MMSI US Equity☆

Item 7.Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Consolidated Financial Statements and related Notes thereto set forth in Item 8 of this report.

Discussion of the year ended December 31, 2023, compared to the year ended December 31, 2022 is included in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2023, and is incorporated by reference into this Form 10-K.

Overview

We design, develop, manufacture, market and sell medical products for interventional and diagnostic procedures. For financial reporting purposes, we report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of four product categories: peripheral intervention, cardiac intervention, custom procedural solutions, and OEM. Within these product categories, we sell a variety of products, including cardiology and radiology devices (which assist in diagnosing and treating coronary arterial disease, peripheral vascular disease and other nonvascular diseases), as well as embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, breast cancer localization and guidance, biopsy, and interventional oncology and spine devices. Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors.

For the year ended December 31, 2024, we reported sales of $1.357 billion, up $99.1 million or 7.9%, compared to 2023 sales of $1.257 billion. Our revenue results for the year ended December 31, 2024 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.

Gross profit as a percentage of sales was 47.4% for the year ended December 31, 2024 as compared to 46.4% for the year ended December 31, 2023.

Net income for the year ended December 31, 2024 was $120.4 million, or $2.03 per share, as compared to $94.4 million, or $1.62 per share, for the year ended December 31, 2023.

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 2025.

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Results of Operations

The following table sets forth certain operational data as a percentage of sales for the years indicated:

​ ​ ​ ​ ​ ​ ​ ​

Selling, general and administrative expenses 29.5 29.7 29.8 ​

Research and development expenses 6.4 6.6 6.6 ​

Impairment charges — — 0.2 ​

Contingent consideration expense 0.0 0.1 0.4 ​

Acquired in-process research and development expense — 0.1 0.6 ​

Income from operations 11.5 9.9 7.6 ​

Other expense — net (0.4) (0.9) (0.4) ​

Income before income taxes 11.1 8.9 7.2 ​

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Sales

Listed below are the sales by product category within each operating segment for the years ended December 31, 2024, 2023 and 2022 (in thousands, other than percentage changes):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Cardiovascular ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Endoscopy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Cardiovascular Sales. Our cardiovascular sales for the year ended December 31, 2024 were $1.302 billion, up 6.7%, when compared to the year ended December 31, 2023 of $1.221 billion. Sales for the year ended December 31, 2024 were favorably affected by increased sales of:

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Endoscopy Sales. Our endoscopy sales for the year ended December 31, 2024 were $54.8 million, up 48.8%, when compared to sales for the year ended December 31, 2023 of $36.8 million. Sales for the year ended December 31, 2024 were favorably affected by sales of our recently-acquired EsophyX® Z+ Device.

Geographic Sales

Listed below are sales by geography for the years ended December 31, 2024, 2023 and 2022 (in thousands, other than percentage changes):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

United States Sales:U.S. sales for the year ended December 31, 2024 were $800.8 million, or 59.0% of net sales, up 10.2% when compared to 2023. The increase in our domestic sales in 2024 was driven primarily by our U.S. direct, OEM and endoscopy businesses.

International Sales. International sales for the year ended December 31, 2024 were $555.7 million, or 41.0% of net sales, up 4.8% when compared to 2023. 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.

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

Gross Profit

Our gross profit as a percentage of sales was 47.4%, 46.4%, and 45.1% for the years ended December 31, 2024, 2023 and 2022, 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.

Operating Expenses

Selling, General and Administrative Expenses. Our selling, general and administrative (“SG&A”) expenses as a percentage of sales were 29.5%, 29.7% and 29.8% for the years ended December 31, 2024, 2023 and 2022, respectively. SG&A expenses increased $26.1 million, or 7.0%, for the year ended December 31, 2024 compared to 2023. 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.

Research and Development Expenses. Our research and development (“R&D”) expenses as a percentage of sales were 6.4%, 6.6% and 6.6% for the years ended December 31 2024, 2023, and 2022, respectively. R&D expenses increased by $4.7 million or 5.7% to $87.5 million for the year ended December 31, 2024, compared to $82.7 million in 2023. 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.

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Contingent Consideration Expense. For the years ended December 31, 2024, 2023 and 2022, we recorded $0.4 million, $1.7 million and $4.6 million, respectively, of net contingent consideration expense from changes in the estimated fair value of our contingent consideration obligations stemming from our previously disclosed business acquisitions. 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

Our operating profit by operating segment for the years ended December 31, 2024, 2023 and 2022 was as follows (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

Cardiovascular Operating Income. Our cardiovascular operating income for the year ended December 31, 2024 was $150.2 million, compared to cardiovascular operating income of $114.4 million for the year ended December 31, 2023. 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.

Endoscopy Operating Income. Our endoscopy operating income for the year ended December 31, 2024 was $5.5 million, compared to operating income of $9.5 million for the year ended December 31, 2023. 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.

Other Income (Expense)

Our other expense for the years ended December 31, 2024, 2023 and 2022 was $5.7 million, $11.9 million, and $4.9 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.

Effective Tax Rate

Our provision for income taxes for the years ended December 31, 2024, 2023 and 2022 was a tax expense of $29.6 million, $17.7 million and $8.1 million, respectively, which resulted in an effective income tax rate of 19.8%, 15.8%, and 9.8%, 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.

Net Income

Our net income for the years ended December 31, 2024, 2023 and 2022 was $120.4 million, $94.4 million, and $74.5 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.

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Liquidity and Capital Resources

Capital Commitments and Contractual Obligations

Our most significant contractual obligations as of December 31, 2024 included total long-term debt obligations of $747.5 million, interest payments on this debt, contingent consideration liabilities of $3.5 million, of which $0.4 million is recorded in current liabilities, and operating lease liabilities of $65.1 million, of which $10.3 million is recorded in current liabilities. Additional information about these obligations is contained in Notes 8, 15 and 17 to our consolidated financial statements set forth in Item 8 of this report.

Cash Flows

At December 31, 2024 and 2023, we had cash, cash equivalents and restricted cash of $378.8 million and $589.1 million respectively, of which $50.6 million and $48.7 million, respectively, were held by foreign subsidiaries. We do not consider our foreign earnings to be permanently reinvested. As of December 31, 2024 and 2023, approximately $2.1 million and $2.1 million respectively, of our cash and cash equivalents represents restricted cash for the payment of certain import and other taxes for our subsidiary in China. 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.

Cash flows provided by operating activities. We generated cash from operating activities of $220.8 million, $145.2 million and $114.3 million during the years ended December 31, 2024, 2023 and 2022, respectively. Net cash provided by operating activities increased $75.6 million for the year ended December 31, 2024 compared to the year ended December 31, 2023. Significant changes in operating assets and liabilities affecting cash flows during these years included:

Cash flows used in investing activities. We used cash in investing activities of $368.7 million, $175.3 million, and $57.4 million for the years ended December 31, 2024, 2023 and 2022, respectively. We invested in capital expenditures for property and equipment of $35.1 million, $34.3 million, and $45.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. Capital expenditures in each period were primarily related to investment in property and equipment to support development and production of our products. 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 $55 to $60 million in 2025 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. ($105.0 million) and Scholten Surgical Instruments, Inc. ($3.0 million). Cash outflows invested in acquisitions for the year ended December 31, 2023 were $134.5 million and were primarily related to payments required by our asset purchase agreements with AngioDynamics, Inc. ($100 million), Bluegrass Vascular Technologies, Inc. ($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.

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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. 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, 2024, we had outstanding borrowings of $747.5 million and issued letter of credit guarantees of $2.9 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.

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. In the event we pursue and complete significant transactions or acquisitions in the future, additional funds may be required to meet our strategic needs, which may require us to raise additional funds in the debt or equity markets.

Critical Accounting Policies and Estimates

Our significant accounting policies are summarized in Note 1 Organization and Summary of Significant Accounting Policies to our consolidated financial statements set forth in Item 8 of this report. While these significant accounting policies affect the reporting of our financial condition and results of operations, the SEC has requested that all registrants address their most critical accounting policies. The SEC has indicated that a “critical accounting policy” is one which is both important to the representation of the registrant’s financial condition and results and requires management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. We base our estimates on past experience and on various other assumptions our management believes to be reasonable under the circumstances, the results of which form the basis for making judgments about carrying values of assets and liabilities that are not readily apparent from other sources. Actual results will differ and may differ materially from these estimates under different assumptions or conditions. Additionally, changes in accounting estimates could occur in the future from period to period. The following paragraphs identify our most critical accounting policies:

Inventory Obsolescence.Our management reviews inventory quantities on hand and records provisions for estimated excess, slow moving and obsolete inventory. Based on this review, we provide adjustments for any slow-moving finished good products or raw materials that we believe will expire prior to being sold or used to produce a finished good and any products that are unmarketable. This review of inventory quantities for unmarketable and/or slow moving products is based on forecasted product demand derived from our historical experience of product sales and production raw material usage. If market conditions become less favorable than those projected by our management, additional inventory write-downs may be required. During the years ended December 31, 2024, 2023 and 2022, we recorded obsolescence expense of approximately $10.6 million, $11.5 million, and $9.8 million, respectively, and wrote off approximately $12.0 million, $11.9 million, and $10.2 million, respectively. Based on this historical trend, we believe that our inventory balances as of December 31, 2024 have been accurately adjusted for any unmarketable and/or slow moving products that may expire prior to being sold.

Valuation of Goodwill and Intangible Assets.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

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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. 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.

We evaluate long-lived assets, including amortizing intangible assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We perform the impairment analysis at the asset group for which the lowest level of identifiable cash flows is largely independent of the cash flows of other assets and liabilities. We first compare undiscounted cash flows to the carrying amount of the asset group to determine if impairment exists, and then determine the fair value of our amortizing assets based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities. This analysis requires similar significant judgments as those discussed above regarding goodwill. 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, 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.

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Item 7A.Quantitative and Qualitative Disclosures About Market Risk.

Currency Exchange Rate Risk

Our consolidated financial statements are denominated in, and our principal currency is, the U.S. Dollar. For the year ended December 31, 2024, a portion of our net sales ($464.9 million, representing 34.3% of our aggregate net sales), was attributable to sales that were denominated in foreign currencies. All other international sales were denominated in U.S. Dollars. Our principal market risk relates to changes in the value of the Chinese Yuan Renminbi (CNY) and Euro (EUR) relative to the U.S. Dollar (USD), with limited market risk relating to various other currencies. In general, a strengthening of the U.S. Dollar against CNY has a negative effect on our operating income. Our Euro-denominated expenses associated with our European operations (manufacturing sites, a distribution facility and sales representatives) provide a natural hedge for Euro-denominated revenues. Accordingly, a strengthening of the U.S. Dollar against the Euro will generally have a positive effect on our operating income.

We forecast our net exposure related to sales and expenses denominated in foreign currencies. As of December 31, 2024 and 2023, we had entered into foreign currency forward contracts, which qualified as cash flow hedges, with aggregate notional amounts of $117.5 million and $141.1 million, respectively. We also forecast our net exposure in various receivables and payables to fluctuations in the value of various currencies, and we enter into foreign currency forward contracts to mitigate that exposure. As of December 31, 2024 and 2023, we had entered into foreign currency forward contracts, which were not designated as hedging instruments, related to those balance sheet accounts with aggregate notional amounts of $95.7 million and $108.4 million, respectively.

A sensitivity analysis of changes in the fair value of all currency exchange rate derivative contracts at December 31, 2024 and 2023 indicates that, if the U.S. Dollar strengthened or weakened by 10% against all currencies, it would have the following impact on the fair value of these contracts (in thousands):

​ ​ ​ ​ ​ ​ ​

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Gains or losses on the fair value of derivative contracts would generally be offset by gains and losses on the underlying hedged transaction or net exposure. These offsetting gains and losses are not reflected above. See Note 9 Derivatives to our consolidated financial statements set forth in Item 8 of this report for additional discussion of our foreign currency forward contracts.

Interest Rate Risk

As discussed in Note 8 Debt to our consolidated financial statements set forth in Item 8 of this report, as of December 31, 2024, we had no outstanding borrowings under the Amended Fourth A&R Credit Agreement. Our exposure to market risk for changes in interest rates relates primarily to variable interest earned on cash balances. Accordingly, our earnings and after-tax cash flow are affected by changes in interest rates. Assuming the current level of cash balances remained the same and no additional borrowings are withdrawn, it is estimated that our interest income before income taxes would change by approximately $3.8 million annually for each one percentage point change in the average interest rate associated with these cash holdings.

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Item 8.Financial Statements and Supplementary Data.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the stockholders and the Board of Directors of Merit Medical Systems, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of Merit Medical Systems, Inc. and subsidiaries (the "Company") as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2024, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP).

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated February 25, 2025, expressed an unqualified opinion on the Company's internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

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Inventories - Provision for estimated excess, slow moving and obsolete inventories – Refer to Note 1 to the financial statements

Critical Audit Matter Description

Inventories are valued at the lower of cost, at approximate costs determined on a first-in, first-out method, or net realizable value. The Company reviews inventories on hand and records provisions based on estimated excess, slow moving and

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obsolete inventories. The valuation of inventories includes an assessment of future product demand based on historical sales and raw material usage and product expiration.

We identified the provision for estimated excess, slow moving and obsolete inventories as a critical audit matter because of management’s significant judgment and estimates in determining the provision for estimated excess, slow moving and obsolete inventories primarily around forecasted product demand derived from historical experience of product sales and production raw material usage. This required a high degree of auditor judgment and an increased extent of effort.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to management’s estimate of the valuation of excess, slow moving and obsolete inventories included the following, among others:

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Intangible Assets – EGS and Cook Developed Technology – Refer to Note 3 to the financial statements

Critical Audit Matter Description

On July 1, 2024, the Company entered into an asset purchase agreement with Endogastric Solutions, Inc. (“EGS”) to acquire the assets associated with the EsophyX® Z+ device. The Company accounted for this acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the tangible and intangibles assets acquired based on their respective fair values, including developed technology intangible assets of $72.8 million.

On November 1, 2024, the Company entered into an asset purchase agreement with Cook Medical Holdings, LLC (“Cook”) to acquire the assets associated with its lead management business. The Company accounted for this acquisition under the acquisition method of accounting for business combinations. Accordingly, the purchase price was allocated to the tangible and intangible assets acquired based on their respective fair values, including developed technology intangible assets of $126.1 million.

The determination of the fair value of the developed technology intangible assets required management to make significant estimates and assumptions related to future cash flows and the discount rate.

We identified the valuation of the acquired developed technology intangible assets from EGS and Cook as a critical audit matter because of the significant estimates and assumptions management made to determine the fair value of the acquired developed technology. This required a high degree of auditor judgment and an increased extent of effort, including the involvement of our fair value specialists, when performing audit procedures to evaluate the reasonableness of management’s forecasts of future cash flows and the discount rate.

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How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to the estimates of future cash flows and discount rate for the acquired EGS and Cook developed technology intangible assets included the following, among others:

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​/s/ DELOITTE & TOUCHE LLP ​

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Salt Lake City, Utah ​

We have served as the Company’s auditor since 1988. ​

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MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

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​ ​ ​ ​ ​ ​ ​

​ December 31, December 31,

​ ​ ​ ​ ​ ​ ​

Current assets: ​ ​

Prepaid expenses and other current assets ​ 28,544 ​ 24,286

Income tax refund receivables ​ 2,335 ​ 859

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Property and equipment: ​ ​

​ ​ ​ ​ ​ ​ ​

Other assets: ​ ​

Intangible assets: ​ ​

Right-of-use operating lease assets ​ ​ 65,508 ​ ​ 63,047

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See notes to consolidated financial statements. (continued)

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MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(In thousands)

​

​ ​ ​ ​ ​ ​ ​

​ December 31, December 31,

LIABILITIES AND STOCKHOLDERS’ EQUITY 2024 2023

​ ​ ​ ​ ​ ​ ​

Current liabilities: ​ ​ ​

Short-term operating lease liabilities ​ ​ 10,331 ​ ​ 12,087

​ ​ ​ ​ ​ ​ ​

Deferred income tax liabilities ​ 240 ​ 5,547

Long-term income taxes payable ​ — ​ 347

Liabilities related to unrecognized tax benefits ​ 2,118 ​ 1,912

Long-term operating lease liabilities ​ ​ 54,783 ​ 56,259

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Commitments and contingencies ​ ​

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Stockholders' equity: ​ ​

Accumulated other comprehensive loss ​ (19,401) ​ (11,334)

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See notes to consolidated financial statements. (concluded)

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MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(In thousands, except per share amounts)

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​ ​ ​ ​ ​ ​ ​ ​ ​ ​

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Operating expenses: ​ ​ ​

Impairment charges ​ — ​ 270 ​ 2,219

Acquired in-process research and development ​ — ​ 1,550 ​ 6,671

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Other income (expense): ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Earnings per common share ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Weighted average shares outstanding ​ ​ ​

​

See notes to consolidated financial statements.

​

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MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(In thousands)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Other comprehensive income (loss): ​ ​ ​

Income tax benefit (expense) ​ (341) ​ 866 ​ (2,177)

Foreign currency translation adjustment ​ (9,224) ​ 2,959 ​ (10,491)

Income tax benefit (expense) ​ 54 ​ (39) ​ 102

Total other comprehensive income (loss) ​ (8,067) ​ 216 ​ (3,559)

​

See notes to consolidated financial statements.

​

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MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Common Stock ​ Retained ​ Accumulated Other ​ ​ ​

​ Shares Amount Earnings Comprehensive Loss Total

Other comprehensive loss ​ ​ ​ (3,559) ​ (3,559)

Stock-based compensation expense ​ 16,045 ​ ​ ​ 16,045

Other comprehensive income ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 216 ​ 216

Stock-based compensation expense ​ ​ ​ ​ 19,043 ​ ​ ​ ​ ​ ​ ​ 19,043

Purchase of capped call option ​ — ​ ​ (66,528) ​ ​ ​ ​ ​ ​ ​ ​ (66,528)

Other comprehensive loss ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (8,067) ​ (8,067)

Stock-based compensation expense ​ ​ ​ ​ 25,753 ​ ​ ​ ​ ​ ​ ​ 25,753

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

See notes to consolidated financial statements.

​

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MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

CASH FLOWS FROM OPERATING ACTIVITIES: ​ ​ ​ ​ ​

(Gain) loss on disposition of business ​ — ​ (431) ​ 1,417

Loss on sale or abandonment of property and equipment ​ 1,490 ​ 5,838 ​ 380

Acquired in-process research and development ​ — ​ 1,550 ​ 6,671

Amortization of deferred credits ​ (103) ​ (104) ​ (107)

Prepaid expenses and other current assets ​ (4,295) ​ 1,281 ​ (1,798)

Prepaid income taxes ​ 709 ​ (92) ​ (379)

Income tax refund receivables ​ (1,536) ​ (58) ​ 1,952

Liabilities related to unrecognized tax benefits ​ 206 ​ — ​ (45)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

CASH FLOWS FROM INVESTING ACTIVITIES: ​ ​ ​

Capital expenditures for: ​ ​ ​

Proceeds from the sale of property and equipment ​ 5 ​ 201 ​ 65

Proceeds (payments) from disposition of business ​ ​ — ​ ​ 431 ​ ​ (971)

​

​ ​

See notes to consolidated financial statements. (continued)

​

​

​

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MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

CASH FLOWS FROM FINANCING ACTIVITIES: ​ ​ ​ ​ ​

Proceeds from issuance of long-term debt ​ — ​ 1,199,203 ​ 215,205

Purchase of capped call option ​ ​ — ​ ​ (66,528) ​ ​ —

Long-term debt issuance costs ​ — ​ (677) ​ —

Contingent payments related to acquisitions ​ (261) ​ (3,569) ​ (32,918)

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

CASH, CASH EQUIVALENTS AND RESTRICTED CASH: ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION ​ ​ ​

Cash paid during the period for: ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES ​ ​ ​

​

See notes to consolidated financial statements. (concluded)

​

​

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MERIT MEDICAL SYSTEMS, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization. Merit Medical Systems, Inc. (“Merit,” “we,” or “us”) designs, develops, manufactures and markets single-use medical products for interventional and diagnostic procedures. For financial reporting purposes, we report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of cardiology and radiology medical device products which assist in diagnosing and treating coronary artery disease, peripheral vascular disease and other non-vascular diseases and includes embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, and interventional oncology and spine devices. Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors. Within those two operating segments, we offer products focused in five product categories: peripheral intervention, cardiac intervention, custom procedural solutions, original equipment manufacturer (“OEM”) and endoscopy.

We manufacture our products in plants located in the U.S., Mexico, The Netherlands, Ireland, France, Brazil and Singapore. We export sales to dealers and have direct or modified direct sales forces in the U.S., Canada, Western Europe, Australia, Brazil, Japan, China, Malaysia, South Korea, UAE, India, New Zealand and South Africa (see Note 13 Segment Reporting and Foreign Operations).

Principles of Consolidation and Basis of Presentation. Our consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States (“U.S. GAAP”). The consolidated financial statements include our wholly owned subsidiaries. Intercompany balances and transactions have been eliminated. Amounts presented in this report are rounded, while percentages and earnings per share amounts presented are calculated from the underlying amounts.

During the year ended December 31, 2024, we elected to change the presentation of investments in privately held companies within the statements of cash flows to be included within Cash paid for notes receivable and other investments. Previously, amounts paid to acquire such investments were presented within Cash paid in acquisitions, net of cash acquired. The change in presentation had no material impact on previously reported financial information and comparative periods have been adjusted to reflect this change in presentation.

Use of Estimates in Preparing Financial Statements. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents. We consider interest-bearing deposits and money market funds with an original maturity date of three months or less to be cash equivalents. As of December 31, 2024 and 2023, we had restricted cash for the payment of certain import and other taxes for our subsidiary in China of $2.1 million and $2.1 million, respectively, which was reported within prepaid expenses and other assets on our consolidated balance sheets.

Receivables.Trade accounts receivable are recorded at the net invoice value and are not interest-bearing. An allowance for credit losses on trade receivables is recorded based on our expectation of credit losses and is based upon our historical bad debt experience, current economic conditions, expectations of future economic conditions and management’s evaluation of our ability to collect individual outstanding balances. Once collection efforts have been exhausted and a receivable is deemed to be uncollectible, such balance is charged against the allowance for credit losses.

Inventories. We value our inventories at the lower of cost, at approximate costs determined on a first-in, first-out method, or net realizable value. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal, and transportation. Inventory costs include material, labor and manufacturing overhead. We review inventories on hand and record provisions based on estimated excess, slow moving and obsolete inventories, as well as inventories with a carrying value in excess of net realizable value. The regular and systematic review

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of the valuation of inventories includes an assessment of future product demand based on historical sales and raw material usage and product expiration.

Goodwill and Intangible Assets.We test goodwill balances for impairment on an annual basis 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, we utilize 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. 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.

Finite-lived intangible assets including developed technology, customer lists, distribution agreements, license agreements, trademarks and patents are subject to amortization. Intangible assets are amortized over their estimated useful life on a straight-line basis, except for customer lists, which are generally amortized on an accelerated basis. Estimated useful lives are determined considering the period the assets are expected to contribute to future cash flows. We evaluate long-lived assets, including amortizing intangible assets, for impairment whenever events or changes in circumstances indicate that their carrying amounts may not be recoverable. We perform the impairment analysis at the asset group for which the lowest level of identifiable cash flows are largely independent of the cash flows of other assets and liabilities. We compare the carrying value of the asset group to the undiscounted cash flows expected to result from the asset group and determine whether the carrying amount is recoverable. We determine the fair value of each asset group based on estimated future cash flows discounted back to their present value using a discount rate that reflects the risk profiles of the underlying activities.

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. An impairment charge would be recognized to the extent the carrying amount of the in-process technology exceeded its fair value.

During the years ended December 31, 2024 and 2023, we recorded no impairment charges related to our intangible assets. During the year ended December 31, 2022, we recorded total impairment charges related to our intangible assets of $1.7 million for our divestiture on April 30, 2022 of the STD Pharmaceutical Products Limited (“STD Pharmaceutical”) business acquired in our August 2019 acquisition of Fibrovein Holdings Limited, which pertained to our cardiovascular segment. The primary indicators of impairment were restructuring activities and uncertainty about future product development and commercialization associated with certain acquired technologies.

Long-Lived Assets. We periodically review the carrying amount of our long-lived assets, including property and equipment, intangible assets, and right-of-use operating lease assets, for impairment. An asset is considered impaired when undiscounted estimated future cash flows are less than the carrying amount of the asset based on the criteria for accounting for the impairment or disposal of long-lived assets under ASC 360, Property, Plant and Equipment. In the event the carrying amount of such asset is not considered recoverable, the asset is adjusted to its fair value. Fair value is generally determined based on discounted future cash flow. The Company recorded write downs of property and equipment in each of the years ended December 31, 2024, 2023 and 2022.

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Property and Equipment. Property and equipment is stated at the historical cost of construction or purchase. Construction costs include interest costs capitalized during construction. Maintenance and repairs of property and equipment are charged to operations as incurred. Leasehold improvements are amortized over the lesser of the base term of the lease or estimated life of the leasehold improvements. Construction-in-process consists of new buildings and various production equipment being constructed internally and externally. Assets in construction-in-process will commence depreciating once the asset has been placed in service. Depreciation is computed using the straight-line method over estimated useful lives as follows:

​

​ ​ ​

Buildings 40 years

Manufacturing equipment ​ 4 - 20 years

Furniture and fixtures ​ 3 - 20 years

Land improvements ​ 10 - 20 years

Leasehold improvements ​ 4 - 25 years

​

Depreciation expense related to property and equipment for the years ended December 31, 2024, 2023 and 2022 was $37.2 million, $34.0 million, and $33.4 million, respectively.

Deferred Compensation. We have a deferred compensation plan that permits certain management employees to defer a portion of their salary until the future. We established a Rabbi trust to finance obligations under the plan with corporate-owned variable life insurance contracts. The cash surrender value totaled $20.7 million and $18.3 million at December 31, 2024 and 2023, respectively, which is included in other assets in our consolidated balance sheets. We have recorded a deferred compensation payable of $19.2 million and $17.2 million at December 31, 2024 and 2023, respectively, to reflect the liability to our employees under this plan.

Other Assets.Other assets as of December 31, 2024 and 2023 consisted of the following (in thousands):

​

​ ​ ​ ​ ​ ​ ​

Investments in privately held companies ​ $ 22,832 ​ $ 19,061

Deferred compensation plan assets ​ ​ 20,716 ​ ​ 18,309

Long-term notes receivable, net ​ ​ 9,423 ​ ​ 3,241

​

We analyze our investments in privately held companies to determine if they should be accounted for using the equity method based on our ability to exercise significant influence over operating and financial policies of the investment. Our share of earnings associated with equity method investments is reported within other income (expense) in our consolidated statements of income. Investments not accounted for under the equity method of accounting are accounted for at cost minus impairment, if applicable, plus or minus changes in valuation resulting from observable transactions for identical or similar investments. We paid $3.8 million, $4.0 million, and $1.4 million in the acquisition of additional equity investments and have no cumulative impairments or other fair value adjustments associated with our existing investments. Refer to Note 15, Fair Value Measurements, for details of impairments of securities previously classified as equity investments.

Other Long-term Obligations. Other long-term obligations as of December 31, 2024 and 2023 consisted of the following (in thousands):

​

​ ​ ​ ​ ​ ​ ​

Contingent consideration liabilities ​ $ 3,128 ​ $ 3,039

​

In connection with a business combination, any contingent consideration is recorded at fair value on the acquisition date based upon the consideration expected to be transferred in the future. We re-measure the estimated liability each quarter based upon changes in revenue estimates, changes in the probability of achieving relevant milestones and changes in the

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discount rate or expected period of payment. Changes in the estimated fair value are recorded through operating expense in our consolidated statements of income.

Revenue Recognition.We sell our medical products through a direct sales force in the U.S. and through OEM relationships, custom procedure tray manufacturers and a combination of direct sales force and independent distributors in international markets. Revenue is recognized when a customer obtains control of promised goods based on the consideration we expect to receive in exchange for these goods. This core principle is achieved through the following steps:

Identify the contract with the customer. A contract with a customer exists when (i) we enter into an enforceable contract with a customer that defines each party’s rights regarding the goods to be transferred and identifies the payment terms related to these goods, (ii) the contract has commercial substance and (iii) we determine that collection of substantially all consideration for services that are transferred is probable based on the customer’s intent and ability to pay the promised consideration. We do not have significant costs to obtain contracts with customers. For commissions on product sales, we have elected the practical expedient to expense the costs as incurred if the amortization period would have been one year or less.

Identify the performance obligations in the contract. Generally, our contracts with customers do not include multiple performance obligations to be completed over a period of time. Our performance obligations generally relate to delivering single-use medical products to a customer, subject to the shipping terms of the contract. Limited warranties are provided, under which we typically accept returns and provide either replacement parts or refunds. We do not have significant returns. We do not typically offer extended warranty or service plans, except in limited cases which are not material.

Determine the transaction price. Payment by the customer is due under customary fixed payment terms, and we evaluate if collectability is reasonably assured. Our contracts do not typically contain a financing component. Revenue is recorded at the net sales price, which includes estimates of variable consideration such as product returns, rebates, discounts, and other adjustments. The estimates of variable consideration are based on historical payment experience, historical and projected sales data, and current contract terms. Variable consideration is included in revenue only to the extent that it is probable that a significant reversal of the revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. Taxes collected from customers relating to product sales and remitted to governmental authorities are excluded from revenues.

Allocate the transaction price to performance obligations in the contract. We typically do not have multiple performance obligations in our contracts with customers. As such, we generally recognize revenue upon transfer of the product to the customer’s control at contractually stated pricing.

Recognize revenue when or as we satisfy a performance obligation. We generally satisfy performance obligations at a point in time upon either shipment or delivery of goods, in accordance with the terms of each contract with the customer. We do not have significant service revenue. Contract assets are recognized for the future right to invoice customers, and contract liabilities are recognized for unearned revenue if payment is received prior to our fulfillment of performance obligations. We do not have material contract assets or contract liabilities.

Reserves are recorded as a reduction in net sales and are not considered material to our consolidated statements of income for the years ended December 31, 2024, 2023 and 2022. In addition, we invoice our customers for taxes assessed by governmental authorities, such as sales tax and value-added taxes. We present these taxes on a net basis.

Shipping and Handling. When billed to our customers, shipping and handling charges are included in net sales for the applicable period, and the corresponding shipping and handling expense is reported in cost of sales.

Cost of Sales. We include product costs (i.e., material, direct labor and overhead costs), shipping and handling expense, product royalty expense, developed technology amortization expense, production-related depreciation expense and product license agreement expense in cost of sales.

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Research and Development. Research and development costs, including new product development, clinical trials, and regulatory compliance, are expensed as incurred.

Restructuring. Restructuring charges consist primarily of termination benefits for employees effected by certain site consolidation and production line optimization transfers related to the company’s transformation initiatives. We account for involuntary employee termination benefits that represent a one-time benefit in accordance with ASC 420, Exit or Disposal Cost Obligations. Severance costs accounted for under ASC 420 are recognized when management with the proper level of authority commits to a restructuring plan and communicates these actions to employees and other applicable criteria. We record such costs into expense over the employee’s future service period, if any. Other exit costs are accounted for under ASC 420 and are either deferred or expensed as incurred based on the nature of the expense. We recorded restructuring charges of $3.1 million, $2.7 million and $7.2 million for the years ended December 31, 2024, 2023 and 2022, respectively. These expenses are reflected within selling, general and administrative expenses within our consolidated statements of income. The restructuring reserve balance as of December 31, 2024 and 2023 was $1.1 million and $4.1 million, respectively.

Income Taxes. Under our accounting policies, we initially recognize a tax position in our financial statements when it becomes more likely than not that the position will be sustained upon examination by the tax authorities. Such tax positions are initially and subsequently measured as the largest amount of tax positions that has a greater than 50% likelihood of being realized upon ultimate settlement with the tax authorities assuming full knowledge of the position and all relevant facts. Although we believe our provisions for unrecognized tax positions are reasonable, we can make no assurance that the final tax outcome of these matters will not be different from that which we have reflected in our income tax provisions and accruals. Such differences could have a material impact on our income tax provisions and operating results in the periods in which we make such determination.

Earnings per Common Share. Net income per common share is computed by both the basic method, which uses the weighted average number of our common shares outstanding, and the diluted method, which includes the potentially dilutive common equivalent shares outstanding. Performance stock units are considered contingently issuable awards and are excluded from the weighted average basic share calculation. These awards are included in the weighted average dilutive share calculation, to the extent they are dilutive, based on the number of shares, if any, that would be issuable as of the end of the reporting period assuming the end of the reporting period is also the end of the performance period. For Convertible Notes, the dilutive effect is calculated using the if-converted method.

Fair Value Measurements.The fair value of a financial instrument is the amount that could be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Financial assets are marked to bid prices and financial liabilities are marked to offer prices. Fair value measurements do not include transaction costs. A fair value hierarchy is used to prioritize the quality and reliability of the information used to determine fair values. Categorization within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy is defined in the following three categories:

Level 1: Quoted market prices in active markets for identical assets or liabilities.

Level 2: Observable market-based inputs or inputs that are corroborated by market data.

Level 3: Unobservable inputs that are not corroborated by market data.

Stock-Based Compensation.We recognize the fair value compensation cost relating to stock-based payment transactions in accordance with Accounting Standards Codification (“ASC”) 718, Compensation — Stock Compensation. Under the provisions of ASC 718, stock-based compensation cost is measured at the grant date, based on the fair value of the award, and is recognized over the employee’s requisite service period, which is generally the vesting period. The fair value of our stock options is estimated using a Black-Scholes option valuation model. The fair value of our performance stock units linked to total shareholder return is estimated using Monte-Carlo simulations. Compensation expense is adjusted each period based on the grant-date fair value and the number of shares that are probable of being awarded based on the performance conditions of the awards. Restricted stock units are valued based on the closing stock price on the date of grant. Cash-settled share-based awards, or liability awards, are remeasured at fair value each reporting period until the awards are settled. Total stock-based compensation expense for the years ended December 31, 2024, 2023 and 2022 was $28.5 million, $21.3 million, and $18.0 million, respectively (see Note 12, Employee Stock Purchase Plan, Stock Options and Warrants).

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Concentration of Credit Risk. Financial instruments that potentially subject us to concentrations of credit risk consist primarily of cash and cash equivalents and accounts receivable. We provide credit, in the normal course of business, primarily to hospitals and independent third-party custom procedure tray manufacturers and distributors. We perform ongoing credit evaluations of our customers and maintain allowances for potential credit losses. Due to the diversified nature and number of our customers, concentrations of credit risk with respect to accounts receivable are limited.

Foreign Currency. The financial statements of our foreign subsidiaries are measured using local currencies as the functional currency, with the exception of our manufacturing subsidiaries in Ireland and Mexico, which each use the U.S. Dollar as its functional currency. Assets and liabilities are translated into U.S. Dollars at year-end rates of exchange and results of operations are translated at average rates for the year. Gains and losses resulting from these translations are included in accumulated other comprehensive loss as a separate component of stockholders’ equity. Transactional exchange gains or losses are included in other income (expense) in determining net income for the period.

Derivatives.We use forward contracts to mitigate our exposure to volatility in foreign exchange rates, and we used an interest rate swap to hedge changes in the benchmark interest rate related to our Amended Fourth A&R Credit Agreement described in Note 8, Debt. All derivatives are recognized in the consolidated balance sheets at fair value. Classification of each hedging instrument is based upon whether the maturity of the instrument is less than or greater than 12 months. We do not purchase or hold derivative financial instruments for speculative or trading purposes (see Note 9, Derivatives).

Recently Adopted Financial Accounting Standards. In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2020-04, Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides temporary optional expedients and exceptions in accounting for modifications of contracts that reference the London interbank offered rate (“LIBOR”) or another reference rate expected to be discontinued as a result of reference rate reform. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls “reference rate reform” if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform if certain criteria are met. In December 2022, the FASB issued ASU 2022-06, Deferral of the Sunset Date of Topic 848, which defers the sunset date of the guidance in ASC 848 to December 31, 2024. During 2023, we transitioned our interest rate swap agreement to reference the Secured Overnight Financing Rate (“SOFR”) in connection with reference rate reform and adopted certain optional expedients provided in ASU 2020-04 in relation to contract modifications and hedge accounting that allowed us to continue hedge accounting for our interest rate swap cash flow hedge (see Note 9, Derivatives). The adoption of this guidance did not have a material impact on our consolidated financial statements.

In November 2023, the FASB issued ASU 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which requires a public entity to disclose significant segment expenses and other segment items on an annual and interim basis and to provide in interim periods all disclosures about reportable segment’s profit or loss and assets that are currently required annually. We adopted this ASU on January 1, 2024, and applied the amendments retrospectively to all prior periods presented in our consolidated financial statements (see Note 13, Segment Reporting and Foreign Operations). The adoption of this guidance did not have an impact on the company’s consolidated financial position, results of operations or cash flows.

