CONMED Corp Q4 FY2024 earnings call

• Pat Beyer started by summarizing fourth quarter and full year financial results, noting sales growth and adjusted net income improvements. He highlighted focus on resolving Orthopedic supply challenges, engaging a consulting firm, and growth drivers like AirSeal, Buffalo Filter, BioBrace, and Foot & Ankle portfolio.
• Todd Garner discussed expense side of income statement, with adjusted gross margin improvement in both fourth quarter and full year. He also talked about R&D, SG&A, operating margin, balance sheet, cash flow, and capital expenditures, emphasizing cash engine strength and working capital tailwinds.

For the fourth quarter, Orthopedic business had constant currency growth of 2.4%, while General Surgery had 8.7% constant currency growth. For the full year, Orthopedic sales grew 2.5% in constant currency and General Surgery grew 7.5% in constant currency. AirSeal achieved double-digit growth in 2024 with record capital and disposable sales. Total sales for the fourth quarter were $345.9 million (5.8% Y/Y growth reported, 6% in constant currency), and full year sales were $1.307 billion (5% Y/Y growth reported, 5.3% in constant currency).

• 2025 revenue guidance: constant currency revenue growth between 4% and 6%, with currency headwind ~100-120 basis points, resulting in reported revenue range $1.344 billion to $1.372 billion.
• EPS guidance: reported adjusted EPS between $4.25 and $4.40.
• Operating cash flow expected $130 million to $140 million, adjusted EBITDA $270 million to $280 million.
• Excludes tariff impact; discussed potential tariff effects on Mexico/Canada ($45M+ tariff increase possible) and China (expiring Section 301 exemption could lead to tariffs starting June 2025).

• Supply chain challenges affecting Orthopedic business performance.
• Currency headwinds impacting financial results.
• Uncertainty around tariffs from trade negotiations, including potential impact on costs and pricing.
• Operational improvement project challenges in resolving Orthopedic supply issues and improving gross margins.

Q: What is the delta of 150 basis points in growth rate between investor deck midpoint and 2025 guidance?

A: Frustrations from supply chain challenges lingering longer than expected, which led to slower performance, especially affecting sports medicine business.

Q: How is AirSeal expected to perform in 2025?

A: AirSeal is expected to remain a double-digit grower, driven by clinical insufflation importance in robotic surgery and laparoscopy.

Q: What is the conservatism in 2025 guidance?

A: Conservatism due to currency headwinds (50 basis points), operational construction project challenges, and need to prove operational improvement before being more bullish.

Q: What is the clinical data profile of BioBrace?

A: BioBrace is used in almost 50 procedures, has 14 peer-reviewed publications, and 9 clinical studies ongoing, with a large random prospective clinical study on 268 patients expected to have readout data by end of 2026.

Q: Can 2026 see faster bottom line growth?

A: Believes adjusted EPS growth should be twice revenue growth rate longer term, with potential for faster growth once operational improvements are realized.

Q: What gets to the high end of 2025 revenue guidance?

A: More than 2024 performance, with successful resolution of operational challenges and realization of portfolio growth potential.

Q: Thoughts on capital allocation and M&A in 2025?

A: Stay active, but focus on paying down debt to get leverage below 3x unless a compelling asset is available.

Q: Update on Buffalo Filter legislation?

A: 18 US states have approved/enacted legislation, with West Virginia, Virginia, and Minnesota enacting in 2025; globally, other geographies also seeing legislation and caregiver focus.

Q: Thoughts on tariffs and pricing?

A: Difficult to pass tariff pricing onto hospitals, price has been neutral recently with potential slight positive, but inflation window closing.

Q: Cadence of Q1 EPS or margins?

A: Revenue and EPS should travel decently together, with currency headwind relatively even throughout the year, and Q1 having 1 less selling day than 2024.