CONMED Grows in Q3 Despite Hurricanes

CONMED Corporation reported $316.7 million in sales and $113.38 million in operating profit for the quarter ending September 30, 2024, which was below Wall Street’s expectations, but the company beat expectations with an earnings per share of 1.59.

Curt Hartman, CONMED Corporation’s Board Chairman, President and CEO, Todd Garner, EVP and CFO, and Patrick Beyer, COO met with Wall Street’s analysts and investors and reported CONMED’s third quarter sales and earnings performance, while also putting it into context given the hurricanes that swept through the southeast in the September quarter.

Hartman reported that the total sales for the September quarter were $316.7 million, which was a 4% increase from the previous year and 4.3% in constant currency.

He also noted that the company and its employees faced unusual difficulties in the quarter. “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 GAAP net income totaled $49 million. This compares to net income of $15.8 million in the third quarter of 2023.

“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 accelerated top line growth while continuing our leveraged earnings growth.”

CONMED’s COO Beyer shared more details, reporting that during the third quarter, AirSeal continued to have strong growth in the U.S. “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,” he said.

“We are continuing to monitor 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 returning to using AirSeal for precision clinical insufflation with a new robot, especially in the longer and more complex procedures that we talked about last quarter.”

Beyer emphasized the benefits of using AirSeal for clinical insufflation: shortened length of stay, reduced postsurgical pain, and quicker postoperative recovery.

He added that CONMED’s orthopedic business continues to grow during the third quarter as they improve the supply chain.

“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 a result of Hurricane Helene. Then, about 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,” Beyer explained.

“While we work 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.”

Sales and Earnings Details

CFO Todd Garner then gave some more specific financial details. For the third quarter of 2024, CONMED’s U.S. sales increased 7.4% from the same quarter in 2023 and international sales was essentially flat, growing just 0.2%.

U.S. orthopedic sales increased 7.4% and 3.9% internationally.

“As Pat said, we remain focused on improving our service levels in the sports medicine space. The hurricanes affecting the Southeastern part of the United States delaying that progress a bit at the end of September and for a longer period in early October.”

He emphasized that while they are working hard to make up the lost hours of production, that it will likely take more than just the fourth quarter to catch up.

Garner said keeping that in mind they expect fourth quarter revenues to be in the range of $339 million to $344 million.

Analysts Press for Clarifications on Adjustments Made to Guidance

Kristin Stewart, an analyst with CL King, asked for clarification on the lower numbers for general surgery and capital equipment revenues.

Garner said that it was because of last year’s results. He explained, “If you remember, a year ago, we were getting out of back order in kind of big swaths which provided a large improvement for third quarter last year. And so as I said in my prepared remarks, international was really strong last year. And in the general surgery specifically, we had some big capital products released from back order in last year’s third quarter.”

Vik Chopra from Wells Fargo asked Beyer, who will take over as CEO when Hartman retires, what his top priorities for 2025 are.

“Taking over for Curt, my focus is to spend time with customers, spend time with our employees and connect with our shareholders and then continue to advance the cause and be part of a growth company. And I’m super excited about taking over for Curt and continuing the story of success that CONMED has had for the last 10 years.”

Chopra also asked about the impact of the IV fluid shortages.

Garner said that there has been deferring of procedures because of that and that their guidance does factor in this impact. Right now, they can’t say decisively if things are going to get better or worse.

CL King’s analyst, Stewart, also asked for more detail on adjustments being made in CONMED’s foot and ankle business. Garner explained that the foot and ankle business has been slower this year than they wanted it to be.

“We’re working hard to get that back on offense. But, being slower than expected is part of that adjustment. BioBrace is doing really well currently. We have adjusted our timing of when we expect the trial to read out, and that’s adjusted out a little bit. We’re really happy with the robust nature of the trial that we have designed,” he said.