Recently Issued Accounting Standards. In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which amends Income Taxes(Topic 740). The FASB issued this update to improve annual basis income tax disclosures related to (1) rate reconciliation, (2) income taxes paid, and (3) other disclosures related to pretax income (or loss) and income tax expense (or benefit) from continuing operations. ASU 2023-09 is effective for fiscal years beginning after December 15, 2025, with early adoption permitted. These amendments are to be applied on a prospective basis. Retrospective application is permitted. We are currently evaluating the impact this standard will have on our consolidated financial statement disclosures.

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses, which requires a public entity to disclose certain operating expenses disaggregated into categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization on an annual and interim basis. ASU 2024-03 is effective

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for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. The provisions within the update may be applied retrospectively for all periods presented in the financial statements. While we are still evaluating the specific impacts and adoption method, we anticipate this guidance will have a significant impact on our consolidated financial statement disclosures.

We currently believe there are no other issued and not yet effective accounting standards that are materially relevant to our financial statements.

​

2.REVENUES

Disaggregation of Revenue.Our revenue is disaggregated based on reporting segment, product category and geographical region. We design, develop, manufacture and market medical products for interventional and diagnostic procedures. For financial reporting purposes, we report our operations in two operating segments: cardiovascular and endoscopy. Our cardiovascular segment consists of four product categories: peripheral intervention, cardiac intervention, custom procedural solutions, and OEM. Within these product categories, we sell a variety of products, including cardiology and radiology devices (which assist in diagnosing and treating coronary arterial disease, peripheral vascular disease and other non-vascular diseases), as well as embolotherapeutic, cardiac rhythm management, electrophysiology, critical care, breast cancer localization and guidance, biopsy, and interventional oncology and spine devices. Our endoscopy segment consists of gastroenterology and pulmonology devices which assist in the palliative treatment of expanding esophageal, tracheobronchial and biliary strictures caused by malignant tumors.

The following table presents sales by operating segment disaggregated based on product category and geographic region for the years ended December 31, 2024, 2023 and 2022 (in thousands).

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Year Ended ​ Year Ended ​ Year Ended

Cardiovascular ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Endoscopy ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

​

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3.ACQUISITIONS AND OTHER STRATEGIC TRANSACTIONS

2024 Acquisitions

On November 1, 2024, pursuant to the terms of the Asset Purchase Agreement (the “Cook Purchase Agreement”) dated September 18, 2024 between Merit and Cook Medical Holdings LLC, (“Cook”), we acquired Cook’s lead management business, which is composed of a comprehensive end-to-end portfolio of medical devices and accessories used in lead management procedures for patients who need a pacemaker or an implantable cardioverter-defibrillator lead removed or replaced. We acquired the portfolio for a purchase price of $210 million, plus the assumption of certain liabilities. We accounted for this transaction under the acquisition method of accounting as a business combination. The sales related to the acquisition have been included in our Cardiovascular segment since the acquisition date and were $5.5 million for the year ended December 31, 2024. It is not practical to separately report earnings related to the acquisition, as we began to immediately integrate the acquisition into the existing operations, sales distribution networks and management structure of our cardiovascular business segment. Acquisition-related costs associated with the transaction, which were included in selling, general and administrative expenses in the consolidated statements of income were approximately $5.4 million. The purchase price was preliminarily allocated as follows (in thousands):

​

​ ​ ​ ​

Assets Acquired ​

Intangible assets ​ ​

Developed technology ​ $ 126,100

Total assets acquired ​ 210,197

​ ​ ​ ​

Liabilities Assumed ​

Accrued expenses ​ 197

Total liabilities assumed ​ 197

​ ​ ​ ​

Total net assets acquired ​ $ 210,000

​

We are amortizing Cook developed technology intangible assets over ten years, the trademark intangible assets over 12 years, and the customer list intangible asset on an accelerated basis over 12 years. We have estimated the weighted average life of the intangible assets acquired from Cook to be 10.3 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects on our consolidated results of operations of the Cook acquisition are not material in relation to reported sales and it was deemed impracticable to obtain information to determine earnings associated with the acquired product lines which represent only a small portion of the product lines of a large, consolidated company without standalone financial information.

On July 1, 2024, we entered into an Asset Purchase Agreement (the “EGS Purchase Agreement”) with EndoGastric Solutions, Inc. (“EGS”), pursuant to which we acquired the EsophyX® Z+ device and various assets related thereto (collectively, the “EGS Acquisition”), which are designed to deliver a durable, minimally invasive non-pharmacological treatment option for patients suffering from gastroesophageal reflux disease. We acquired the purchased assets identified under the EGS Purchase Agreement for a purchase price of $105 million. We accounted for the EGS Acquisition under the acquisition method of accounting as a business combination. The sales related to the EGS Acquisition have been included in our endoscopy segment since the acquisition date and were $14.4 million for the year ended December 31, 2024. It is not practical to separately report earnings related to the EGS Acquisition, as we began to immediately integrate the acquisition into the existing operations, sales distribution networks and management structure of our endoscopy business segment. Acquisition-related costs associated with the EGS Acquisition, which were included in selling, general

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and administrative expenses in the consolidated statements of income were approximately $3.4 million. The purchase price was allocated as follows (in thousands):

​

​ ​ ​ ​

Assets Acquired ​

Trade receivables ​ $ 2,568

Inventories ​ ​ 3,553

Prepaid expenses and other current assets ​ ​ 99

Property and equipment ​ ​ 258

Intangible assets ​ ​

Developed technology ​ ​ 72,800

Customer list ​ ​ 6,600

Total assets acquired ​ 108,275

​ ​ ​ ​

Liabilities Assumed ​

Trade payables ​ 494

Accrued expenses ​ 2,752

Total liabilities assumed ​ 3,246

​ ​ ​ ​

Total net assets acquired ​ $ 105,029

​

We are amortizing the EGS developed technology intangible assets over ten years, the trademark intangible assets over 11 years, and the customer list intangible asset on an accelerated basis over 11 years. We have estimated the weighted average life of the intangible assets acquired from EGS to be 10.1 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects to our consolidated results of operations of the EGS Acquisition are not material in relation to reported sales.

On March 8, 2024, we entered into an asset purchase agreement with Scholten Surgical Instruments, Inc. (“SSI”) to acquire the assets associated with the Bioptome, Novatome, and Sensatome devices. The total purchase price of the SSI assets included an up-front payment of $3 million, and three deferred payments, including (i) $1 million payable upon the earlier of (a) the first anniversary of the closing date or (b) the date on which Merit can independently manufacture the purchased devices (“Deferred Payment Date”), (ii) $1 million payable upon the first anniversary of the Deferred Payment Date, and (iii) $1 million payable upon the second anniversary of the Deferred Payment Date. We have accounted for this transaction as an asset purchase, and recorded the amount paid and deferred payments as a developed technology intangible asset, which we are amortizing over eight years.

