Q1 2025 CONMED Corp Earnings Call
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Operator: Ladies and gentlemen, we will begin momentarily.
Speaker Change: Ladies and gentlemen, we will begin momentarily. Please remind me your line the comment call will begin momentarily.
Operator: The Conmed Corp will begin momentarily. Please stand by.
Please standby.
Speaker Change: [music].
Operator: Dont' forget to visit� new here.
Speaker Change: Okay.
Speaker Change: You here.
Operator: Good day and thank you for standing by.
Speaker Change: Good day, and thank you for standing by and welcome to <unk> first quarter fiscal 2020 five earnings conference call.
Operator: Welcome to Conmed's first quarter fiscal 2025 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.
Speaker Change: At this time all participants are in a listen only mode.
Speaker Change: After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone you would.
Speaker Change: Then here an automated message advising your hand is raised to withdraw your question. Please press star one one the game.
Operator: Please be advised that today's conference is being recorded. Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook, its plans, and objectives. These statements represent the forward-looking statements that involve risk and uncertainties, as those terms are defined under the federal securities law. Investors are cautioned that any such forward-looking statements are not guarantees of future events, performance, or results. The company's actual results may differ materially from its current expectations. Please refer to the risk and other uncertainties disclosed under the forward-looking information in today's press release, as well as the company's SEC filings for more details on the risk and uncertainties that may cause actual results to differ materially.
Speaker Change: Be advised that today's conference is being recorded.
Speaker Change: For the conference call I'll begin 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.
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Speaker Change: Investors are cautioned that any such forward looking statements are not guarantees of future events performance or results.
Speaker Change: 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 acts.
Speaker Change: <unk> results to differ materially.
Operator: 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 gap measurements, management uses these figures to aid in monitoring the company's ongoing financial performance from quarter to quarter and year to year on a regular basis and for benchmarking against other medical technology companies. Adjusted net income and adjusted earnings per share measure the income of the company, excluding credits or charges that are considered by the company to be special or outside of its normal ongoing operation.
Speaker Change: 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.
Speaker Change: You will also hear management refer to non-GAAP or adjusted measurements during this discussion.
Speaker Change: 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.
Speaker Change: 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.
Operator: These adjusting items are specified in the reconciliation supporting the company's earnings releases posted to the company's website.
Speaker Change: These adjusting items are specified in the reconciliation supporting the company's earnings releases posted to the company's website.
Operator: With these required announcements completed, I will turn the call over to Pat Beyer, President and Chief Executive Officer, for opening remarks.
Speaker Change: With these required announcements completed I will turn the call over to Pat Beyer, President and Chief Executive Officer for opening remarks, Mr buyer.
Patrick Beyer: Mr. Beyer? Thank you, Lateef. And those attending, I want to thank you for staying on. We had a little technical issue and we had to log off and come back on. I want to thank you for joining us. Good afternoon. And thank you for joining us for Conmed's first quarter 2025 earnings.
Pat Beyer: Thank you Latif and those attending I want to thank you for staying on where little technical issue and we had the log off and come back on I want to thank you for joining US good afternoon, and thank you for joining us for <unk> first quarter 2025 earnings call.
Patrick Beyer: With me on the call is Todd Gardner, Executive Vice President and Chief Financial Officer. I'll provide a brief overview of the financial and operating performance for the first quarter. 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.
Todd Gardner: With me on the call is Todd Gardner.
Pat Beyer: Lastly, our vice President and Chief Financial Officer.
Pat Beyer: I'll provide a brief overview of the financial and operating performance for the first quarter.
Pat Beyer: 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.
Patrick Beyer: We will then open the call to your questions. I'll start by quickly reviewing our first quarter results. Total sales for the quarter were $321.3 million, representing a year-over-year increase of 2.9% as reported and 3.8% in constant currency, a little better than our guidance. While we have more work left to do with our supply chain initiatives, we are pleased that we are starting the year consistent with our full year growth expectations. From an earnings perspective, excluding special items that affected comparability, our adjusted net income of $29.6 million increased 19.6% year over year, and our adjusted diluted net earnings per share of $0.95 increased 20.1% year over year.
Pat Beyer: I'll start by quickly reviewing our first quarter results.
Pat Beyer: Total sales for the quarter were $321.3 million, representing a year over year increase of two 9% as reported and three 8% in constant currency, a little better than our guidance.
Pat Beyer: While we have more work left to do with our supply chain initiatives. We are pleased that we are starting the year consistent with our full year growth expectations from an earnings perspective, excluding special items that affected comparability. Our adjusted net income of $29 6 million increased 19 points.
Pat Beyer: 6% year over year, and our adjusted diluted net earnings per share of <unk> 95 increased 21% year over year.
Patrick Beyer: First quarter sales growth was balanced across our segments with constant currency sales growth of 3.9% in orthopedics and 3.8% in general surgery. Performance in orthopedics was led by double-digit sales growth in our foot and ankle products, as well as strong demand for biobrace. We're excited about the Outlook for Biobrace, our highly differentiated product for soft tissue repair and sports. Biobrace is being used clinically in over 50 procedures from the rotator cuff to the ACL and into the Achilles. We have 14 peer-reviewed publications already in print, and we have nine clinical studies underway. We have a large randomized prospective clinical study with 268 patients, and we look to have this study enrollment completed in 2026, with publication in 2027.
Pat Beyer: First quarter sales growth was balanced across our segments with constant currency sales growth of three 9% in orthopedics and three 8% in general surgery.
Pat Beyer: Performance in Orthopedics was led by double digit sales growth in our foot and ankle products as well as strong demand for <unk>.
Pat Beyer: We are excited about the outlook for Biobased, our highly differentiated product for soft tissue repair and sports.
Pat Beyer: <unk> is being used clinically in over 50 procedures from the rotator cuff to the ACL entity of Kellys we.
Pat Beyer: We have 14 peer reviewed publications already in print and we have nine clinical studies underway. We have a large randomized prospective clinical study with 268 patients and we look to have this study enrollment completed in 2026 with publication in 2027.
Patrick Beyer: Also on the good news front, in early April, we received FDA clearance for our new delivery device for a biobrace and rotator cuff repair. We believe this will make the procedure easier and faster for surgeons. General surgery continues to be led by air seal and smoke evacuation, both seeing double digit demand in quarter one. We continue to believe in the importance of clinical insufflation provided by air sealing, robotic surgery and laparoscopy, which is particularly important for longer and more complex procedures. Physicians are continuing to choose AirSeal to prioritize patient care as AirSeal has been clinically proven to reduce both length of stay and post-operative pain for patients.
Pat Beyer: Also on the good news front in early April we received FDA clearance for our new delivery device for our bio bracing rotator cuff repair. We believe this will make the procedure easier and faster for surgeons.
Speaker Change: General surgery continues to be led by air seal, a smoke evacuation bulk see double digit demand in quarter one we.
Pat Beyer: We continue to believe in the importance of clinical and deflation.
Pat Beyer: Provided by air sealing robotic surgery, and laparoscopy, which is particularly important for longer and more complex procedures.
Pat Beyer: <unk> are continuing to choose <unk> to prioritize patient care as mcl has been clinically proven to reduce both length of stay and postoperative pain for patients.
Patrick Beyer: We are working on a way to help investors understand the air seal attachment rate to DV5 compared to XI and compared to non-robotic procedures. There are multiple uses within the hospital, and there is no practical method to determine where a product is used after the sale. The hospital could be using the capital or the disposables in all three modalities, which ties to the broad clinical benefit in both laparoscopy and robotic surgery. We do, though, sell one SKU that is only used in conjunction with robotic procedures, and that SKU grew in the healthy double digits in quarter one.
Pat Beyer: We are working on a way to help investors understand the <unk> attachment rate to <unk>, five compared to X XI and compared to non robotic procedures.
There are multiple users within the hospital and there is no practical method to determine where our product is used after the sale.
Pat Beyer: Hospital could be using the capital or the disposables and all three modalities, which ties to the broad clinical benefit and bulk laparoscopy and robotic surgery we.
Pat Beyer: We do though sell one SKU that is only used in conjunction with robotic procedures and that <unk> grew in the healthy double digits in quarter one.
Patrick Beyer: Turning to our supply chain initiatives, we have made progress here. The number of SKUs on backorder are declining. We're seeing early progress, but we are not where we need to be yet. We continue to believe we should be in a better position by the end of the year.
Pat Beyer: Turning to our supply chain initiatives, we have made progress here.
<unk> Skus on back order or declining we're seeing early progress, but we're not where we need to be yet we continue to believe we should be in a better position by the end of the year.
Patrick Beyer: I'm excited about our long-term future. We have a significant tailwind from mix at our back with strong growth drivers and the opportunity to turn our supply chain operations into an area of strength for the company is well within our control. Of course, we would acknowledge that the near-term macroeconomic and policy backdrop creates some uncertainty for our customers. However, demand for our products remains strong. We think this is a function of the healthy end markets in which we operate and our clinically differentiated products. We are closely tracking the spending pattern of our customers but have not seen any material changes to date as hospital systems appear to prioritize the areas that are key to our business, including our high growth focus areas of minimally invasive surgery and the areas of laparoscopy and arthroscopy, which tend to not be as reliant on large capital purchases.
Pat Beyer: I'm excited about our long term future.
Pat Beyer: We have a significant tailwind from mix at our back with strong growth drivers and the opportunity to turn our supply chain operations into an area of strength for the company as.
Pat Beyer: It's well within our control.
Pat Beyer: Of course, we would acknowledge that the near term macroeconomic and policy backdrop creates some uncertainty for our customers. However demand for our products remains strong.
Pat Beyer: This is a function of the healthy end markets in which we operate and our clinically differentiated products. We are closely tracking the spending patterns of our customers, but have not seen any material changes to date as hospitals systems appear to be prioritizing areas that are key to our business, including our high growth.
Pat Beyer: Areas of minimally invasive surgery, and the areas of laparoscopy, and arthroscopy, which tend to not be as reliant on large capital purchases.
Patrick Beyer: Within these two categories, we have four very unique platforms that are still in the early stages of their growth trajectory. These four platforms are surrounded by a portfolio of products that have been developed hand-in-hand with physicians over time with the goal of supporting ease of use and improve patient outcomes. I'm excited about the opportunities that lie ahead for this portfolio, particularly AirSeal, Buffalo Filter, BioBrace, and Conmed Foot & Ankle, especially as we begin to see the effects of the improvements to our supply chain operations over the coming quarters.
Pat Beyer: And these two categories. We have four very unique platforms that are still in the early stages of their growth trajectories. These four platforms are surrounded by a portfolio of products that have been developed hand in hand with physicians over time with the goal of supporting ease of use and improve patient outcomes.
Pat Beyer: I am excited about the opportunities that lie ahead for this portfolio, particularly <unk>.
Pat Beyer: Buffalo filter buyer base and convert foot and ankle, especially as we begin to Cvs tax improvements to our supply chain operations over the coming quarters.
Todd Garner: With that, I'll turn the call over to Todd, who will provide a more detailed analysis of our financial performance and discuss our 2025 financial guidance, as well as quantifying our latest thinking on tariffs.
Todd Gardner: With that I'll turn the call over to Todd who will provide a more detailed analysis of our financial performance and discuss our 2025 financial guidance as well as quantifying our latest thinking on tariffs Todd.
Todd Garner: Todd? Thank you, Pat. All sales growth numbers I referenced 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. As a reminder, we had one less sales day in Q1 compared to the prior year, which we estimate to be worth between 100 and 150 basis points of growth. For the first quarter of 2025, our total sales increased 3.8% year over year. For Q1, our sales in the U.S.
Todd Gardner: Thank you Pat.
Todd Gardner: All sales growth numbers I reference today will be given in constant currency. The reconciliation to GAAP numbers is included in our press release.
Todd Gardner: As usual we have included an investor deck on our website that summarizes the results for the quarter and our financial guidance.
Todd Gardner: As a reminder, we had one less sales day in Q1 compared to the prior year, which we estimate to be worth between 100, and 150 basis points of growth.
Todd Gardner: Sure.
Todd Gardner: For the first quarter of 2025, our total sales increased three 8% year over year for Q1, our sales in the U S increased four 2% versus the prior year quarter and our international sales grew three 4%.
Todd Garner: increased 4.2% versus the prior year quarter, and our international sales grew 3.4%. Total worldwide orthopedic sales grew 3.9% in the first quarter. In the US, orthopedic sales decreased 2.1%, and internationally, orthopedic sales increased 7.9%. While supply challenges in parts of our orthopedics business drove the underperformance in the U.S., we were pleased to see another quarter of double-digit growth in foot and ankle. Total worldwide general surgery sales increased 3.8% in the quarter. U.S. general surgery sales grew 6.9% while internationally general surgery sales decreased 3.3%. The decline internationally was due to our energy and critical care product.
Total world worldwide Orthopedics sales grew three 9% in the first quarter in the U S. Orthopedic sales decreased two 1% and internationally orthopedic sales increased seven 9%.
Todd Gardner: While supply challenges in parts of our orthopedics business drove the underperformance in the U S. We were pleased to see another quarter of double digit growth in foot and ankle.
Todd Gardner: Total worldwide General surgery sales increased three 8% in the quarter.
Todd Gardner: U S General surgery sales grew six 9% while internationally general surgery sales decreased three 3% the.
Todd Gardner: The decline internationally was due to our energy and critical care product lines.
Todd Garner: 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 56.4%, which is 80 basis points higher than the prior year quarter. This was a little stronger than we expected given the mix of the sales in Q1. We're encouraged by the opportunities to improve the supply chain operations that are being identified in conjunction with our external consultants, and we expect at least $20 million of annual savings to come out of this effort.
Todd Gardner: Now, let's move to the expense side of the income statement.
Todd Gardner: We will discuss expenses and profitability in the first quarter, excluding special items, which are detailed in our press release.
Todd Gardner: Adjusted gross margin for the first quarter was 56, 4%, which is 80 basis points higher than the prior year quarter. This was a little stronger than we expected given the mix of the sales in Q1.
Todd Gardner: We're encouraged by the opportunities to improve the supply chain operations that are being identified in conjunction with our external consultants and we expect at least $20 million of annual savings to come out of this effort.
Todd Garner: However, those benefits won't really materialize until calendar 2026, as our manufacturing variances are deferred into inventory and get recognized as that inventory is sold. We now have increased visibility into how margins could play out for the rest of the year. We expect margins in Q2 to be in the mid-56% range, Q3 in the mid-55s, and Q4 approaching 57%. That all adds up to margins being relatively flat versus 2024 for the full year, consistent with what we estimated at the beginning of the year. The currency impact has improved by about 20 basis points in the last three months, but the timing of the savings from the operational improvements are a little slower to materialize than anticipated.
Todd Gardner: However, those benefits won't really materialize until calendar 2026, as our manufacturing variances are deferred into inventory and get recognized as that inventory is sold.
Todd Gardner: We now have increased visibility into how margins could play out for the rest of the year.
Todd Gardner: We expect margins in Q2 to be in the mid 56% range Q3 in the mid 50 fives in Q4 approaching 57%.
Todd Gardner: All adds up to margins being relatively flat versus 2024 for the full year consistent with what we estimated at the beginning of the year.
Todd Gardner: The currency impact has improved by about 20 basis points in the last three months, but the timing of the savings from the operational improvements are a little slower to materialize than anticipated.
Todd Garner: Research and development expense for the first quarter was 4.0% of sales, 40 basis points lower than the prior year quarter. First quarter adjusted SG&A expenses were 38.7% of sales, consistent with the prior year as expected. On an adjusted basis, interest expense was $6.8 million in the first quarter. The adjusted effective tax rate in Q1 was 23.1%. First quarter gap net income was $6.0 million compared to $19.7 million in 2024. Gap earnings per diluted share were $0.19 this quarter compared to $0.63 a year ago. Excluding the impact of special items discussed earlier, in the first quarter we reported a adjusted net income of $29.6 million, an increase of 19.6 percent compared to the first quarter of 2024.
Todd Gardner: Okay.
Todd Gardner: Research and development expense for the first quarter was 4.0% of sales 40 basis points lower than the prior year quarter.
Todd Gardner: First quarter adjusted SG&A expenses were 38, 7% of sales consistent with the prior year as expected.
Todd Gardner: On an adjusted basis interest expense was $6 $8 million in the first quarter. The adjusted effective tax rate in Q1 was 23, 1%.
Todd Gardner: First quarter GAAP net income was $6.0 million compared to $19 $7 million in 2020 for GAAP.
Todd Gardner: GAAP earnings per diluted share were <unk> 19 cents this quarter compared to <unk> 63, a year ago.
Todd Gardner: Excluding the impact of special items discussed earlier in the first quarter. We reported adjusted net income of $29 6 million, an increase of 19, 6% compared to the first quarter of 2024.
Todd Garner: Our Q1 adjusted diluted net earnings per share were $0.95, an increase of 20.1% compared to the prior year quarter. According to the balance sheet, our cash balance at March 31st was $35.5 million compared to $24.5 million at December 31st. Accounts receivable days as of March 31st were 62 days, no change from the end of 2024. Inventory days at March 31 were 222 compared to 211 at December 31, as we go through the process of improving the supply chain. Long-term debt at the end of the quarter was $891.4 million versus $905.1 million as of December 31st.
Todd Gardner: Our Q1 adjusted diluted net earnings per share were <unk> 95.
Todd Gardner: An increase of 21% compared to the prior year quarter.
Todd Gardner: Turning to the balance sheet, our cash balance at March 31 was $35 5 million compared to $24 $5 million at December 31.
Todd Gardner: Accounts receivable days as of March 31 were 62 days no change from the end of 2024.
Todd Gardner: Inventory days at March 31 were 222 compared to 211 at December 31 as.
Todd Gardner: As we go through the process of improving the supply chain.
Todd Gardner: Long term debt at the end of the quarter was 891 $4 million versus $905 $1 million as of December 31.
Todd Garner: Our leverage ratio on March 31st was 3.2 times, which was a little better than expected. Cash flow provided from operations in the quarter was $41.5 million compared to $29.1 million in the first quarter of 2024. Our cash flow remains very strong. Capital expenditures in the first quarter were $3.8 million compared to $2.0 million a year ago.
Todd Gardner: Our leverage ratio on March 31 was three two times, which was a little better than expected.
Todd Gardner: Cash flow provided from operations in the quarter was $41 5 million compared to $29 $1 million in the first quarter of 2024, our cash flow remains very strong.
Todd Gardner: Capital expenditures in the first quarter were $3 8 million compared to $2.08 million a year ago.
Todd Garner: Now let's turn to financial guidance. I'm going to talk about guidance without tariffs first and then detail how we're estimating the tariff impact so you can have both pieces as we expect the environment may continue to be dynamic. So, excluding tariffs for now, let's start with revenue. While Q1 came in a little better than we expected, it does not change our view of the constant currency growth for the year, so we continue to expect the year to be between 4% and 6% constant currency growth. Our projected FX impact did ease by about 50 basis points for the year, going from what had been a headwind of 100 to 120 basis points to a headwind of 50 to 70 basis points.
Todd Gardner: Now, let's turn to financial guidance.
Todd Gardner: When I talk about guidance without tariffs first and then detail how we are estimating the tariff impact. So you can have both pieces as we expect the environment may continue to be dynamic.
Todd Gardner: So excluding tariffs for now let's start with revenue.
Todd Gardner: While Q1 came in a little better than we expected. It does not change our view of the constant currency growth for the year. So we continue to expect the year to be between 4% and 6% constant currency growth.
Todd Gardner: Our projected FX impact did ease by about 50 basis points for the year going from what had been a headwind of 100 to 120 basis points to a headwind of 50 to 70 basis points.
Todd Garner: That takes our full year guidance up from a range of $1.344 billion to $1.372 billion to a slightly higher range of $1.35 billion to $1.378 billion. We expect reported revenue in Q2 to be between $335 million and $340 million. Our adjusted EPS guidance excluding tariffs for the full year is increasing from a prior range of 425 to 440 to a new higher range of 445 to 460. That reflects the beat in Q1, as well as an improvement in FX of about 5 cents on the year. We started the year with an estimate of currency headwind of approximately $0.15 to $0.20.
Todd Gardner: That takes our full year guidance up from a range of 134 4 billion to $1 $3 72 billion to a slightly higher range of 135 billion to $1 $3 $7 8 billion.
Todd Gardner: We expect reported revenue in Q2 to be between $335 million and $340 million.
Todd Gardner: Our adjusted EPS guidance, excluding Paris for the full year is increasing from a prior range of $4 25 to $4 42, a new higher range of $4 45 to $4 60.
Todd Gardner: That reflects the beat in Q1 as well as an improvement in FX of about five on the year.
Todd Gardner: We started the year with an estimate of a currency headwind of approximately 15 to 20.
Todd Garner: We now expect that headwind to be between $0.10 and $0.15. We expect Q2 adjusted EPS to be between $1.10 and $1.15.
Todd Gardner: We now expect that headwind to be between 10 and 15.
Todd Gardner: We expect Q2, adjusted EPS to be between $1 10, and $1 15.
Todd Garner: Now let's talk about tariffs. The good news since our last call is that it has become clear that product coming from our plant in Mexico will be exempt from tariffs as we are USMCA compliant. Our disclosure today is based on a 145% tariff on products coming from China, 25% from Canada, and 10% on products from Europe and the rest of the world. Using those percentages, we estimate approximately $5.5 million of supply chain exposure in 2025. 85% of that is from China, 12% is from Europe. This computes to approximately $0.14 of EPS, with $0.02 hitting Q3 and $0.12 hitting Q4.
Todd Gardner: Now, let's talk about tariffs.
Todd Gardner: Good news since our last call is that it has become clear that product coming from our plant in Mexico will be exempt from tariffs as we our U S MCA compliant.
Todd Gardner: Our disclosure today is based on a 145% tariff on products coming from China.
Todd Gardner: 25% from Canada, and 10% on products from Europe, and the rest of the world.
Todd Gardner: Using those percentages, we estimate approximately $5 $5 million of supply chain exposure in 2025.
Todd Gardner: <unk>, 85% of that is from China.
Todd Gardner: <unk> percent is from Europe.
Todd Gardner: This compares to approximately 14 cents of EPS with <unk>, hitting Q3, and 12 hitting Q4.
Todd Garner: We have added a slide in our investor deck that shows our adjusted EPS guidance without tariffs and then with this estimate of tariff exposure. So in a very dynamic environment, we started the year consistent with our revenue guidance and delivering better on the bottom line.
Todd Gardner: We have added a slide in our investor deck that shows our adjusted EPS guidance without tariffs and then with this estimate of tariff exposure.
Todd Gardner: So in a very dynamic environment, we started the year consistent with our revenue guidance and delivering better on the bottom line.
Todd Garner: We remain focused on the operational improvements we need to move fully on offense in all parts of our business.
Todd Gardner: We remain focused on the operational improvements we need to move fully on offense in all parts of our business.
Operator: With that, we'd like to open the call to your questions and I'll hand it back to Lutee. Thank you. As a reminder, to ask a question, you will need to press star 11 on your telephone. To remove yourself from the queue, you may press star 11 again. You will be limited to one question and one follow-up. Please stand by while we compile the Q&A roster.
Todd Gardner: With that we'd like to open the call to your questions and I'll hand, it back to the team.
Todd Gardner: Okay.
Speaker Change: Thank you as a reminder to ask a question you will need to press star one one on your telephone to remove yourself from the queue. You May press star one again.
Speaker Change: It will be limited to one question and one follow up please standby, while we compile the Q&A roster.
Speaker Change: Our first question.
Matt O'brien: comes from the line of Matt O'Brien of Piper Sandler. Please go ahead, Matt. Hey, thanks for taking our questions.
Speaker Change: Comes from the line of Matt O'brien of Piper Sandler. Please go ahead, Matt.
Speaker Change: Hey, Thanks for taking our questions. This is Phil on for Matt.
Phil: This is Phil on for Matt. Starting with guidance, it looks like you beat this quarter by, you know, just over 7 million versus the street. You're raising for your guidance by less than that, especially if you factor in that improvement on the FX side of things. Can you help us understand the shifting perspective on the remaining three quarters as it relates to the top line? You know, any softness you're seeing in hospital, you know, budgets, that sort of thing?
Starting with guidance it looks like you beat this quarter by just over 7 million versus the street you are raising full year guidance by less than that especially if you factor in that improvement on the FX side of things can you help us understand the shifting perspective on the remaining three quarters as it relates to the top line.
Speaker Change: Softness that Youre seeing in hospital Budd.
Patrick Beyer: Thank you. Yeah, thanks for the question, Phil. No, no softness that we're worried about. We guided the year to be four to six constant currency. You know, if you do days, days adjusted, we're well right in the middle of that range, a little maybe a little better than the middle of that range for Q1. So that's where we expect the year to be. You know, we're not going to get ahead of ourselves after Q1 and change how we see the year. That's, that was the thought and guidance we did. So basically, we took the year up for the currency improvement.
Speaker Change: Budget that sort of thing thank you.
Phil: Yes, thanks for the question Phil.
Phil: No no softness that we're worried about we guided the year to be four to six constant currency.
Phil: If you do days days', adjusted where well right in the middle of that range, a little maybe a little better than the middle of that range for Q1.
Phil: So that's where we expect the year to be.
Phil:
Phil: We're not going to get ahead of ourselves after Q1 and change how we see the year. So.
Phil: That was the thought in guidance. We did so basically we took the year up for the currency improvement and Thats. It we left the operation of the same.
Phil: And that's it. We left the operational. That's helpful.
Patrick Beyer: And then, you know, one final one for Patrick, really just trying to get a good State of the Union at this point, understanding you've only been CEO for a short while, but what has surprised you, you know, maybe both good and bad at this point? Thank you so much. Thanks. And fair question. You know, on the bad side, you know, quite honestly, I've been here 10 years before I took over the CEO job and nothing has surprised me on the bad side. On the good side, I've been a continual positive passion from the Conmed team.
