Welcome to the Merit Medical Systems Second Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note that this conference call is being recorded and that the recording will be available on the company's website for replay shortly. I would now like to turn the call over to Mr. Fred Lampropoulos, Merit Medical Systems' Founder, Chairman and Chief Executive Officer. Please go ahead.

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, July 30, 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 entitled 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 sections 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 second quarter 2025 financial results. I will then discuss two important strategic announcements we made during the second quarter and will provide an update on our reimbursement strategy for the WRAPSODY CIE. Then Raul will provide a more in-depth review of our quarterly financial results and our financial guidance for 2025, which we updated in today's press release. Then we will open the call for your questions. Beginning with the review of our second quarter results, we reported total revenue of $382.5 million, up 13% year-over-year on a GAAP basis, and up 12.5% year-over-year on a constant currency basis. The constant currency revenue growth we delivered in the second quarter exceeded the high end of the range of growth expectations that we outlined on our quarter 1 2025 earnings call. The better-than-expected constant currency revenue results were driven by a 6.7% constant currency organic growth which exceeded the 6% high end of the range we outlined in our second quarter guidance. With respect to our profitability performance in the second quarter, we delivered financial results that significantly exceeded our expectations. We delivered another quarter of notable year-over-year improvement in our non-GAAP operating margin, which increased nearly 109 basis points year-over-year to a 21.2%, representing the highest non-GAAP operating margin performance in any quarter in the company's history as a public company. We also delivered 10% growth in our non-GAAP EPS which exceeded the high end of our expectations, and we generated $70 million of free cash flow, an increase of 20% year-over-year. This performance was a direct result of the team's continued hard work and commitment to our strategic objectives. We're very proud…

Thank you, Fred. I will start with a detailed review of our revenue results in the second 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. Second quarter total revenue growth was driven by 10% growth in our Cardiovascular segment and 81% growth in our Endoscopy segment. Cardiovascular segment sales exceeded the high end of the expectations we outlined on our first quarter call, and Endoscopy sales came in at the high end of our expectations. Our total revenue results included approximately $19.6 million of revenue from our acquisitions of the lead management product portfolio from Cook Medical, the assets of EndoGastric solutions and to a lesser extent, the acquisition of Biolife following the May 20 close. Excluding sales of acquired products, segment revenue growth on an organic constant currency basis was 6.8% for our Cardiovascular segment and 1% for our Endoscopy segment. Turning to a review of our second quarter revenue results by product category. Cardiac intervention product sales increased 23% and represented the largest driver of Cardiovascular segment growth in the period. Excluding the contributions from the sale of acquired products, cardiac intervention product sales increased approximately 10% on an organic constant currency basis, well above the high end of organic growth expectations we assumed for Q2. Rounding out the Q2 performance across the rest of our Cardio segment, sales of our peripheral intervention products and our Custom Procedure Solutions products increased 6%, which was in line and above the high end of our expectations, respectively. Sales of our OEM products increased 4% in Q2, modestly lower than our expectations. The softer-than-expected OEM performance in Q2 was entirely related to sales to OEM customers…

[Operator Instructions] The first question that I have for today will be coming from the line of Jason Bednar of Piper Sandler.

Congrats on another nice quarter with the P&L here. I'll kick things off on WRAPSODY and I'll just preface this by saying I'm sorry for any confusion. It's a busy afternoon here and bouncing between a few calls. But I'm not receiving TPT maybe just lay it out, was there -- I guess, was there a problem with the actual filing or -- and sorry, just trying to read through the script and it was not necessarily clear to me. Did you receive feedback from CMS? Maybe talk about your engagement with CMS since? I think a lot of investors are trying to handicap the likelihood of receiving TPT under the new December time line. So maybe you can clarify and just what gives you confidence in this new time line?

