.

The foregoing fixed rates are exclusive of potential future changes in the applicable margin associated with our variable rate debt under the Amended Fourth A&R Credit Agreement.

See Note 8 Debt and Note 9 Derivatives to our consolidated financial statements set forth in Item 8 of this report for additional details regarding the Amended Fourth A&R Credit Agreement, Convertible Notes, and our interest rate swap.

Our interest rate as of December 31, 2025 and 2024 was a fixed rate of 3.0% on our Convertible Notes.

See Note 8 Debt to our consolidated financial statements set forth in Item 8 of this report for additional details regarding the Amended Fourth A&R Credit Agreement and our Convertible Notes.

We currently believe that our existing cash balances, anticipated future cash flows from operations and borrowings under our long-term debt agreements will be adequate to fund our current and currently planned future operations for the next twelve months and the foreseeable future.

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We allocate any excess purchase price over the fair value of the net tangible and identifiable intangible assets acquired in a business combination to goodwill.

We base the fair value of identifiable intangible assets acquired in a business combination on valuations that use information and assumptions that a market

participant would use, including assumptions for estimated revenue projections, growth rates, cash flows, discount rates, useful life, and other relevant assumptions.

We base the fair value of identifiable intangible assets acquired in a business combination on valuations that use information and assumptions that a market participant would use, including assumptions for estimated revenue projections, growth rates, cash flows, discount rates, useful life, and other relevant assumptions.

We test our goodwill balances for impairment annually as of July 1, or whenever impairment indicators arise.

When impairment indicators are identified, we may elect to perform an optional qualitative assessment to determine whether it is more likely than not that the fair value of our reporting units has fallen below their carrying value.

During our annual impairment test performed as of July 1, we utilized four reporting units in evaluating goodwill for impairment using a quantitative assessment, which uses a combination of a guideline public company market-based approach and a discounted cash flow income-based approach.

Our election to perform a qualitative impairment assessment for an individual reporting unit in a given year is influenced by a number of factors, including, but not limited to, the size of the reporting unit's goodwill, the significance of the excess of the reporting unit's estimated fair value over carrying value at the last quantitative assessment date, the amount of time since the last quantitative analysis was performed, and other performance and market indicators.

During a qualitative assessment, if we determine that it is not more likely than not that the implied fair value of the goodwill is less than its carrying amount, no further testing is necessary.

If we do not perform a qualitative assesment, or we determine that it is more likely than not that the implied fair value of the goodwill is less than its carrying amount, we perform a quantitative assessment, which uses a combination of a guideline public company market-based approach and a discounted cash flow income-based approach.

The quantitative assessment considers whether the carrying amount of a reporting unit exceeds its fair value, in which case an impairment charge is recorded to the extent the reporting unit’s carrying value exceeds its fair value.

This analysis requires significant judgment, including estimation of the amount, timing and duration of future cash flows, which is based on internal forecasts, and a determination of a discount rate based on our weighted average cost of capital.

During our annual test of goodwill balances in 2024, which was completed during the third quarter of 2024, we determined that the fair value of each reporting unit with goodwill exceeded the carrying amount by a significant amount.

During our annual impairment test performed during the third quarter of 2025, we evaluated each of our four reporting units using a qualitative assessment.

As a result of the assessment, we determined that it was not more likely than not that the implied fair value was less than its carrying amount for each of our four reporting units, and no detailed quantitative assessment was necessary.

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.

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In-process technology intangible assets, which are not subject to amortization until projects reach commercialization, are assessed for impairment at least annually and more frequently if events occur that would indicate a potential reduction in the fair value of the assets below their carrying value.

During the year ended December 31, 2022, we identified indicators of impairment associated with certain acquired intangible assets within the asset groups based on our qualitative assessment.

During the year ended December 31, 2022, we recorded total impairment charges associated with intangible assets in our cardiovascular segment of $1.7 million.

We did not have any goodwill or intangible asset impairments for the years ended December 31, 2025, 2024 and 2023.

These expenses are reflected within impairment charges in our consolidated statements of income.

The primary factors driving impairment of certain intangible assets were planned closure and restructuring activities and uncertainty about future product development and commercialization associated with certain acquired technologies.

See Note 5 Goodwill and Intangible Assets to our consolidated financial statements set forth in Item 8 of this report for additional details regarding impairments of intangible assets.

See Note 5 Goodwill and Intangible Assets to our consolidated financial statements set forth in Item 8 of this report for additional details regarding goodwill and intangible asset balances.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis