Merit Medical Systems, Inc. (MMSI) Earnings Call Transcript & Summary

Good afternoon. Welcome to the Merit Medical Systems, Inc. 2020 Annual Meeting of Shareholders. I would now like to turn the call over to Fred Lampropoulos, Merit's Founder, Chairman of the Board, Chief Executive Officer and President. Please go ahead, sir.

Good afternoon, ladies and gentlemen, and welcome to our 2020 Annual Meeting of Shareholders. I hope you're all staying safe. And I hope, along with the whole Merit family, we want to express our appreciation and gratitude for everyone on the front line fighting this pandemic and caring for those who have been adversely impacted. Today's virtual meeting is a live audio webcast. In fact, it's our first. Our directors, director nominees, executive officers and employees as well as representatives from our registered public accounting firm, Deloitte & Touche, are attending today's meeting through the webcast. They will be able to assist with questions during the Q&A portion of our meeting. As is our custom, we will conduct the business portion of our meeting first and then review the company's recent business activities. We will then answer the questions submitted online. And please note that you may vote your shares online anytime during this meeting before the closing of the polls. This meeting has now officially come to order. Thank you again for joining us. And now let me turn the meeting over to Brian Lloyd, our Chief Legal Officer and Corporate Secretary. Brian?

Thank you, Fred. We are conducting this meeting in accordance with our third amended and restated bylaws and the meeting rules. In order to ensure that the business of the meeting proceeds in an orderly fashion, we ask that you please observe the meeting rules. These rules are available on the meeting website. As a reminder, you may submit questions at any time before the end of the Q&A session. Some of our comments and responses to your questions during today's meeting may include forward-looking statements that are based on certain assumptions and are subject to a number of risks and uncertainties. The risks, uncertainties and assumptions that could affect these forward-looking statements include risks that are described in our SEC reports, including our annual report on Form 10-K for the year ended December 31, 2019, as amended. I'd also like to point out that the information presented at this meeting may include references to amounts that are expressed on a non-GAAP basis. A reconciliation of such non-GAAP amounts to GAAP and other information related to these non-GAAP measures is available in our SEC filings and on our website. Merit's agents have certified that notice of this meeting was provided beginning on May 27, 2020, to all shareholders of record as of April 30, 2020, the record date for the meeting. Copies of those certifications are in my possession. I therefore declare that legal notice of the meeting has been duly given. The Board of Directors has appointed Alan Rex, Merit's Director of Internal Audit; and Dale Stewart Merit's International Controller, as the inspectors of election for this meeting. Both inspectors are present at the meeting today and have taken and signed an Oath as inspectors of election. This document will be filed with the minutes of this meeting. As inspectors of election, Messrs. Rex and Stewart have informed me that the majority of the outstanding shares held of record as of close of business on the record date are represented to this meeting. I declare that there is a quorum present and that we may proceed with the business of the meeting. Please remember that you may vote your shares online anytime during this meeting before the closing of the polls.

Thank you, Brian. There are 3 items of business on today's agenda. In accordance with Merit's third amended and restated bylaws, these are the only proposals to be voted on at the meeting. The proposals to be voted on at this meeting are described in our proxy statement that was made available to all shareholders. The first item of business is the election of directors to serve until 2023 annual meeting and until their successors are elected and qualified. The nominees for directors of the company are Lonny J. Carpenter, David K. Floyd and James T. Hogan. The second item of business is the approval on an advisory basis of the compensation of the company's named executive officers as described in the proxy statement. The third item of business is the ratification of the appointment of Deloitte & Touche LLP as the independent registered public accounting firm of the company for the fiscal year ending December 31, 2020. Now this concludes the voting at today's meeting, and the polls for each matter to be voted on at this meeting are now closed. The inspectors of election have tallied the votes, and I will now announce the preliminary results. As of this time, all 3 directors have been elected to serve until the 2023 annual meeting or until their successes are duly elected and qualified. The shareholders have, on an advisory basis, voted to approve the compensation of the company's named executive officers. And Deloitte Touche LLP has been ratified as the company's independent registered public accounting firm for the fiscal year ended December 31, 2020. Now these, as I have mentioned, are preliminary results of voting. The final voting results will be reported in our report filed with the Securities and Exchange Commission, and a report of the inspector of elections, which will be maintained in the company's corporate records with the minutes of these meetings. Let me start today by, first of all, thanking the outgoing directors. There are four. Nolan Karras, who has been our lead director. Nolan has worked tirelessly and has been a great adviser and helped take his experience on previous public Boards and has helped us to, we think, build a better company as regards governance and particularly enterprise risk management, looking at the things that can go wrong. Secondly, and certainly a business partner for a very, very long time, almost 30 years. Kent Stanger and I worked together at Utah Medical. We were the founders of Merit Medical. And I recall Kent and I drawing out some of our product ideas on a napkin a long time ago. Kent has put his heart and soul into the business and been a good adviser to me. And Kent, I want to thank you for all of your efforts. Dr. David Liu. Dr. Liu, as many of you know, is a board-certified oncologist and an interventional radiologist. And from an advice point of view, I relied on David to talk to me about embolics, peripheral procedures and the things that Merit was focusing on, and he was a great adviser. Frank Miller. Dr. Miller and I have known each other for many, many years. We would literally sit around the kitchen table in his home and discuss procedures, competitors, important issues as regards features and benefits of products and strategies for many, many, many years. When I needed somebody to be in a location far from our headquarters, it was Frank Miller who got on a plane late in the evenings and flew all night long to New Zealand or to Peoria or to other areas where he would be scrubbed in and observing procedures in the morning. These are 4 good men who have served the company well, and I want to sincerely thank all of them. Let me go on to our new directors. I make you know, first of all, as shareholders that we have spent substantial time onboarding the new directors. We have had a number of training and advisory meetings in which we have briefed them on financial objectives, our forecast, our sales and marketing silos and organization. We've talked about legal issues. And we still have many more sessions in which we will continue to onboard these directors to make sure that they have adequate knowledge of the company and our culture. I think those are all very, very important. Lonny Carpenter is a former West Pointer. And I like military people. I have a great affinity for the military in which I served. And in fact, I served in a training class that I believe I was the only reserve officer with 453 officers from West Point. And so I have a great respect, but also for his business acumen. He's been with Stryker for many, many years and other ventures, is well versed in growth and the challenges of growth, and he is a welcome addition. David Floyd. Very similar background, not military, but nevertheless, I think he told me once his dad was a Marine, and that's good enough for me. He is -- by the way, had some troubles traveling today. Hopes to attend the directors' meeting following this meeting, which is a private meeting, but just so that David is -- had a little bit of difficulty, as I suppose all of us do in these interesting and challenging times. David also has a background at Stryker. He has a lot of international experience. And we believe that he is going to be someone that is going to be of great value. And then finally, James Hogan. Jim, I'd like to call him Jim, is formerly with Medtronic. A lot of international experience. Once again, he lived in Europe for, I believe, almost 15 years and oversaw not only the European theater, but also Central and South America. So that business experience with 3 seasoned executives, I think, is going to be very, very helpful as the company now navigates and builds our business. So this is, in many ways, heavy on my heart and, in other ways, very, very exciting to have these new advisers, new Board members that we will sign to various committees, and we look forward to their input. And in fact, in our conversations, in our initial interviews, all the members of the Board, including those who are outgoing, were very, very impressed with the abilities and the credentials of these individuals. So I, again, want to thank everybody for past service and look forward to serving with the new directors. A few items on the business side of things. As many of you know, recently, the WRAPSODY Endovascular Stent System was approved in Europe. We believe it is one of the platforms for the future. We have many additional products and ideas that we are working on for this very, very exciting opportunity. We have -- are in the process of launching the product in Europe, and we would expect that our procedures and our new implantations will start taking place in the next few weeks. So we're very excited about that. And then I think, finally, the challenges of the times. I have Raul Parra sitting in the room with me, our Chief Financial Officer. And we have spent endless hours of sizing the business, looking at the inputs and the outputs, looking at the global circumstances, and needless to say, they're challenging. That being said, I believe that Merit has accepted those challenges, and I think we have sized the business. And again, in fairness, we did have a 6-month head start. I think we all know that in 2019, we stubbed our toe. Some will say we fell on our face. That being said, we got up. We brushed ourselves off. And I think in a relatively short period of time, you saw the results and the improvements in the fourth quarter and in the first quarter. And we're looking forward in the next 3 or 4 weeks of reporting our second quarter to you. Business is improving, albeit slowly. And by that, I mean, we are not seeing a V. And our expectation is -- as a company is that business will continue to improve as we presently see it. But as all of you are aware, there are many challenges out there. In the state of Utah, we are hitting all-time records of patients with COVID-19. Now is it because there's more testing? Is it because it's spreading? What are all the circumstances? Now those are challenges for our state labs and for others. I can tell you that all Merit plants globally are operating. Merit is operating under all CDD -- CDC standards. We are considered as an employer of need. And we have done things that are over and above the things that are required, separations, daily temperature. Many things are required, but I think as I look around at our manufacturing facilities where our engineering staff have put into place separation barriers in our cafeteria -- our campus is closed. We just don't allow people to go wandering around or come onto the campus. And most people are working from home, as are most of you on this call today. Generally, we are as well, but we come into the office from time to time during the week. But I can assure you that we visit all of our facilities several times a week to check on the welfare of our employees and to check on the business in general. When will things return to normal? I have no idea. However, what I do know is this, Merit is building products that help to test, that help health care workers to deliver the proper therapies. We have sized the business correctly, I believe. And unless there's some change, we believe that all we need to do is continue to march, pay attention to the details and continue to set goals that are both attainable but -- and which we have to strive. So I'm actually very positive about the future, about our -- the things that we've put into place. And for just a moment, I'm going to let Raul Parra. Raul, I -- didn't warn me about this, but take a minute or so and just tell them about the things that we're doing and the things you're involved in.