2023 Acquisitions

On June 8, 2023, we entered into an asset purchase agreement with AngioDynamics, Inc. (“AngioDynamics”) to acquire the assets associated with a portfolio of dialysis catheter products and the BioSentry® Biopsy Tract Sealant System for a purchase price of $100 million. We accounted for this transaction under the acquisition method of accounting as a business combination. The sales related to the acquisition have been included in our cardiovascular segment since the acquisition date and were approximately $26.9 million and $14.4 million for the years ended December 31, 2024 and 2023, respectively. It is not practical to separately report earnings related to the acquisition, as we began to immediately integrate the acquisition into existing operations, sales distribution networks and management structure of our cardiovascular business segment. Acquisition-related costs associated with the AngioDynamics acquisition, which are included in selling,

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general and administrative expenses in the accompanying consolidated statements of income, were approximately $4.9 million for the year ended December 31, 2023. The purchase price was allocated as follows (in thousands):

​

​ ​ ​ ​

Assets Acquired ​

Prepaid expenses ​ $ 2,000

Property and equipment ​ ​ 108

Intangible assets ​ ​

Developed technology ​ ​ 65,200

Customer list ​ ​ 5,800

Total net assets acquired ​ $ 100,000

​

We are amortizing the AngioDynamics developed technology intangible assets over ten years, the trademark intangible assets over 11 years, and the customer list intangible asset on an accelerated basis over ten years. We have estimated the weighted average life of the intangible assets acquired from AngioDynamics to be 10.5 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects on our consolidated results of operations of the AngioDynamics acquisition are not material in relation to reported sales and it was deemed impracticable to obtain information due to the unavailability of the information provided to the Company, management’s inability to reasonably estimate the amounts from the carve out of assets and differing fiscal year-end of the acquired business.

On May 4, 2023, we entered into an asset purchase agreement to acquire the assets associated with the Surfacer® Inside-Out® Access Catheter System from Bluegrass Vascular Technologies, Inc. (“Bluegrass”), for a purchase price of approximately $32.7 million. Prior to the acquisition, we held an equity investment of 1,251,878 Bluegrass common shares representing approximately 19.5% ownership in Bluegrass. The fair value of this previously held equity investment of approximately $0.2 million is included in the purchase price allocation. We accounted for this transaction under the acquisition method of accounting as a business combination. The sales and results of operations related to the acquisition have been included in our cardiovascular segment since the acquisition date and were not material. Acquisition-related costs associated with the Bluegrass acquisition, which are included in selling, general and administrative expenses in the accompanying consolidated statements of income, are not material. The purchase price was allocated as follows (in thousands):

​

​ ​ ​ ​

Assets Acquired ​

Inventories ​ $ 175

Intangible assets ​ ​

Developed technology ​ ​ 28,000

Trademarks ​ ​ 900

Total net assets acquired ​ $ 32,973

​

We are amortizing the Bluegrass developed technology intangible asset over 15 years and the related trademarks over 13 years. We have estimated the weighted average life of the intangible assets acquired from Bluegrass to be 14.9 years. The goodwill consists largely of the synergies expected from combining operations and is expected to be deductible for income tax purposes. The pro forma effects on our consolidated results of operations of the Bluegrass acquisition are not material.

On May 1, 2023, we entered into an asset purchase agreement to acquire certain assets from ART, related to intellectual property rights for soft tissue markers. The total purchase price of the ART assets included an up-front payment of $0.8 million, a deferred payment of $0.8 million payable upon the first to occur of (1) shipment and installation of two commercial production winders used to manufacture the product or (2) 30 days after delivery of the winders to Merit, and, a deferred payment of $0.5 million payable upon regulatory approval from the U.S. Food and Drug Administration for Merit to commence commercialization, marketing and sale of the product in the United States. We have accounted for this

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transaction as an asset purchase and recorded $1.5 million of acquired in-process research and development expense associated with the upfront payment and completion of the milestone related to the installation of the commercial production winders. The final payment will be capitalized as a developed technology intangible asset when paid upon completion of the regulatory approval milestone under the terms of the asset purchase agreement. The payments are reported within operating expenses because the technological feasibility of the underlying research and development project has not yet been reached and such technology has no identified future alternative use as of the date of acquisition.

2022 Acquisitions

On October 3, 2022, we entered into an asset purchase agreement with BioTrace Medical, Inc., developer of the Tempo® Temporary Pacing Lead device, for a purchase price of $2.5 million. We are also required to pay a total of six annual royalty payments between 5% and 10% of net sales, dependent on net sales goal achievement, upon achievement of the first device sold in the United States. We accounted for this transaction as an asset purchase. We recorded the amount paid upon closing as a developed technology intangible asset, which we are amortizing over 10 years.

On April 30, 2022, we acquired the Restore Endosystems Bifurcated Stent System pursuant to the terms of a unit purchase agreement we executed with all of the members of Restore Endosystems LLC. Subject to the terms and conditions of the unit purchase agreement, we paid $3 million in cash at closing. We also accrued $3.5 million of other long-term obligations, which represents the fair value of two separate $2 million payments which are payable no later than two and four years following the closing of the acquisition, respectively, or earlier upon the achievement of specified milestones. We will impute interest on these liabilities with the passage of time. We have accounted for this transaction as an asset purchase and recorded $6.5 million of acquired in-process research and development expense because the technological feasibility of the underlying research and development project has not yet been reached and such technology has no identified future alternative use as of the date of acquisition.

​

4.INVENTORIES

Inventories at December 31, 2024 and 2023, consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​

​

​

5.GOODWILL AND INTANGIBLE ASSETS

The changes in the carrying amount of goodwill for the years ended December 31, 2024 and 2023, are as follows (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ Cardiovascular ​ Endoscopy ​ Total Cardiovascular ​ Endoscopy ​ Total

​

Total accumulated goodwill impairment losses aggregated to $8.3 million as of December 31, 2024 and 2023. We did not have any goodwill impairments for the years ended December 31, 2024, 2023 and 2022.

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Other intangible assets at December 31, 2024 and 2023, consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Gross Carrying ​ Accumulated ​ Net Carrying

​ Amount Amortization Amount

​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​ ​ Gross Carrying ​ Accumulated ​ Net Carrying

​ Amount Amortization Amount

​

Aggregate amortization expense for the years ended December 31, 2024, 2023 and 2022 was $65.6 million, $56.1 million, and $48.4 million, respectively.

Estimated amortization expense for the developed technology and other intangible assets for the next five years consists of the following as of December 31, 2024 (in thousands):

​ ​ ​ ​

Year ending December 31, Estimated Amortization Expense

​

​

6.INCOME TAXES

The Organization for Economic Cooperation and Development (“OECD”) Pillar 2 global minimum tax rules, which generally provide for a minimum effective tax rate of 15%, are intended to apply for tax years beginning in 2024. On February 2, 2023, the OECD issued administrative guidance providing transition and safe harbor rules around the implementation of the Pillar 2 global minimum tax. Under a transitional safe harbor released July 17, 2023, the undertaxed profits rule top-up tax in the jurisdiction of a company's ultimate parent entity will be zero for each fiscal year of the transition period, if that jurisdiction has a corporate tax rate of at least 20%. The safe harbor transition period will apply to fiscal years beginning on or before December 31, 2025 and ending before December 31, 2026. We are closely monitoring developments and evaluating the impact these new rules are anticipated to have on our tax rate, including eligibility to qualify for these safe harbor rules. Based on the 2024 financial results, we anticipate to meet the safe harbor rules in all jurisdictions and do not anticipate the Pillar 2 laws to have a material impact on our effective tax rate.

