Please stand by and welcome to the Merit Medical Systems Fourth Quarter 2024 Earnings Conference Call. At this time, all participants are placed in listen-only mode. Please note that this conference call is being recorded and the recording will be available on the Company's website for replay shortly. I would now like to turn the call over to Mr. Fred Lampropoulos, Merit Medical Systems' Founder, Chairman, and Chief Executive Officer. Please go ahead, sir.

Thank you, and welcome, everyone. I am joined on the call today by Raul Parra, our Chief Financial Officer and Treasurer; and Brian Lloyd, our Chief Legal Officer and Corporate Secretary. Brian, would you mind taking us through the safe harbor statements, please?

Thank you, Fred. This presentation contains forward-looking statements that receive safe harbor protection under federal securities laws. Although we believe these forward-looking statements are based upon reasonable assumptions, they are subject to risks and uncertainties. The realization of any of these risks or uncertainties, as well as extraordinary events or transactions impacting our company, could cause actual results to differ materially from the expectations and projections expressed or implied by our forward-looking statements. In addition, any forward-looking statements represent our views only as of today, February 25, 2025, and should not be relied upon as representing our views as of any other date. We specifically disclaim any obligation to update such statements, except as required by applicable law. Please refer to the section titled Cautionary Statement regarding Forward-Looking Statements in today's press release and presentation for important information regarding such statements. For a discussion of factors that could cause actual results to differ from these forward-looking statements, please also refer to our most recent filings with the SEC, which are available on our website. Our financial statements are prepared in accordance with accounting principles, which are generally accepted in the United States. However, we believe certain non-GAAP financial measures provide investors with useful information regarding the underlying business trends and performance of our ongoing operations and can be useful for period-over-period comparisons of such operations. This presentation also contains certain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to the most directly comparable U.S. GAAP measures is included in today's press release and presentation furnished to the SEC under Form 8-K. Please refer to the section of our press release and presentation entitled Non-GAAP Financial Measures for important information regarding non-GAAP financial measures discussed on this call. Readers should consider non-GAAP financial measures in addition to, not as a substitute for financial reporting measures prepared in accordance with GAAP. Please note that these calculations may not be comparable with similarly titled measures of other companies. Both today's press release and our presentation are available on the Investors page of our website. I will now turn the call back to Fred.

Thank you, Brian. Let me start with a brief agenda of what we will cover during our prepared remarks. I will start with a summary of our fourth quarter and full year 2024 results. Then Raul will provide a more in-depth review of our quarterly financial results and our financial guidance for 2025, which we introduced in today's press release. Then, we will open the call for your questions. Beginning with a review of the fourth quarter results, we reported total revenue of $355.2 million, up 9% year-over-year on a GAAP basis and up 10% year-over-year on a constant currency basis. The constant currency revenue growth we delivered in the fourth quarter exceeded the high end of the range of growth expectations that we outlined in our Q3 earnings call. Specifically, we expected constant currency revenue growth for the fourth quarter in the range of 6% to 9% year-over-year. The better-than-expected total constant currency revenue results were driven by strong organic growth with contributions from acquired products coming in largely in line with what our fourth quarter guidance had assumed. With respect to our profitability performance in the fourth quarter, we delivered financial results that significantly exceeded our expectations. We leveraged the stronger-than-expected revenue results to deliver non-GAAP operating profit growth of 30% and a non-GAAP operating margin of 19.6% of sales, up approximately 305 basis points year-over-year. We also delivered 26% growth in our non-GAAP earnings per share, which exceeded the high end of our expectations as well. We were pleased to deliver strong performance in the fourth quarter, capping off an impressive year of operating and financial performance in 2024, highlighted by more than 8% total constant currency revenue growth, including 6% organic constant currency growth. Significant improvements in our profitability profile with a 51.7% non-GAAP gross margin and a 19% non-GAAP operating margin, both of which are records for Merit, and perhaps most importantly, we delivered strong free cash flow generation of more than $185 million, up 67% year over year. This performance was a direct result of our team's continued hard work and commitment to our strategic objectives. We are very proud of the strong execution our team delivered in 2024. We believe our fourth quarter results reflect continued strong momentum in the business, and we are confident in our team's ability to deliver the financial guidance for 2025 we introduced in today's press release, in which Raul will review in detail later on in the call. We are focused on delivering continued strong execution, solid constant currency growth, improving profitability, and strong free cash flow in 2025, as well as continued progress in our continued growth initiatives CGI program and related financial targets for the three-year period ending December 31, 2026. Now, with that, let me turn the time over to Raul for an in-depth review of our quarterly financial results and our financial guidance for 2025. Raul?

