Q3 2025 CONMED Corp Earnings Call
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Operator: 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. Our first question comes from the line of Robbie Marcus of JPMorgan. Please go ahead, Robbie.
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Speaker #2: Good day and thank you for standing by . Welcome to CONMED Corp third Quarter Fiscal 2025 Earnings Conference Call . At this time , all participants are in a listen only mode .
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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.
[Analyst]: Hi, this is actually Lily on for Robbie. Thanks for taking the question. 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? Should we be expecting any other changes to your thinking and strategy on M&A or debt paydown?
Speaker #2: You will then hear an automated message advising your hand is raised . To withdraw your question , please press star one . One again .
Speaker #2: 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 .
Securities laws.
Investors are cautioned that any such forward looking statements are not guarantees of future events performance or results.
Todd Garner: 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 that pay a dividend. 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. When I've given that answer, I think investors have almost unanimously been 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.
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.
Speaker #2: 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 .
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.
Speaker #2: 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 .
We'll also hear management refer to non-GAAP or adjusted measurements during this discussion.
Speaker #2: For more details on the risk and uncertainties that may cause actual results to differ materially . The company disclaims any obligation to update any forward looking statements that may be discussed during this call , except as may be required by applicable law .
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.
Todd Garner: That exchange and fit in more with the peer set, what's expected in our market, in our size, and return cash to shareholders through share repurchases instead of dividends.
Speaker #2: You will also hear management referred 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 this normal ongoing operations.
[Analyst]: Great, that's helpful. I was hoping to get some early thoughts on 2026. I know you're not guiding yet, but there's some moving pieces here. 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? Thanks so much.
These adjusting items are specified in the reconciliation supporting the company's earnings releases posted to the company's website.
Speaker #2: 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 this normal ongoing operations .
With these required announcements completed I will turn the call over to Pat buyer, President and Chief Executive Officer for opening remarks, Mr buyer.
Todd Garner: I certainly appreciate the attempt. 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. We're not going to get into that. I don't have anything to call out for you at this time.
Thank you operator, good afternoon, and thank you for joining us for <unk> third.
Speaker #2: 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 , President and Chief Executive Officer , for opening remarks .
Third quarter 2025 earnings call.
With me today are tapped Gardner, our executive Vice President and Chief Financial Officer.
Operator: Thank you. Our next question comes from the line of Matt O'Brien at Piper Sandler. Your line is open, Matt.
I'll begin with a review of our performance in the quarter.
He will then walk through our financial results and guidance in more detail. We will then open the call to your questions.
Speaker #2: Mr. Bayer .
Speaker #3: Thank you . Operator . Good afternoon , and thank you for joining us for CONMED Corp quarter 2020 Earnings Call . With me today is Todd Gardiner .
[Analyst]: Hi there. This is Anna from Matt. Thanks for taking the questions. 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. Did this become a larger headwind, sort of incrementally, or what's the thought process there?
Before I dive into the quarter I want to take a moment to recognize the continued dedication of our global team there.
Their commitment to our mission and powering healthcare provider worldwide to deliver exceptional outcomes for patients is what drives our performance and enables us to navigate change with confidence.
Speaker #3: Our executive vice president and chief Financial officer . I'll begin with the review of our performance in the quarter . Todd will then walk through our financial results and guidance in more detail .
Speaker #3: 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 .
Turning to our third quarter results total sales were approximately $338 million.
This represents six 7% growth year over year as reported and six 3% growth in constant currency.
Speaker #3: Their commitment to our mission , empowering healthcare providers worldwide to deliver exceptional outcomes for patients is what drives our performance and enables us to navigate change with confidence .
Todd Garner: Great question, Anna. Thank you for that question to make sure we're clear. No, this has been consistent. We started saying 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 six-month deferral. The tariffs you're seeing hit the P&L in the back half of 2025 are actually the tariffs from calendar Q1 and Q2 of 2025. That has been consistent with how we've projected it. Q2 of 2025 was $0.07, and that's what's being recognized in Q4 of 2025.
Performance was led by general surgery, which grew six 9% globally on a constant currency basis, and orthopedics, which delivered five 3% constant currency growth globally.
Speaker #3: 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 two 2% year over year.
<unk> special items that affected comparability.
Adjusted diluted earnings per share came in at $1 eight and.
An increase of two 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.
Speaker #3: 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 eight , an increase of 2.9% compared to the prior year quarter .
I'll begin with vibrates in foot and ankle two foundational growth drivers within our orthopedics portfolio.
[Analyst]: Great. That's super helpful. Thanks for clarifying there. I believe DV-5's manufacturer on their quarterly call mentioned a 90% utilization rate of their insufflator in the quarter. In your view, what keeps that from going to 100%? Where does AirSeal fit into the picture there?
<unk> continues to be a cornerstone of our sports medicine strategy quarter, three growth was driven by expanding clinical adoption and strong surgeon engagement.
Speaker #3: 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 biobase and foot and ankle two foundational growth drivers within our orthopedics portfolio .
The higher prices now used across 70, plus distinct procedures from rotator cuff.
Repairs to Kelly's and gluteus media suite constructions underscoring its first utility and clinical relevance.
Speaker #3: Biobase continues to be a cornerstone of our sports medicine strategy. Quarter three growth was driven by expanding clinical adoption and a strong surge in engagement.
Pat Beyer: Good question on this pad here. If you remember last quarter, we guided that what we're seeing is between 80% and 90% of procedure rates with DV-5s happening. What we're seeing is the clinical benefits of AirSeal, and we would remind you those are shorter length of stay, reduction of pain, are equally applicable to DV-5 that were in XI. What we're seeing is the early adoption with AirSeal with DV-5 is limited because of the commitment that hospitals have to have to do a set number of procedures with DV-5. What we're seeing with the total volume of DV-5s in the market, it's nearly 90%. What we're able to see is those hospitals that have DV-5s and are after the commitment volume that they have to do, it's in that range of 80% to 90%. It ties to what we were saying before.
Turning to our foot and ankle franchise, we see continued opportunity in this clinical area and we will remain focused on driving growth and delivering strong economic returns to expanded adoption and portfolio innovation.
Speaker #3: Biobase 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 .
Shifting to our general surgery portfolio I want to highlight two platforms that continue to demonstrate strong performance and long term potential buffalo filter and <unk>.
Speaker #3: 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.
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.
Speaker #3: Shifting to our general surgery portfolio , I want to highlight two platforms that continue to demonstrate strong performance and long term potential Buffalo Filter and Air Seal .
Moving to <unk>. This platform remains a foundational pillar of our general surgery.
Folio.
Clinical benefits reduced post operative pain shorter length of stay and improved outcomes are well established and continue to resonate with surgeons.
Speaker #3: 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 air Seal .
Pat Beyer: I would also just say we're learning every day on that. What is steadfast is when clinicians use AirSeal with DV-5, they're getting enhanced clinical benefits for their patients.
As DB five adoption expands in the U S. We continue to see <unk> attachment rates within our range of expectations.
Speaker #3: This platform remains a foundational pillar of our general surgery portfolio . The clinical benefits reduce post-operative pain , shorter length of stay , and improved outcomes are well established and continue to resonate with surgeons .
We're also closely monitoring the potential redeployment of extra high system trade ins into international markets, and then to United States Afcs, while still early we view this as a promising opportunity to accelerate <unk> growth globally.
Operator: Thank you. Our next question comes from the line of Vic Chopra of Wells Fargo. Please go ahead, Vic.
Speaker #3: As DB5 adoption expands in the US , we continue to see air seal attachment rates within our range of expectations . We're also closely monitoring the potential redeployment of XY system trade ins into international markets and into United States .
Vic Chopra: Hey, good afternoon, and thanks for taking the questions. Congrats on a nice quarter. A couple for me. Maybe one just on AirSeal. I mean, I think you're talking 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 US, and how you're thinking about international markets. I had a follow-up, please.
Particularly in regions, where X sight placements are increasing and air sea of clinical advantages are well understood.
Stepping back one of my first priorities as CEO after more than a decade with combat was to initiate a comprehensive strategic review of our portfolio and operations to.
Speaker #3: ASCs . While still early , we view this as a promising opportunity to accelerate air cell growth globally , particularly in regions where XY placements are increasing and air seals clinical advantages are well understood .
To support this effort engaged top tier consultants to bring a fresh perspective on where we are today.
Pat Beyer: Yeah, Vic, 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 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. It will also play out in the international markets in which we're seeing right now.
Our greatest opportunities lie and how we can deliver the strongest long term returns for shareholders.
Speaker #3: 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 engage 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.
Setting each product offering through the lens of long term return on invested capital.
<unk> its clear sharpen our focus and improve our margin profile and positioning con net for durable long term growth.
For a company of our size comment has a diverse set of product lines early findings confirms that our strongest growth opportunities lie in our core markets.
