Conmed Corp. Aktie

Good day and thank you for standing by. Welcome to CONMED's First Quarter Fiscal 2026 Earnings Conference Call. [Operator Instructions] 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 risks 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 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 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 Pat Beyer, President and Chief Executive Officer, for opening remarks. Mr. Beyer?

Thank you. Good afternoon, and thank you for joining us for CONMED's First Quarter 2026 Earnings Call.

With me on the call today is Todd Garner. The search for our new CFO is progressing well, and we look forward to providing you with an update soon. I ask Todd to join me today as he is assisting us as our adviser with our Q1 earnings report. I'll start and provide you with an update of our first quarter results and updates on our strategic priorities. Todd will then take you through the financials and our 2026 guidance in more detail before we open the call for your questions.

Before turning to the quarter, I want to recognize our teams around the world for their continued focus and execution. Across the business, their work is making a real difference for our customers and for the company.

During the first quarter, we reached an agreement to divest certain GI products. And in April, we reached a second agreement to divest our remaining GI products. As is customary, we will provide transition services under TSAs through the end of this year and into 2027. This decision was intentional and strategic. It allows us to concentrate resources and investment on our higher growth, higher-margin offerings and better focuses the organization on driving improved execution and delivering long-term shareholder value.

I'll start by briefly reviewing our first quarter results. Total sales for the quarter were $317 million, a decrease of 1.3% compared to the prior year quarter. Excluding the impact of our previously announced exit from our gastroenterology product lines, total sales increased 3.8% year-over-year as reported and 2.1% in constant currency. Orthopedics delivered sales growth of 4.5% on a constant currency basis, while general surgery sales declined 7.4% in constant currency but were flat after adjusting for the gastroenterology exit.

From an earnings perspective, excluding special items that affected comparability, our adjusted net income of $27.1 million decreased 8.5% year-over-year, and our adjusted diluted net earnings per share of $0.89 decreased 6.3% year-over-year. These were, of course, impacted by the exit of our GI business.

Now I want to turn to our 3 key growth platforms: AirSeal, Buffalo Filter and BioBrace. These platforms sit at the center of our long-term strategy and provide a durable foundation for growth and margin expansion. Our decision to exit gastroenterology and place a strategic focus on minimally invasive surgery, smoke evacuation and orthopedic soft tissue repair reflects our intent to allocate capital, talent and attention towards the area where we see the greatest opportunity. I'll walk through each platform and highlight what we're seeing develop in the market.

Starting with AirSeal, our clinical insufflation platform that is supported by 2 durable growth vectors, robotic and laparoscopic surgery. AirSeal benefits from a large installed base of over 10,000 systems globally, which continued to grow in quarter 1, giving us broad clinical presence and deep surgeon familiarity. AirSeal plays a critical role in complex procedures where conventional insufflation systems may be less reliable. AirSeal's clinical differentiation underpins its role in robotic surgery, particularly as these procedures continue to expand across subspecialties and migrate into ambulatory surgery centers.

AirSeal follows surgeon preference. Beyond robotics, the laparoscopic opportunity remains significantly underpenetrated. In the United States alone, more than 3 million laparoscopic procedures are performed annually. And today, AirSeal is used only in 6% to 7% of those cases.

We continue to see good traction in laparoscopy market, including continued growth in the first quarter. Taken together, AirSeal's installed base, differentiation among high acuity specialists, importance in ambulatory environments and expanding laparoscopic adoption support our confidence that AirSeal can deliver high single-digit to low double-digit growth over the long term.

Turning to Buffalo Filter, our smoke evacuation platform. This continues to be one of our most compelling long-term growth opportunities. On the legislative front, we now have 20 U.S. states with smoke-free operating room laws on the books, covering approximately 51% of the population. We continue to see additional states moving towards legislation and expect this trend to persist, giving the safety benefits for health care professionals.

We are continuing to see traction internationally, particularly in the Nordic countries, Canada and Australia. On the product side, our PlumeSafe X5 launched in the first half of 2025 continues to gain traction. Its smaller footprint, quieter operation and faster smoke clearance are resonating in outpatient and ambulatory environments.

Importantly, we remain disciplined in how we are scaling this area. Our strategic focus is on direct smoke evacuation, where we control the customer relationship and capture the full margin profile. While OEM remains part of the portfolio, over time, we expect direct smoke to represent a larger share of smoke evacuation revenue, consistent with our broader focus on higher growth, higher-margin opportunities.

Our third key growth platform is BioBrace, which continues to perform exceptionally well and remains a signature element of our sports medicine strategy. BioBrace is increasingly recognized by surgeons as a differentiated solution in soft tissue repair, addressing both the mechanical and biologic drivers of failure. It is the only FDA-cleared implant that delivers structural reinforcement while also promoting biologic healing, a combination that is reshaping how surgeons approach complex repairs. As surgeons gain experience with the technology, we are seeing broader utilization across both primary repairs and more complex cases.

Clinical validations remain a critical component of the platform's long-term value proposition. There are currently over 30 published studies on BioBrace. Our 268-patient randomized controlled trial remains on track to complete enrollment in 2026 with publication expected in 2027. In the interim, the growing body of existing clinical data, along with the American Academy of Orthopedic Surgeons guidelines recommending augmentation in rotator cuff repair are reinforcing surgeon confidence and supporting adoption.

We believe BioBrace is still early in its life cycle. As BioBrace becomes further embedded into surgical workflows and expands across additional soft tissue procedures, we see a long runway for sustained growth and increasing contribution to our orthopedics portfolio.

From an operational standpoint, we finished 2025 strong and continue to improve supply chain performance during the first quarter. We are moving into a position in which we are able to provide customers with the consistent service they expect. This allows our orthopedic sales team to get back on offense and engage more proactively with surgeons and accounts. To support this momentum, we continue to expand capacity across both our internal manufacturing footprint and through qualified external partners. This dual approach gives us greater flexibility, improved resilience and positions us to support sustained growth.

Importantly, these improvements are now showing up in our results. Orthopedics delivered mid-single-digit growth in the first quarter, marking the third consecutive quarter of at least mid-single-digit growth, a trend that reflects improving supply reliability alongside continued strength in our core platform. We are making sustained progress, and we believe we are on a clear path toward where we ultimately want to be, operating a more durable, high-performance supply chain that can support long-term growth.

Our capital allocation priorities remain unchanged. We continue to balance organic investment in innovation, manufacturing and commercial effectiveness, disciplined acquisitions that strengthen our existing platforms and returning capital to shareholders, supported by strong and consistent cash generation. Our balance sheet continues to strengthen, and we believe CONMED is well positioned to invest in our business while maintaining financial discipline.

In summary, we enter 2026 with a focused portfolio, improving execution and differentiated growth drivers operating in attractive markets. We remain committed to delivering reliable performance and creating long-term value for our shareholders.

With that, I'll turn the call over to Todd, who will provide a more detailed analysis of our quarter 1 financial performance and discuss our 2026 financial guidance. Todd?

Thank you, Pat. All sales growth numbers I reference today will be given in constant currency. The reconciliation of GAAP to constant currency is included in our press release. The organic numbers referenced exclude GI sales from 2025 and 2026. As usual, we have included an investor deck on our website that summarizes the results of the quarter and our financial guidance. It also includes a reconciliation of GAAP to constant currency organic growth.

For the first quarter of 2026, our total sales decreased 2.9% year-over-year. Organic sales increased 2.1% year-over-year. For Q1, total sales in the U.S. decreased 5.8% versus the prior year quarter, and total international sales grew 1.0%. Organic sales in the U.S. increased 2.8% and organic international sales grew 1.3%.

Total worldwide orthopedic sales grew 4.5% in the first quarter. Total U.S. orthopedic sales increased 5.5%. And internationally, orthopedic sales increased 3.9%.

Total worldwide general surgery sales decreased 8.5% in the quarter. Organic worldwide general surgery sales were flat over prior year. Total U.S. general surgery sales decreased 10.4% while total international general surgery sales decreased 3.8%. Organic U.S. general surgery sales increased 1.5% while organic international general surgery sales decreased 3.3%.

AirSeal and direct smoke both grew in Q1, and we continue to expect AirSeal and direct smoke to be in the high single-digit to low double-digit range for the full year. But as expected and included in our original guidance for the year, in Q1, both product lines were below our expected range for the full year.

We are seeing positive signs with AirSeal as more capital units entered the market in Q1 than robotic systems from the market leader. We are also seeing good early returns from our increased focus on laparoscopic procedures. The data points we can see give us confidence that AirSeal should continue to grow in the high single-digit to low double-digit range in 2026.

The OEM smoke products were again a meaningful headwind in Q1. These non-focused products for us can be very lumpy quarter-to-quarter, and that was the biggest drag on general surgery sales in Q1. Now let's move to the expense side of the income statement. We will discuss expenses and profitability in the first quarter, excluding special items which are detailed in our press release.

Adjusted gross margin for the first quarter was 57.4%, which is 100 basis points higher than the prior year quarter, driven by favorable product mix and positive foreign currency impact.

Adjusted research and development expense for the first quarter was 4.8% of sales, 80 basis points higher than the prior year quarter. This increase was driven primarily by increased investment into our key growth drivers.

First quarter adjusted SG&A expenses were 40.0% of sales, 130 basis points higher than the prior year quarter. As we said in January, we expect the first quarter to be the highest quarter of the year.

On an adjusted basis, interest expense was $5.8 million in the first quarter. The adjusted effective tax rate in Q1 was 24.2%.

First quarter GAAP net income was $13.8 million compared to $6.0 million in 2025. GAAP earnings per diluted share were $0.45 this quarter compared to $0.19 a year ago.

Excluding the impact of special items, in the first quarter, we reported adjusted net income of $27.1 million, a decrease of 8.5% compared to the first quarter of 2025. Our Q1 adjusted diluted net earnings per share were $0.89, a decrease of 6.3% compared to the prior year quarter.

Turning to the balance sheet. Our cash balance at March 31 was $35.0 million compared to $40.8 million at December 31.

Accounts receivable days at March 31 were 65 days compared to 62 days at March of 2025 and 60 days at December 31.

Inventory days at quarter end were 246 compared to 222 days a year ago and 207 on December 31. As we continue to focus on service levels, we have purposely built more inventory.

Long-term debt at the end of the quarter was $860.2 million versus $834.2 million as of December 31.

Our leverage ratio on March 31 was 3.1x. Q1 is typically our biggest cash outlay, and we continue to expect this ratio to hold at roughly 3x as we balance debt leverage and share buybacks. In Q1, we bought back approximately 858,000 shares for a total of $37.4 million.

Cash flow provided from operations in the quarter was $13.5 million compared to $41.5 million in the first quarter of 2025. Capital expenditures in the first quarter were $2.9 million compared to $3.8 million a year ago. We continue to expect operating cash flow for the full year to be between $145 million and $155 million and capital expenditures between $20 million and $30 million, resulting in free cash flow around $125 million. No change from our prior guidance at the beginning of the year.

Now let's turn to financial guidance. We'll start with revenue. We are pleased to be able to raise our organic growth expectation for 2026 to 5.0% to 6.5% from our prior range of 4.5% to 6.0%. Pat outlined the good signals we are seeing in the business, and we are pleased with the improving outlook. Currency has also improved slightly, and we now expect foreign exchange rates to be a tailwind to revenue of between 40 and 50 basis points.

When we provided initial 2026 revenue guidance in January, we had recently announced our strategic intention to exit the GI product lines, but the only transaction that was complete was the agreement with Gore that was announced in December. In January, we did not have clarity on how or when we would exit the remaining product lines, and our guidance included that lack of clarity.

In March, as Pat said, we closed on the sale of certain GI products to Micro-Tech. And in late April, we closed on the sale of the remainder of our GI portfolio to a strategic acquirer who we will be able to disclose in the coming few weeks. As Pat said, these agreements include a period of us providing product and services that may likely extend beyond 2026. So we now have much better clarity on what to expect for the remainder of 2026.

In January, we estimated that we would sell between $21 million and $25 million of GI product lines in 2026. With these 2 agreements complete and happening faster than originally anticipated, our 2026 revenue guidance for the GI product lines is now between $14.5 million and $17.5 million, which is about a $7 million reduction from our prior guide at the midpoint. Fortunately, the lower revenue also comes with lower costs. And so our EPS guidance of $0.45 to $0.50 impact for the full year is still consistent with our January expectations.

Because of our improving growth profile, despite that approximate $7 million of lower GI revenue for the year, we are raising the lower end of our reported range by $5 million and keeping the high end of the range the same. That results in expected reported revenue between $1.35 billion to $1.375 billion for 2026.

We expect reported revenue in Q2 to be between $336 million and $340 million. And we've provided a detailed look at the assumptions of the organic growth and currency impact for the remainder of the year in our investor deck.

We expect to refinance our debt during Q2 before the outstanding convertible notes go current. We have strong banking partners, and we are seeing attractive rates and plenty of capacity available to us. Given the historic trough in med tech multiples, we have determined that issuing new convertible notes at this time would not be in the best interest of CONMED shareholders. So our intent is to refinance with bank debt, which we expect could increase our full year adjusted interest expense, impacting adjusted EPS for the full year by at least $0.10.

Despite this increase, thanks to the strength in the profitability we saw in Q1 and the increase in our organic growth profile, we are able to keep our adjusted EPS guidance for the full year unchanged at the range of $4.30 to $4.45. For Q2, we expect adjusted EPS to be between $1.09 and $1.14.

With that, we'd like to open the call to your questions. Operator?

[Operator Instructions] Our first question comes from the line of Travis Steed of Bank of America.

This is Gracia on for Travis. On the first one, I wanted to ask a little bit more about the debt refinancing that you called out that you're starting in Q2. And just a little bit more about the strategy and what levers you can do to mitigate potential EPS dilution both in 2026 and then also in 2027 as well. And then I had one follow-up.

Sure. Thanks, Grace. So we're starting those discussions with our banking partners. We have a very strong banking group, some of the best banks in the world. We have ample capacity. We're seeing good rates. The change from what we thought -- what we planned for the full year is we thought that there would be a mix of bank debt and convertible notes that was in the prior original kind of intention.

As we look at the historic low multiples in med tech, we determined that it was not in the best interest of CONMED shareholders to do new convertible notes at this time. So that raises the cost of capital just a little bit. As I said in my script, we see that as at least $0.10. I'm not being terribly precise there, obviously, because the negotiations are not done. We don't know exactly what we're going to get. And there's a lot of year left in cash flows and what the rates may do. And so it's going to be more than we originally thought as we laid out 2026, but thankfully, the strength in the business the results of Q1 allow us to keep EPS the same despite that increased headwind from interest expense.

Great. Helpful. And then the second one, earlier this morning, just saw a company come out and talk about inflationary pressures. So I think that's top of mind. I was sort of wondering what you're seeing on the macro front in terms of inflation impacting margins and any framework to think about how that could impact CONMED over the rest of the year and what is sort of implicit in your margin guide there as well?

Grace, it's Pat here. Thanks for the question. Again, any macro geopolitical or economic margin pressure or price pressure would be included in guidance. I just want to let you know that. We are seeing some pressure on some commodity products like oil, gold that are affecting our cost of goods sold, but we're working hard with our vendors and our partners and our supply chain to mitigate as much as we can there.

At a macro level, we're seeing some component prices go up. We're partnering with our supply chain to mitigate those, and we're also partnering with our hospital systems to partner with them on cost-effective clinical solutions. And we don't expect any more of the macro influences on the cost side to impact our guidance here. And so we've included that in there.

Our next question comes from the line of Ross Osborn of Wells Fargo.

Starting out with AirSeal, and apologies if I missed this, but what was the attach rate to DV5 during the quarter?

Ross, Pat here, and welcome. We did not state the attachment rate for the quarter. What I would say to you is the attachment rate for AirSeal in quarter 1 followed the guidance that we have given in the past, and that was on the DV5. We have guided between 10% and 20%, and we continue to be in that zone, Ross.

Okay. Sounds great. And then for my second question, what is your level of visibility into state legislation on ORs may result in a tailwind?

And I'm sorry about that. And you're talking about smoke evacuation?

Yes. Just curious regarding guidance, how much is baked in for new states coming on board?

Again, anything would have been built into it. Again, I think we stated 20 states have enacted 45% of the hospitals in the U.S., 51% of the population. We have line of sight of 13 additional states have bills pending, and we believe Maryland and Massachusetts are the most likely ones to pass. In fact, Maryland is actually at the governor's desk. And so we continue to see legislation play a role in the background as well as the clinical benefits of it, and societies continue to play as equal or more important role as societies like AORN are pushing for legislation and action from hospitals to standardize on smoke evacuation.

Our next question comes from the line of Robbie Marcus of JPMorgan.

Congrats on a nice quarter. Two for me. Hoping you could walk us through the bridge on second quarter. It seems like a larger-than-normal step-up in dollars. And I realize the last few years maybe aren't the best proxies for 1Q to 2Q. I know 2Q is historically a stronger quarter. Maybe just give us a bridge of how you get there on a dollar basis. What's getting better and how to think about that? And then I have a follow-up.

Sounds good. Todd can talk you through the dollars. And then if there's any questions on the background and clinical spaces, I'll jump in on that side.

Yes. And I know, look, we're only half an hour from releasing the deck on our website. But Robbie, I do want to make sure you see the deck, specifically, I think it's Slide 5. We provided much more granularity on the pieces of organic, the GI sales and currency. So that will just give you some extra visibility.

And I would say, in general, if you remember, Q4 was a pretty strong quarter for us. Because of that, we were pretty cautious on the Q1 guide. It came in better than we expected, but we were right in that Q1 was a little softer because Q4 was so strong, particularly internationally. And so it is true that we are expecting to see an acceleration in Q2 better than what we saw in Q1. But I think that fits with how we saw the year to start with, and the signals we're seeing in Q1 have given us confidence that the Q2 numbers are in a good place.

Yes. I see the slide. I guess I'm asking what businesses are getting better because it's just -- it's a larger dollar amount from first quarter to second quarter, especially with the GI numbers going down year-over-year. So I was wondering if you could kind of give us a bridge. What's getting better in second quarter to get us to that dollar amount?

Robbie, I'm going to be focused on the growth drivers. And so our orthopedic business and BioBrace will continue to accelerate its growth. We will continue to work through our supply chain historical challenges that have gotten a lot better, and we're moving more towards on offense. So you can expect the orthopedic business to continue to accelerate, number one.

Number two, we called out that international would be much slower in the first quarter because of the big quarter 4 they had. Their absolute value dollars will accelerate in quarter 2. Then you're going to see the natural drivers of AirSeal and our smoke evacuation from a dollar standpoint and a growth standpoint accelerate there.

The AirSeal business, although it grew, the absolute growth wasn't as much as we would have liked to have seen, but the absolute capital units that have hit the market were pretty attractive for us, and they accelerated in quarter 1, and we expect to see the disposable trends grow in quarter 2 and throughout the year. So that will also play a role in accelerating that absolute dollar growth value from quarter 1 to quarter 2, Robbie.

Perfect. And then just quickly on gross margin. You had a really good result, your best one in many quarters. Any color there and just how to think about that through 2Q through 4Q?

Thanks, Robbie. We did -- we grew 100 basis points over the prior year quarter. Our full year guide for gross margin was 50 to 100 for the year. So we were at the top end of that for Q1. As we look at the rest of the year, we think we should be in that 50 to 100 every quarter. So Q1 was good at the top of the range, and we continue to have the guide of 50 to 100 basis points of improvement in 2026.

Our next question comes from the line of Matthew O'Brien of Piper Sandler.

This is Anna on for Matt. I want to touch on the laparoscopic opportunity in AirSeal specifically. I know you've mentioned that market penetration is fairly low there for a while now. So I'm just wondering what the gating factor is there and how we should think about the laparoscopic application as a growth driver long term for AirSeal and then any investments you're making to accelerate penetration into that market.

Thank you. So as we think about laparoscopy, historically, we've done a strong job internationally where the robotic penetration was lower. Internationally, we're selling AirSeal in the laparoscopic market successfully. So we know there's an economic and clinical benefit to the hospital systems and patients around the world.

To give some detail on the U.S., there are over 3 million procedures in the U.S. laparoscopically, and we address -- and we have a penetration rate of about 6% to 7%. So we have a strong programs in the United States towards standardization in the laparoscopic market. We know that the clinical benefit and the economic benefit is there, but we're taking a pretty focused approach.

For example, in the laparoscopic market, 2 procedures, colorectal and hysterectomy have over 350,000 procedures done laparoscopically. These are complex surgeries in nature. They're 3 hours plus in length of procedure, and we know the benefits of AirSeal and stable low-pressure clinical insufflation make a real difference. And so we have an active program in the United States around standardization and laparoscopy. We had a good quarter 1 where our pipeline is growing strongly. And I commented that the actual units of AirSeal going into the market in the United States was really strong in quarter 1. We put over 50% more in quarter 1 in the market than we did in quarter 1 2025. So some good moves are happening there.

Awesome. That's great to hear. Super helpful. And then I also just wanted to ask on the supply chain. Just any additional color on the progress you've made there. And then once these issues are fully subsided, I'd imagine it might take some time for you to recoup any lost business or any dislocated business. So just wondering if there is an expected lag there and when you expect to fully be back on offense with the supply chain issues?

Yes. So I appreciate the question. So I'll remind you that at the end of 2025, we said we made real progress. The good news was it wasn't a moment, it was a movement, and we've continued to make progress. And the gains we made at the end of 2025, we've sustained. That's number one.

Number two, it's allowed us to grow our orthopedic business, and we commented that we've had 3 quarters in a row where we've actually achieved minimum mid-single-digit growth. The good news is BioBrace had never gone on back order. So our sales professionals, even though they weren't on offense on our core orthopedic product lines, they were connecting with clinicians, taking care of clinicians, clinical issues and maintaining their relationships. So we believe that while we will not take all of the previous business we may have lost back quickly, we believe our relationships are strong with the hospitals.

And as contracts continue to come up and we have opportunities, we'll continue to take the appropriate market share that we deserve and we've earned. And again, I would remind you, the sports medicine market is a large market, growing mid-high single digits. And our expectation is we're a winning company, and we would expect to, over time, move to that mid-single-digit, high single-digit growth trajectory.

[Operator Instructions] Our next question comes from the line of Mike Matson of Needham & Company.

So just on Buffalo Filter, the OEM business, is there any way you can help us understand how big of a part of Buffalo Filter, that general surgery business that is? And what's the expectation around when that stops potentially being a drag on Buffalo Filter overall? Like when does it kind of get small enough or level off in terms of the declines?

Mike, the Buffalo Filter piece of our smoke evacuation is smaller than our direct, number one. We grew our direct business in quarter 1. And we believe over time, it will continue to get smaller. And we believe the leading indicators we saw in quarter 1 tell us that total smoke will in 2026 be high single digits, low double digits. And so over time, it will phase away, and we'll continue to focus on our direct business.

All right. And then just on the interest expense commentary. So it sounds like you're saying that there's -- it's going to be -- and I know it's rough numbers at this point, but approximately $0.10 greater impact from the added interest expense than you previously expected, but you're able to kind of absorb that and you're maintaining the EPS guidance. But I guess looking into '27 then, and I know you're not giving guidance for '27, obviously, but I mean, is it -- it's probably going to kick in midyear. So is that like a $0.20 annualized impact? And would that $0.20 be kind of a headwind in '27?

Yes. Fair question, Mike. We don't want to get ahead of ourselves. Obviously, we said that with where things are right now, we've determined to not access the convertible part of the market. That doesn't mean that we wouldn't between now and '27, right? So there's a lot of things that can move between now and then. We have a very strong cash engine. And so we'll give '27 guidance at the right time. But -- so I'd ask you to just kind of stay open-minded to where this goes. And I will remind you, we said at least this is still a little bit of a moving target. So we don't want to be too precise with it, and we certainly don't want to be precise into next year.

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

Thank you, Latif. I want to thank everybody for joining us on the call. We entered 2026 with a clear focus on execution. We are concentrating on our key growth platforms and continuing to build a strong foundation for long-term performance. Exiting the GI portfolio further sharpens our focus and positions CONMED as a more disciplined company going forward.

I'm really proud of our team and the positive impact they're having on patient outcomes as well as their continued commitment to creating value for our shareholders. Thank you for joining us today, and I want to thank you for your continued interest and support.

This concludes today's conference call. Thank you for participating. You may now disconnect.

[indiscernible] These figures are not a substitute for GAAP measurements, management uses these figures at 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 websit.

With these required announcements completed, I will turn the call over to Pat Beyer, President and Chief Executive Officer, for opening remarks. Mr. Beyer?

Good afternoon, and thank you for joining us for CONMED's Fourth Quarter 2025 Earnings Call. With me today is Todd Garner, our Executive Vice President and Chief Financial Officer.

I'll start and provide you with an overview of our fourth quarter and full year results and then share updates on our strategic priorities. Todd will then take you through the financials and our 2026 guidance in more detail before we open up the call for your questions.

Before I dive into the quarter, I'd like to recognize the continued dedication of our global team, their commitment to our mission to our customers and to one another is evident in every part of our company.

I'll start by briefly reviewing our fourth quarter and full year results. Total sales for the quarter were $373.2 million, representing a year-over-year increase of 7.9% as reported and 7.1% in constant currency. For the full year, sales were $1.375 billion, representing year-over-year growth of 5.2% as reported and 5.1% in constant currency.

Orthopedic sales increased 12.1% in the fourth quarter and 5.5% for the full year on a constant currency basis. In general surgery, sales increased 3.8% in the fourth quarter and 4.7% for the full year in constant currency. Fourth quarter adjusted earnings per share of $1.43 grew 6.7%, while full year adjusted EPS of $4.59 grew 10.1%.

Earlier this month marked my first anniversary as CEO of CONMED. Over the past year, due to extensive discussions with internal and external stakeholders that culminated in a comprehensive portfolio review, my conviction in where CONMED can win has only strengthened. We win where innovation and minimally invasive surgery converge in robotic and laparoscopic surgery and smoke evacuation and an orthopedic soft tissue repair. These are high-growth, high-margin markets where we are uniquely positioned to lead with our differentiated products and strong commercial teams.

As part of that portfolio review, in December, we announced the decision to exit our gastroenterology product lines. While this creates some near-term earnings dilution, the move aligns with our resources tightly to our strongest growth drivers and is expected to improve our long-term consolidated growth margin profile by approximately 80 basis points once complete. This was a thoughtful and strategic decision that positions CONMED to deploy capital and talent where we create the most value.

When I stepped into the CEO role, it was clear that we needed to resolve the supply chain constraints in sports medicine that had weighed on the growth of our Orthopedics portfolio. We put the right focus and resources in place people, planning and production. We engaged a top-tier outside consultant, invested in infrastructure and are building out a strong operations team. We made meaningful progress in 2025, culminating in our strongest growth quarter of the year in the fourth quarter. We ended the year with our backorder value and number of SKUs on back order at a 3-year low, and we continue to make additional progress in the first quarter.

We are not yet at our goal of operating a world-class supply chain but we have made significant progress and are at a point where our sales force can once again be proactive with our growth drivers.

Looking forward, we view the work ahead across 2 primary objectives. The first is to stabilize the scale, build reliable, repeatable processes that give a sustainable supply resiliency and enable our teams to be on offense. We have made meaningful progress here. The second longer term, objective is to build a high-performance supply chain that is agile, data-driven and capable of supporting sustained nation, completing the second objective is what we believe will allow us to deliver sustained above-market growth in our Orthopedic portfolio over time.

Now turning to our 3 high-growth platforms. I'll start with AirSeal, our clinical insufflation system used in robotic and laparoscopic surgery. AirSeal was used in approximately 1.6 million procedures in 2025 and reflecting its established role in complex surgical cases with a clinical benefit of stable, low pressure in inflation are modes pronounced. Utilization and robotic surgery remains in line with expectations with consistent engagement from surgeons who value its clinical profile.

The expansion of the robotics market outside the U.S. and into lower-cost settings, such as ambulatory surgery centers, represents an additional opportunity for AirSeal. These environments are well aligned with the clinical and economic benefits AirSeal delivers, and we expect them to play an increasingly important role in our long-term growth. We continue to see meaningful white space and traditional laparoscopy. In the U.S. alone, there are more than 3 million laparoscopic procedures performed annually, and AirSeal today is utilized in only about 6% to 7% of cases.

As we scale our commercial efforts and drive greater awareness of the clinical and economic benefits that mirror what we've demonstrated in robotics, we believe that laparoscopy represents a substantial long-term growth lever. Taken together, these dynamics reinforce our confidence that AirSeal can deliver high single digits to low double-digit rate growth over the long term, which is what we saw in both the fourth quarter and the full year 2025.

Next, I'd like to turn to Buffalo Filter, which remains 1 of our most compelling long-term opportunities. Surgical smoke evacuation is now recognized as a $1 billion-plus potential global market yet is still in the early stages of adoption. Today, 20 U.S. states representing approximately 1% of the population have enacted smoke-free operating room legislation, and we continue to see steady progress internationally, including early momentum across the Nordic countries and Canada.

We are also leading the market with product innovation, our next-generation Ploom Safe X5 launched in the first half of 2025 delivers significantly enhanced performance, quieter operation, and faster, more efficient smoke clearance, strengthening our competitive position and expanding the clinical and economic value we bring to customers.

Our third high-growth platform is BioBrace, which has become a signature element of our sports medicine strategy. Bio brace is now used across more than 70 unique procedures, demonstrating both the breadth of the surgical adoption and the versatility of the technology. Our BioBrace RC delivery system launched last year has further strengthened this momentum by making rotator cuff repair more reproducible and expanding our access to a broader set of surgeons.

Clinically, the BioBrace platform is backed by a growing body of evidence. Our 268 patient randomized controlled trial remains on track to complete enrollment in 2026 with publication expected in 2027. And as of 2025, The American Academy of Orthopedic Surgery Guidelines recommended augmentation for rotator cuff repair. We are also seeing increasing utilization of BioBrace and foot and ankle procedures where surgeons are recognizing the same benefits in strength, hemin, support and workflow efficiency.

We expect this trend to continue as BioBrace becomes further embedded across a wider range of soft tissue repairs, reducing revision rates and promoting faster healing.

Turning to the balance sheet. Our strong cash engine brought leverage to 2.9x in the fourth quarter giving us the flexibility to lean into innovation, growth and capital returns. As we announced in the third quarter, our Board suspended our dividend and approved $150 million share repurchase authorization. Historically, the dividend represented roughly $25 million annually and deploying at least that level into repurchases, it creates to approximately $0.07 of EPS in 2026. We importantly, we view this as a minimum, not a ceiling.

Taken together, our financial strength, our operational progress and the potential of our growth platforms gives us confidence in the path forward. Our focus remains clear: getting CONMED back to above market growth. We will do this by leaning into our core strength, continuing to normalize supply and sports medicine operating with discipline and focus and investing in high-growth, high-margin platforms. I'm part of our progress in 2025 and energized by the opportunity ahead.

Before I turn the call over to Todd, I want to briefly address the CFO transition we announced earlier this month. Todd and I have been discussing long-term leadership structure and alignment for some time. And together, we concluded this is the right moment for both him and for CONMED. Todd will remain CFO through the transition and will then move into an advisory role, ensuring continuity while we complete a comprehensive search for our next CFO. He has been instrumental in strengthening CONMED's financial foundation over the past 8 years. And on behalf of our Board and our entire leadership team, I want to thank him for his partnership contributions and unwavering commitment to CONMED.

With that, I'll turn the call over to Todd, who will provide a more detailed analysis of our financial performance and discuss our 2026 financial guidance. Todd?

Thank you, Pat. It's been an honor to be CONMED's CFO and working with you focused on delivering for our shareholders. I'm committed to a smooth transition with a continued focus on what is best for CONMED and our shareholders.

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, the year and our financial guidance. For the fourth quarter of 2025, our total sales increased 7.1%. For Q4, our sales in the U.S. increased 1.4% versus the prior year quarter, our international sales grew 15.4%.

Total worldwide Orthopedic sales grew 12.1% in the fourth quarter. In the U.S., Orthopedic sales grew 6.6% and and internationally, Orthopedic sales increased 15.7%. Total worldwide general surgery sales increased 3.8% in the quarter. U.S. general surgery sales declined 0.4%, while internationally, general surgery sales increased 14.8%. The decline in the U.S. was driven by our OEM smoke evacuation SKUs, which we've been clear as a nonfocus area for us.

The second biggest decline in the U.S. general surgery in Q4 was related to strategic portfolio management within our energy platforms. As you've heard from us, we're increasing focus on our growth drivers, and as Pat said, AirSeal grew globally within our exited range with positive demand in the U.S.

For the full year 2025, our total sales increased 5.1%. For the full year, our U.S. sales grew 3.5%, and international sales grew 7.1% versus the prior year. Total worldwide Orthopedic sales increased 5.5% for the full year 2025. In the U.S., Orthopedic sales grew 2.3% and internationally, Orthopedic sales increased 7.6%. Total worldwide general surgery sales increased 4.7% for the full year 2025. U.S. general surgery sales grew 4.0% while internationally, general surgery sales increased 6.4%.

Now let's move to the expense side of the income statement. We'll discuss expenses and profitability in the fourth quarter and the full year, excluding special items, which are detailed in our press release. Adjusted gross margin for the fourth quarter was 56.6%, down 100 basis points from the prior year period, driven by the expected tariff impact. For the full year, adjusted gross margin was 56.4%, an increase of 10 basis points over 2024 and despite the new tariffs.

Adjusted research and development expense for the fourth quarter was 3.8% of sales, the same as the prior year quarter. For the full year adjusted R&D expense was 4.0% of sales, 20 basis points lower than 2024. Fourth quarter adjusted SG&A expenses were 35.6% of sales, the same as the prior year quarter. For the full year, adjusted SG&A expenses were 37.1% of sales, also the same as 2024. On an adjusted basis, interest expense was $5.8 million in the fourth quarter and $25.4 million for the full year. The adjusted effective tax rate in Q4 was 25.7%. For the full year, our adjusted effective tax rate was 24.9%.

The Fourth quarter GAAP net income was $16.7 million compared to $33.8 million in Q4 of 2024. GAAP earnings per diluted share in Q4 were $0.54 this quarter compared to $1.08 a year ago. For the full year, GAAP net income was $47.1 million compared to GAAP net income of $132.4 million in 2024. GAAP earnings per diluted share were $1.51 in 2025 compared to $4.25 in 2024. Excluding the impact of special items discussed earlier, in the fourth quarter, we reported adjusted net income of $44.4 million, an increase of 6.2% compared to the fourth quarter of 2024. Our Q4 adjusted diluted net earnings per share were $1.43, an increase of 6.7% compared to the prior year quarter.

For the full year of 2025, we reported adjusted net income of $143.1 million, an increase of 10.1% compared to 2024. Our full year adjusted diluted net earnings per share were $4.59 and also an increase of 10.1% compared to the prior year.

Turning to the balance sheet. Our cash balance at the end of the year was $40.8 million compared to $38.9 million as of September 30. Accounts receivable days as of December 31 were 60 days, the same as the end of Q3 and 2 days lower than a year ago. Inventory days at year-end were 207 compared to 191 at September 30 and 211 days a year ago. Long-term debt at the end of the year was $834.2 million versus $853.0 million as of September 30. Our leverage ratio on December 31 was 2.9x. Cash flow provided from operations in the quarter was $46.3 million compared to $43.3 million in the fourth quarter of 2024. Cash flow provided from operations for the full year 2025 and was $170.7 million compared to $167.0 million in 2024.

Capital expenditures in the fourth quarter were $5.1 million compared to $4.0 million a year ago. For the full year, capital expenditures were $19.8 million in 2025, compared to $13.1 million in 2024.

Now let's turn to financial guidance. Let's start with revenue. We're guiding the full year reported revenue between $1.345 billion and $1.375 billion, which represents constant currency organic growth between 4.5% and 6%, with FX tailwind between 0 and 50 basis points. We've provided the detailed assumptions in our investor deck in conjunction with this call. That deck also shows the moving pieces in adjusted gross margin from 2025 to 2026. We're guiding a net improvement of 50 to 100 basis points for the full year despite digesting headwinds from incremental tariffs between 100 and 110 basis points.

The improvement is driven by our continued strong organic mix tailwind and cost improvements. We expect adjusted SG&A expense as a percentage of sales to be between 38.0% and 38.5% in 2026. The increase is due to lower sales because of the GI exit and increased investments to accelerate our key growth drivers. We expect full year adjusted R&D expense in 2026 to be between 4.5% and 5% of sales. This represents an increased investment to support our key growth drivers [indiscernible].

Capital expenditures in the fourth quarter were $5.1 million [indiscernible] operating cash flow in 2026 to be between $145 million and $155 million with capital expenditures in the $20 million to $30 million range, putting free cash flow around $125 million for the year. We project adjusted EBITDA between $255 million and $265 million for 2026. For Q1 specifically, we expect reported revenue between $308 million and $313 million. We expect adjusted SG&A expense in Q1 as a percentage of sales to be the highest quarter of the year and above the range we guided for the full year. We expect adjusted EPS in Q1 to be between $0.80 and $0.83.

Our 2026 plan is built to strengthen the portfolio by increasing the focus and investments on our key growth drivers. As Pat said, our financial strength, our operational progress, and the potential of our growth platforms give us confidence in the path forward.

With that, we'd like to open the call to your questions, and I'll hand it back to the operator.

[Operator Instructions] And our first question comes from Vic Chopra with Wells Fargo.

I really enjoyed working with you. So I appreciate the color you gave on Q1, but perhaps can you talk about how you see the rest of the year playing out from a cadence standpoint? And any selling day differences to highlight for the year? And then I have a quick follow-up.

Yes. No selling day differences, thank fully. All the quarters were look the same. Of course, we're all around the world, right? And so there could be some rounding but they all round to the same number of days for the quarters. And I wouldn't call anything out other than normal seasonality that we -- that's typical but as medtech plays out through the quarters. So we called out Q1 and I would say the rest of the year should follow the normal sequence that the medtech calendar does.

Okay. Great. And my follow-up question is for Pat. But can you maybe just talk about where you are with the CFO search? I'm sure they're pretty big shoes to fill and maybe talk about what you're looking for in a new CFO?

Vik, appreciate the question. Again, it's an important role for the company. We've been blessed to have Todd as our CFO at CONMED for 8 years, and I've been lucky to have him as a teammate. We are actively searching now. I'm looking for a CFO that exhibits the same dynamics that Todd did, which is a CFO that will be focused on shareholder value accretion and be a great teammate to the leadership team and will be a steward of the CONMED shareholders that we have.

Our next question comes from Robert Marcus with JPMorgan.

Great. Just for me, Todd, I just wanted to ask on the slides you showed at our health care conference in the slides you showed today, different organic revenue numbers, same similar growth rates but different organic revenue numbers. Maybe you could just walk through that. And then I had a follow-up.

Yes, absolutely. Robbie, your conference was, I think, on the fifth business day of the year, so the final 25 numbers were still rolling up. What we guided was in the neighborhood of 4% to 6% organic constant currency growth at your conference, as the final 25 numbers come into play, and that's now the base, we landed at 4.5% to 6%, which is just more precise. So I would say at your conference, we were a little wider on the characterization. And now we're a little more precise with the final 25 numbers and the specific 26 pieces of how it all lays out.

Great. Then a follow-up. It looks like versus the Street, you beat pretty handily in ortho and mist in surgery. I was hoping you could just talk through what drove the upside in ortho? What drove the downside? And how you're thinking about the 2 different businesses throughout '26.

Robbie, thanks for the question. Pat here. I'll take that. Again, we feel good about both pieces of our portfolio. Again, soft tissue augmentation and sports medicine repair is a strong platform for us, and robotic and laparoscopic innovation platforms also continue to be a strong platform for us.

I'll take the Orthopedic side first. We really had 4 things, Robbie, I would call out on the ortho side. So how did we be, number one, I would just level set everybody, the base of our ortho performance is a group of committed sales professionals that have continued to support our clinicians tirelessly through the supply chain challenges we've had. So when you have that and then you have the benefit of an improving supply chain, continued strength of BioBrace. And we've got a positive benefit of some of the clinical solutions CONMED has had approved in the United States that we're now getting those approved around the world. And in the fourth quarter, our European business was able to launch our a meniscal repair program that had just been approved on it. So really 3 good things happening on the global side for our Orthopedic business.

On the general surgery side, Robbie, I want to confirm that our smoke and our AirSeal business performed in line with guidance that we've said it would do, which is high single digits to low double digits. On the backdrop of that, the USA GS growth was impacted by our continued execution on portfolio management and focusing on our growth drivers. During the fourth quarter and during 2025, we've been doing heavy portfolio management, and we exited some minor products in the GS range, and we continue to focus on our direct smoke business. Those things will continue to evolve, but our focus continues to be accretive growth over the long term. and continue to factor this approach into our guidance. And so we knew what we were doing in quarter 4. We tried to include that in our guidance and the overall macro level for CONMED.

Our next question comes from Matthew O'Brien with Piper Sandler.

Todd, maybe just to follow up on Robbie's question, and I'm trying to do this on the fly and get all these numbers correct with FX. And and the GI divestiture. But it just seems like the constant currency full year number for CONMED is a little bit lower than what you said at JPM a few weeks ago. Am I doing the math on that wrong? Or is it just -- is it just the delta in terms of how you did versus the Street on '25 that makes things maybe a little skewed in terms of how we're calculating things.

Yes. It really is just the finish of '25 and then the mix between what's expected in the GI business. That's the only piece really, there's FX and then the GI sales. So we got to the total dollar range that we gave at JPMorgan,but the pieces shook out just slightly when you add in the prior year starting point for both the GI business and the organic side of the business.

Okay. But no change to the organic full year expectation of slowdown in the core organic number?

Yes. Again and again, I think we just spoke a little more generally at JPMorgan when we said the 4% to 6% range, and when you put a decimal point on that, on the final numbers, including where 2025 ended, it rounds to 4.5 to 6 million. So it's just a little more precision in that communication today versus at JPMorgan.

Got it. And then maybe for Pat, just going back to AirSeal. It has decelled from the 20% range down to high single digits to low doubles like you've mentioned. Still good growth there. Is that still a $200 million, $250 million business roughly kind of growing at that rate? And then the confidence in that growth rate going forward I know that traditional lap is underpenetrated. I get that but robotics has been so easy to drive that growth. And then the ASC setting is a lower cost setting generally. So in AirSeal much more expensive than traditional insufflators. So again, putting all that together, why are you still confident in the high single to low double-digit growth rate going forward?

Matt, fair question and good question. Again, I'm not going to comment on the scale of specifically AirSeal. I will draw your attention to the investor deck, which has a pie chart that kind of shows the AirSeal and our direct smoke as a pie. So you see that it's a significant portion of the company. We also believe it's a high single-digit, low double-digit grower based on what we're seeing in the clinical performance and the clinical acceptance and demand from customers we're seeing globally. And we still feel really strongly about the 2 lanes that we can swim in there being the laparoscopic robotic opportunities we have globally, and the laparoscopic nonrobotic procedures that we're seeing as an opportunity globally.

And we continue to see those evolve and strengthen as the clinical outcomes that we're seeing with reduction in length of stay and reduction in pain continue to play out there.

Our next question comes from Travis Steed with Bank of America.

I guess there's still some people confused, Todd, on the slides. If you look at the organic constant currency dollar number, it's about $100 million lower than it was at JPMorgan. So I just want to understand any way to kind of bridge that $100 million difference because I think it was like $1324 million on the current slide deck versus $1423 million to $1450 million before?

Yes. So the organic -- when we communicated with '25 in the base, we were talking about organic from that base, which has GI in that base number. But as we move to '26 and GI is out of the number, we're now talking about the organic without that number. So that's really just -- and you'll notice, if you go look at the JPMorgan deck, the GI impact was presented as a negative from that number, right? But now the presentation is GI revenue as a positive number. So instead of taking the GI impact subtracted from that top number, you now have the true organic going forward in the '26 baseline, and then the GI sales as a positive of what we expect to sell in the GI business. So it's a -- there is a difference in how it was presented. That's true, Travis. Thanks for that clarification.

Yes, I just want to make sure it was clear. And going forward, how will the GI be reported?

Yes, it will be reported separately as we're doing it in this deck.

Our next question comes from Mike Matson with Needham & Company.

Yes. Thanks. So I know there was a question on kind of the growth in general surgery versus orthopedics but the other kind of difference I saw was U.S. versus OUS. So OUS seem particularly strong, whereas U.S. is a little weaker, taking both businesses into account. So can you maybe talk about what happened there? And then on the international side, was any of that kind of one-off like stocking orders for distributors or anything like that? Or is that just true kind of in demand?

Two things I'd say, let's focus on the U.S. general surgery. Again, when I talk about the portfolio management, the 2 items were we exited 1 of our small minor product lines that impacted the U.S. more than international. And when I talked about focusing on our direct smoke business, our OEM business is in the United States. So those 2 items impact the U.S. more than they do internationally.

And international, again, we -- you're right to call out that we do have distributors around the world, but we're not in -- we don't stock distributors there. Distributors are managing their business at year-end and the demands they have with their customers and their supply chains and their systems economically around the world. And so it wouldn't have called that. But we did have a strong international fourth quarter. and it does cause us to pause and think about how Q1 will be internationally in that. [indiscernible]

Just given the supply chain, I didn't know if there were some back orders that you filled or something like that. But I understand you're right -- so then I guess the other question would just be -- so you put the GI benefit -- it sounds like you did kind of a comprehensive review of the entire portfolio. So is there a potential to see any other exits or divestitures from here? Or are you happy with what's left at this point?

Two things. Portfolio management is going to be a continual operational execution that we will go through. And you saw that in quarter 4 in the United States where we exited a small product line. We feel really strongly about our growth platforms and our growth drivers today. That's something our portfolio review showed us. We feel strongly about our sports medicine tissue augmentation and repair market and feel strongly about our laparoscopy minimally invasive market. And we'll continue to drive at our growth drivers there. And today, we do not see any major portfolio management that would warrant signaling that like the GI opportunity we saw and was appropriate to do.

Next question comes from Young Li with Jefferies.

All right. Great. Todd, great working with you and wishing you all the best going forward. I guess first question just on AirSeal. Is it possible to get a little bit more color about maybe OUS growth trends because tied a little bit less to DB5 and intuitive. And then also for the U.S. laparoscopic opportunity underpenetrated. But how has that share capture with Charge been trending over the past few years?

Young, Pat here. As we think of -- again, macro comments, I would say, on AirSeal, it continued to perform in the range that we said globally, high single digit, low double digits. The attachment rate to DB5 continue to be in the range that we said it would be between 10% and 20%. What we're seeing globally is these 2 opportunities we have, laparoscopic and robotic pace itself differently. So where internationally, our business was more tilted towards laparoscopic. We're now seeing more Xis and the robotic opportunity present itself. And so we're expanding into that opportunity.

In the United States, we've been more robotic-focused and we've been tilted towards that. And we're now seeing the 3 million-plus procedures annually in the United States and the laparoscopy opportunity present itself, and we're moving more into that. We think of those 4 swim lanes being presented in 2 geographies, and they're not going to sequence themselves perfectly at the same time in each area, in each geography. But we see those as strong growth opportunities for us that we're continuing to drive into.

All right. Got it. I appreciate the comments. I guess one on investments. Now that your leverage is below 3. Can you maybe talk about the appetite and interest in M&A again, thoughts on valuation and the target environment out there? And then I think you also mentioned at JPMorgan, a focus on organic investments. Maybe if you can talk about some of the things in the pipeline at the high level, that would be helpful.

Young, I'll comment some macro comments and then turn it to Todd, if he has any other things. Again, we're continuing to look at M&A in areas that we can -- technologies that we can tuck-in to the segments we're focused on. And so it's important that we continue to do that. We're also continuing to be prudent and pragmatic with internally investing organically. You would see in our -- in the earnings script, we talk about our investment into R&D, and we're spending more on that in 2026 than we have done historically as we continue to invest in these growth platforms that we feel strongly with.

So I think what you're going to see from us is a continued balanced approach there. You're seeing our leverage go down, which makes it more easier and more appropriate for us to consider and pursue external acquisitions. At the same time, I would remind you, we've continued to tell the outside world. We have not walked away from any M&A opportunity that we felt was the right technology or the right company to be in CONMED's hands, and we continue to follow that approach.

Todd, anything I missed?

No. I think it's a. I don't wanna anything to add.

Thank you. I would now like to turn the call back over to Pat Beyer for any closing remarks.

Thanks, Josh. I want to thank everybody for joining us on our quarter 4 earnings call. We are -- we feel good about a strong quarter 4 for CONMED. We've had a solid 2025. We move into 2026 smarter, and with a strong conviction to deliver on our commitments to our shareholders and the patients we serve in 2025, 2026. Thank you very much.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Great. Thanks, everyone. Very happy to introduce our next session. I'm Robbie Marcus, med tech analyst at JPMorgan. We have Pat Beyer, CEO of CONMED. He's going to do a presentation followed by some Q&A. Pat?

Thanks, Robbie, and thank you for joining me here today to give me an opportunity to share with you the CONMED story. I've had my first year as a CEO at CONMED on day 13 as the CEO of CONMED last year, I got to present at JPMorgan. So I'm officially a veteran here on the second time I'm presenting. Forward-looking statements. Share with you the CONMED vision. This is something CONMED continues to line up and feels incredibly proud about. We empower health care providers worldwide to deliver exceptional outcomes to patients. And there's a focus behind this vision. And we've evolved it over time, but it hasn't changed for a number of years, and we stand behind people, both the team that CONMED has and the patients and providers we support, the products and the focus on innovative clinical solutions.

And we believe importantly that we should be a profitable organization for our shareholders going forward. As I share with you who CONMED is, I want you to look on the left-hand side here, there's balance where we think balance should exist. There is balance in our portfolio. About 58% of our portfolio is our general surgery business and 42% our Orthopedics business. There's balance in geography. 57% of our business comes from the United States, 43% comes from international. And there's focus where we would like focus. 86% of our portfolio and our sales comes from single-use products. It allows us for durable growth and stable growth when you have a portfolio like that.

On the right-hand side, we're sharing with you our midterm outlook of where we think our growth will come from. The bottom says we expect our growth to be in the 4% to 9% range in the midterm. Our General Surgery business will grow between 5% and 11% and Orthopedics between 4% and 8%. The majority of our growth is going to come from the 2 largest pieces of that pie. AirSeal and our direct smoke evacuation will be high single-digit to double-digit growth, and our Sports Medicine business will be mid-single digits to high single digits growth. We would call out that our BioBrace is in that portfolio there. The good news is our biggest pieces of our pie and our fastest pieces of our pie are also our most profitable and where our biggest margin profile is.

I would also tell you, our GI business is in that green segment there, which is other declining to flat. CONMED has a history of consistent delivering both on the top line as you see our revenue growth. We're going to finish this year between $1.365 billion and $1.372 billion and also on the bottom line adjusted EPS. So a history of consistent delivering I would call out, we're cognizant that we've had a couple of hiccups in recent years. We had the WMS issue with our warehouse in 2022. And in 2024, we missed guidance twice. And in 2025, we've spent a lot of time building back credibility, and there's been an incredible amount of focus on our foundation and on our future.

Who is the best CONMED today and what is the best CONMED going forward? I'm going to share with you our 3 high-growth platforms. And last year at JPMorgan, I talked about 4 high-growth platforms. These are our growth drivers. We rolled in our foot and ankle business into the platform of BioBrace because we really want to talk about platforms, not individual segments. And I'm going to share more about each one of these platforms right now. First of all, our AirSeal portfolio. It benefits clinically our patients by reducing the length of stay and reducing pain. Patients leave the hospital faster with less pain.

From a provider side, the hospital actually shorter length of stay is better for their economic returns. And for the clinicians, shorter length of stay is better for them, and they actually are able to operate faster with a stable pneumoparentum that they're able to operate on clinically. We also want to -- as we look at our AirSeal portfolio, 2 large markets there. The robotic market, which we know well of, and we've talked about the space there in the robotic portfolio and our partnership with Intuitive. We know that there's been some concern with the DV5, the recent Intuitive launch of their new robot. We have stated publicly that our attachment rate to the DV5 is between 10% and 20%, and that continues to hold.

The Xi attachment rate, which is their historical robot, we continue to be in the 35% range. But we're not just a robotic clinical insufflation company. We also believe there's an incredible opportunity to improve patient outcomes in the laparoscopy area. This is an area where approaching 3 million-plus procedures are done annually, and we have between 6% and 7% market share there. So another incredible growth opportunity for CONMED there. This is a clinical solution that has been to date used in over 8 million procedures annually. over 1 million patients a year leave the hospital after being treated with an AirSeal. We're in over 4,000 facilities around the world and in over 80 countries.

Our second growth driver is Buffalo Filter, and this is advanced smoke evacuation. We believe this market today is in the $300 million, $350 million range. We believe it is going to $1 billion. We know better today what's in the toxic smoke that comes in the operating room. We also know how to remove that smoke, and that's the benefit of clinical smoke evacuation. CONMED has a system that has unparalleled efficacy. We filter 99.9997% of the toxic molecules that come from smoke. Our tailwinds are going to come from 2 areas. The number -- the first area is legislation globally, both in the United States and in international markets around the world, we know the clinical benefit and the harm that can happen to caregivers treating patients.

Legislation is happening around the world. In the United States in 2025, the 20th state passed legislation, and that meant over 51% of the population in the United States is now covered by legislation. The second area that's driving smoke evacuation is the clinical validation. Over 3 million procedures happen annually. On average, between 3 and 4 caregivers are in an operating procedure at a time. That means 12 million caregivers annually are protected from using systems like Buffalo Filter. We have 2 differentiating factors in our system. First of all, is the filter I talked about, which is the filtration we have with Buffalo Filter and the 99% efficacy.

The other area is our new PlumeSafe X5 smoke evacuator. It's proven to be faster and easier to pull smoke away from the operating room side and from the surgical site. We feel good about the Buffalo Filter smoke evacuation system. And our third growth driver is BioBrace. In the world of sports medicine tissue repair, there's 2 dynamics that are critical for the tissue to repair itself. One is biologic interface integration and one is mechanical strength. BioBrace is the only FDA-approved technology that is approved for both areas. In the world of sports medicine, over 3.7 million procedures happen annually. And you see at the bottom here, the large 3 markets that we address are ACL, rotator cuff and Achilles.

As we look at BioBrace specifically, I mentioned to you that we're the only implant that's FDA cleared for both mechanical reinforcement and biooinductivity. BioBrace is actually approved for anywhere in the United States, soft tissue weakness exists. BioBrace to date has been used in over 70 procedures. In addition, for the broad indication, we've worked hard to make the procedure more reproducible. And in 2025, we launched our BioBrace RC, which is our new delivery device. This allows surgeons to operate faster, more reproducibly, and it allows a broader spectrum of surgeons to repair the rotator cuff with BioBrace. As you think about clinical validation, our BioBrace portfolio has 14 peer-reviewed publications. We're currently engaged in an RCT of 268 procedures.

We expect to finish enrollment in 2026, and we expect to have publication in 2027. Another very important item that happened in 2025 is the United States American Academy of Orthopedic Surgeons issued a guideline. They said, we recommend augmentation for rotator cuff repair. And it has made a significant improvement in surgeons in the United States moving towards accepting augmenting rotator cuffs. You're seeing on the right-hand side, if you remember the prior slide, failure in rotator cuffs and failure in ACL repair is in the 20% and 30%. Our published repair rates on the rotator cuff have been 94% and our published repair on the ACL has been 98.6%. So we feel good about our growth drivers, and we work hard to be -- we have a strong cash engine.

And we know that in 2022, we acquired BioBrace, and we acquired our In2Bones corporations that we bought in 2022. I mentioned last year at JPMorgan, one of our goals in an area that we had to address was the concern shareholders might have and investors might have around our leverage. And we had committed in 2025 to get that to below 3. And we achieved that 1 quarter early and achieved it at the end of quarter 3. So CONMED has financial strength and lowering leverage, durable cash flow. We also announced in 2025 that we were suspending the dividend, and we would be moving that back to share repurchasing. As we think about where are we investing our cash, it's in 2 areas. you would expect and want us to invest in organic innovation and ensuring we have our supply chain and our manufacturing appropriately managed and continuing to advance our commercial organization.

That's the organic side. On the inorganic side, we continue to look at opportunities that exist on the outside for new technologies and new companies in the clinical spaces where we're currently operating. In December of 2025, CONMED announced that we were exiting the GI business. We did it for the right strategic decisions about the company. It allowed us to focus on our growth drivers and the markets around laparoscopy and on Sports Medicine repair. But it created some moving pieces in a number of the analyst models. And so we decided this morning and we decided at JPMorgan to give preliminary guidance for 2026. And I'm going to start on the revenue side. We're guiding in 2026 with preliminary guidance on the top line of $1.345 billion to $1.375 billion.

And how do we back into that? We start with our organic constant currency revenue, $1.423 billion to $1.450 billion. We're guiding 4% to 6% top line growth. We then announced the GI divestiture, and that reduces that top line by $78 million to $82 million. We've got some tailwind of foreign currency FX of $0 million to $7 million, which is 50 basis point tailwind. That's how we get to our organic preliminary guidance. On the EPS side, we're guiding $4.25 to $4.45. How do we get to that? Same way. Our organic constant currency is from $4.93 to $5.08. Foreign currency is again a tailwind, $0.05 to $0.10. We announced that we were suspending the dividend and that we would use that $25 million for share repurchase. That's a $0.07 tailwind.

We then have organic without tariffs of $5.10 to $5.20. We then take the incremental tariff impact over 2025 and it's $0.35 to $0.30, which is organic without tariffs, $4.75 to $4.90. And then you add the impact of the GI divestitures, which is $0.50 to $0.45. So hopefully, that's glam. And hopefully, it brings some clarity as we're rolling into the end of January on the guidance, preliminary guidance CONMED sharing for 2026. We continue to be responsible on the ESG side and continue to be pragmatic here. This is the fourth year we'll be publishing a tears sheet. We've hired a dedicated headcount to manage this responsibly and continue to do the right thing here. So as we roll into 2026, I'm proud to share with you CONMED's driven to win, not just as an organization, but also as a leadership team.

We're focusing on leveraging our growth drivers. These are high-growth, high-margin products. We're focused on optimizing our portfolio and making portfolio review a way of life at CONMED, continuing to focus on optimizing it. We exited the GI business for the right reasons so that we could align resources strategically around minimally invasive surgery, smoke evacuation and orthopedic soft tissue repair. I talked about in 2025, focusing on the foundations, transforming our supply chain is one of those. I announced at the end of quarter 3 that we had made progress in our supply chain.

We'll announce in our quarter 4 earnings more information on that, but it continues to be a focus. And we will continue to drive supply chain transformation focused on resiliency, predictability, scalability and efficiency, and we'll continue to be focused on strengthening our balance sheet to enhance the ability to drive growth and provide shareholder returns. So with that, I'd like to close it. Thank you very much for your time. And Robbie, I will open it up to you to come ask some questions from me and Todd.

Great. Maybe we could start with the guidance for 2026. Fair to say you reaffirmed 2025. Is it fair to assume it's somewhere in the range of the guidance as we think about growth rates into 2026 and thinking about 2025 exit rates?

Right. Still -- I mean, this is business day 6 of the year, right? So we feel good about the guidance we gave for Q4. We did not provide any Q4 results with this. But as Pat said, we wanted to give a preliminary framework for '26 to make sure people were in the right place. And in a couple of weeks, we'll announce the full results of Q4 and all the typical granularity we give around the full year guidance.

We had updated our numbers for the fourth quarter announcement, and we'll talk about that in a second. But we were kind of at the lower end of your EPS range. So I'm happy to see the range a little above that. Can you walk us through sort of some of the puts and takes into the guidance? What gets better, what gets worse? What's a headwind to tailwind in 2026 that we should consider in the model?

Yes. The 2 big headwinds are, of course, the dilution that comes with the GI exit. And you'll notice, I'm sure you picked up that it's a little better a month later than we said a month ago, was slightly better. And then, of course, tariffs. The full impact of a full year of tariffs was between an incremental $0.30 to $0.35. And so those are the 2 big headwinds that keep our EPS a little lower than last year. as Pat walked through, if you take those 2 big pieces out, the organic business is very strong. So even at that mid-single-digit revenue growth rate, our margin tailwind is real. We've been talking about that for a number of years.

That continues to offset the macro challenges that we're getting, especially this year from tariffs. And so we did think you weren't alone, Robbie, and that we could see that '26 was looking a little better than people were translating. And so that was one of the reasons to kind of get everybody in the right framework heading into Q4 earnings in a couple of weeks.

Maybe we could talk about the gastroenterology product line exit. What drove that? And are there any offsets you can see in the near term to help replace that earnings power?

Two things. So what drove it? Hopefully, I framed that in the presentation. Our strategic review highlighted to us a couple of things. Number one, our growth drivers really were our growth drivers, AirSeal, Buffalo Filter and BioBrace, and number one. Number two, for a company our size, we were probably in too many spaces. And so to be able to focus on our growth drivers, it made sense to exit the GI. So to replace what we lost in GI won't happen in 1 year, but the ability to invest in high-margin, fast-growing categories like AirSeal, Buffalo Filter and BioBrace, over time, we will make that up.

Are there any other distribution agreements in the business that we should be aware of that might come under strategic review? Or maybe said another way, are there any other assets you don't have full ownership of at CONMED?

Boy, at any time we have -- we distribute products, and we don't have full ownership, but they're not of the magnitude that was in the GI business. That was an outlier for us.

Okay. That was the largest by far.

Yes.

Great. And maybe as you think about the portfolio optimization, right, what are some of the key things? Is it -- you're in a lot of businesses. So when you think about is it just -- does this make strategic sense for us? Does it make financial sense to us? Are there certain minimum return thresholds that will trigger in or out of the business? Maybe just walk us through the reasons behind the strategic review and some of the preliminary findings along the way and how you're thinking about forward findings moving forward?

Sure. Again, so I've been at CONMED 10 years, going on 11. First year as CEO, I wanted to pause and reflect on where -- what businesses were we in, what businesses should we stay in. And the strategic review heightened where we make money, where our highest return businesses were, where our biggest growth opportunities were. And so our focus today and our strategic decisions are around where are our categories and where are our segments where we can have segment leadership, high ROIC, high-margin, high-growth opportunities. And that's really what we're driving at. And the space around soft tissue repair in the sports medicine world and laparoscopy are the 2 areas where we're driving at with the smoke evacuation right now.

So as you're coming out of 2025, there were some supply issues in the lower extremity business, and that business was progressively getting better each quarter. Where do you stand with that now? And how do you feel about that business going into 2026?

Yes. At the end of quarter 3, and I'm going to stay on what we disclosed at the end of quarter 3, we made progress in our supply chain challenges. We -- our orthopedic business grew in the low 4s in quarter 3. This is a segment that's growing between 5% and 7%. So we were behind the market. We know that, but we have made progress there. And I think what you can expect is for us to continue to make progress on the supply chain challenges we had and continue in 2026 to move into more offense on that. I would also just comment, BioBrace did not have the supply chain challenges. So as you think about the sports medicine side, while our sales professionals weren't able to go on offense on many of the sports medicine products, they were still in taking care of surgeons and treating patients with BioBrace.

And so they're front and center solving clinical issues for the surgeon for when we are back on offense to rebuild that credibility.

Did that help with relationships? Obviously, if you're unable to fill the whole order, you generally lose the sale. But if you're still selling into the accounts on certain things, did that BioBrace help you retain accounts and sales better than without it?

It did. Yes, exactly right.

Maybe we talk on BioBrace. This is something CONMED has been talking about for a number of years. Now the doc feedback continues to be really positive. Where are we in terms of a run rate of this business? And when do we start to see a hockey stick of sales growth here?

Right? I think you were getting some published data pretty soon in '26, and that can help a good amount. We've had a lot of independent doc publications. I see at AAOS each year. So the feedback is great, but I feel like this should be a much bigger product in the future. How do you get it there?

Well, when we bought BioBrace in August of 2022, we said 2 critical pieces were going to be needed to expand sales. One was the instrument to make the procedure easier, and we launched that in July of 2025, BioBrace RC. The next one was clinical data, and that's our 268-patient RCT that will finish in 2026 and publish in 2027. But Robbie, I think the way that you will see that play out in absolute dollars and go, wow, it's making an impact is our sports medicine growth that you'll see because we don't publish the results of BioBrace as a stand-alone. But as you see the sports medicine portfolio get bigger and grow faster, know that, that's an engine that's driving that.

Is that something we can see immediately in '27 upon publication?

Well, I think that will play a result. But I would also say clinical data is coming in 3 ways. Surgeons get clinical data by treating a patient, watching that patient perform after 6 months, after a year, and then they're seeing a benefit. So every surgeon validates clinical efficacy on their own. They also get clinical efficacy through societies, the American Academy of Orthopedic Surgeons saying, we recommend augmentation really helps on the clinical validation of that. I think the data that we will publish in 2027 will differentiate CONMED from the market tremendously.

AirSeal.

AirSeal gets a lot of attention. It's a great product. It has a very high attach rate and usage with surgical robotics with the older generation. The new surgical robot has an integrated insufflator and probably a lower utilization rate going forward. How are you thinking about AirSeal's growth over time? And how long can it be a growth asset for? Because despite all the investor rumblings, it's still a growth asset for CONMED and growing nicely above corporate average with good margins. So -- how long do you think that can continue for? And how is it performing versus your expectations?

Robbie, you said it well. Again, we think AirSeal is a high single-digit, low double-digit grower. The attachment rate of DV5 is between 10% and 20%. The attachment rate of Xi is between 35% and 40%, and we see the opportunity in laparoscopy. I also

think the opportunity in AirSeal is 1 million procedures a year, what other areas and what other technology and what other shine can come from that, that helps us get other products sold into that space. That's one of the leverage points about having a growth platform that we can build off of.

My understanding is the vast majority of sales come from surgical robotics right now. What do you have to do to move into laparoscopic surgery? And what stage are you in right now?

Yes. We would say about 60% of our sales are robotic, 40% is laparoscopy. Nothing drives action like necessity. And so in the United States, the necessity of the DV5 is challenging our sales professional to drive harder in laparoscopy. And we're beginning to make more headways in the United States. We know we've been successful internationally for a number of years in that.

Is there a big delta in growth rate if I look at 2025, let's say, year-to-date, has laparoscopic been growing faster than surgical?

Yes. So the issue is we sell SKUs to hospitals, and they can use them in either laparoscopic or robotic. So we don't actually get a report that tells us where they were used. So the best we have is estimates from our sales force who's close to the customer. So it's hard to track that granularly, quarterly. But what we can say is laparoscopic has grown faster than robotics simply from the fact that when we bought this company in 2016, it was all U.S. revenue and it was all robotic. It was all attached to robotics. And so if we're right that about 60% today is attached to robotics, by definition, that means the laparoscopic mix has grown faster than the robotic mix over that time period.

So we know that, that's where the big opportunity is. And as Pat said in his presentation, we estimate we're only about 6% to 7% penetrated there. And so that's a huge opportunity. All the benefits are the same. The financial benefits are the same. clinical benefits are the same. And so we just need to develop those muscles in the U.S. that our OUS folks have demonstrated to be very successful at selling into that channel. And that is happening, as Pat said. The U.S. team is getting more adept at making those sales into that channel.

Do you think it's just been a priority or focus issue? I mean it's been much easier to just sell into the surgical robotic channel and that was doing so well. Is that the reason?

Pat said nothing drives behavior like necessity, right? And when you -- that business, it was very intelligent for SurgiQuest was the name of the company we bought in 2016. They had a premium device that was twice as expensive as the competition. They made the strategic decision that we're going to run behind a $2 million robot and say, "Hey, customer, you just paid $2 million to have better procedures. Here's a $30,000 box that will improve all of those procedures. And so that was a very happy place to live for a sales rep for a long time. It still is. There's still a lot of opportunity there. It's still a very good place to be. And those robotic procedures need AirSeal.

And so we are still very much attached to and invested in and connected to that space. But as that attachment rate goes from 35% to 40%, as Pat said, down to 10 to 20 sales reps don't want to make less money. We don't want to sell less product. And so it drives us to this other part of the opportunity where we have under -- where we've spent not enough time leading up until now.

Maybe if we touch on your third priority growth driver with Buffalo Filter. In the past, you've talked about $300 million opportunity going to $2 billion, I believe, opportunity. That's a pretty big jump. So maybe walk us through how you get from point A to point B.

Yes. You would have noticed, Rob, we're learning fast in this market. We would say it's $1 billion plus now, not $2 billion. 51% -- and we're pretty close on the $300 million, $350 million today. 20 states in the U.S. have legislation and 51% of the population. Internationally, Canada, Nordic and Australia have legislation for the most part. So we think just purely mathematically as other countries take off legislation and hospital systems embrace improving the care of their caregivers, that market will move from $350 million to $1 billion pretty smoothly.

How split is this between U.S. and outside U.S.

I think it probably mirrors what our revenue. I think this -- CONMED is a pretty balanced smoke evacuation globally.

Okay.

There has been a lot of movement, particularly in the U.S. with legislation. I know it can often take up to 2, 3 years for that once legislation, the light switch goes on, they have a long time to start complying with it. Where are we in terms of those 20-something states? And how many do you think are fully compliant as of now? And how much more is there to go over the '26, '27, '28?

Well, I don't think any are 100% compliant. It happens in various measures. We have seen between 3 and 4 states roll every year. We don't think it's going to go from 20 to 50 in 2 years. We think it's going to go slowly like that and expect to move it. The big states, Texas, California, Florida, that's where it might go from 20 states to 23, but the population will go from 51 to 70. And so that's what we need. We need the big states move it.

This is a market you have the branded and you have the OEM business. The OEM business has been lagging the branded business for some time now. Do you think that can pick up? And part B, any threats from competition you're seeing in the smoke evacuation market?

Robbie, fair question. Again, I think our -- and we call out in our pie chart our direct smoke evacuation business with our AirSeal business. is high single digits, double digits. And so we're really focused on that. We have a number of vendors who value our clinical portfolio, and we OEM it to them, and we partner with them. At the same time, our focus is supporting our sales professionals and the direct business going forward. And we'll probably see that OEM business slowly go away over time.

As you think about cash flow and your capital allocation priorities, your leverage has come down over time. You eliminated the dividend and that, quite honestly, puts you in line with most of your peers in medical devices. You were standout with the dividend there. How are you thinking about your capital allocation priorities and where most of the cash will go over the coming years?

Yes, there's been no change, although we did change the dividend policy, of course, there's been no change to our capital allocation priorities. We're well aware that all successful med tech companies have grown through both organic and inorganic activities. And so we have continued to keep our eyes open and ears open to compelling assets that are out there that would improve the portfolio, the long-term strength of the portfolio. Our filters have not changed. They are accretive to revenue growth with some durability, either patent protection or know-how or something that makes that durable, needs to be accretive to gross margins, maybe not on day 1, but a clear line of sight to accretive from a margin perspective.

And then it has to be at a value -- you can't give all the value to the seller. There has to be value for the CONMED shareholder. So those filters haven't changed. They don't -- those filters are the same when our leverage was over 5. They're the same when our leverage is below 3. The filters don't change with leverage. So we will continue to look for compelling assets. In the meantime, we do expect to drive leverage down. And now we have the benefit of -- the Board has approved a new share repurchase program, which we're excited about. Now that leverage is at a manageable level defined by the market, we would like to be opportunistic and be buyers of our stock at this level. But of course, that's a balance, right? We don't really want our leverage to go up.

And so thankfully, we have a great cash engine. And so we'll have those choices. And anyway, so there's been no change in how we see capital allocation.

Maybe I can end asking on optimizing the portfolio. And we saw an exit a subtraction in December. The first few years I followed CONMED, there were lots of additions and then there was a pause in between. Do you think we're going to see more additions or more subtractions in 2026?

I wouldn't put a window on 1 year. I would say we're a growth company. We're driven to grow and driven to win. And so you will see more additions than subtractions going forward by nature of we're going to grow and the markets and the portfolios we're in are growth the categories and the segments we're in are growing, and we have a great opportunity to add to them as opposed to subtracting.

And maybe just to clarify on the share repurchase, there's already some built into 2026 guidance. I think it's $0.07. Do you think there's potential room, let's say, M&A doesn't present itself in 2026? Is there additional room if shares remain attractive to you to go above and beyond the $0.07?

For sure. I'm super glad you asked that question. The $0.07 that's included and called out in the guidance is literally the numeric impact from -- we've been spending about $25 million in a dividend. So that is putting that $25 million into share. That's where the $0.07 comes from. It's just the $25 million. So it doesn't -- you can't back into how much we're planning on spending the whole year. That is simply what happens to EPS by instead of putting money in the dividend, putting it into share repurchase.

So let's think of that as an absolute minimum of share repurchase in 2026, it could be well above that.

That's correct.

Great. Well, I don't think we have time for another question. Thanks for a great discussion. Thanks, everybody, for joining us.

Thanks, everybody.

Thank you, everybody.

Thank you for standing by. Welcome to CONMED's Third Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] 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 risks 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 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 non-GAAP or adjusted measurements during this discussion. While these figures are not a substitute for GAAP measures, 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 Pat Beyer, President and Chief Executive Officer, for opening remarks. Mr. Beyer?