Thank you, Fred. I will start with a detailed review of our revenue results in the fourth quarter, beginning with the sales performance in each of our primary reportable product categories. Note, unless otherwise stated, all growth rates are approximated and presented on both a year-over-year and constant currency basis. Fourth quarter total revenue growth was driven by 8% growth in our Cardiovascular segment and 88% growth in our Endoscopy segment. Cardiovascular segment sales exceeded the high end of expectations we outlined on our third quarter call. Our total revenue results included approximately $7.6 million of revenue from our acquisition of EndoGastric Solutions and approximately $5.5 million of revenue from our acquisition of the lead management product portfolio from Cook Medical. Excluding sales of acquired products, segment revenue growth on an organic constant currency basis was 6.1% and 6.5% for our Cardiovascular and Endoscopy segments, respectively. Turning to a review of our fourth quarter revenue results by product category. Sales of our Peripheral Intervention or PI products increased 5.5% and was the largest driver of cardiovascular segment upside versus the high end of our growth expectations for the quarter. Growth in the PI product category was driven by the following factors. Sales of our axis and embolotherapy products increased in the low teens. Delivery systems product sales increased 28% and radar localization product sales increased 9%. Cardiac Intervention product sales increased 7%, slightly above the high end of our growth expectations, driven primarily by strong sales of EP CRM products and to a lesser extent growth in sales of fluid management products. Excluding the contributions from the sale of acquired products, Cardiac Intervention product sales increased approximately 1% on an organic constant currency basis. Sales of our Custom Procedural Solutions or CPS products increased 3.5%, which was in line with…

Thank you, Raul. Before we open the call for questions, I just wanted to add that the U.S. WRAPSODY CIE program is progressing well, and we are very much looking forward to the presentation of 12-month AVF data from our WRAPSODY WAVE trial at the Society of Interventional Radiology on Sunday, March 30th. That wraps up our prepared remarks. Operator, would you now open the lineup for questions?

Thank you, sir. [Operator Instructions] And the first question today will be coming from the line of Jason Bednar of Piper Sandler. Your line is open.

Hey, good afternoon. Congrats on a nice finish to the year here, guys. Raul, I want to start with the EPS guidance. I've gotten a few questions here. I think it's the one thing that maybe surprised folks just given how strong the business has been because it's a little bit lighter than The Street. It seems like maybe some of that's coming from the accounting on the convertible node. But are there any other factors that you'd identify as maybe influencing the conservative EPS guide or things that we should be thinking about that maybe weren't in-street models before today?

Yes, no, look, it's a great question. Obviously, super excited about the year that we're putting together, super excited about the performance for 2024. I think it was probably one of the best, if not the best, financial performance we've ever put together. Just a solid, strong beat all around. But organic constant currency on the revenue side, 5.3% to 6.6%, 40 to 80 basis points on the operating margin. As far as the EPS growth, there's two things that I want everybody to kind of consider. The first one is we've got an additional $5 million of interest expense versus the interest income of $1 million last year. Recall, we had a kind of a large cash balance last year. We did the acquisitions. So, when you think about that, that's roughly about $0.8 of headwind to EPS growth. And then the second one, which is, probably more important, I want to make sure I highlight it because there's a disconnect between the hedge that we bought and the gap accounting that on how you treat the dilution for the convert. So that, that's going to be $0.11. There's an incremental 1.8 million shares that we've added that, essentially impacts our earnings by $0.11. When you kind of factor those two things in, we end up somewhere around 9% to 12% growth, if you exclude those items. So, I think that's probably more in line with what everybody was expecting, but that the dilution on the convert does have a significant impact. And again, we have a hedge in place that covers us up until a hundred -- we get above a $114. And so, there is a disconnect between the economic benefit of that hedge versus how we treat it from a GAAP standpoint, which is a little disappointing, but that's just the way a GAAP works and that's how we're going to account for it.

Okay, very helpful. And yes, it makes a lot of sense. I want to take a stab at something here. I know just if we take a step back and think about the '26 margin targets that you had out there, the business is already looking different today than it was a year ago due to M&A with EGS and Cook. Also, you've got WRAPSODY in there. I guess is the 20% to 22% margin target still the right range to use? Or maybe I should ask, do you feel better at like the upper end of that range, the midpoint, or better that range in light of the benefits that you're seeing from some of these factors?

Thanks for that question, Jason. I think you probably already know how I'm going to answer it. But, look, we're committed to a minimum of 5% organic constant currency, and we're committed to a minimum of 20% operating margins and a minimum of $400 million in free cash flow. We're confident obviously in the LRP. Like I just said, we're super excited about year one of CGI and how 2024 played out. Right now, we're just hyper focused on making sure that we execute in 2025 And yes, that's all I'll say but great question.

Thank you. One moment for the next question please. And the next question will be coming from the line of Lawrence Biegelsen of Wells Fargo. Your line is open.

I heard Wells Fargo. It's Larry Biegelsen. I didn't hear my name, I assume. Can you hear me okay, Fred and Raul?

Yes, we got you. We got you, Larry.

We got you.

Okay. All right. Where should I start, on OEM, Fred, really strong 22% in Q4. Is that these kind I imagine these are like long-term contracts, Fred. So how should we think about OEM growth in in 2025? Is that a good jumping-off point? In other words that 22% for the next few quarters until it lapsed in Q4?

Yes, well, let me just say that first of all is well ahead of what our guidance assumed in the third quarter call. Our OEM customer demand, Larry, in the U.S. remains strong as we expected product on the OEM side outside the U.S. We're impacted more by challenging raw material and some supply chain thing, but I think we've discussed that in the past. But the bottom line is, is we're just getting better than expected order demand. We do have some contracts, but again, it goes back to what's always been the hallmark of Merit's OEM business its reliability and quality. And at the end of the day, that's what carries the day for Merit and always has. So, we were confident in the numbers and I think Mike Black and his team did a really good job. And we had to build all this stuff and deliver it which we did.

Yes, I mean -- Larry, I mean that, maybe we don't really guide to the underlying product category growth. But obviously, we have a high level of confidence in OEM and their execution and what they've been able to do over the last several years. So, I think everything that we expect out of OEM is baked into our numbers.

What a WRAPSODY multi-part here? So just early feedback, Fred, on WRAPSODY, I think Raul you said you'd give us sales by quarter. And just lastly, Raul, the -- you said the 5% minimum or minimum organic. I seem to recall that doesn't include WRAPSODY in the U.S. So WRAPSODY contributes about 60 basis points this year. Is that the right way to think about it? Thanks for taking the question

Yes. So obviously, we gave the yearly guidance on WRAPSODY $7 million to $9 million. We did not say that we were going to provide actual revenues by quarter. But CGI is organic constant currency growth, Larry, and we did not include the U.S. launch of the WRAPSODY if that's what you were asking.

Any feedback Fred?

We're just excited about the product. The initial market response is great. I think the RTG Group, the Renal Therapy Group, and those products and that whole program we put together is performing as we hoped it would. And we're looking forward to introducing the 12-month data by physicians and a full discussion of that at the SIR meeting. And we're confident in the numbers. First couple months have been very encouraging and it's nice, we invested a lot. We took a lot of time. We're excited about the product, what it means to us, Larry, in the long run.