Phil: That's helpful. And then one final one for Patrick really just trying to get a good state of the Union at this point understanding you've only been a short while but what has surprised you maybe both good and bad at this point. Thank you so much.
Patrick: Thanks, and fair question.
On the bad side quite honestly I've been here 10 years before I took over the CEO job and nothing has surprised me on the bad side.
Patrick: On the good side I've been.
Continual positive passion from the <unk> team.
Patrick Beyer: I've been really pleased and astounded by the commitment to delivering on world-class products and clinical solutions, and I've spent a fair amount of time with customers in quarter one, and the embracing that they have on our technology has been really pleasing. And so that's probably been the most positive surprise, the passion from the team and the passion from the customers we serve. Thank you.
Patrick: I've been really pleased and astounded by the commitment to delivering on.
Patrick: World Class products, and clinical solutions, and I've spent a fair amount of time with customers in quarter, one and the embracing that they have on our technology has been really pleasing and so that's probably been the most positive surprise the passion from the team and the passion from the customers we serve.
Patrick: Thank you our next question.
Robbie Marcus: comes from the line of Robbie Marcus of J.P. Morgan.
Speaker Change: Comes from the line of Robbie Marcus of Jpmorgan. Your line is open Ravi.
Robbie Marcus: Your line is open, Robbie. Oh, great. Thanks for taking the questions and congrats on a good quarter here. Two for me. Todd, first on tariffs, hard to avoid it here. Hopefully you could help us reconcile the math you gave us from last call and this call. I think China was... $250,000 Michael Matson, Curt Hartman, Todd Garner, Robert Marcus, Kristen Stewart, Patrick Beyer, part of the tariff question, help us understand some of the mitigation efforts you can. start to put into place because it's not so much the two cents in third quarter. 12 cents in fourth quarter that annualizes into next year and how we should think about any offsets.
Patrick: Oh great.
Ravi: Thanks for taking the questions and congrats on a good quarter here.
Patrick: Two from me.
Todd Gardner: Todd first on tariffs hard to.
Todd Gardner: Avoided here I just wanted hopefully you could help us reconcile the math you gave us from last call and this call.
Todd Gardner: I think China was.
Speaker Change: Mike 250000.
Todd Gardner: A month impact at a 10% <unk>.
Todd Gardner: We're afraid so to me it would be a little more than the implied annualized rate here then than you are coming up with at a 145.
Todd Gardner: <unk>.
Todd Gardner: Part of the tariff question help us understand some of the mitigation efforts you can you can start to put into place.
Todd Gardner: Not so much the two cents in the third quarter.
Todd Gardner: The 12 cents in fourth quarter that annualize into next year and how we should think about.
Todd Gardner: Any offsets you can put into place in the run rate into next year. Thanks.
Todd Garner: Sure. Thanks, Robbie. Yeah, of course, the great news from the last call is that the lion's share of the numbers we talked about last time were from Mexico, and that has turned into, does not look like it should be an issue for us at all. So we're left with the China number, and as you say, the rates are much higher, but it's also become clearer on how that will flow through, right? So that will flow through with our inventory. So while the rates are higher, less of it will hit 2025 than previously estimated. So we'll have to see where that lands.
Todd Gardner: Sure. Thanks Robbie.
Todd Gardner: Of course, the great news from the last call is that the lion's share of the numbers. We talked about last time were for Mexico and that has turned into not does not look like it should be an issue for us at all so we are left with the China number and as you say the rates are much higher but it's also become clear on how that will flow through.
Todd Gardner: Right so.
Todd Gardner: That will flow through with our inventory so while the rates are higher less of it will hit.
2025 than previously estimated so we'll have to see where that lands pretty good news out of China last week with China's saying that they intend to exempt medical devices.
Todd Garner: Pretty good news out of China last week with China saying that they intend to exempt medical devices, products into China. So hopefully there's more rational conversations that happen going forward.
Todd Gardner: Products into China, So hopefully there is.
Todd Gardner: There is more rational.
Todd Gardner: Conversations that happen going forward, but so our new updated numbers for 2025 or are as I showed them today.
Todd Garner: So our new updated numbers for 2025 are as I showed them today. And then mitigation efforts, you know, the first thing is we can pretty quickly stop the practice of shipping everything into the U.S. and then out to the world from our Atlanta Distribution Center. So the first and easiest thing is kind of the logistics of shipping products around the world. We can avoid the U.S. for the products that don't need to come to the U.S., so that's the quickest and easiest. There's also, you know, obviously price mitigation that you can consider if we're in the same boat as everybody else in a certain country, that gets easier.
Todd Gardner: <unk>.
Todd Gardner: And then mitigation efforts.
Todd Gardner: First thing is we can pretty quickly stopped the practice of shipping everything into the U S and then out to the world.
Todd Gardner: From our Atlanta distribution center. So the first and easiest thing is kind of those the logistics of shipping products around the world. We can avoid the U S for the products that don't need to come to the U S. So that's the quickest and easiest.
Theres also.
Todd Gardner: Obviously price mitigation that you can consider if we're in the same boat as everybody else in a certain country that gets easier if for some reason comment as an outlier.
Todd Garner: If for some reason Conmed is an outlier, that gets harder, of course.
Todd Gardner: It gets harder of course.
Todd Garner: When you talk about changing vendors or changing where you make something, I think everybody on the call should understand, in a regulated industry under the FDA, none of that happens really quickly. And, of course, that can affect labeling changes and multiple other things. And so those would be slower, but still mitigations available to us.
Todd Gardner: When you think when you talk about changing vendors are changing where you make something I think everybody on the call should understand and are regulated in industry.
Todd Gardner: Under the FDA, none of that happens really quickly and of course that can affect labeling changes and multiple other things.
Todd Gardner: And so those would be slower, but still mitigation is available to us and then the last thing I would say is.
Todd Garner: And then the last thing I would say is... kind of accounting and transfer price approaches. You know, the construct of how things are done were based on previous rules and previous conventions and kind of how things and market rates. And, you know, once we have a stable set of ground rules going forward, you could re-look at, you know, how some of that, how some of that is reported and tracked and reported. And so, you know, that's kind of the list of things we're looking at to mitigate tariff exposure. Thank you.
Todd Gardner: Kind of accounting and transfer price approaches the.
Todd Gardner: The construct of how things are done were based on previous rules.
Todd Gardner: And previous conventions, and kind of how things and market rates.
Todd Gardner: And.
Todd Gardner: Once we have a stable set of ground rules going forward.