Thank you, operator. Good afternoon, and thank you for joining us for CONMED's Third Quarter 2025 Earnings Call. With me today is Todd Garner, our Executive Vice President and Chief Financial Officer. I'll begin with a review of our performance in the quarter. Todd will then walk through our financial results and guidance in more detail. We will then open the call to your questions.

Before I dive into the quarter, I want to take a moment to recognize the continued dedication of our global team. Their commitment to our mission, empowering health care providers worldwide to deliver exceptional outcomes for patients is what drives our performance and enables us to navigate change with confidence.

Turning to our third quarter results. Total sales were approximately $338 million. This represents 6.7% growth year-over-year as reported and 6.3% growth in constant currency. Performance was led by general surgery, which grew 6.9% globally on a constant currency basis and orthopedics, which delivered 5.3% constant currency growth globally.

From an earnings perspective, adjusted net income for the quarter was $33.4 million, up 2.2% year-over-year, excluding special items that affected comparability. Adjusted diluted earnings per share came in at $1.08, an increase of 2.9% compared to the prior year quarter.

Let me now turn to the platforms that continue to anchor our growth strategy and deliver differentiated durable performance across the business. I'll begin with BioBrace and Foot and Ankle, 2 foundational growth drivers within our orthopedics portfolio.

BioBrace continues to be a cornerstone of our sports medicine strategy. Quarter 3 growth was driven by expanding clinical adoption and strong surgeon engagement. BioBrace is now used across 70-plus distinct procedures from rotator cuff and ACL repairs to Achilles and gluteus medius reconstructions, underscoring its versatility and clinical relevance.

Turning to our Foot and Ankle franchise. We see continued opportunity in this clinical area and will remain focused on driving growth and delivering strong economic returns through expanded adoption and portfolio innovation.

Shifting to our general surgery portfolio, I want to highlight 2 platforms that continue to demonstrate strong performance and long-term potential, Buffalo Filter and AirSeal. Starting with Buffalo Filter, we're seeing sustained momentum driven by expanding legislative mandates, heightened awareness of surgical smoke risks and deeper integration to hospital protocols.

Moving to AirSeal. This platform remains a foundational pillar of our general surgery portfolio. The clinical benefits, reduced postoperative pain, shorter length of stay and improved outcomes are well established and continue to resonate with surgeons.

As DV5 adoption expands in the U.S., we continue to see AirSeal attachment rates within our range of expectations. We're also closely monitoring the potential redeployment of Xi system trade-ins into international markets and into United States ASCs. While still early, we view this as a promising opportunity to accelerate AirSeal growth globally, particularly in regions where Xi placements are increasing and AirSeal's clinical advantages are well understood.

Stepping back, one of my first priorities, as CEO after more than a decade with CONMED, was to initiate a comprehensive strategic review of our portfolio and operations. To support this effort, we engaged top-tier consultants to bring a fresh perspective on where we are today, where our greatest opportunities lie and how we can deliver the strongest long-term returns for shareholders.

While the review is still underway, I want to share some early insights. Our evaluation has been detailed and rigorous, assessing each product offering through the lens of long-term return on invested capital. The objective is clear: sharpen our focus, improve our margin profile and position CONMED for durable long-term growth.

For a company of our size, CONMED has a diverse set of product lines. Early findings confirm that our strongest growth opportunities lie in our core markets, minimally invasive robotic and laparoscopic surgery, smoke evacuation and the surgical treatment of orthopedic soft tissue repair. We are positioned to capitalize on these opportunities through a portfolio of best-in-class clinical solutions, including AirSeal, Buffalo Filter and BioBrace, which is gaining momentum through its expanding application within Foot and Ankle procedures.

These platforms will be the cornerstone of our future investments in growth and profitability, enabling CONMED to drive superior clinical outcomes for patients while delivering meaningful improvements in health care economics.

As part of our evolving capital allocation framework, we are transitioning the cash return to shareholders from our legacy dividend policy to prioritize share repurchases. The Board has authorized a new $150 million share repurchase program. Historically, we have returned approximately $25 million annually through dividends. Today, we are suspending the dividend, and you should expect at least $25 million of share repurchases annually going forward. This change enhances our financial flexibility and supports disciplined capital deployment aligned with long-term shareholder value creation.

In conclusion, we remain confident in our ability to deliver both top line growth and margin expansion, supported by a focused portfolio, operational discipline and a commitment to innovation.

With that, I'll turn the call over to Todd, who will provide a more detailed analysis of our quarter 3 financial performance and discuss our 2025 financial guidance. Todd?

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 third quarter of 2025, total sales increased 6.3% year-over-year. The quarter included one extra selling day, which we estimate contributed between 100 and 150 basis points to growth.

For Q3, our sales in the U.S. increased 5.9% versus the prior year quarter, and our international sales grew 6.8%. Total worldwide orthopedic sales grew 5.3% in the third quarter. In the U.S., orthopedic sales increased 5.5% and internationally, orthopedic sales increased 5.2%.

Total worldwide general surgery sales increased 6.9% in the quarter. U.S. general surgery sales grew 6.0%, while internationally general surgery sales increased 9.2%.

Now let's move to the expense side of the income statement. We will discuss expenses and profitability in the third quarter, excluding special items, which are detailed in our press release.

Adjusted gross margin for the third quarter was 56.1%, which was ahead of our projection due to positive sales mix. As a reminder, the Q3 results reflect the expenses that went into inventory in Q1 when our manufacturing variances were high. This drove a 40 basis point decline in gross margin compared to Q3 of 2024, including 20 basis points of headwind from new tariffs.

Research and development expense for the third quarter was 4.1% of sales, 20 basis points lower than the prior year quarter.

Third quarter adjusted SG&A expenses were 37.3% of sales, 10 basis points higher than the prior year. On an adjusted basis, interest expense was $6.3 million in the third quarter. The adjusted effective tax rate in Q3 was 25.5%.

Third quarter GAAP net income was $2.9 million compared to $49.0 million in 2024. GAAP earnings per diluted share were $0.09 this quarter compared to $1.57 a year ago. Excluding the impact of special items discussed earlier, in the third quarter, we reported adjusted net income of $33.4 million, an increase of 2.1% compared to the third quarter of 2024. Our Q3 adjusted diluted net earnings per share were $1.08, an increase of 2.9% compared to the prior year quarter.

Turning to the balance sheet. Our cash balance at September 30 was $38.9 million compared to $33.9 million at June 30. Accounts receivable days as of September 30 were 60 days, down from 62 days at the end of Q2. Inventory days at September 30 were 191, down from 212 days at the end of June.

Long-term debt at the end of the quarter was $853.0 million versus $881.1 million as of June 30. Our leverage ratio stood at 3.0x as of September 30, reaching that milestone slightly ahead of expectations for the year, which, as Pat explained, provides us additional flexibility to return cash to shareholders through share repurchases.

Cash flow provided from operations in the quarter was $53.7 million compared to $51.2 million in the third quarter of 2024. Capital expenditures in the third quarter were $5.2 million compared to $3.4 million a year ago.

Now let's turn to financial guidance. Let's start with revenue. We're guiding Q4 revenue to be between $363 million and $370 million, which represents mid-single-digit constant currency growth for the total company with about 100 basis points of tailwind from currency. That would put the full year 2025 reported revenue guidance at a range of $1.365 billion to $1.372 billion, which is a narrowing from the prior range. FX is still projected to be essentially neutral for the full year 2025. We continue to project adjusted gross margin in Q4 to be in the mid-55% range, inclusive of about 150 basis points of headwind from the new tariffs in 2025.

Turning to adjusted EPS. We expect Q4 to be between $1.30 and $1.35, which would put the full year guidance at a range of $4.48 to $4.53 compared to the prior guidance range of $4.40 to $4.55. So far, 2025 has been a year of solid execution amid meaningful strategic transformation work. As Pat mentioned, our portfolio review is ongoing, and we're already seeing early benefits from a more focused approach. We believe the work done in 2025 positions CONMED to be a stronger, more profitable company over the long term.

With that, we'd like to open the call to your questions.

[Operator Instructions] Our first question comes from the line of Robbie Marcus of JPMorgan.

This is actually Lily on for Robbie. Maybe I'll start with one on capital allocation and suspending the dividend. Can you talk a bit more about what drove that shift in capital allocation strategy? And should we be expecting any other changes to your thinking and strategy on M&A or debt pay down?

Great question, Lily. Thank you. No other changes. You should not expect any other changes. We worked with our banking partners. We looked at our peer set, med device companies our size. We're one of the very few to pay a dividend. I -- maybe one of the more common questions I get these days is with the stock where it is, why the company is not buyers of our own stock. I've answered over the last couple of years that we feel like we've had to prioritize getting leverage down. And when I've given that answer, I think investors have almost unanimously in agreement with those priorities.

Now that we've reached the 3.0 mark, which has been kind of the target, we've reached it a little sooner than we thought. We thought now would be a good time to make that exchange and fit in more with the peer set and what's expected in our market and in our size and return cash to shareholders through share repurchases instead of dividends.

Great. That's helpful. And then I was hoping to get some early thoughts on 2026. I know you're not guiding yet, but there's some moving pieces here. So can you talk about how you're thinking about supply and your ability to fully meet demand next year? And any other important headwinds or tailwinds to be keeping in mind?

I certainly appreciate the attempt, and I know all of our interest is quickly moving to 2026. We're going to guide 2026 at the appropriate time when the year starts. So we're not going to get into that, and I don't have anything to call out for you at this time.

Our next question comes from the line of Matt O'Brien of Piper Sandler.

This is Anna on for Matt. So I guess I just want to ask one on tariffs. If there was any incremental tariff headwind versus what you expected before. In the press release, you commented on $0.09 in the back half in Q2, and now you're expecting $0.07 in Q4. So did this become a larger headwind sort of incrementally? Or what's the thought process there?

Great question, Anna. Thank you for that question to make sure we're clear. So this has been consistent. So we started seeing -- a couple of quarters ago, we forecasted that Q3 would be about $0.02 and Q4 would be about $0.07. The reason we have been so accurate with that is because tariffs go into our manufacturing variances, which travel with inventory and then get released in the external P&L with that revenue, which for us is about a 6-month deferral. So the tariffs you're seeing hit the P&L in the back half of '25 are actually the tariffs from calendar Q1 and Q2 of '25. And so that has been consistent with how we projected it. So Q2 of 2025 was $0.07, and that's what's being recognized in Q4 of 2025.

Great. That's super helpful. And then I believe DV5's manufacturer on their quarterly call mentioned a 90% utilization rate of their insufflator in the quarter. So in your view, what keeps that from going to 100%? And then where does AirSeal fit into the picture there?

Good question. This is Pat here. If you remember last quarter, we guided that our -- what we're seeing is between 80% and 90% of procedure rates with DV5's happening. And what we're seeing is the clinical benefits of AirSeal, I would remind you, those are shorter length of stay, reduction of pain are equally applicable to DV5 that were in Xi. And what we're seeing is the early adoption with AirSeal with DV5 is limited because of the commitment that hospitals have to have to do a set number of procedures with DV5.

And what we're seeing with the total volume of DV5s in the market, it's nearly 90%. But what we're able to see is those hospitals that have DV5s and are after the commitment volume that they have to do, it's in that range of 80% to 90%. So it ties to what we were saying before. And I would also just say we're learning every day on that. What is steadfast is when clinicians use AirSeal with DV5, they're getting an enhanced clinical benefit for their patients.

Our next question comes from the line of Vik Chopra of Wells Fargo.

Congrats on a nice quarter. A couple for me. So maybe one just on AirSeal. I mean, I think you talked in your comments about Xi systems being put into international markets and into the ASCs. I'm just curious how you're thinking about the adoption rate in ASCs in the U.S. and how you're thinking about international markets? And then I had a follow-up, please.

Yes. Vik, as I think about Xis, we know that Xis have to have an external insufflator. We know that Xis have a history of benefiting from the clinical benefits of AirSeal. We know that when -- if an Xi is placed in an ASC, shorter length of stay really matters. And so that benefit of AirSeal, which delivers reduction of pain, shorter length of stay will play out, we believe, in the ASCs, and it will also play out in the international markets in which we're seeing right now.

Got it. That's super helpful. And I'm just curious, if you can elaborate on the specific initiatives that strengthened your supply chain in the third quarter and how you intend to either maintain or enhance these improvements through 2026?