Thank you. One moment for the next question. And the next question will be coming from the line of Steve Lichtman of Oppenheimer. Your line is open.

Thank you. Good evening, guys. Gross margin was a standout in the quarter. I'm wondering, Raul, what gross margin is implied in the 2025 operating margin guidance? And if you could talk about some of the drivers you're seeing on the gross margin line?

Yes. Well, first of all, I'm going to take the time to run around the bases, on what was a home run hit by the buyer on the gross margin, to be honest with you. Steve, you've heard me say this that, and a lot of our investors have heard me say this along with a lot of our covering analysts. When we go after gross margin, we really kind of throw the kitchen sink at it, and with knowing that there's going to be things that are not going to work out in our favor and there's going to be other things that are going to be better. And it's just, our approach is just to tackle it from pricing to efficiencies to logistics, essentially the kitchen sink. And what happened, in the fourth quarter is we essentially kind of hit on everything. And that's what you see, the execution there. I mean, at 300 basis point improvement in the gross margin is just outstanding. The mix was great. OEM was strong. U.S. was strong. Our mix was strong. Our operations group, I just had to call out because they executed at a really high level. And unit growth was strong. So, everything that we would have wanted in gross margin really hit in the fourth. Now, as far as the 2025 guidance, as you know, we don't give gross margin guidance. We do give operating margin guidance. And as you can see, we feel really strongly about what we're giving. We're going to give 40 to 80 basis points in 2025. When we originally launched CGI, I think we were pretty clear that we would, most of the operating margin accretion, at least on the low end, would be coming from gross margin. And on the high end, there would be a mix of gross margin improvement and OpEx leverage. And so, I'll just leave it at that, that I think that plan has not changed.

And I guess just building on that for the second question, what are the types of investments that you're making in WRAPSODY this year? I know you've talked about sort of training seminars. Can you talk about just qualitatively, I guess some of the things that you're doing to lay the groundwork?

Yes, I think, Steve, it comes down to training, understanding, going through the exercise of the appropriate reimbursement exercises, and that the sort of things that we've talked about with NTAP and TPT. And going to the trade shows, highlighting the project, meeting, the things -- we're not running away from it, we're running with it. And a lot of people -- registry -- the registry, we're almost, I think we're on 420 or so out of the 500 and people look at that. And those are important things. So, the investments we've made, we continue on. And maybe most importantly, is the psychology of the sales force. Raul and I just left our U.S. and I was also at the European, but just in the U.S., just a high level of enthusiasm for the business and what we're doing and the role that they play. So, it's nice to know that you can win and that's how our people feel just across the board with all of our products.

Thank you. One moment please. Our next question's coming from the line of David Rescott of Baird. Your line is open.

Congrats on the strong finish here to the year. Two questions from us and I'll ask both of them upfront. First on WRAPSODY, I want to make sure I heard it clearly. You have the guide for revenue set this year and that you laid out today and the $7 million to $9 million would be incremental on top of that from WRAPSODY. If that is the case, would it be fair to assume that any incremental kind of margin benefit that you could have from that would also be upside to the EPS guide that you set for the full year? And then on the Endoscopy segment for the guide for the full year, I'd say maybe it was a little, a touch lower than what we were kind of assuming. So, I'm wondering if there's anything you can talk about on Endoscopy, either as it relates to the underlying business or the EGS deal and how that's being integrated when you thought about setting out the guide for Endoscopy this year? Thank you.

Yes. So, on the WRAPSODY piece, just to be clear and sorry if I confused you, when I meant the $7 million to $9 million was not included in the original CGI goals, David. So just to be clear, right? Obviously, clearly the $7 million to $9 million that we've already disclosed in 2025 as far as our yearly revenue target for WRAPSODY is included in the guidance we already gave you. So is that clear to your...

Yes, yes, yes, yes, okay, that makes sense, sorry.

