CONMED Corp Q2 FY2025 earnings call

• Key growth drivers: AirSeal's use in DV5 and Xi procedures, with projected growth in non-robotic procedures; Buffalo Filter's double-digit growth due to legislative adoption and new products; BioBrace's clinical use in 52 procedures and full market release in the US; Foot & Ankle's sustained growth after resolving supply chain issues. - Supply chain priorities: Stabilize and scale operations via targeted improvements in procurement, planning, and production; drive efficiencies with a top-tier consulting firm to generate at least $20M annual savings; build a high-performance supply chain by strengthening supplier relationships, improving inventory management, and leveraging data. - Financial focus: Maintain strong balance sheet and reduce debt, aiming for leverage ratio below 3.0 by end-2025; optimize portfolio towards higher-margin, high-growth opportunities.

Total sales for the quarter were $342.3 million, up slightly above the high end of the guidance range with year-over-year growth of 3.1% (2.9% in constant currency). Worldwide general surgery sales grew 4.4%, and worldwide orthopedic sales grew 0.8% year-over-year. AirSeal is the largest single contributor to general surgery growth with a 92% recurring revenue profile. Buffalo Filter had double-digit direct sales growth in Q2, supported by legislative adoption, new product introductions, and deeper hospital protocols. Orthopedic products saw growth in Q2, led by double-digit demand for BioBrace, which is in clinical use across 52 distinct procedures. Foot & Ankle products delivered double-digit growth for the third consecutive quarter, reflecting resolution of prior supply chain challenges.

• Full year reported revenue guidance revised to $1.356 billion to $1.378 billion, with Q3 reported revenue expected to be between $330 million and $337 million. - Adjusted EPS guidance: Organic constant currency guide increased to $4.59 to $4.74, with reported adjusted EPS expected to be between $4.40 and $4.55 for the year, and Q3 adjusted EPS between $1.03 and $1.08. - FX impact is essentially neutral for full year 2025, with tariff impact of $0.02 in Q3 and $0.07 in Q4 incorporated.

• Supply chain challenges could impact operations and growth. - Tariffs and foreign exchange fluctuations may affect financial performance.

Q: Any increased competition or pressure in the Buffalo Filter market given legislative tailwinds?

A: Patrick J. Beyer stated no new players have entered, competition remains the same despite market growth.

Q: Concern about capacity, supply chain restraints, and sales force expansion?

A: Patrick J. Beyer mentioned progress in supply chain with lower back order, and sales professionals are added dynamically as business grows.

Q: Thoughts on capital expenditures and impact of tighter hospital budgets?

A: Patrick J. Beyer said capital demand from hospitals is strong, with some tough comparables and supply chain impacting current capital flow but expecting normal trends going forward.

Q: Guide explanation, raising bottom end of guide with FX improvements?

A: Todd W. Garner said gradual improvement in growth rate expected in back half, with guidance keeping reported range same as currency eased, bringing bottom end up.

Q: EPS guide raise, primarily due to margin improvements, FX, or tariffs?

A: Todd W. Garner said about $0.03 from FX, $0.03 from tariffs, and $0.03 from performance and operations contribute to the $0.09 raise.

Q: AirSeal disclosures, Xi attachment rate change vs before DV5 introduction?

A: Todd W. Garner said Xi attachment rate has been trending up over the decade, now north of 35%.

Q: DV5 utilization, why 10%-20% use?

A: Patrick J. Beyer said it's for more complex procedures where single digit low-pressure insufflation improves patient outcomes, like laparoscopic prostatectomy.