Vik, we started talking about it at the end of last year that we had to improve our supply chain, specifically in our orthopedic world. We commented in quarter 1, we had an outside consultant come in and help us. We've made progress in quarter 1. We made progress in quarter 2. In quarter 3, we had record manufacturing volumes for our orthopedic products. And also, we had a record reduction in the critical SKUs associated to getting our orthopedics business back on offense. I would characterize it as we made progress. We're not there yet. We expect to make continued progress in quarter 4. And the key things we're working on are systems and enhancements to our procurement, our planning and our production area.

Our next question comes from the line of Young Li of Jefferies.

I was wondering if you can maybe kind of give on sort of the U.S. AirSeal non-robotic laparoscopic opportunity, if you guys have been making any headways in that channel? And then also maybe a similar question just for U.S. now Intuitive robotic attachments, Hugo, CMR, like Asian. I'm just wondering how is the attachment rate for those categories?

Vik, good question. I'll try to take it in 2 parts, and I think I heard your question. Number one, AirSeal attachment internationally on the robots that are internationally that are not DV5. There was a recent meeting in Strasbourg, France, that was the Global Society of Robotic Surgery. There are a number of robotic systems that are coming into the market. It leads us to believe there's a future for robotic surgery outside of DV5 and outside of Intuitive, and that also salutes the work that Intuitive has done in pioneering the clinical benefits of robotic surgery.

DV5, as you know, has to have and -- it has an integrated insufflator. The robotic systems that aren't DV5 have to have an insufflator that attaches to it. In the international space, we're seeing AirSeal where the clinical benefits are well known. Again, I would remind you, shorter length of stay, reduction in pain are also being used in the non-DV5 robots.

We also -- I would pivot to your other question on the United States. We continue to see a strong opportunity in the laparoscopic area, the non-robotic procedures. Again, we commented, I think, last quarter, there's over 2 million procedures that are done laparoscopically. There are longer cases that are done also laparoscopically, where the clinical benefit of AirSeal is being used. And we're seeing more and more of a benefit and a drive from our United States commercial teams into that area. Sorry about that. I said Vik, sorry about that, Young.

No worries. It's an honor to be confused for Vik.

I'll make it up to you in London.

Okay. Yes. Looking forward to seeing you there. Just a follow-up, I guess, just on the orthopedic side, I guess, kind of two-parter. Just maybe following up on ortho supply questions. Can you maybe comment a little bit about your latest thoughts on share loss and your [ ability ] to recapture share once these supply chain issues are resolved hopefully by year-end or early next year?

And then on BioBrace, I think you said 70-plus procedures. That's a pretty big jump. I think last quarter, you called out 52. What triggered such a big jump type of procedures and where that can go?

Young, 2 things. So I would -- again, it's two-parts. It's a little bit hard to hear you at the beginning. Again, playing on the number of procedures. The beauty of BioBrace is it has a clinical indication where tissue weakness exists, it's approved to be used, and it has the clinical benefit of strength and healing, which allows for surgeons to continue to expand and use it in extended indications where they haven't been normally able to use it with other products on the market. And that's just the expansion from the 50s to the 60s to 70s is just a natural evolution of time where surgeons continue to see clinical application for it.

With respect to the orthopedic sales force taking market share and getting back on offense, I would just continue to say our customers, although they're not using a number of our products because they're not available for them to use, doesn't mean our sales professionals aren't in those cases, supporting other products that are available for them. And our sales professionals are doing a great job continuing to sell what they can sell and support clinical cases. But I would also tell you, our expectation is not the moment we get off of back order that we again to immediately start taking more market share. We believe it will be a transactional period of time where it will take a quarter or 2 for those customers to again open their eyes to our sales force and the opportunity for them to use CONMED products.

Our next question comes from the line of Travis Steed of BofA Securities.

This is Gracia on for Travis. My first question, I just wanted to ask a little bit on the capital environment and what you're seeing this quarter in those trends and then how you expect them to sort of progress over the next 12 months here?

Pat here. We're not -- again, we're seeing a healthy capital market. We're not seeing a capital slowdown. We're seeing hospitals continue to invest in capital equipment that improves patient outcomes and improves volume throughput through the operating room, which is the space we operate in, which is surgical procedures. And I think what we're seeing going into next year also as interest rates come down, a continued flow of that.

Great. And then maybe just one follow-up on margins. I know you guided more flat for margins in '25 and $20 million of annual savings from the operational improvements. How do you think this supports margin expansion and maybe the next year as well and puts and takes to consider in SG&A and R&D, just thinking looking forward?

Yes. Thanks, Gracia. Did I get that name right?

Yes, that's correct.

Okay. So we're going to talk about '26 in '26. But you're right, we have been making improvements, as Pat said. We have communicated that we expect to save tens of millions of dollars overall. Of course, there's things that work against that, right? The new tariffs, of course, are going to be worked against that. But we will give 2026 guidance when we do our Q4 call.

Our next question come from the line of Mike Matson of Needham & Company.

This is Joseph on for Mike. Maybe just on orthopedics. I saw that it looks like improved growth in the U.S. and internationally. So I just want to see if you can maybe just give more color on that improvement in the quarter. What are you seeing there? And what were the major drivers in the quarter?

Joseph, good question. Again, I'd call out 2 things. BioBrace continues to do well. BioBrace is a great growth platform, not just in our Sports Medicine portfolio, but also in our Foot and Ankle portfolio, and it's doing great things for us. That also combined with improving reduction in back order and improving service levels on the operations side are allowing us to take some incremental steps forward in growth. But I would again just call out, we're not declaring victory there on the operations front and continue to expect progress in quarter 4.

Okay. And then I guess just a quick follow-up. Really appreciate all the color you gave on the backlog and the improvement there. But I'm just wondering if there's a way that you can kind of plot this out time line-wise, maybe what inning of the improvement are we in? Yes, that would be helpful.

Well, I'm going to -- hopefully, this isn't the World Series game that went to the 18th innings last couple. You know what, we're in the second half of the game. I'm not sure if we're in the sixth, seventh or eighth, but we're certainly in the fifth, sixth, seventh. So we're in the second half. I don't want to declare victory. There's more innings to play here. I feel good about our progress. I feel good about our commitment. I feel great about our learnings. It's now just time. And we know supply chain can take quarters as vendors turn on and make progress. And it doesn't happen overnight, but I feel good about our progress there.

I would now like to turn the conference back to Pat Beyer for closing remarks. Sir?

Thank you. I just -- I want to thank everybody for joining us for our quarter 3 earnings call. We look forward to a great fourth quarter and look forward to updating you on 2026 in January. Thank you.

This concludes today's conference call. Thank you for participating, and you may now disconnect.

Good day, and thank you for standing by. Welcome to CONMED's Second Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] 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 risks 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 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 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?

Thank you, Latif. Good afternoon, and thank you for joining us for CONMED's Second Quarter 2025 Earnings Call. With me on the call is Todd Garner, 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 $342.3 million, 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 $35.6 million 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 4 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 of these topics, starting with our 4 key growth drivers: AirSeal, Buffalo Filter, BioBrace and Foot & Ankle.

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 DV5 in the marketplace, we are seeing AirSeal being used in 10% to 20% of DV5 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 AirSeal use in non-robotic procedures can grow between 10% to 15% annually over the next 5 years. If we apply those rates to the sell-side consensus of what the mix between DV5 and Xi will be over the next 5 years, we project AirSeal 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 procedures, continued Xi placements and growing adoption in laparoscopy will provide durable, healthy growth in this differentiated product line.

Turning to Buffalo Filter. Quarter 2 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 U.S. 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 19th state to enact such laws, with implementation required by January 1, 2026. Globally, we continue to see geographies around the world also enact legislation. We estimate the global smoke evacuation market is approximately $300 million today with line of sight to $2 billion over the next several years. We also continue to drive innovation in this market. In the first half of 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 2 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. But 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 align squarely with that trend.

Our Foot & 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 3 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 million 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 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 3.0 by the end of 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 2 financial performance and discuss our 2025 financial guidance as well as quantifying our latest thinking on tariffs. Todd?

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 second quarter of 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&A expenses were 37.1% of sales, 20 basis points higher than the prior year.

On an adjusted basis, interest expense was $6.4 million in the second quarter. The adjusted effective tax rate in Q2 was 24.8%. Second quarter GAAP net income was $21.4 million compared to $30.0 million 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 $35.6 million, an increase of 16.4% compared to the second quarter of 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 $33.9 million compared to $35.5 million at March 31. Accounts receivable days as of June 30 were 62 days, no change from the end of Q1. Inventory days at June 30 were 212, which is 10 days lower than at March 31. Long-term debt at the end of the quarter was $881.1 million compared to $891.4 million 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 $29.1 million compared to $43.3 million in the second quarter of 2024. Capital expenditures in the second quarter were $5.7 million compared to $3.6 million 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 billion to $1.378 billion, which is a narrowing from the prior range of $1.350 billion to $1.378 billion. FX is now projected to be essentially neutral for the full year 2025. We expect Q3 reported revenue to be between $330 million and $337 million, 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 6 months of the year behind us and our cost of goods sold being deferred with inventory for 6 months, we now know the tariff impact on 2025, which is $0.02 in Q3 and $0.07 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-56% 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 $4.40, 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 $0.09, resulting in reported adjusted EPS between $4.40 and $4.55, which is $0.09 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 overperforming 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.

Our first question comes from the line of Mike Matson of Needham & Company.

This is Joseph on for Mike. Maybe just starting with Buffalo Filter, was just wondering if you guys have seen any increased competition or pressure in the market just given all the legislative tailwinds. Have you seen any large players out there?

Joseph, we have not seen any new players other than the ones we continue to compete with. The market continues to grow, we announced the 19th state in the United States just passed legislation, North Carolina, but the competition remains the same.

Okay, that's helpful. And then I guess, maybe just a concern, I guess, around where your capacity is at, supply chain restraints, where is that kind of going together with sales force expansion? I know you guys usually talk about sales force expansion maybe around the beginning of the year. I'm not sure if you guys have talked about it in 2025 yet, so I was just kind of curious your view on that.

Let me have both questions. Let's start with the -- getting our supply chain fixed and back on offense there. We're making progress. We've made progress in the first half. Again, we're focused on planning, production and procurement. We are finished quarter 2 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 sales force. 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, be that the geography has the opportunity to do them. And we will continue to add sales professionals as our business grows.

Our next question comes from the line Robbie Marcus of JPMorgan.

This is Lily on for Robbie. 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?

Good question. Let me start with we're not seeing, in general, a 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 3 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 our 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.

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 so how would you characterize your share position evolving over the last few months?

Well, from a pure number standpoint, 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.

Our next question comes from the line of Matthew O'Brien of Piper Sandler.

This is [ Anna ] on for Matt. I just wanted to ask on the guide here. You guys beat on revenues but are only raising the bottom end of the guide, especially when considering FX improvements. Could you just help us understand the perspective maybe on the next 2 quarters as it relates to the top line?

Yes. Thanks, [ Anna ]. We've delivered the first half pretty much in line with what we thought. And as we look at the back half, our guidance today shows a little bit, 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 kind of 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 brought the bottom end up, kept the top end the same, and that's how we're going to move into the back half.

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?

Yes. If you look at the $0.09 raise from what we said a quarter ago, about $0.03 is from FX, about $0.03 is from tariffs and about $0.03 is from performance and operations. And so it's kind of all 3 of those add up to $0.09.

Our next question comes from the line of Young Li of Jefferies.

I guess to start, maybe just on the new AirSeal disclosures. Wondering if you can put that into perspective a little bit. I think the Xi attachment rate is 35% to 40%. How did that change versus before the introduction of DV5?

Yes. That's been trending up really over the last decade. And so it was -- we talked about it being about 1/3 of procedures a few years ago, then it was closer to 35%, and 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 AirSeal.

All right. Great. And then just following up on the DV5 comments, 10% to 20% utilization. I'm kind of curious what type of procedures typically are -- I guess, are these procedures being used because the DV5 system doesn't have their own insufflation product on it? Or is it being used because of more complex procedures and the clinicians are choosing AirSeal for those type of procedures on DV5?

Yes, Young, it's the latter. And so just to maybe remind you, DV5 has an integrated insufflator that's 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 AirSeal brought into the procedure. And we're seeing between 10% to 20% of the DV5 procedures are actually the surgeon is saying, I want to use single digit low-pressure AirSeal for those procedures. And it's -- we're a little over a year out now with DV5 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.

I would now like to turn the conference back to Pat Beyer for closing remarks. Sir?

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 4 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.

This concludes today's conference call. Thank you for participating. You may now disconnect.