Yes, and as far as Endotech, I think we feel pretty strongly about the guide that we've got out there. If you remember, we've got an integration of two sales forces going on. I think what we've done here is just done a measured guidance for that group, knowing the complications of integrating two sales forces. We are super excited about the products. I know Fred just mentioned we were at the U.S. sales force. I talked to a lot of our endoscopy sales team, and they're excited about having the new products, but there is a learning curve. And I think we've tried to, as you know, we guide with a realistic and achievable guidance. So, I would say there's really nothing to see here other than that's what we've done.

And David, so you'll be aware, and we may have discussed this in the past, but the product is fully integrated into our operations in Salt Lake City. All the TSAs are closed and we did that ahead of time. And I think we did a magnificent job of training and transferring. So that part's all been completed as well.

Thank you. One moment please for the next question. And the next question is coming from the line of Mike Matson of Needham & Company. Your line is open.

I guess I want to start with the currency impact you're expecting to revenue this year. I think you said 20 basis points. It seems kind of low relative to some of your peers. I mean, I've seen companies talking about 1% to 2% headwinds in '24. Can you maybe talk about, I don't know if you're doing any kind of hedging on the revenue level or something, maybe?

Yes, I mean, we do, do hedging. And as you can imagine, our hedging program is kind of a rolling program. We try and minimize the impact from FX. We think we're on the right track here. And feel good about the number. Remember, our U.S. sales number has also, as a percentage of revenue, has also climbed. So, we're more heavy or U.S.-centric than we have been historically. Before, we were more 50-50. Now we're kind of sitting closer to 55%, 45%, in that range, Mike. So, I think that obviously helps. But we do have a hedging program in place and that helps minimize some of the impact.

Can I just add? It's consistent, Mike. We don't change it. We don't horse around. We don't time markets. We don't speculate. It's been consistent year over year for many, many years.

And then just one on WRAPSODY, I know you've given guidance for the U.S. And I know you're probably not going to give any numbers for O-U.S. But what I am wondering is, has the data from the total trial in the U.S. helped at all outside the U.S.? And just how well is the product doing in international markets? I know it's kind of a pricey product. I don't know if that's kind of an obstacle in some of those more price-sensitive markets.

Well, I'll just simply say that it has not been an obstacle. And we left the European sales meeting with encouragement of the sales force on the product. And even though we don't have an RTG Group there, because of the different geographies, I think that RTG group is carrying that and other products. And we're quite pleased, as we have said, with WRAPSODY, and we continue to receive a strong, positive response on the product. And so, we're looking forward to some of the events coming up, like the SIR meeting and others that will discuss the detail by the professionals that can interpret and give you their impression, not a bunch of manufacturing folks and that sort of thing. So, we're quite excited about that.

Thank you. One moment please. And the next question will be coming from the line of [Elaine Keough] of Raymond James. Your line is open.

It's Jayson. Hi, guys. A couple questions here. Was there anything anomalous or one time in the very strong fourth quarter gross margin number?

No. I mean, just, again, it was just really strong execution by our team.

Okay. What's left to do from an operational standpoint to integrate Cook and EGS, if anything?

Yes. So EGS is fully integrated. The only thing that this year is the first year, Jayson, as you know, where we have a combined sales force. So, as you know, last year, we did leave EGS and our Endoscopy sales group as two separate sales forces as they were training on how to sell the products, the different products. January 1st, that went away, and there's a combined sales force now. So other than that, everything's already done with EGS, and fully integrated. We're manufacturing the products and everything. On the Cook side, we continue to work under a TSA, order to cash, for the most part. There is a few countries, some of the major European or APAC countries that are not on board yet, but we have a substantial amount of order to cash done. Manufacturing continues to be done by Cook. We're looking to obviously integrate that sometime this year, if not early part of next year. But yes, everything continues to be on pace, if not ahead in certain situations.

And just lastly, I know you've called out SKU rationalization, I think, last year. Is there anything notable around SKU rationalization in '25?

