Earnings call transcript: CONMED Q2 2025 beats expectations, stock dips

CONMED Corporation reported its financial results for the second quarter of 2025, surpassing earnings and revenue forecasts. The company achieved an adjusted earnings per share (EPS) of $1.15, exceeding the expected $1.12, marking a 2.68% surprise. Revenue for the quarter reached $342.3 million, slightly above the forecasted $338.4 million. The company maintains strong financial health, earning a "GREAT" rating from InvestingPro with a perfect Piotroski Score of 9. Despite these positive results, the stock saw a minor decline of 0.3% in after-hours trading, closing at $50.29, which is near the lower end of its 52-week range.

Key Takeaways

• CONMED’s Q2 2025 EPS of $1.15 beat forecasts by 2.68%.
• Revenue increased by 3.1% year-over-year to $342.3 million.
• Stock price fell by 0.3% in after-hours trading despite earnings beat.
• The company forecasts full-year revenue between $1.356 billion and $1.378 billion.
• Supply chain improvements are expected to generate $20 million in annual savings.

Company Performance

CONMED demonstrated solid performance in Q2 2025, with revenue growth of 3.1% compared to the same period last year. The company continues to innovate in its product lines, notably with its AirSeal and Buffalo Filter platforms, which are seeing robust adoption. However, orthopedic sales growth was modest at 0.8%, reflecting a need to regain market share in this segment.

Financial Highlights

• Revenue: $342.3 million, up 3.1% year-over-year
• Adjusted EPS: $1.15, a 17.3% increase from the previous year
• Adjusted net income: $35.6 million, a 16.4% increase

Earnings vs. Forecast

CONMED’s earnings per share of $1.15 exceeded the forecasted $1.12, reflecting a positive surprise of 2.68%. Revenue also surpassed expectations, coming in at $342.3 million against a forecast of $338.4 million, a 1.16% surprise. This marks a continuation of the company’s trend of outperforming earnings expectations in recent quarters.

Market Reaction

Despite the earnings beat, CONMED’s stock experienced a slight drop of 0.3% in after-hours trading, closing at $50.29. This decline may be attributed to broader market trends or investor concerns over specific segments, such as orthopedics, which showed slower growth. According to InvestingPro analysis, the stock appears undervalued at current levels, trading at an attractive P/E ratio of 13.04 with a strong free cash flow yield of 11%. The stock remains near its 52-week low of $46, potentially presenting an opportunity for value investors. Seven analysts have recently revised their earnings estimates upward for the upcoming period.

Outlook & Guidance

CONMED has set its full-year revenue guidance between $1.356 billion and $1.378 billion, with adjusted EPS expected to range from $4.40 to $4.55. The company is focusing on supply chain improvements and strategic innovations to drive growth. The AirSeal platform and Buffalo Filter are projected to see continued adoption, contributing to mid-to-high single-digit revenue growth in the latter half of 2025.

Executive Commentary

CEO Pat Beyer emphasized the importance of supply chain initiatives, stating, "We are confident our supply chain initiatives can accelerate growth in orthopedics as well as move into 2026." CFO Todd Gardner highlighted margin expectations, affirming, "We continue to see the year playing out that way." The company’s financial stability is evident in its strong current ratio of 2.26, indicating ample liquidity to meet short-term obligations. CONMED has also maintained consistent dividend payments for 14 consecutive years, demonstrating its commitment to shareholder returns. For detailed analysis and additional insights, investors can access the comprehensive Pro Research Report available on InvestingPro.

Risks and Challenges

• Supply chain disruptions could impact operational efficiency.
• Market share loss in orthopedics needs addressing to sustain growth.
• Economic uncertainties may affect hospital spending on minimally invasive surgeries.
• Competitive pressures in the global smoke evacuation market could intensify.

Q&A

During the earnings call, analysts inquired about the impact of supply chain issues on capital sales, which have been affected by tough comparables. The company addressed concerns about orthopedics, stating efforts are underway to regain market share. Additionally, the adoption of the AirSeal platform in robotic procedures was highlighted as a growth area.

The article provides an in-depth look at CONMED’s recent performance, highlighting its financial achievements and strategic initiatives.

Full transcript - CONMED Corporation (CNMD) Q2 2025:

Conference Call Operator: Good day, and thank you for standing by. Welcome to ConMed’s Second Quarter Fiscal twenty twenty five Earnings Conference Call. At this time, all participants are in a listen only mode. After the speakers’ presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 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 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. 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 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 Pat Beyer, President and Chief Executive Officer, for opening remarks. Mr.

Beyer?

Pat Beyer, President and Chief Executive Officer, ConMed: Thank you, Latif. Good afternoon, and thank you for joining us for ConMed’s second quarter twenty twenty five earnings call. With me on the call is Todd Gardner, Executive Vice President and Chief Financial Officer. I’ll provide a brief overview of the financial and operating performance for the second quarter as well as an update on our priorities and our growth drivers. Todd will then provide a more detailed analysis of our financial performance and guidance as well as our updated view on the impact of tariffs.

We will then open the call to your questions. I’ll start by quickly reviewing our second quarter results. Total sales for the quarter were 3 and $42,000,000.300000 which came in slightly above the high end of our guidance range on year over year growth of 3.1% as reported and 2.9% in constant currency. Sales growth was driven by worldwide general surgery sales of 4.4%. Worldwide orthopedic sales grew 0.8% year over year.

We are confident our supply chain initiatives can accelerate growth in orthopedics as well as move into 2026. We will discuss these initiatives in more detail later on in my prepared remarks. From an earnings perspective, excluding special items that affected comparability, our adjusted net income of $35,600,000 increased 16.4% year over year, and our adjusted diluted net earnings per share of $1.15 increased 17.3% year over year. Importantly, we believe the work we are doing with our supply chain, the ongoing review of our portfolio, and the investments we are making behind our four key growth drivers support a mid single digit to high single digit revenue growth profile for the business over the longer term. I will now discuss each each of these topics starting with our four key growth drivers, AirSeal, Buffalo Filter, Biobrace, and Foot and Angle.

I’ll begin with AirSeal. This platform remains the largest single contributor to our general surgery growth and is the primary driver of its 92% recurring revenue profile. We want to provide a more granular look at the potential of the platform here. With a little over a year now of experience with d v five in the marketplace, we are seeing Araceal being used in ten to twenty percent of d v five procedures. The procedures on Xi continue to grow at a healthy level, and AirSeal is used in 35 to 40% of those procedures.

For the purposes of this update, we are projecting that the air seal use in nonrobotic procedures can grow between 10 to 15% annually over the next five years. If we apply those rates to the sell side consensus of what the mix between d v five and Xi will be over the next five years, we project Arceo procedures will grow in the high single digits to the low double digits over that period. We believe that the clinical benefits of AirSeal in complex procedure, continued Xi placements and growing adoption in laparoscopy will provide durable, healthy growth in this differentiated product line. Turning to Buffalo Filter. Quarter two direct sales reflect another quarter of double digit growth.

Growth in Buffalo Filter is supported by legislative adoption, new product introductions, and deeper hospital protocols that protect caregivers from the harmful byproducts of surgical smoke. 19 US states have enacted smoke free operating room laws, with West Virginia, Virginia, and Minnesota taking effect in 2025. On July 1, North Carolina became the nineteenth state to enact such laws with implementation required by 01/01/2026. Globally, we continue to see geographies around the world also enact legislation. We estimate the global smoke evacuation market is approximately $300,000,000 today, with line of sight to $2,000,000,000 over the next several years.

We also continue to drive innovation in this market. In the 2025, we have launched PlumeSafe PX5, a smaller and quieter next generation evacuator designed for ambulatory and outpatient settings. Moving on, sales for our orthopedic products grew in quarter two despite ongoing supply chain recovery work, which I will touch on shortly. Growth in the quarter was led by double digit demand for BioBrace, our highly differentiated biologic implant designed for soft tissue repair and augmentation. BioBrace is now in clinical use across 52 distinct procedures from rotator cuff and ACL repairs to Achilles and gluteus medius reconstructions, underscoring its versatility across sports medicine anatomies.

In April, the FDA cleared a dedicated BioBrace surgery device for rotator cuff repair, BioBrace RC, and early surgeon feedback indicates the instrument streamlines workflow and improves reproducibility. Based on the strong feedback we received in the second quarter, we are moving into full market release in The United States. Importantly, hospital systems continue to prioritize minimally invasive surgery spend, and Biobrace aligns squarely with that trend. Our foot and ankle products delivered double digit growth for the third consecutive quarter, reflecting the successful resolution of prior supply chain challenges. This sustained momentum is a direct result of the foundational work we completed last year to stabilize our operations and improve product availability.

At ConMed, we’re focused on building a stronger, more resilient operational foundation to support long term growth and deliver exceptional value to our customers and stakeholders. A key priority is resolving our remaining supply chain challenges, particularly within sports medicine, and transforming this area into a competitive advantage. Looking ahead, our strategy here centers on three core objectives. First, stabilizing and scaling operations. We are implementing targeted improvements in procurement, planning, and production to enhance reliability and scalability.

These efforts will allow us to better meet customer demand and support future growth. Two, driving efficiencies. We’ve engaged a top tier consulting firm to help optimize our operations. This collaboration is expected to generate at least $20,000,000 in annual savings while also accelerating our ability to execute with precision and agility. Three, building a high performance supply chain.

Our goal is to evolve our supply chain into a strategic asset, one that is agile, cost effective, and capable of supporting innovation. We are focused on strengthening supplier relationships, improving inventory management, and leveraging data to drive smarter decision making. We are confident that by the end of the year, we will be in a significantly improved position. The path forward is clear, and the opportunity opportunity to turn operations into a true engine of growth and value creation is well within our control. To support these initiatives, ConMed is committed to maintaining a strong balance sheet and reducing debt.

We expect our leverage ratio to fall below three point o by the 2025, providing financial flexibility for future investments. In conclusion, we remain confident in our business fundamentals and long term strategy. We are actively optimizing our portfolio towards higher margin, high growth opportunities to enhance shareholder returns. Thank you to our employees, partners and stakeholders for your continued commitment and support. We look forward to updating you on our progress in the quarters ahead.

With that, I’ll turn the call over to Todd, who will provide a more detailed analysis of our quarter two financial performance and discuss our 2025 financial guidance as well as quantifying our latest thinking on tariffs. Todd?

Todd Gardner, Executive Vice President and Chief Financial Officer, ConMed: Thank you, Pat. All sales growth numbers I reference today will be given in constant currency. The reconciliation to GAAP numbers is included in our press release. As usual, we have included an investor deck on our website that summarizes the results of the quarter and our financial guidance. For the 2025, our total sales increased 2.9% year over year.

For Q2, our sales in The U. S. Increased 2.8 versus the prior year quarter and our international sales grew 2.9%. Total worldwide orthopedics sales grew 0.8% in the second quarter. In The U.

S, orthopedic sales decreased to 0.8% and internationally orthopedic sales increased 1.8%. Total worldwide general surgery sales increased 4.4% in the quarter. U. S. General surgery sales grew 4.3%, while internationally general surgery sales increased 4.7%.

Now let’s move to the expense side of the income statement. We will discuss expenses and profitability in the second quarter, excluding special items, which are detailed in our press release. Adjusted gross margin for the second quarter was 56.5%, which is 120 basis points higher than the prior year quarter and consistent with our expectations. We continue to make progress on back order with the numbers headed in the right direction. Research and development expense for the second quarter was 4.1% of sales, 10 basis points lower than the prior year quarter.

Second quarter adjusted SG and A expenses were 37.1% of sales, 20 basis points higher than the prior year. On an adjusted basis, interest expense was $6,400,000 in the second quarter. The adjusted effective tax rate in Q2 was 24.8%. Second quarter GAAP net income was $21,400,000 compared to $30,000,000 in 2024. GAAP earnings per diluted share were $0.69 this quarter compared to $0.96 a year ago.

Excluding the impact of special items discussed earlier, in the second quarter, we reported adjusted net income of $35,600,000 an increase of 16.4% compared to the 2024. Our Q2 adjusted diluted net earnings per share were $1.15 an increase of 17.3% compared to the prior year quarter. Turning to the balance sheet. Our cash balance at June 30 was $33,900,000 compared to $35,500,000 at March 31. Accounts receivable days as of June 30 were sixty two days, no change from the end of Q1.

Inventory days at June 30 were two twelve, which is ten days lower than March than at March 31. Long term debt at the end of the quarter was $881,100,000 compared to $891,400,000 at March 31. Our leverage ratio on June 30 was 3.1x, which was a little better than expected. Cash flow provided from operations in the quarter was $29,100,000 compared to $43,300,000 in the 2024. Capital expenditures in the second quarter were $5,700,000 compared to $3,600,000 a year ago.

Now let’s turn to financial guidance. Let’s start with revenue. We are updating our full year reported revenue guidance to a range of 1,356,000,000.000 to $1,378,000,000 which is a narrowing from the prior range of $1,350,000,000 to $1,378,000,000 FX is now projected to be essentially neutral for the full year 2025. We expect Q3 reported revenue to be between $330,000,000 and $337,000,000 with about 50 basis points of tailwind from FX. Last quarter, we talked about margin and EPS guidance without tariffs and then gave specific disclosure on the expected tariff impact on 2025 by quarter.

With the first six months of the year behind us and our cost of goods sold being deferred with inventory for six months, we now know the tariff impact on 2025, which is $02 in Q3 and $07 in Q4. That is now incorporated in our guidance. We told you back in January to expect gross margins in 2025 to be similar to 2024. That was without any additional tariffs. We continue to expect 2025 gross margins to be similar to 2024.

While digesting the additional tariffs, currency has ameliorated somewhat. The FX impact on gross margins is still a headwind, but better than the original estimate of 50 basis points. We told you a quarter ago to expect margins in Q2 to be in the mid-fifty 6% range, Q3 in the mid-55s and Q4 approaching 57, which was without tariffs. Including our tariff disclosure from the same call, that translated to Q4 guidance in the mid-55s. We continue to see the year playing out that way.

Turning to EPS. We started the year guiding adjusted EPS between $4.25 and $4.4 with currency headwind between $0.15 and $0.20 So the organic constant currency guide without additional tariffs was $4.45 to $4.55 at the beginning of the year. That organic constant currency guidance without tariffs is now increased to $4.59 to $4.74 We now expect currency to be a headwind of approximately $0.10 and tariffs to be approximately $09 resulting in reported adjusted EPS between $4.4 and $4.55 which is $09 better on both ends than our guidance last quarter, inclusive of tariffs. Our guidance slide in the investor deck shows the apples to apples comparison of our prior guidance and today’s guidance. Specific to Q3, we expect adjusted EPS to be between $1.03 and $1.08 In summary, we are over performing in profitability and our leverage is lower than projected halfway through the year.

We remain focused on our growth drivers to improve our execution and get back to above market revenue growth consistently. With that, we’d like to open the call to your questions.

Conference Call Operator: As a reminder, to ask a question, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again. Our Our first question comes from the line of Mike Matson of Needham and Company. Please go ahead, Mike.

Joseph, Analyst, Needham and Company: Hi. This is Joseph on for Mike. Maybe just starting with Buffalo Filter. Was just wondering if you guys have seen any, you know, increased, competition or or or pressure, you know, in the market, just given all the legislative tailwinds? Have you seen them you know, any any large players out there?

Pat Beyer, President and Chief Executive Officer, ConMed: Joseph, we have not seen any new players, other than the ones we continue to compete with. The market continues to grow. I you know, we announced the nineteenth state in The United States just passed legislation, North Carolina, but the competition remains the same.

Joseph, Analyst, Needham and Company: Okay. That’s that’s helpful. And then, I guess, you know, maybe just a concern, I guess, around, you know, where your capacity is at, supply supply chain restraints, and, you know, where is that kind of going together with Salesforce expansion? I know you you guys usually talk about Salesforce expansion maybe around the beginning of the year. I’m not sure if, you know, you’ve guys talked about it in 2025 yet.

So was just kinda curious, your your view on that.

Pat Beyer, President and Chief Executive Officer, ConMed: Let me have both questions. Let’s start with the, getting our, our supply chain fixed and and back on offense there. We’re making progress. We made progress in the first half. Again, we’re focused on planning, production, and procurement.

We are finished quarter two with lower back order and lower SKUs on back order and expect to be finishing 2025 in a much better position. From a standpoint of adding sales professionals, we typically add them in the second half to be ready to kick off a new year with an expanded Salesforce. But but to be honest, we typically add sales reps dynamically throughout the year. As we lose sales professionals where we have opportunities, we continue to add them where the sales territory becomes open. And when new products are expanding and moving throughout the year, we add sales professionals where it makes sense, albeit that the geography has the opportunity to do them.

And we will continue to add sales professionals as our business grows.

Conference Call Operator: Our next question comes from the line of Robbie Marcus of JPMorgan. Please go ahead, Robbie.

Lily, Analyst, JPMorgan: Hi. This is Lily on for Robbie. Thanks for taking the question. Maybe I’ll start with capital. That came in a bit softer than what we were thinking.

So can you talk a bit to the trends that you’re seeing there? And is there any impact that you’ve seen in the quarter or that you’re expecting moving forward from tighter hospital budgets?

Pat Beyer, President and Chief Executive Officer, ConMed: Good question. Let me start with we’re not seeing, in general, the slowdown from hospitals. The capital market continues to be what it has been. When we look at our specific capital comparables versus prior year, you’re probably seeing three things. Number one, in 2024, there was a competitive recall in the insufflation market, and we saw our numbers were probably more robust than they normally would have been in that period.

We also had a number of new distributors on the international side in 2024 that started up, so you saw a higher capital flow last year on that. And supply chain has also impacted our capital flow a little bit this year. So all in all, one side, capital demand from hospitals continues to be strong. We had some tough comparables, and our supply chain is challenging our current capital ability to sell. But outside of that, we continue to have a capital portfolio we’re proud of and expect capital to continue to have the same trends going forward as it has in prior years.

Lily, Analyst, JPMorgan: Got it. That’s helpful. And then just as a follow-up, can you talk a bit about how you’re feeling generally about your share position in ortho in light of these supply constraints? And to what extent do you think that any share loss that you may have seen has been sticky just given it’s been a few quarters of disruption. And and so how would you characterize your your share position evolving over the last few months?

Sorry. Thank you.

Pat Beyer, President and Chief Executive Officer, ConMed: Well, from a pure number standpoint, our you know, we’re not taking the share that we would like, and we know that our growth has not is lower than the actual market growth. So from a pure number standpoint, we’ve lost market share. The good news is with a platform like Biobrace, we’re still driving forward, and we’re on offense there. We’re continuing to be seen as an innovative orthopedic company globally. Our sales professionals continue to be in operating rooms solving clinical issues, and our sales forces are continuing to be ready to get on offense when our supply chain challenges mitigate over at the second half of the year.

So on one hand, we have lost market share this year. The numbers say that. On the other side, our innovation from new products continues to roll out, and our Biobrace platform continues to put us in a good position going forward.

Conference Call Operator: Our next question comes from the line of Matthew O’Brien of Piper Sandler.

Anna, Analyst, Piper Sandler: Hi there. This is Anna on for Matt. Thanks for taking the questions. I just want to ask on the guide here. You guys beat on revenues but are only raising the bottom end of the guide, especially when considering, you know, FX improvements.

Could you just help us understand the perspective maybe on the next two quarters as it relates to the top line?

Todd Gardner, Executive Vice President and Chief Financial Officer, ConMed: Yeah. Thanks, Lana. We’ve delivered the first half pretty much in line with what we thought. And as we look at the back half, you know, our guidance today shows a little bit you know, we expect, gradual improvement in the growth rate. As Pat said, we don’t expect the same kind of capital, headwinds in the back half that we had in the front half.

But we see kinda a gradual, hopefully steady improvement as we work through the rest of the year, And that led us to provide the guidance we did today, which is keeping the reported range the same even though to your point, you’re absolutely correct that currency did get a little easier. So low brought the bottom end up, kept the top end the same, and, and that’s how we’re gonna move into the back half.

Anna, Analyst, Piper Sandler: Got it. And then just on EPS, you raised the guide there. Is that primarily just due to margin improvements or more so on, like, the FX tariff side of things?

Todd Gardner, Executive Vice President and Chief Financial Officer, ConMed: Yeah. If you look at the 9¢ raise from what we said a quarter ago, about 3¢ is from FX, about $03 is from tariffs, and about $03 is from performance and operations. And so it’s kind of all three of those add up to $09

Lily, Analyst, JPMorgan: Great. Thank you.

Conference Call Operator: Thank you. Our next question comes from the line of Young Lee of Jefferies. I

Young Lee, Analyst, Jefferies: guess to start maybe just on the air seal disclosures. Wondering if you can, you know, put that in a perspective a little bit. I think the Xi attachment rate is 35 to 40%. How did that change versus, you know, before the introduction of b b five?

Todd Gardner, Executive Vice President and Chief Financial Officer, ConMed: Yeah. That’s been trending up really over the last decade. And so it was, you know, we talked about it being about a third of procedures a few years ago, then it was closer to 35. And, you know, now we’re north of 35. So that’s just been a very consistent increased adoption and usage rate that we’ve seen with robotics and air seal.

Young Lee, Analyst, Jefferies: Mhmm. Alright. Great. And then just, you know, following up on the the the d v five comments, 10 to 20% utilization. I’m kinda curious what type of procedures typically are

Todd Gardner, Executive Vice President and Chief Financial Officer, ConMed: I guess, are

Young Lee, Analyst, Jefferies: these procedures being used because the d v five system doesn’t have their own insufflation product on it, or is it being used because of, you know, more complex procedures and the clinicians are choosing AirSeal for those type of procedures on d v five.

Pat Beyer, President and Chief Executive Officer, ConMed: Yeah. Young, it’s the latter. And so just to, you know, maybe remind you, d v five has an integrated insufflator that’s supply supplied with the robot. The more complex procedures where the surgeon understands the benefit of single digit low pressure insufflation will improve patient outcomes through less pain and shorter length of stay, those procedures such as a laparoscopic prostatectomy, the surgeon is actually asking the hospital to have the air seal brought into the procedure. And we’re seeing between ten to twenty percent of the d v five procedures are actually the surgeon is saying, I wanna use single digit low pressure air seal for those procedures.

And that and it’s we’re we’re, you know, we’re a little over a year out now with d v five in the marketplace. We’re learning more every day, and this is an opportunity for us to update you on what we’re seeing real time.

Conference Call Operator: Thank you. I would now like to turn the conference back to Pat Beyer for closing remarks. Sir?

Pat Beyer, President and Chief Executive Officer, ConMed: Thank you. Again, I would again like to reiterate what we said. We feel really strong about our growth outlook going forward. We’re excited to get off of back order in the second half of the year and move on offense on our orthopedic side. And we’re thankful to be able to have four strong growth drivers in our portfolio and excited about the team ConMed has to deliver aggregate growth for our shareholders in the future.

And so thank you, everybody, for joining us on the call.

Conference Call Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.

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