Thanks, Fred. I think as we look back during our first quarter call, we did speak about a gradual return, which is what we anticipated and we planned for. We made reference to a swoosh. I think we're experiencing that. And so I think we're very well prepared for what we are seeing. I think there's a level of excitement about the business. I think we've done the right things. And we feel like we've set the company up for a good return when things get back to normal. I would say that, again, everything that's happened, we anticipated and have been reacting to it. We continue to monitor the business on a weekly basis and make adjustments as necessary. But we look forward to reporting our Q2 call.

Well, Raul, thank you very much, and I agree with you. Again, we don't know what the outcomes are going to be, but we do know that the business is here to withstand. We've not had to draw on any of our facilities. We have almost $0.25 million -- a billion dollars, excuse me, $0.25 billion available to us. But we think we have adequate reserves and cash. And because of the sizing of the business, I think we're doing just fine. I want to thank -- before we move on, I want to thank our operational staff. When you have to make all of these changes and still keep production and lower in some areas and increase in others, it's a real challenge. And I'm pleased with the things that we've done. I'm also pleased, and as many of you know, we have our own medical clinic on site. I cannot tell you how fortunate we are to have Dr. Nicole Priest, who looks after interfaces with the state health department, who interfaces with all of the facilities worldwide. And there's a place to go on a person with knowledge. And I think having that capability has been of extraordinary value to the company. So with that said, I believe that what we'd like to do at this point, Brian, is, first of all, welcome our new directors as we have. And I'd also like, as I mentioned, to thank our departing directors one more time. Now what I'd like to do is after -- we don't have a formal business presentation other than the things that we've said. So what I would like to do now, and this is about the shortest annual meeting I believe we've ever had, is we will take some questions. But what I'd like to do is to the annual meeting of shareholders is now adjourned. It is now time for the Q&A session. So if you have a question, you may type it in, in the box provided on today's virtual platform, and Brian will read the questions. And we'll let you do that now, and we'll answer them to the best of our ability before we conclude our meeting. Ladies and gentlemen, we await your questions.

Fred, we don't appear to have any questions in the queue.

Well, we should do this more often. This is very expedient. And again, ladies and gentlemen, I want to thank you for your attendance. We have conducted the business that was necessary under our bylaws. And so at this time, the meeting has concluded. Thank you for attending today. You may now disconnect. God bless you all. Thank you.

This now concludes the meeting. Thank you for joining, and have a pleasant day.