Listen, I think what we did before, we had a PAC business and those sorts of things. But there's always a continuous part of our CGI to take a look at things that the smaller amounts of products and moving customers over to something where we build $5,000 a month instead of $50,000 or $500,000. That's an ongoing program that fits into the objectives that we have internally.

Yes, I mean, we continue to work on, as Fred mentioned, product lifecycle management. To the scale of what you saw last year, as far as the PAC business that Fred was talking about, we don't have any material impact this year. But obviously, clearly, SKU rationalization is just part of what we're doing going forward.

Thank you. One moment please. And our next question will be coming from the line of John Young of Canaccord. Your line is open.

Hi, Fred and Raul. Congratulations on a strong end of the year. I just want to first start on WRAPSODY. Did you guys get the TPT application in before the March 1st deadline yet?

We got it. Yes, I'm sorry. I kind of jumped on that. The answer is yes. The NTAP and the TPT were filed on time. Both of them are in.

And then the supply chain challenge you highlight on the OEM O-U.S. business obviously did not really materialize. Should we still expect any impact going forward in 2025 of any supply chain challenges?

Yes, I think there's two components to the supply chain issues that we were having last year. And if you remember, one of them was being able to get sufficient raw materials for one of our products. And then the secondary one was, can we ramp up production fast enough for one of the products that had a strong demand? And so, I think we, for the most part, have solved those issues. I would say that we continue to keep an eye on them. But I think our level of confidence is significantly higher than it was, say, during our third quarter call.

And then maybe I can sneak in a third. You were pretty crystal clear on the tariff impacts are not included in the guidance today, or you're not really going to quantify anything today. But more high level, just the ability to move manufacturing for you guys from Mexico to other facilities like Ireland or Utah, what is the ability to do that for Merit? And maybe, have you taken any near-term mitigation or hedging efforts at this point?

I mean, there's things we've done internally to try and mitigate the impact. They're minimal, quite frankly. And if I'm just being honest, John, things are changing so drastically and so fast that making any investments and moving manufacturing from one area to another just does not make sense. I think you had a lot of people do that in the last Trump administration, or not a lot, but you had some people that did it. And now, those countries are also included in the target tariffs, or could be, because we don't know what's going to happen. And so, I think for us, it's business as usual. Let's control what we can control. Let's be hyper-focused in our 2025 goals. Let's execute to those. We're very nimble, and we'll just adjust the best we can when something is announced that is official.

John, I've always said to the team that we've survived eight American presidents and eight administrations in the history of our company. We've dealt with tariffs before. And the one thing we don't want to ever do is to overreact, but I think we have our thumb on it. We're watching. We're listening. But it's really, as Raul pointed out, it changes just during the conversation we've had with you. So as soon as we can get something clear, we'll talk more about it when it's appropriate.

Thank you. One moment please for the next question. And our next question will be coming from the line of Michael Petusky of Barrington Research. Your line is open.

So, Raul, I may have missed this. I was briefly distracted. If you've addressed this, forgive me. But the R&D expense, I'm assuming the pop in that in Q4 had a lot to do with WRAPSODY activities. But can you just sort of speak to that and then sort of speak to if this is closer to a new normal or if it's likely to back off as we head into the first half of 2025?

I wouldn't say it's a new normal. Look, Mike, to be honest with you, the gross margin was pretty strong. We felt like we needed to make some short-term investments in R&D. There was some things we wanted to look at from a consulting standpoint. And so, we had our consultants in and help us with some work that we thought was long overdue. And so, we took advantage of that. And I think we feel comfortable with the historical levels of R&D. Obviously, clearly, as time progresses and we focus more on therapeutic products, that'll tend to trend upwards. But I think we're not looking to blow R&D out of the water either. I think the investment that we've made is effective and we think at the right levels.

Sufficient to our plan.

And then I'm wondering, the cadence of CapEx, obviously, it's going to be a number this year. Do you have any guidance, first half, second half, or just where that's likely to sort of come in? Because it will really matter in terms of free cash generation.

