CONMED Corporation

Good day, and thank you for standing by. Welcome to the first quarter fiscal year 22 ConMed earnings conference call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star then two. With us today are Kurt Hartman, President and CEO, and Todd Garner, Executive Vice President and Chief Financial Officer. I would like to now turn the conference over to ConMed. Please note this conference is being recorded.

Good afternoon, everyone. Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook and its plans and objectives, which represent forward-looking statements that involve risks and uncertainties as those terms are defined under the federal securities laws. Investors are cautioned that any such forward-looking statements are not guarantees of future events, performance, or results, and the company's actual results may differ materially from its current expectations. Please refer to the risks and other uncertainties disclosed under forward-looking information in today's press release, as well as the company's SEC filings for more details on the risks and uncertainties that may cause actual results to differ materially. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call, except as may be required by applicable law. You will also hear management refer to certain non-GAAP-adjusted measurements during this discussion. While these figures are not a substitute for gap measurements, management uses these figures to aid in monitoring the company's ongoing financial performance from quarter to quarter and year to year on a regular basis and for benchmarking against other medical technology companies. Adjusted net income and adjusted earnings per share measure the income of the company excluding credits or charges that are considered by the company to be special or outside of its normal ongoing operations. These adjusting items are specified in the reconciliation supporting the company's earning releases posted to the company's website. With these required announcements completed, I will turn the call over to Kurt Hartman, ConMed's Chair of the Board, President, and Chief Executive Officer for opening remarks. Mr. Hartman?

Thank you, Debbie and Julie. Good afternoon and thank you for joining us for ConMed's first quarter 2022 earnings call. With me on the call is Todd Garner, Executive Vice President and Chief Financial Officer. Today we'll share with you our first quarter results, a more detailed review of the Into Bones acquisition, and the overall outlook for our business. We'll then open the call to your questions. I'll start by reviewing our first quarter results. Total sales for the quarter were $242.3 million, representing a year-over-year increase of 4.1% as reported and an increase of 4.3% in constant currency. From an earnings perspective during the first quarter, our GAAP net income totaled $15 million. This compares to net income of $9.9 million in the first quarter of 2021. Excluding special items that affected comparability, our adjusted net income of $23.5 million increased 22.9% year-over-year, and our adjusted diluted net earnings per share of 70 cents increased 11.1% year-over-year. March was our best month in the quarter as the impact of Omicron was strongest in January and dissipated throughout the quarter. In our international markets, I would note that Asia, Japan, and Canada all started slow, while Europe and Latin America delivered very solid performances. The U.S. market showed improvement late in the quarter. Overall, I'm pleased with the quarter and the commercial performance as we continue to navigate the impact of COVID. We introduced new products across the business and delivered solid results in both the top and bottom lines. During the quarter, we saw additional smoke legislation pass in Arizona, Georgia, and Washington, which now places about 18% of the U.S. hospital network under some form of legislation. While this is favorable, it clearly indicates more room ahead on this important topic. We are encouraged by our revenue outlook after one quarter, both with and without the acquisition. Given the inflationary pressures and the impact expected from the acquisition, I'm comfortable that we have landed on a responsible earnings outlook, which Todd will cover in more detail. I'll now switch my comments to the acquisition of privately held Into Bones. Today we announced that we signed a definitive agreement to acquire Memphis, Tennessee-based Into Bones for a $145 million upfront payment with the potential for an additional $110 million in revenue growth-based earnouts over a four-year period. We think Into Bones is an excellent platform for ConMed. The company brings to ConMed a very experienced leadership team, an innovative and comprehensive foot and ankle portfolio, a well-established and growing sales channel, an existing international presence, and an exciting platform for future innovation. We're excited to enter the lower extremity foot and ankle market, which is an estimated $4.5 billion market growing in the high single-digit range. We expect the transaction, which is subject to Hart-Scott-Rodino clearance and approval, to close late in the second quarter or early in Q3. We expect the transaction to be accretive to our top line and gross margin while being marginally dilutive to earnings in 2022 and 2023. From an organizational standpoint, the business will run as a full platform standalone in the U.S. market and will retain the current organizational structure, including the existing sales channels. Outside of the U.S., the products will be picked up commercially by our international team in areas where there is no existing coverage or where the existing coverage is not as comprehensive as we believe is needed. As with our current global orthopedics effort, this business will report directly to Pat Beyer, our president of international and global orthopedics. We believe the ConMed platform will allow us to expand areas such as medical education and engineering, human resources, and accounting services to as well as the previously mentioned international market expansion, to name a few. Overall, Kahneman has been evaluating strategic options in this space for the last several years, and we think our patience and diligence has allowed us to find a great platform addition led by a talented management team. We look forward to welcoming Alan Taylor and the Indubones employees and sales agents and assure you that we're committed to continued growth in this business. In closing, I'm pleased with our start to the year, excited with the addition of the Indubones business, which gives us a solid entry into the high-growth, lower-extremity market, and I'm looking forward to the continued efforts to grow and expand our business in all the markets we serve. I'll now turn the call over to Todd, who will provide a more detailed analysis of our Q1 financial performance, discuss the impact of the Indubones deal, and take you through our full-year guidance. Todd? Thank you, Kurt.