Yes. Jason, this is Fred. Let me walk through the WRAPSODY fact-based story, so that you can hear this all in sequence. Again, we provided an update on U.S. reimbursement in an outpatient setting. We applied for new technology APC assignment by the 3/1 deadline. CMS did not award a new APC assignment as part of the proposed rule on 715. Now that the application for the new APC assignment is completed, we intend to submit an application for transitional pass-through or TPT. The deadline for that submission is 9/1 and if awarded, it will become effective January 1 of 2026. Revised 2025 revenue expectations for U.S. WRAPSODY due to the 6-month delay for potential contributions related to TPT add-on and we have not changed any of our expectations for the long-term addressable market in the U.S. to the WRAPSODY CIE or the potential contributions to our long-term growth profile of the company. We corrected our prior commentary on the application for reimbursement in the outpatient setting. And for the avoidance of doubt, our prior commentary regarding our submission for TPT add-on by the March 1 deadline was not correct. We are targeting submission for TPT add-on by September 1, which is the deadline. So I hope that, that brings it and that we -- I hope that answers your question. That's a lot of information.

Yes. I know it's always -- I always find it complex dealing with reimbursement and some of the different rules and deadlines here. But maybe, Fred, can you -- to follow up, can you maybe give investors the confidence or maybe describe what gives you the confidence on hitting that new deadline or securing -- not necessarily hitting the deadline, but securing TPT under the new deadline that you have set or the expectations you've set here? And then I'm sure you don't want to go there on unpacking all the different possible paths. But maybe you can talk about the commitment you have to securing TPT against maybe a more aggressive commercial launch without TPT. If in the scenario that you don't receive in December. I guess I'm just curious how many times you want to go down this road in going after it. I would think a lot because it's economically attractive, but there's some puts and takes here. So maybe if you can have that discussion as well, it would be helpful.

Go ahead, Raul.

Yes. Just to clarify, Jason, I think essentially, what we're saying is we were under the assumption that we had filed for TPT, right, but it had not. So it's not like we're refiling. We went for APC. It was clear that, that was filed timely, didn't get the outcome that we wanted, just to be clear. We're engaging with CMS and having those discussions and making sure that we're clear. But we are confident that we'll meet the deadline for TPT. I would say that nothing has changed. We continue to like our expectations for meeting all the TPT guidelines. We think we meet them. Obviously, clearly, we have to submit, and then it's the waiting game. And -- but I think we all around here are encouraged just by the fact that we have the best data. We've got a great product and we know we'll do what we thought we were going to do and submit the application by its deadline.

So Jason, this was the first time that Merit pursued reimbursement for a PMA product, and I think you said that it's complicated. And we engaged external advisers to assist. Our external advisers filed an application on the APC assignment and confirmed filing. So unfortunately, our team believed that the application filed for TPT add-on payment was the APC. That's how we understood it, and we own it. Our internal discussion reference to our strategy as well as our public comments reflected this -- the misunderstanding. We expected to receive a response on the application on the proposed rule for 2026 issued on the 15th of July. And as we pointed out, CMS did not award an APC assignment as part of the proposed rule. And now that, that application is complete, we intend to submit an application for the TPT, as I mentioned and Raul mentioned on 9/1 which is essentially 30 days from now.

Yes. Okay. And I'll let others hop in here. But just to maybe to put a bow on it, you've high confidence on securing TPT later this year.

We believe in our product, we believe in the data. We believe that it is the product we think it is, and we believe all of those things, and we have high confidence in that product. Yes. And this process even though we made a mistake, I think we've said that, we own it. Nobody else owns it. We own it. And it's going to delay. But that's, I believe, the only thing it's going to delay.

I think just bottom line, nothing from a long-term perspective has changed from our standpoint strategically for this product. And so the unfortunate part is, obviously, we thought we had filed the TPT. We got the wording wrong. Obviously, we filed for APC. Now we know where we stand on that, and we move on to the next step, which is TPT, have a high level of confidence in the product, Jason.

And our next question will be coming from the line of Jayson Bedford of Raymond James.

Can you hear me, Fred?

We've got you, Jason.

Yes. I wasn't sure who got picked here. So geez, I really want to use a three-letter acronym here, but I'm not going to use it.

Please don't.

Yes. So I think I understand the difference between APC and TPT, I think a lot has to do with the newness of the technology. But I'd love for you to describe maybe why you're optimistic that you may be able to secure a TPT if you got rejected for an APC, right? So I guess my point is, why would they not apply the same logic.

Okay. I'm going to let Raul take it up.

So this is all new to us, right, and we're now get to be expert in it. But APC is essentially around the procedure, Jason. Correct, right? And that's kind of the distinction where [ TPC ] is cost based around the product.

Does that help, Jason?

It does. And I assume APC kind of lumpy in with everyone else, whereas TPT acknowledges the difference. Is that fair?

Again, I think what Raul said, it's procedure-based, and that was -- they couldn't see the difference. We believe our procedure was different. The CMS believes that there are other situations like that, that are covered, which is why we didn't receive it. TPT acknowledges the differences in the performance of the device, but it's cost based. Does that help?

Yes. And one of the things that we do get a comment period, right, even though the APC assignment is complete, we do get to comment, and we can provide additional information as to why we think it's a different procedure. But at the same time, we also know what that outcome is, which means that we can take the other road and file for TPS -- TPT sorry.

Okay. Maybe just 2 other quickies. Down 6% in China, not necessarily related to VBP. Is there a specific category? Is it competition? Or would you chalk it up to just general demand?

No. I mean, I think it's just the current environment, the macro environment, Jason. But I think other than that, there's not much else to see. We continue to expect low single-digit growth in APAC for 2025. I don't think that's changed for us. So I'd say it's kind of as expected, quite frankly. That takes and puts, but ultimately, we're kind of where we thought we'd be.

Puts and takes of the whole up and down thing.

And the next question will be coming from the line of Robbie Marcus of JPMorgan.

Great. Congrats on a good quarter. Maybe I could start on margins. Obviously, a really strong margin upside, both on gross and operating margin. Some of it came from less negative tariff impact, but part of it was also underlying. Maybe you could tease out what's what in gross and operating margin and then walk us through the balance of the year on both?

Yes. Look, I mean, I think, obviously, super proud of the team of how we're performing. I think there's 2 things that I'd like to highlight. One is, obviously, our sales force continues to execute at a very high level with another strong quarter. That obviously helped from a leverage standpoint on operating expenses and all the gross margin. Gross margin, it's a lot of everything. I think ops lessons helped us. Pricing helped us. Our mix has helped us. Again, our sales force delivering really good kind of mix and geography mix.

Yes. And Rob, I was just going to say, I think it has to do with foundations for growth, and it has to do with continued growth initiatives. Those things have not left us. They're still what we use as alignment for compensation and how we measure ourselves and very candidly, how our Board measures us. So those are -- that's part of it, too, in that momentum. I also think the more attention made on pricing and positioning the product and so on and so forth.

Really, the only kind of sour spot I would call is the tariffs, which were kind of outside of our control that we had to deal with. So we ended up with about half of what we anticipated in the P&L, but we're able to overcome it with strong sales and obviously, the discipline that we showed on pricing and mix.

And how should we think about the cadence, particularly on gross margin in third quarter, fourth quarter, any upgrade there, what's less negative tariffs and what's underlying?

I was hoping you're going to forget about that question, Robbie, because we typically don't guide on gross -- actually, we don't guide on gross margin. But I think if you look at the expectations for our operating margin, clearly, we took that up. We're in the 19% to 20% range for the year. Clearly, we expect some margin to be -- gross margin be contributor. And so I'll just leave it at that, that we continue to feel really comfortable with our guidance for operating margin. I think we're -- as we look to finish up the second year, I think it sets us up really well for CGI and what we want to do for there. I mean I think if we hit the high end of our guidance, we're already looking at the bottom end of CGI, which I think is a really good spot to be in.

You can't blame me for trying, given all the moving parts.

No, I appreciate it. Yes, yes.

And the next question will be coming from the line of Steve Lichtman of Oppenheimer.

I wanted to start first with the sales beat in the quarter, particularly around cardiac intervention, which saw a nice uplift even ex the acquired products. Can you talk a little bit more about what the drivers of that were? And what kind of sustainability of that growth we could see?

Yes. Let me pick that one up. We generally don't mention names of products, so I won't do that. But I think a lot of this comes out of Merit's products that we have developed internally. I think a lot of it has to do with presence in the lab. And I think the Cook acquisition and the presence in the cardiac area is important. And very candidly, we expect that to continue with the other products and other things that Merit develops internally. So we think it's going to continue to be one of the strong areas in the company that we focused on and it's a lot of things that other people overlook, and we just don't, and we'll focus.

To add a little more color, right? I think Fred mentioned the Cook acquisition, which obviously isn't organic yet. But if you remember, one of the reasons we did that acquisition, the strategy behind that was to get deeper into our cardiac bag and specifically those products. And you see the sales force focused on them. They're excited about that. And so you're seeing a little bit of uptick there too.

There's some pull-through too with the access products that Merit makes and you've got to get in there. And that's kind of our strong suit. So that's another part of it as well.

Great. Just shifting to margin. Obviously, you're benefiting here by being -- from your conservatism on the first quarter call relative to tariffs. Raul, you talked at that time about some work you'd look to do to offset tariffs. How much of that work can still flow through and maybe drive excess margin now even at the lower -- hopefully, lower tariff impact?

Well, I mean I think we're trying to be nimble on some of those things that we're doing, right? I mean a lot of it was things that we could do easily, right? Redirect shipments, product line transfers that were already on the books. Can we pull those forward? Those are all things that are being worked on. I think the hard part, quite frankly, is that it's a fast-moving target that changes almost on a daily basis, right? I think we had two changes just this week. One was confirmed and one was just a rumor out there that...

And the President can change his mind, they're going to see what he thinks.

So look, I think the nice thing, quite frankly, is just being as transparent as possible on these tariffs. I think our guidance covers a lot, right? I mean I think when you look at the high end, we've got roughly $7 million of impact there. When you look at the low end, we essentially left that an original amount of $26 million that we originally called out in the guidance. So I think we have a good number within the range of our guidance to cover all sorts of changes that may come our way, but it is a moving target. And so I would just say that we're comfortable where we're at. I think our operations group is doing everything they can to try and mitigate the expense, but we're also making sure that they stay focused on what really matters, and that's their CGI targets which is things that they can control.

And getting products to our customers.

Products to our customers.

That's the key to all of this, no matter what.

Yes, yes, yes.

Got it. And then just my one last question and on WRAPSODY is what's happening or going to be happening on the ground here as sort of reimbursement work is being done. Obviously, you have an approved product, you have great data, what's going on in terms of education, training so that when you hopefully get that reimbursement sorted out, kind of hit the ground running?

Well, listen, I think our updated range assumes that we maintain a premium price. We believe it's a premium product. That has not changed. We do not expect to see a ramp in adoption utilization in the outpatient setting in the second half, but we do expect to gain market share in the hospital setting where we have approval and where we have NTAP. So anyway, we have plenty to do. It gives us more time to train, more time to get ready for other expanding markets from a regulatory point of view. So this was a punch we took, but it didn't hurt very much. I mean it hurts. Don't get me wrong, but...

Our eyes are watering, but we're...

But we're still in the fight. We're still swinging.

And the next question is coming from the line of Jim Sidoti of Sidoti & Company.

Talk a little bit about Biolife and the distribution for StatSeal. Did they have international sales? And is that something you can put through your reps?