Mike, I wish I had a good response to you. We keep waiting for winter to show up. And so, we continue to build the facility across the street. We were talking about pouring footings just today. Normally, the ground freezes and you don't necessarily want to do that or can't do that. And so, you hold off till spring or summer, right? And so, the weather's been pretty mild here in Utah. And so, the building continues. Now, this is Utah. We could have a snowstorm, 4 feet of snow here in the next two hours and we don't even know it.

We could have one on May the 25th.

We could.

We've had one before.

So, I'm not going to provide you with a kind of a cadence other than to say, obviously, we clearly talked about the additional CapEx that we would do as part of our CGI program, because we wanted to build a facility which we'll think will make us more efficient over time. And obviously, I'd be disappointed if I just didn't highlight the strong free cash flow number that we had for last year. I mean, $186 million, $66 million in the fourth quarter, I mean, it's just outstanding. We're focused on that number. We'll control CapEx as we've done over the last several years. But yes, I think that's all I have for you. We're just going to keep executing. That's the goal.

Thank you. One moment for the next question. And our next question will be coming from the line of Jim Sidoti of Sidoti & Company. Your line is open.

Good afternoon. Can you hear me?

Yes, we can, Jim. How are you?

Good, good. Fred, you sound much better than you did last time. I hope you're feeling better.

Yes, I had the bug. I'm fine. But yes, thank you, Jim.

Just following up on that CapEx question, because I think I heard you say CapEx is $90 million to $100 million for the year, which is about double, a little more than double what you've done the last couple of years. What do you get from that distribution center? How is that going to help you?

Well, essentially in two ways. The first one is just from an efficiency standpoint. The system we currently have, Jim, is almost 20 years old. So, it's essentially kind of met its end of life. There's a lot better systems out there that we're using at two of our other distribution centers, and we think we can just be significantly more efficient with the new system. And so, we've squeezed all the juice that we can out of the current system, and we postponed it, I think, sufficiently. We've been talking about this for probably five years, and we finally felt like we were at the right kind of size to make sure that we did what we needed to do from a distribution standpoint.

Well, I was going to say, Jim, the other side of it is we are spending a lot of money to have stuff like resins and things stored offsite. They'll be in this building, and that'll eliminate that expense and the convenience of having to go pick it up downtown and bring it back out. So, there's that efficiency. But I think the biggest one, too, is that we have Richmond for the East Coast, and it keeps creeping to the West, and we need to get it back so there's an equilibrium so we can serve our customers as well. So, there's all the reasons we've discussed here.

And the second would be capacity, right? Those of you who have visited our South Jordan site have seen the molding machines. Yes, we can't add any more molding machines there. Luckily, we have additional capacity in Mexico. But, yes, as we look to expand and need additional capacity for our molding, we will have additional room that is opened up by moving our distribution that currently sits on the main cap in Sierra right across the street. So that's the goal.

It sounds like you're still going to generate some pretty good, strong free cash flow, even with this increased CapEx.

Would you look at those numbers again? We hit $186 million. Thank you for the opening there, Jim. But, no, look, we'll do a minimum of $400 million under CGI. I think we're well on our way with the $186 million we just did. We think we can do somewhere at least $150 million. But, yes, I think we're feeling pretty confident there.

So, the last couple of years, a large part of that has gone to debt paydown. Will that be the case again in 2025?

We'll continue to put cash on our balance sheet, Jim, and wait for opportunities that make sense for us. We've obviously got a clear strategy on the M&A front. I think you guys have started to see that. We're finding assets that are margin accretive, that can help us with adding additional growth, and also are at call points that we feel really comfortable with and allow us to get deeper in the bag.

Thank you. That does conclude the Q&A session for today, and I would like to turn the call back over to Fred Lampropoulos for close remarks. Please go ahead, sir.

Well, ladies and gentlemen, thank you. I know it's a very busy time during earnings season. We appreciate your interest, and we'll look forward to reporting events as necessary. Best wishes to all. Signing off from Salt Lake City, good evening.

Thank you for participating in today's program. This does conclude today's conference call. You may all disconnect.