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For the years ended December 31, 2024, 2023 and 2022, income before income taxes is broken out between U.S. and foreign-sourced operations and consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

The components of the provision for income taxes for the years ended December 31, 2024, 2023 and 2022, consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Current expense: ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Deferred expense (benefit): ​ ​ ​

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

​

The difference between the income tax expense reported and amounts computed by applying the statutory federal rate of 21.0% to pretax income for the years ended December 31, 2024, 2023 and 2022, consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Uncertain tax positions ​ 218 ​ 4 ​ (47)

Deferred compensation insurance assets ​ (535) ​ (548) ​ 706

Valuation allowance ​ ​ — ​ ​ (90) ​ ​ 3,523

Remeasurement of state deferred taxes ​ ​ — ​ ​ (73) ​ ​ (375)

Remeasurement of contingent consideration liabilities ​ ​ 108 ​ ​ 317 ​ ​ 1,061

Other — including the effect of graduated rates ​ (498) ​ 208 ​ (70)

​

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Deferred income tax assets and liabilities at December 31, 2024 and 2023, consisted of the following temporary differences and carry-forward items (in thousands):

​ ​ ​ ​ ​ ​ ​

Deferred income tax assets: ​ ​

Allowance for credit losses on trade receivables ​ $ 2,215 ​ $ 2,009

Net operating loss carryforwards ​ 8,320 ​ 10,007

Stock-based compensation expense ​ 7,569 ​ 7,913

State R&D tax credits ​ ​ 5,924 ​ ​ 5,237

​ ​ ​ ​ ​ ​ ​

Deferred income tax liabilities: ​ ​

Foreign withholding tax ​ (1,681) ​ (2,005)

Operating lease liabilities ​ ​ (11,737) ​ ​ (10,129)

Total deferred income tax liabilities ​ (68,466) ​ (73,307)

Net deferred income tax liabilities ​ $ 15,804 ​ $ 1,741

​ ​ ​ ​ ​ ​ ​

Reported as: ​ ​

Deferred income tax assets ​ $ 16,044 ​ $ 7,288

Deferred income tax liabilities ​ (240) ​ (5,547)

Net deferred income tax liabilities ​ $ 15,804 ​ $ 1,741

​

Deferred tax assets and liabilities are netted on the balance sheet by separate tax jurisdictions. Deferred income tax balances reflect the temporary differences between the carrying amounts of assets and liabilities and their tax basis and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered. The valuation allowance is primarily related to state credit carryforwards, non-US net operating loss carryforwards, and capital loss carryforwards for which we believe it is more likely than not that the deferred tax assets will not be realized. The valuation allowance increased by $0.4 million during the year ended December 31, 2024, increased by $0.2 million during the year ended December 31, 2023, and increased by $2.7 million during the year ended December 31, 2022.

As of December 31, 2024, we had U.S federal net operating loss carryforwards of $19.8 million, which were generated by Cianna Medical, DFINE Inc., and Biosphere Medical, Inc., prior to our acquisition of these companies. These net operating loss carryforwards are subject to annual limitations under Internal Revenue Code Section 382. If unused, $19.8 million of the net operating losses will expire between 2030 and 2037. We anticipate that we will utilize all current net operating loss carryforwards prior to their expiration dates over the next 11 years. We utilized a total of $4.8 million in U.S. federal net operating loss carryforwards during the year ended December 31, 2024.

As of December 31, 2024, we had $20.9 million of non-U.S. net operating loss carryforwards, of which $19.2 million have no expiration date and $1.7 million expire at various dates through 2036. Non-U.S. net operating loss carryforwards utilized during the year ended December 31, 2024 were not material.

We do not consider our foreign earnings to be permanently reinvested. Consequently, we have recorded tax expense of $0.7 million, $0.4 million and $0.3 million for foreign withholding taxes on unremitted foreign earnings during the years ended December 31, 2024, 2023 and 2022, respectively. Additionally, for the year ended December 31, 2022, a tax benefit

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of $4.3 million was recorded with respect to the restructuring of our foreign entities and the associated change in foreign withholding taxes on the unremitted foreign earnings.

We are subject to income taxes in the U.S. and numerous foreign jurisdictions. Significant judgment is required in determining our worldwide provision for income taxes and recording the related assets and liabilities. In the ordinary course of our business, there are many transactions and calculations where the ultimate tax determination is uncertain. In our opinion, we have made adequate provisions for income taxes for all years subject to audit. We are no longer subject to U.S. federal, state, and local income tax examinations by tax authorities for years before 2021. In foreign jurisdictions, we are no longer subject to income tax examinations for years before 2018.

Although we believe our estimates are reasonable, the final outcomes of these matters may be different from those which we have reflected in our historical income tax provisions and accruals. Such differences could have a material effect on our income tax provision and operating results in the period in which we make such determination.

The total liability for unrecognized tax benefits at December 31, 2024, including interest and penalties, was $2.1 million, of which $2.1 million would favorably impact our effective tax rate if recognized. The total liability for unrecognized tax benefits at December 31, 2023, including interest and penalties, was $1.9 million, of which $1.9 million would favorably impact our effective tax rate if recognized. As of December 31, 2024 and 2023, we had accrued $0.2 million and $0.3 million respectively, in total interest and penalties related to unrecognized tax benefits. We account for interest and penalties for unrecognized tax benefits as part of our income tax provision. During the years ended December 31, 2024, 2023 and 2022, our liability for unrecognized tax benefit was increased (decreased) for interest and penalties by $(52,000), $(46,000), and $14,000, respectively. We estimate it is reasonably possible that within the next 12 months the total liability for unrecognized tax benefits may increase, including expirations related to statutes of limitation, up to $0.1 million.

A reconciliation of the beginning and ending amount of liabilities associated with uncertain tax benefits for the years ended December 31, 2024, 2023 and 2022, consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​ ​ ​ ​

Unrecognized tax benefits, opening balance ​ $ 1,622 ​ $ 1,576 ​ $ 1,635

Gross increases in tax positions taken in the current year ​ 559 ​ 442 ​ 294

Lapse of applicable statute of limitations ​ (371) ​ (508) ​ (343)

Unrecognized tax benefits, ending balance ​ $ 1,880 ​ $ 1,622 ​ $ 1,576

​

The tabular roll-forward ending balance does not include interest and penalties related to unrecognized tax benefits.

​

7.ACCRUED EXPENSES

Accrued expenses at December 31, 2024 and 2023, consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​

Payroll and related liabilities ​ $ 73,514 ​ $ 66,929

Current portion of contingent liabilities ​ 358 ​ 408

Advances from employees ​ 158 ​ 285

​

​

​

​

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8.DEBT

Principal balances outstanding under our long-term debt obligations as of December 31, 2024 and 2023, consisted of the following (in thousands):

​ ​ ​ ​ ​ ​ ​

Term loans ​ $ — ​ $ 99,063

Less unamortized debt issuance costs ​ (17,949) ​ (23,550)

Less current portion ​ — ​ —

​

Future minimum principal payments on our long-term debt as of December 31, 2024, are as follows (in thousands):

​ ​ ​ ​

Year Ending ​ Future Minimum

December 31, Principal Payments

Total future minimum principal payments ​ $ 747,500

​

Fourth Amended and Restated Credit Agreement

On June 6, 2023, we entered into a Fourth Amended and Restated Credit Agreement (the "Fourth A&R Credit Agreement"). The Fourth A&R Credit Agreement is a syndicated loan agreement with Wells Fargo Bank, National Association and other parties. The Fourth A&R Credit Agreement amended and restated in its entirety our previously outstanding Third Amended and Restated Credit Agreement and all amendments thereto. The Fourth A&R Credit Agreement provides for a term loan of $150 million and a revolving credit commitment of up to an aggregate amount of $700 million, inclusive of sub-facilities for multicurrency borrowings, standby letters of credit and swingline loans. On June 6, 2028, all principal, interest and other amounts outstanding under the Fourth A&R Credit Agreement are payable in full. At any time prior to the maturity date, we may repay any amounts owing under all term loans and revolving credit loans in whole or in part, without premium or penalty.