Vic Chopra: Got it. That's super helpful. I'm just curious, if you can elaborate on the specific initiative that strengthened your supply chain in the third quarter and how you intend to either maintain or enhance these improvements through 2026. Thank you.
Our evaluation has been detailed and rigorous.
Setting each product offering through the lens of long term return on invested capital.
<unk> invasive robotic and laparoscopic surgery.
<unk> and the surgical treatment of orthopedic soft tissue repair.
<unk> its clear sharpen our focus and improve our margin profile and position <unk> for durable long term growth.
We are positioned to capitalize on these opportunities through a portfolio of best in class clinical solutions, including <unk>, Buffalo filter and <unk>, which is gaining momentum.
Pat Beyer: You know, Vic, 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 Q1, we had an outside consultant come in and help us. We made progress in Q1. We made progress in Q2. In Q3, we had record manufacturing volumes for our orthopedic products. Also, we had a record reduction in the critical SKUs associated to getting our orthopedics business back on all ends. I would characterize it as we made progress. We're not there yet. We expect to make continued progress in Q4. The key things we're working on are systems and enhancements to our procurement, our planning, and our production area.
For a company of our size comment has a diverse set of product lines early findings confirmed that our strongest growth opportunities lie in our core markets.
Expanding application within foot and ankle procedures.
And then my invasive robotic and laparoscopic surgery.
These platforms will be the cornerstone of our future investments in growth and profitability, enabling content to drive superior clinical outcomes for patients, while delivering meaningful improvements in the health care economics.
Smoke evacuation and the surgical treatment of orthopedic soft tissue repair.
We are positioned to capitalize on these opportunities to our portfolio of best in class clinical solutions, including <unk>, Buffalo filter and Barb race, which is gaining momentum.
As part of our evolving capital allocation framework, we are transitioning the cash returned to shareholders from our legacy dividend policy to prioritize share repurchases.
Expanding applications within foot and ankle procedures.
These platforms will be the cornerstone of our future investments in growth and profitability, enabling content to drive superior clinical outcomes for patients, while delivering meaningful improvements in the health care economics.
The board has authorized a new $150 million share repurchase program here.
Historically, we have returned approximately $25 million annually through dividends today.
Operator: Thank you. Our next question comes from the line of Young Lee of Jefferies. Please go ahead, Young.
As part of our evolving capital allocation framework, we are transitioning the cash returned to shareholders from our legacy dividend policy to prioritize share repurchases.
Today, we are suspending the dividend and you should expect at least $25 million.
Young Li: All right, great. Thanks for taking our questions. I was wondering if you can maybe give us insight on sort of the US AirSeal non-robotic laparoscopic opportunity, if you guys have been making any headways in that channel. Also, maybe a similar question just for US non-derivative robotic attachments, Hugo, CMR. Asian. I'm just wondering how the attachment rate for those categories.
Share repurchases annually going forward.
This change enhances our financial flexibility and supports disciplined capital deployment aligned with long term shareholder value creation.
The board has authorized a new $150 million share repurchase program here.
Historically, we have returned approximately $25 million annually through dividends today.
In conclusion, we remain confident in our ability to deliver both top line growth and margin expansion supported by our focused portfolio operational discipline and our commitment to innovation.
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.
With that I'll turn the call over to Todd who will provide a more detailed analysis of our quarter three financial performance and discuss our 2025 financial guidance.
<unk> 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 our focused portfolio operational discipline and our commitment to innovation.
Pat Beyer: Vic, good question. I'll try to take it in two parts. I think I heard your question. Number one, AirSeal attachment. Internationally, on the robots that are internationally that are not DV-5. 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 DV-5 and outside of Intuitive. That also salutes the work that Intuitive has done in pioneering the clinical benefits of robotic surgery. DV-5, as you know, has to have an integrated insufflator. The robotic systems that aren't DV-5 have to have an insufflator that attaches to it.
Sure.
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've included an investor deck on our website.
With that I'll turn the call over to Todd who will provide a more detailed analysis of our quarter three financial performance and discuss our 2025 financial guidance.
The results of the quarter and our financial guidance.
For the third quarter of 2025 total sales increased six 3% year over year.
Sure.
The quarter included one extra selling day, which we estimate contributed between 100 and 150 basis points to growth.
Thank you Pat all sales growth numbers I reference today will be Gary in constant currency. The reconciliation to GAAP numbers is included in our press release as usual we've included an investor deck on our website.