Todd Gardner: You could re look at.
Todd Gardner: How some of that.
Todd Gardner: How how some of that is reported in tracked and reported.
Todd Gardner: So that's kind of a list of things, we're looking at to mitigate tariff exposure.
Todd Gardner: Okay.
Rick Wise: Our next question comes from the line of Rick Wise of Stiefel. Your question please, Rick. Thank you. Good afternoon, Pat. Hi, Todd.
Speaker Change: Thank you. Our next question comes from the line of Rick Wise of Stifel. Your question. Please Rick.
Speaker Change: Hi, Thank you good afternoon, Pat Hi, Todd.
Rick Wise: Maybe you could expand a little more on your supply chain improvement initiatives. I think Todd, you or Pat said you expect further improvement coming quarters.
Speaker Change: Maybe you could expand a little more on your supply chain.
Speaker Change: Our improvement initiatives.
Todd Gardner: I think Todd you were.
Todd Gardner: That said you expect further improvement in coming quarters, maybe help us understand maybe in a little more detail where argue what's happening what kind of impact where will we see it.
Patrick Beyer: Maybe help us understand maybe in a little more detail, where are you, what's happening, what kind of impact, where will we see it, and maybe in particular, update us on where things stand with bioware. Hi, Rick, thanks for the question. So if we think about the supply chain, I want you to think about a couple things. First of all, we're improving our supply chain for stability. and for continuity going forward and the ability to grow this business sequentially in the future.
Todd Gardner: And maybe in particular update us on where things stand with <unk>.
Todd Gardner: Hi, Rick Thanks for the question. So as we think about the supply chain I'd want you to think about a couple of things first of all.
Todd Gardner: We're improving our supply chain for stability.
Todd Gardner: And for continuity continuity going forward and the ability to grow this business sequentially in the future.
Patrick Beyer: There's really three areas we're focused on right now. Number one, it's the procurement and the supply and that relationship with our suppliers. Number two, it's the planning of that production. And number three, it's the production. And those three things dynamically connect. And that's our focus today. And it's just not as robust as we would like it A lot of work is going on in that. We've announced, and we've told the outside world, we're working with a first-class consulting company to help us on that. We've made progress. Our focus in the early days is our implant products to help surgeons get back and using our implants for procedures that they want to use in it.
Todd Gardner: It's really three areas, we're focused on right now number one it's the procurement and the supply and that relationship with our suppliers number two it's the planning of that production and number three it's to production and those three things dynamically connect and Thats, our focus today and it's just not as real.
Todd Gardner: But as we would like it debate a lot of work is going on in that we've announced and we've told the outside world. We're working with a first class.
Todd Gardner: Consulting company to help us on that we've made progress our focus.
Todd Gardner: In the early days is our implant products to help surgeons get back and using our implants for procedures that they want to use them that we've made good progress there a number of our key portfolios are actually off of back order and we're able to go on offense on notice in quarter in quarter one.
Patrick Beyer: We've made good progress there. A number of our key portfolios are actually off of backorder, and we're able to go on offense on those in quarter one, which is great news there.
Todd Gardner: Which is great news there.
Patrick Beyer: And Rick, what was the other question you had there? Vibrate. Yeah, vibrate. Rick, we had a really good race quarter. And I alluded to it in the. my script there. We passed the 51 mark in clinical procedures. We're up to 52 now.
Todd Gardner: Yeah.
Speaker Change: And Rick what was the other question you had there.
Todd Gardner: Yes.
Todd Gardner: Robert.
Rick Wise: Rick I had a really great quarter, and I alluded to it in the.
Todd Gardner: In the.
Rick Wise: My script there.
Rick Wise: We passed the 51, Mark and clinical procedures were up to 52 now we have our application device for rotator cuff repair got 500 10-K approved in early April which is a significant move for US we believe that will make the procedure easier and more.
Patrick Beyer: We had our application device for rotator cuff repair, got 510K approved in early April, which is a significant move for us. We believe that will make the procedure easier and more predictable for the surgeons. And early feedback has been really good. We've been in procedures already. And our prospective randomized clinical study with 268 patients continues to advance and we're over the halfway mark on enrollment. So we feel really good about Vibrate.
Rick Wise: Predictable for the surgeons and early feedback has been really good we been in procedures already and our prospective randomized clinical study with 268 patients continues to advance and we're at the halfway mark on enrollment. So we feel really good about libraries Rick.
Xuyang Li: Our next question comes from the line of Xuyang Li of Jeffries. Please go ahead, Xuyang. All right, great. Thanks for taking our questions.
Speaker Change: Okay. Thank you. Our next question comes from the line of young Li of Jefferies. Please go ahead.
Young Li: Alright, great. Thanks for taking our question.
Xuyang Li: I guess maybe we can start with Pat. I think on the last call, you mentioned doing a deep dive of the portfolio for the next decade. Where are you with that process? When can we hear more about the potential changes you'll implement with the portfolio? And can you share any of the early findings so far? I understand that you probably got distracted with the tariff stuff.
Young Li: Maybe to start with.
Young Li: I think on the last call you mentioned doing a deep dive.
Young Li: The portfolio.
Young Li: Next decade.
Young Li: Where are you with that process.
Young Li: Wait to hear more about the potential changes.
Young Li: Implemented with the portfolio.
Speaker Change: Can you share it.
Speaker Change: Early findings, so far understanding probably got distracted with the tap stuff.
Patrick Beyer: Yeah, young, thanks for the question. So I'm four months into CEO role first four months, I'm spending an incredible amount of time with three Number one, our shareholders have had spent good time at endless meetings with shareholders, talking to them about Conmed. Number two, a lot of time with team Conmed employees, both from the factory floor to our sales forces, to our marketing people, understanding who we are and who we should. And number three, maybe most importantly, customers. And I've spent time in quarter one in the operating room talking to customers, understanding why they use us and what they'd like to use from us.
Speaker Change: Yes. Thanks for the question. So I'm four months into CEO role first four months on spending an incredible amount of time with three constituents number one our shareholders have had spent good time at analyst meetings with shareholders talking to them about convert.
Speaker Change: Number two a lot of time with T Con net employees bulk from the factory floor to our sales forces to our marketing people understanding who we are and who we should be and number three maybe most importantly customers and I've spent time in quarter one in the operating room talking to customers understanding why there.
Speaker Change: Use us and what they like to use from us and what I can tell you is our fourth growth driver for growth drivers are strong.