Yes. Part of the attractiveness of this whole deal was they had 4 distributors in the United States. I can tell you that we've converted all of those and negotiated through all of those and all of our sales are now coming in direct. So we get orders and we deliver those directly to customers. On the international side, they're approved, but they didn't have any footprint. We do. So that's always been the attractiveness for us is the growth potential of the product with Merit. And this goes back to the cardiac and you'll see that fall into line in that part that we were talking about earlier. So it's something, again, I've been watching for 10 years. It's something that our physicians have encouraged us to look at because they use it, you need to have this. And finally, the right time came up and the way we go. We feel very good about the product but maybe more importantly than us sitting in the room is the sales force. They are the guys that are out there that are fired up about it. And that's what we always want. It's that enthusiasm that drives the revenue.

Right. And with regards to cash flow, another good quarter for cash flow. Are you thinking -- you're at a point where you'll start to pay down some of the debt going forward? Or do you think you're going to keep the cash in the bank for additional deals?

Yes. No, I mean I'll take this question and use it to highlight our free cash flow again, which was $90 million year-to-date, $70 million in the quarter, which is just fantastic. For now, Jim, we'll continue to hoard the cash, I'll say. We do have some capital expenditures that are coming in the back half of the year as we get started on this building. I say started, but we've already got walls up, and it's going to be coming at us here pretty quickly. And so -- but for now...

They are all in our forecast, in our guidance, they're in everything. So...

So we're feeling pretty good about it and continue to deliver strong free cash flow. Again, I'll highlight our operations group, I think, is doing a pretty good job of balancing the inventory, which is the primary driver of our working capital, allowing us to have these strong free cash flow number.

And our next question will be coming from the line of Larry Biegelsen of Wells Fargo.

It's Lei calling in from Larry Biegelsen. My first is just around your guidance update. So you beat Q2 revenue by about $10 million at the midpoint of your guidance raise on a constant currency basis, the increase is less than $10 million. Is that all due to WRAPSODY being moved out 6 months? Or is there anything else that changes about your second half outlook? And I have another question after that.

Sure, sure. I mean there's takes and puts across the board. But I think generally, our practice is to kind of look at the first half beat and obviously, flow some of that through. I think we ended up in a really good spot. Like you said, the midpoint of our updated guidance is about $10 million. I think we all felt pretty good about where we're at. There's a lot of uncertainty out there. I think the business continues to execute at a really high level. But just with all the tariffs and all the noise, there's a lot of things out there that just kind of give you a little bit of pause as well as the business is doing. So I'd say we feel pretty good about the guidance. And I think we have a high level of confidence in it. I'll just say that.

Okay. That's helpful. And then second question is around tariffs. I think in the past, you said you can offset up to 45% of annualized tariff for -- in 2026. Is that still true? Any commentary on how we should think about tariffs for next year?

Yes. I mean, I would say that, that was true based on that initial assessment of what happened then, right? I think we'll -- we feel pretty confident that we can overcome some of them. I just have to see, quite frankly, where we end up at the end of the year, what's real, what's the news headline but I think we have a good game plan. And I would say nothing has changed from that last update that we gave other than things have gotten a little bit better, and we've gotten some clarity, but it's still kind of a lot of moving parts. So I'll just say that I think our guidance kind of contemplates everything that's out there right now, right, on the high end and the low end. And so we feel pretty confident. And also, I'll just -- one additional item is we have not changed our CGI targets, right? We're still committed to those, which I think is really important.

And the next question will be coming from the line of Mike Matson of Needham & Company.

Yes. I guess I'll ask one more on WRAPSODY. Hopefully, this wasn't addressed earlier, but just you did say something about OBLs in the prepared remarks. And just curious, are you -- do you have any plan to pursue any additional reimbursement in the OBL setting? And how important is that? I mean, how many of these procedures have been done in that setting?

The focus is on outpatient, right? It's the largest area of the market. And so I think that's the biggest percentage and that's where the focus is right now, Mike.

Okay. Got it. And then just one more on the Biolife acquisition. So given the nature of the products, are those going to be sold by -- in both the peripheral and the cardiac business? Because I can imagine it could be used in both types of procedures potentially.