For Q3, our sales in the U S increased five 9% versus the prior year quarter and our international sales grew six 8%.
Results of the quarter and our financial guidance.
For the third quarter of 2025 total sales increased six 3% year over year.
Total worldwide orthopedic sales grew five 3% in the third quarter.
The quarter included one extra selling day, which we estimate contributed between 100 and 150 basis points to growth.
In the U S orthopedic sales increased five 5% and internationally orthopedic sales increased five 2%.
For Q3, our sales in the U S increased five 9% versus the prior year quarter and our international sales grew six 8%.
Total worldwide General surgery sales increased six 9% in the quarter.
Pat Beyer: In the international space, we're seeing AirSeal, where the clinical benefits are well known, again, would remind you, shorter length of stay, reduction in pain, are also being used in the non-DV-5 robots. I would pivot to your other question on the United States. We continue to see a strong opportunity in the laparoscopic area of the non-robotic procedures. 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. 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 Vic. Sorry about that, Young.
U S General surgery sales grew 6.0%.
Total worldwide orthopedic sales grew five 3% in the third quarter.
Internationally General surgery sales increased nine 2%.
Now, let's move to the expense side of the income statement.
In the U S orthopedic sales increased five 5% and internationally orthopedic sales increased five 2%.
We will discuss expenses and profitability in the third quarter, excluding special items, which are detailed in our press release.
Total worldwide General surgery sales increased six 9% in the quarter.
Adjusted gross margin for the third quarter was 56, 1%, which was ahead of our projection due to positive sales mix.
U S General surgery sales grew 6.0%.
Internationally General surgery sales increased nine 2%.
As a reminder, the Q3 results reflect the expenses that went into inventory in Q1, when our manufacturing variances were high.
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.
This drove a 40 basis point decline in gross margin compared to Q3 of 2024, including 20 basis points of headwind from new tariffs.
Adjusted gross margin for the third quarter was 56, 1%, which was ahead of our projection due to positive sales mix.
Research and development expense for the third quarter was four 1% of sales 20 basis points lower than the prior year quarter.
Young Li: No worries. It's an honor to be confused for Vic.
As a reminder, Q3 results reflect the expenses that went into inventory in Q1, when our manufacturing variances were high.
Pat Beyer: I'll make it up to you in London.
Third quarter adjusted SG&A expenses were 37, 3% of sales 10 basis points higher than the prior year.
Young Li: Okay. Yep. Looking forward to seeing you there. Just a follow-up, I guess, just on the orthopedic stuff. 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 recapture share once these supply chain issues are resolved, hopefully by year-end or early next year? 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 triggers such a big jump in the type of procedures and where that can go?
This drove a 40 basis point decline in gross margin compared to Q3 of 2024, including 20 basis points of headwind from new tariffs.
On an adjusted basis interest expense was $6 $3 million in the third quarter.
The adjusted effective tax rate in Q3 was 25, 5%.
Research and development expense for the third quarter was four 1% of sales 20 basis points lower than the prior year quarter.
Third quarter GAAP net income was $2 9 million.
Compared to $49.0 million in 2024.
Third quarter adjusted SG&A expenses were 37, 3% of sales 10 basis points higher than the prior year.
<unk> earnings per diluted share was <unk> <unk> 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 two 1% compared to the third quarter of 2024.
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.
Our Q3 adjusted diluted net earnings per share were $1 eight an increase of two 9% compared to the prior year quarter.
Compared to $49.0 million in 2020 for.
GAAP earnings per diluted share were nine cents this quarter compared to $1 57, a year ago.
Turning to the balance sheet, our cash balance at September 30 was $38 9 million compared.
Excluding the impact of special items discussed earlier in the third quarter. We reported adjusted net income of $33 4 million, an increase of two 1% compared to the third quarter of 2024.
Pat Beyer: Vic. Two things. I would, again, the two parts, 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. 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.
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.
Our Q3 adjusted diluted net earnings per share were $1 eight an increase of two 9% compared to the prior year quarter.
Inventory days.
At September 30 were 191 down from 212 days at the end of June.
Turning to the balance sheet, our cash balance at September 30 was $38 9 million compared.
Long term debt at the end of the quarter was 853.0 million.
Versus $881 $1 million as of June 30.
Compared to $33 9 million at June 30.
Accounts receivable days as of September 30, or 60 days down from 62 days at the end of Q2.