Patrick Beyer: And what I can tell you is our four growth drivers are strong. BioBrace, Foot & Ankle, AirSeal, and Smoke. Those portfolios around those, we're continuing to dive into and look at, what should they be? It's early days on that. I expect to spend more time on that. What I'm pleased with is our growth drivers have durability there. And I've been really pleased to see what the internal teams are driving around those and what our customers think of. Great, very helpful.
Speaker Change: A brief medical <unk> and smoke those portfolios around knows we're continuing to dive into and look at what should they be it's early days on that I expect to spend more time on that what I'm pleased with is our growth drivers have durability there.
Speaker Change: I've been really pleased to see what the internal teams are driving around those and what our customers think of them.
Xuyang Li: And then I guess for the follow-up, I wanted to ask a little bit about capital trends and air seal. It looks like capital's down 5% in the quarter, U.S. down 10.
Speaker Change: Okay, great very helpful.
Speaker Change: And then I guess for the follow up wanted to ask a little bit about capital trends.
Speaker Change: Eric.
Speaker Change: It looks like capitals down 5% in the quarter Europe down 10 Wonder if you can maybe put that number.
Patrick Beyer: Wondering if you can maybe put that number, those numbers in context for us, you know, how much of that's driven by air seal. And, you know, now that there's around 500 DB5s in the U.S. and, you know, 5% of the overall installed base worldwide, I guess I'm just kind of wondering, you know, are you seeing any differences in terms of utilization or ordering patterns for DB5 accounts versus non-DB5 accounts?
Speaker Change: Numbers in context for us how much of that is driven by our CEO and now that moved around 500 TV size in the U S.
Speaker Change: 5% of the overall installed base worldwide I guess I'm just kind of wondering.
Speaker Change: Seen any.
Speaker Change: Differences in terms of utilization ordering patterns for our TV five accounts versus maybe five accounts.
Patrick Beyer: Now, why don't I take the AirSeal one and Todd will take the capital piece. On the AirSeal side, you're right. So intuitive release there a week ago, 505 total units in the market, 146 increase Our attachment rate, and when I say attachment rate, I mean the air seals that are operating on the DV5s continue to be there. It's still early days and we can't be definitive about a percentage, but we still have DV5 units going in the field where surgeons are saying, I have complicated procedures and I want to use air seal and clinical insufflation.
Speaker Change: Yes, why don't I take the <unk>, one and Tom will take the capital piece on the <unk> side you're right.
Speaker Change: And to have released earnings a week ago 505 total units in the market 146 increase.
Speaker Change: Our attachment rate and then when I say attachment rate I mean, the air seals that are operating on the <unk> continue to be there. It's still early days and we can't be definitive about a percentage, but we still have DB five units going into the field, where surgeons are saying I have a complicated procedures.
Speaker Change: And I want to use <unk> in clinical and supply chain. So from a percentage of application. We don't know right now, but we are seeing continued adoption and the other thing I would call out is we have one SKU that is only used on da Vinci robots.
Todd Garner: So from a percentage of application, we don't know right now, but we are seeing continued adoption.
Todd Garner: And the other thing I would call out is we have one SKU that is only used on da Vinci robots and that at that skew grew double digits in quarter one. You know, on the capital side, you know, Xuyang, from our perspective, there's no real change in the customer's appetite. I'll remind everybody that our capital is on the low end of capital expenditures that hospitals deal with. There is a little noise in the comps. You know, the Q1 specifically in the U.S. was double digits last year. So there might be a little noise in the comp, but we don't really see any flags or alarms on capital demand for our types of products.
Speaker Change: That SKU grew double digits in quarter one.
Speaker Change: And on the capital side young from our perspective, there is no real change in the customers' appetite I'll remind everybody that our our capitals on the low end of our capital expenditures are hospitals deal with.
Speaker Change: There is a little noise in the comps Q1, specifically.
Speaker Change: In the U S was double digits last year.
Speaker Change: So there might be a little noise in the comp, but we don't really see any flags or alarms on capital demand for our types of products.
Speaker Change: Okay.
Speaker Change: Thank you.
Travis Steed: comes from the line of Travis Steed of Bank of America.
Speaker Change: Our next question.
Speaker Change: Comes from the line of Travis Steed of Bank of America. Please go ahead Travis.
Travis Steed: Please go ahead, Travis. Hey, thanks for taking the question. Todd, I wanted to follow up on the tariff and kind of tie it together to what you disclosed last quarter. I think last quarter you gave us some helpful numbers on China. So like if you think about the 35% tariff rate, I think it was $875,000 per month. which is like 10 and a half million dollars annually. And if you take that to the new rate, it's 170% incremental because you weren't paying the original tariff underlying rate. And that gets to me, it's around $50 million on an incremental basis for the China tariff.
Travis Steed: Hey, Thanks for taking the question Todd I wanted to follow up on the tariffs and kind of tie. It together what you disclosed last quarter I think last quarter, you gave us some helpful numbers on China.
Travis Steed: And so like if you think about the 35% tariff rate.
Speaker Change: $375000 per month.
Speaker Change: Which is like <unk> $5 million annually.
Speaker Change: You take that to the new rate.
Speaker Change: 170% incremental because you werent paying into the original tariff underlying rate and that gets to me to around $50 million on an incremental basis for the China tariff just wanted to make sure that math is correct and if anything has kind of changed the math you gave on the last earnings call as it relates to China.
Todd Garner: Just wanted to make sure that math is correct. And if anything's kind of changed with the math you gave on the last earnings call as it relates to China. Yeah, I think, you know, we spent 90 days, so it's a more specific product by product analysis now. And like I said before, the timing of when that hits, right? So the tariffs that you pay in Q1, for example, and we did pay some tariffs in Q1, those will show up in the P&L in Q3, because that expense travels with inventory. So if you want to, you know, I think it's too early to talk about 2026 and annual impact there.
Speaker Change: Yes, I think we spent 90 days so it's a more specific product by product analysis, now and like I said before.
Speaker Change: The timing of when that hits right. So.
Speaker Change: The tariffs that you pay.
Speaker Change: In Q1 for example, and we did pay some tariffs in Q1 those will show up in the P&L in Q3, because that expense travels with inventory so.
Speaker Change: So if you want to I think it's too early to talk about 2026.
Todd Garner: I haven't heard any of our peers really do that. But we gave it to you quarter by quarter. You know, I told you $0.02 in Q3 and $0.12 in Q4 for the purpose of, you know, you can see that obviously Q4 would be closer to the run rate than Q1. Is that $0.12 in Q4, the actual run rate, or is the run rate kind of higher than that? I'm not sure how much the inventory returns are helping Q4 as an offset. Yeah, I mean, obviously, there'll be mitigation steps that you could do. And, you know, there could also be growth.
