CONMED Corporation

Good day and thank you for standing by. Welcome to ConMed's third quarter fiscal 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook, its plans and objectives. These statements represent the forward-looking statements that involve risk 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. The company's actual results may differ materially from its current expectations. Please refer to the risk and other uncertainties disclosed under the forward-looking information in today's press release, as well as the company's SEC filings for more details on the risk 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 non-GAAP or adjusted measurements during this discussion. While these figures are not a substitute for GAAP 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 earnings releases posted to the company's website. With these required announcements completed, I will turn the call over to Curt Hartman, ConMeds Chair of the Board, President and Chief Executive Officer for opening remarks. Mr. Hartman?

Thank you, Josh. Good afternoon, and thank you for joining us for ConMed's third quarter 2024 earnings call. With me on the call is Todd Garner, Executive Vice President and Chief Financial Officer, and Pat Beyer, our Chief Operating Officer. Today, I will share with you our third quarter results and commentary on the announced succession plan. Pat will touch on AirSeal and our manufacturing progress, and Todd will cover the quarterly financials and our updated outlook. We'll then open the call to your questions. With that said, total sales for the quarter were $316.7 million, representing a year-over-year increase of 4% as reported and 4.3% in constant currency. Pat will later address the specific impacts of the hurricanes, and I want to offer my sincere appreciation to our employees, global operations and logistics team, and especially our facilities leader, Ernesto Barnett, who for my tenure has run a world-class emergency preparedness and response plan We also acknowledge that many are still facing local hardships and our thoughts are with our impacted employees and those across the southeast impacted by the hurricanes. From an earnings perspective during the third quarter, our gap net income totaled $49 million. This compares to net income of $15.8 million in the third quarter of 2023, excluding special items that affected comparability Our adjusted net income of $32.7 million increased 15% year-over-year, and our adjusted diluted net earnings per share of $1.05 increased 16.7% year-over-year. Overall, our top line finished below our capabilities, but we again had several areas of strong financial performance in the quarter to include adjusted EPS growth, cash flow, and our leverage ratio. I remain confident in the setup for ConMed and our ability to return to accelerated top-line growth while continuing our leveraged earnings growth. Next, I would like to offer some comments on the succession plan that we announced today. Any comments here would be incomplete if I didn't start with an immense amount of appreciation for my wife and family who supported my substantial engagement in this industry over the last 34 years. They gave and I took far more than I can ever repay. Further, I want to acknowledge and offer A sincere thank you to both our current and former global employees without whom our progress and successes would not have been possible. From a historical perspective, one key tenet of the philosophy I established when I took over the full-time CEO role in November of 2014 was that our turnaround and future success would be dependent on first getting the right people. If we did that, then increased innovation, growth in revenue, and growth in profitability would follow. Getting the right people means having a strong talent acquisition team, having a strong professional development program, and finally, having a succession planning process across all levels of the company. Heather Cohen, the company's recently retired long-term head of human resources and one of the few executives I retained upon my arrival, was instrumental in making those strategic initiatives a reality and deserves as much credit as anyone for the company's turnaround. Heather's effective work in these areas gave me the comfort to inform the board in February of 2023 of my desire to retire no later than the end of 2024. This timeline allowed the board to utilize our succession planning framework and perform its principal role of evaluating and selecting the right CEO in a responsible timeframe. November will mark my 10th year in the full-time CEO role, and I have a personal belief that 10 years is long enough. Pat Beyer was the very first person I hired after I joined ConMed in 2014, and I'm very pleased that the board selected him to lead ConMed. Pat brings a long tenure of MedTech leadership and a track record of success in the industry. He is a tireless people-first leader who also understands the importance of innovation, how to engage customers, and this role in the spotlight of the public markets. Pat has my full endorsement, and I have the utmost confidence that he will bring fresh perspectives that will continue to advance the growth of ConMed in the markets we serve. I joined this industry 34 years ago, and I have had a long and blessed journey, which began with a then-small medtech company in Kalamazoo, Michigan. I served and learned under some of the best leaders this industry has ever had, including John Brown, Ron Ellenbos, and most directly, Cy Johnson. Each of them took a chance on me, and I am beyond grateful for their investment and belief in me. There are others, like Brad Black, who took the first chance on me by hiring me out of the military, and Barry Conchie of Conchie and Associates, who has been a constant presence in my career. I would also point to Sherry Bertner and her team at Bertner Advisors, who have been incredible thought partners for the ConMed team over the past decade. Obviously, there are many more coworkers, peers, and customers who have been instrumental to my career and its success. I am grateful for everyone who invested in me during my time in this industry. The last 10 years have been about respecting the past that created ConMed while ensuring we could compete in the future. We are proud that, no matter the issue, we always made the right decisions that were in the best long-term interests of ConMed. Our execution has not always been flawless, but our strategy is well understood by our employees and investors, and the foundation of the company is solid. This leadership team is capable of continuing our pursuit of building a world-class medical technology company that our owners are proud of. I look forward to supporting Pat and the entire management team both through this transition and in ConMed's continued success in the future. Finally, I want to directly thank Todd, who's been an incredible addition since joining the team in January of 2018 and has been a true thought partner to me and our business leader since his arrival. To close out my comments, I look forward to seeing continued progress from this exceptional team as they advance our mission under Pat's leadership. I'll now turn the call over to Pat, who will provide a quick update on AirSeal and our supply chain. Todd will then provide a more detailed analysis of our Q3 financial performance and take you through our updated full-year guidance. Pat?