Yes. The answer is yes. It's used on radio procedures. It's used for PICC lines, ports, any place where you're bleeding and where -- they're using those as we speak.

Yes. It's one of the exciting parts about that business when we acquired it is that it's one of the few products that we've acquired that really fits in just about every bag that we have.

Okay. And then just -- I think you referred to having some prior sort of -- some sort of prior hemostatic product that you guys were selling. So what were those? And how do those come out fit with Biolife, Biolife products?

Well, yes, some of these are things that actually work together. So if you take a look at this patch and stop the bleeding, they'll oftentimes put use a sync and use this, in fact...

Radial compression device...

Yes, radial compression device. So they'll use that and this to get faster hemostasis so that you can get to an ambulatory state and get them out of the hospital. So there are often used. In fact, as I mentioned earlier, Mike, this was something that physicians encouraged us to look at because they used it and say, it would be nice just to buy this from one company and some of that has a full suite of products. And that was something that we said years ago, and we just kept falling along until they finally aligned.

And the next question will be coming from the line of David Rescott of Baird.

Can you guys hear me?

Yes, we got you, David.

Great. I wanted to ask on the guide for the year, particularly on the lower end of this EPS guide since in general, it's probably a good gauge of apples-to-apples from earlier in the year since you have the $26.3 million in there from the tariff perspective. I guess, one, why I guess, keep that headwind at the low end if we're halfway through the year already, and we know that China tariffs are significantly less than what they were a couple of months ago. So is there anything else in the other updated tariffs that are kind of getting you back to that $26.3 million? And then second part to this, I think you beat by $0.15 or so. The lower end went up by $0.24, or so, I think. So there's about a $0.10 delta of the underlying business versus Biolife I think the convert impact is the same. So can you just help us bridge the gap on what was better in the quarter versus second half?

Yes, I'll walk you through. So right. So Q1, we had about a $0.14 beat. So we flowed that through. Q2, and this is obviously -- I'm just talking strictly low end, so I don't want to confuse anybody. On the low end, we flowed through the $0.21 for Q2. And as you pointed out, we didn't make any changes to our tariff amount. And then you had an offset there for interest expense, that increase. So that's going to be $0.04, and that's due to the -- obviously, to the acquisition that we just did. And then as you know, there was some tax changes that were just signed into law. And so that will be a $0.07 impact also. So you end up with the $0.24 that you just talked about. But this is -- I'm glad you said what you said, David, because this is exactly why we left the low end the way we did because you just implied right, that the China would be better. That's just a rumor, right? That's what -- that was a headline that came out 2 days ago. There was two conflicting stories on it. We actually don't know if that's going to happen. I think the President said that it might. So I think from our standpoint, still a lot of complexity to this and a lot of moving parts to it. And I think we just felt like the low end just reflects a high level of confidence in our 2025 outlook, if there's significant changes to the tariffs, right? And so I think we felt comfortable just leaving it as is.

And this is a point of interest. In FT, there's a big article today about the issue of the Chinese Navy and that the increased tensions in South China Sea. Is that going to affect what's going on with tariffs and that dialogue and the answer is absolutely. So again, who knows how that shakes out. So I think we're taking the right approach. I agree with you, Raul. I mean that's what we've talked about for a long time and several times in the last several days.

Okay. And then I might have missed it in the earlier Q&A. I know you set out earlier this year with the 7% to 9% for the contribution from WRAPSODY. I believe at the time that didn't necessarily contemplate any reimbursement kind of uplift, whether it's TPT or NTAP. Have you reiterated that contribution for the full year? And then how are or how is kind of the sale force in your view responding maybe a little bit to this delay in the reimbursement uplift? Does anything change on the commercial front over the next couple of months until you are able to secure that if you are?