Speaker Change: And annual impact there I don't I havent heard any of our peers really do that but we gave it to you quarter by quarter I told you two cents in Q3 and 12 cents in.
Speaker Change: In Q4 for the purpose of.
Speaker Change: To see that obviously Q4 would be closer to the run rate than Q3.
Speaker Change: Okay is that 12% in Q4, the actual run rate or is the run rate kind of higher than I'm not sure how much. The inventory turns are are helping Q4 as an offset.
Speaker Change: Yes.
Speaker Change: Obviously there'll be mitigation.
Speaker Change: Steps that you could do and there could also be growth and so we're not going to get into 2026 members today.
Todd Garner: And so we're not going to get into 2026 numbers today. But, but that's the that's the impact for 2025. And I think it gives you decent visibility into what the run rate would look like. And, you know, hopefully, very soon, we're not at the 145% number anymore, either.
Speaker Change: But that's the that's the impact for 2025 and I think it gives you a decent visibility into what the run rate would look like.
Speaker Change: Hopefully very soon we're not at the 145%.
Todd Garner: But you know, we'll see how that all plays Great, okay, thanks a lot. Thank you.
Speaker Change: Number anymore, either but we'll see how that all plays out.
Speaker Change: Great. Okay. Thanks, a lot.
Mike Matlin: Our next question comes from the line of Mike Matlin of Needham. Your line is open, Mike. Yeah, thanks. You know, I was just wondering if you could give us any sense of what you think the company's kind of growth, top line growth potential is once you get past the supply chain issues completely. I mean, I know in the past, you talked about kind of very high single digit, organic growth, driven by, you know, kind of the 30% plus of these, the four platforms you growing, you know, 20%, plus, maybe like low to mid single digit growth in the rest of the business.
Speaker Change: Thank you.
Speaker Change: Our next question comes from the line of Mike Matt.
Speaker Change: Needham.
Speaker Change: Your line is open mic.
Speaker Change: Yes. Thanks.
Speaker Change: I was just wondering if you could give us any sense of what you think the company is kind of a growth top line growth potential is once you get past the supply chain issues completely.
Speaker Change: I know in the past you talked about kind of very high single digit organic growth driven by kind of the 30% plus of these before platforms, you mentioned growing 20% plus maybe like low to mid single digit growth in the rest of the business.
Patrick Beyer: You know, looking at the slides and hearing your commentary, it sounds like maybe those four growth drivers are, you know, you're talking about double digits. So maybe the right way to look at that, it's more like 10% growth of those and low to mid single digits in the rest of the business. But I don't know if you can comment on that at all.
Speaker Change: Looking at the slides and hearing your commentary it sounds like maybe those four drivers or youre talking about double digit so maybe the right way to look at that it's more like 10% growth of those.
Speaker Change: Low to mid single digits and the rest of the business.
Speaker Change: I don't know if you could comment on that at all.
Patrick Beyer: Mike, yeah, good question. Again, so we've guided this year. for to for to say. And we're on track for that. I've talked about our four growth drivers that are double digit growers and we feel good about We are operating in big markets growing fast. So we think our markets are growing mid-high single digits. And so, you know, as I think about this business, it's a four to nine percent grower there on the top line. And obviously, we're looking for more growth drivers and how we can drive that harder. But I think that balance mix with four growth drivers, double digits, and the rest of the portfolio, I think four to nine percent is in that range.
Mike Matt: Mike Good question again, so we've guided this year.
Speaker Change: Four to six and we're on track for that.
Speaker Change: I've talked about our core growth drivers that are double digit growers and we feel good about.
Speaker Change: We are operating in big markets growing fast. So we think our markets are growing mid high single digits and so.
Speaker Change: As I think about this business, it's a 4% to 9% grow are there on the top line and obviously, we're looking for more growth drivers and how we can drive that harder, but I think that balanced mix with four growth drivers double digits and the rest of that portfolio I think 4% to 9% is in that range.
Patrick Beyer: Yeah, okay. I mean, are the supply chain issues kind of keeping you at the lower end of the range, and maybe you could get toward the higher end of that range without the supply chain issues? I don't know if you're able to quantify the impact this year at all from that. I mean, how many points of growth is that taking away? Yeah, we can't quantify it today, but I think you're right there. We want to win in our markets, and we believe that's taking markets here. And winning is more in the 7% and 8% and 9% range, not 4% or 5% and 6%.
Speaker Change: Yes, okay.
Speaker Change: I mean is the other.
Speaker Change: Are there supply chain issues kind of keeping you at the lower end of the range and maybe you could get towards the higher end of that range without the supply chain issues I don't know if youre able to quantify the impact this year at all from that I mean, how many points of growth is that taking away.
Speaker Change: Yes, we can't quantify it today, but I think youre right there I mean.
Speaker Change: We want to win in our markets and we believe that's taking market share and winning is more in the 7% to eight 9% range not four five and six thats, what we should be doing and that's what we're driving for.
Patrick Beyer: That's what we should be doing and that's what we're driving. Okay, got it.
Todd Garner: And then just question for Todd. The currency benefit that's, you know, pushing up your EPS guidance, where will that show up in the P&L? Is it in gross margin, op-ex, or kind of spread between them? Yeah, it is spread through the P&L, Mike. As I said, gross margin, you know, we started a quarter ago, I said there's about 50 basis points of headwind in gross margin, that's gone down 20. So now, you know, still still headwind, but closer to 30 than 50. And, and so yeah, the FX impact is in both gross margin and the operating Thank you.
Speaker Change: Okay got it and then just a question for Todd.
E.
Speaker Change: The currency benefit.
Speaker Change: Pushing up your EPS guidance.
Speaker Change: Where will that show up in the P&L is it in gross margin and Opex are kind of spread between them.
Speaker Change: Yes, it is spread through the P&L.
Speaker Change: Mike as I said, our gross margin, we started a quarter ago. I said, there was about 50 basis points of headwind in gross margin that's gone down 20%, So now still still headwind, but closer to $30 50.
Speaker Change: And so yes, the FX impact is in both gross margin and the operating expenses.
Patrick Beyer: I would now like to turn the conference back to Pat Beyer for closing remarks, sir. Thank you, Lateef. I want to thank everybody for joining us for your time today, and we look forward to speaking with you on our next earnings call. Thank you.
Speaker Change: Thank you I would now like to turn the conference back to Pat buyer for closing remarks, Sir.
Speaker Change: Thank you Latif I want to thank everybody for joining us for your time today and we look forward to speaking with you on our next earnings call. Thank you.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Thanks for watching!
Speaker Change: This concludes today's conference call. Thank you for participating you may now disconnect.
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