Thanks, Kurt. When I joined ConMed in December of 2014, I was excited to join an organization with a passion for talent and engaged employees and a focus on delivering innovative clinical solutions to advance patient care. Those were the foundational stones on which ConMed was being built. Under Kurt's leadership, the operating pillar of delivering excellent results also thrived. Under his leadership over the past 10 years, ConMed sales have grown more than 80%. EPS has grown by approximately 240%. and operating cash flow has almost tripled. I have been a part of a great growth story, and I'm committed to continuing that story. At the center of ConMed's mission is improving patient outcomes. My focus for the coming months will be to continue to connect with our customers and our employees while transitioning to this new opportunity. It is an honor for me to be announced as ConMed's next chief executive officer. I look forward to advancing ConMed's commitment to excellence for customers, patients, employees, and shareholders. I also want to personally thank Curt and the board for their trust and confidence. Turning back to quarter, I appreciate the opportunity to share more information regarding our AirSeal and orthopedic businesses. As it relates to AirSeal, I wanted to give some insights into what we are seeing in the field. During the third quarter, U.S. capital sales of AirSeal saw continued strong growth. We have not seen any slowdown in AirSeal capital orders in the U.S., nor have we seen any slowdown in the demand for disposables. We are continuing to monitor the locations where new robots are in use, as some of these robots are now moving past their initial trial periods. We continue to see surgeons return to using AirSeal for precision clinical insufflation with the new robot, especially and the longer and more complex procedures that we talked about last quarter. We continue to believe this validates surgeons' preferences for air CO4 clinical insufflation and the associated results, including shortened length of stay, reduced post-surgical pain, and quicker post-operative recovery. Now turning to orthopedics, we took positive steps with our orthopedic business in the third quarter to improve our ability to grow and take market share. We mentioned to you on last quarter's earnings call that our orthopedic businesses' supply chain had improvements to make. We made progress on these fronts during the quarter and expect to continue that trend in the fourth quarter. We remain focused and committed to getting our commercial teams in a position to win in the market. At the end of the third quarter, we communicated that our Largo facility, where many of our orthopedic products are manufactured, had suffered some manufacturing slowdown at the very end of the quarter as Hurricane Helene hit. Approximately two weeks later, Hurricane Milton hit the Largo area, resulting in a shutdown of our headquarters and manufacturing plant in Largo for four additional days. While we worked to quickly reopen our facilities, it took several more days for attendance to fully ramp up as many of our employees were dealing with the impact that the hurricane had on their personal life. Our facilities weathered the storm without issue And most importantly, all of our employees were safe and accounted for. With that, I'll turn the call over to Todd, who will share more details with you on our third quarter results and our outlook.