Our leverage ratio stood at 3.0 times as of September 30th reaching that milestone slightly ahead of expectations for the year, which is Pat explained provides us additional flexibility to return cash to shareholders through share repurchases.
Inventory days.
September 30th were 191 down from 212 days at the end of June.
Long term debt at the end of the quarter was 853.0 million.
Cash flow provided from operations in the quarter was $53 7 million compared.
Versus $881 1 million as of June 30.
Compared to $51 2 million in the third quarter of 2024.
Our leverage ratio stood at 3.0 times as of September 30th.
Pat Beyer: 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 to them. Our sales professionals are doing a great job, continuing to sell what they can sell, and support clinical cases. I would also tell you our expectation is not the moment we get off of back order that we, again, immediately start taking market share. We believe it'll be a transactional period of time where it'll take a quarter or two for those customers to, again, open their eyes to our sales force and the opportunity for them to use CONMED products.
Capital expenditures in the third quarter were $5 $2 million compared to $3 4 million a year ago.
<unk> that milestone slightly ahead of expectations for the year, which is Pat explains provides us additional flexibility to return cash to shareholders through share repurchases.
Now, let's turn to financial guidance.
Let's start with revenue.
We're guiding Q4 revenue to be between 363 and $370 million, which represents mid single digit constant currency growth for the total company was about 100 basis points of tailwind from currency.
Cash flow provided from operations in the quarter was $53 7 million <unk>.
Compared to $51 2 million in the third quarter of 2024.
Capital expenditures in the third quarter were $5 2 million compared.
Compared to $3 $4 million a year ago.
That would put the full year 2025 reported revenue guidance at a range of $1 $3 65 billion to $1 $3 72 billion, which is a narrowing from the prior range.
Now, let's turn to financial guidance.
Let's start with revenue.
We're guiding Q4 revenue to be between 363, and $370 million, which represents mid single digit constant currency growth for the total company with about 100 basis points of tailwind from currency.
FX is still projected to be essentially neutral for the full year of 2025.
We continue to project adjusted gross margin in Q4 to be in the mid 55% range inclusive of about 150 basis points of headwinds from the new tariffs in 2025.
Operator: Thank you. Our next question comes from the line of Travis Steed of BofA Securities. Please go ahead, Travis.
That would put the full year 2025 reported revenue guidance at a range of 1.3 dollars 65 billion to $1 $3 72 billion, which is a narrowing from the prior range.
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.
Travis Steed: Hey, this is Bree Sean for Travis. My first question, I just wanted to ask a little bit on the capital environment and what you're seeing. This quarter and those trends, and then how you expect them to sort of progress over the next 12 months here.
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.
Compared to the prior guidance range of $4 40 to $4 55.
Pat Beyer: Pad here. 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. I think what we're seeing going into next year also as interest rates come down, a continued flow of that.
So far 2025 has been a year of solid execution and made meaningful strategic transformation work.
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.
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 physicians comment to be a stronger more profitable company over the long term.
Compared to the prior guidance range of $4 40 to $4 55.
So far 2025, it's been a year of solid execution and made meaningful strategic transformation work.
With that we'd like to open the call to your questions.
Travis Steed: Great. Thank you. Maybe just one follow-up on op margins. I know you guided more flat for margins in 2025 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 what’s it take to consider in SG&A and R&D, just thinking, looking forward?
Thank you as a reminder to ask a question you will need to press star one on your telephone to remove yourself from the queue. You May press star one again.
Pat mentioned.
Portfolio review is ongoing and we're already seeing early benefits from a more focused approach.
We believe the work done in 2025 physicians comment to be a stronger more profitable company over the long term.
You will be limited to one question and one follow up please standby, while we compile the Q&A roster.
With that we'd like to open the call to your questions.
Our first question comes from the line of Robbie Marcus Jpmorgan. Please go ahead Robby.
Thank you as a reminder to ask a question you will need to press star one one on your telephone.
Young Li: Yeah, thanks. Gretchen, did I get that name right?
Hi, This is actually Lili on for Robbie Thanks for taking the question.
To remove yourself from the queue you May press star one again.
Travis Steed: Yes, that's correct.
Young Li: Okay, we're going to talk about '26, end '26. 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 are things that work against that, right? The new tariffs, of course, are going to work against that. We will give 2026 guidance when we do our Q4 call.
Ill 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.
You will be limited to one question and one follow up please standby, while we compile the Q&A roster.
Our first question.
Comes from the line of Robbie Marcus of Jpmorgan. Please go ahead Robby.
Great question. Thank you.