Well, I mean, no. So right. So we updated our range to $2 million to $4 million, David. I'm not sure if you caught that, but -- and just for the sake of clarity, our guidance originally included all sorts of scenarios and assumptions around the adoption and utilization of these add-on reimbursement processes. And so clearly, for us now, we've got clarity on one. We still think that we're obviously going to use the comment period to add additional color to CMS and then we're also going to follow up for the additional add-on on the TPT.

David, as you know, we're just delayed 6 months and on that one product. But let's talk about -- you asked about the sales force, that RTG group is doing extraordinarily well. They have numerous products. We're seeing strength in all of those products across the board. So yes, I'm sure that you'd like to have everything in the bag, but they're doing very well and have plenty to sell and all of those are doing well. So I've talked to several of the sales force about their enthusiasm, about their targets and this that and the other. And they're all aligned, and they're all -- I mean, I'll use the word, they're on fire. These sales guys are fired up, because they have products that are distinct.

I mean we were going to hold our premium pricing.

Yes.

I know our competitors are not. And I think they're listening, but...

There's a few of them on the call, four to be exact. I was wondering when you were going to raise that. Okay. I hope that helps. Does that answer your question?

Yes, that's great. And I did miss the 2 to 4 update, so thanks for clarifying that.

The next question will be coming from the line of Michael Petusky of Barrington Research.

I wanted to ask, and maybe I missed a more fulsome explanation. But China, the language you're using around the China quarter is sort of similar to last quarter where you sort of say, well, soft macro environment, just came in below what we thought, but not anything -- unless I missed it with real specificity. I'm just curious, like two soft quarters in China not related to VBP is not typical for you guys. And I'm just curious if you're digging into that. Or did I miss a more full explanation of that.

Well, I mean, I think -- well, I think the big explanation is that we continue to expect low single-digit growth in APAC for 2025, right? I mean I think we've been very clear about that all year long. And China is a big contributor to that. And so I would say that, yes, it came in lower than expected, but also we just -- it's China, right? There's just a lot of -- it's a tough macro environment there. And I would say that we've had quarters where we've done better than anticipated. But I don't think anybody around here is kind of hitting the panic button, Mike, to be honest with you. I mean, I just think it's just the environment we're in right now. It's not isolated to any one customer or any one segment, it's just a general softness. And that's all I have to say to it. Obviously, volume-based purchasing continues to be a headwind, and as we've talked about over the last couple of years.

Okay. And I just want to ask a quick question, and it's hard to keep track of how long any of these tariffs were actually on in the second quarter. But is any of the $7 million, was it actually -- like did any of that actually hit in Q2? Was there an impact from tariffs?

Yes, we are about $2 million that flow through that's included in the gross margin.

You said $2 million?

Yes, or $1.2 million, sorry, $0.02.

Okay. Got you. Okay. And then just a last question for Fred. Just curious, the balance sheet leverage is despite you guys being fairly active the last couple of years is still pretty low in part due to the good cash flow. Just curious, are there assets out there that are interesting? What are you seeing? What are you seeing in terms of valuation? Anything you can add on that would be great.

I'll just be very broad. There are opportunities. We look at them if they're right for Merit, we'll do something about it. If not, we'll just continue to march. We may have to wait 10 years like we did for one of them. They're out there, but got to be patient and -- but they're there.

Thank you. And this concludes today's Q&A session. I would like to go ahead and turn the call back over to Fred for closing remarks. The floor is yours, sir.

Thank you very much. Ladies and gentlemen, thank you very much for your time on such a busy day. It's an interesting time for me. This will be the last publicly held quarterly report that I will speak to. I'll still be involved in the company. I will be the Executive Chairman after October 3, and I'll still be a member of the Board for a number of years. But I want to thank you for all that you've taught me. I want to thank you for all the scolding you've given me and helped us as a business and brought things to our attention that were necessary. So best wishes to all of you. And again, thank you and signing off now from Salt Lake City, Utah, the home of the 2034 Winter Olympics. Good evening.

This concludes today's presentation. You may all disconnect.