Hi, This is actually Lili on for Robbie Thanks for taking the question.
No. Other changes you should not expect any other changes we worked with our banking partners we looked at.
Ill 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 and debt Paydown.
Our peer set.
Device companies our size.
Operator: Thank you. Our next question comes from the line of Mike Matson of Needham & Company. Your line is open, Mike.
We're one of the very few and pay a dividend.
It may.
Maybe one of the more common questions I get these days.
Vic Chopra: Yeah. Hey, guys. This is Joseph Fond from Mike. Maybe just on orthopedics. I saw that it looks like improved growth in the US and internationally. I just want to see if you can maybe just give more color on that improvement in the quarter. What are you seeing there? What were the major drivers in the quarter?
With the software that is why the company is not buyers of our own stock.
Great question. Thank you.
No. Other changes you should not expect any other changes we worked with our banking partners we've looked at.
I've answered over the last several years.
We feel like we've had to prioritize getting leverage now.
Our peer set.
Device companies our size.
Given that answer I think investors almost unanimously is in agreement with those priorities.
We're one of the very few and pay a dividend.
Maybe one of the more common questions I get these days.
Now that you've reached the three zero, Mark which has been kind of a target we've reached a little sooner than we thought we thought now would be a good time to make that.
With the stock.
Pat Beyer: George said good question. Again, I'd call out two things. BioBrace continues to do well. BioBrace is a great growth platform, not just in our sports medicine portfolio, but also in our medical portfolio, and it's doing great things for us. That also, combined with improving reduction in back order and improving service levels on the operation side, are allowing us to take some incremental steps forward in growth. I would again just call out, we're not declaring victory there on the operation front and continue to expect progress in Q4.
Why the company is not buyers of our own stock.
I've answered over the last several years.
Make that exchange and.
We feel like we've had to prioritize leverage now.
More with the peer set in what is expected at our in our market and in our size and.
Given that answer I think investors almost unanimously disagreement with those prices.
And return cash to shareholders through share repurchases.
Now that you've reached a 3.0, mark which has been kind of a target we've reached a little sooner.
Great that's helpful.
We don't know it would be good time to make that.
And then I was hoping.
Got some early thoughts on 2026, I know youre not guiding yet, but there is some moving pieces here. So can you talk about how youre thinking about supply and your ability to fully meet demand next year and any other important headwind or tailwind to be keeping in mind. Thanks. So much.
Exchange in <unk>.
More with the peers that and what's expected.
In our market and our size.
And.
Vic Chopra: Okay. I guess just a quick follow-up. Really appreciate all the color you gave on the backlog and the improvement there. I'm just wondering if there's a way that you can kind of plot this out timeline-wise, maybe what inning of the improvement are we in? Yeah, that'd be helpful.
And return cash to shareholders through share repurchases and dividends.
I certainly appreciate that.
Great that's helpful.
And then I was hoping.
And I know all of our interest as quickly in 2026.
Yes, some early thoughts on 2026, I know youre not guiding yet, but there is some moving pieces here. So can you talk about how youre thinking about supply and your ability to fully meet demand next year and then the other important headwind or tailwind to be keeping in mind. Thanks. So much.
We're going to we're going to guide 2026 at the appropriate time in the year.
So we're not going to get into that.
Pat Beyer: Well, I'm going to hopefully this isn't the World Series game that went to the 18 innings last couple of years. 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. 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. We know supply chain can take quarters as vendors turn on and make progress. It doesn't happen overnight, but I feel good about our progress here.
And I don't have it in the call out for you.
Thank you.
I certainly appreciate that.
Question comes from the line.
All of our interests as quickly in 2026.
Matt O'brien of Piper Sandler Your line is open Matt.
We're going to guide to 2000.
At the appropriate time.
Hi, there this is all about.
<unk>.
On for Matt Thanks for taking the questions. So I guess I just wanted to ask one on tariffs.
So we're not going to get into that.
And I don't have anything to call out for you.
If there was any incremental tariff headwind versus what you expected before.
Thank you our.
In the press release, you commented on <unk> in the back half and Q2 and now Youre expecting seven in Q4. So does this become a larger headwind.
Our next question comes from the line.
Matt O'brien of Piper Sandler Your line is open Matt.
Vic Chopra: Thanks very much. Congrats on the quarter.
Pat Beyer: Thank you.
Hi, there this is all about.
Operator: Thank you. I would now like to turn the conference back to Pat Beyer for closing remarks. Sir.
Comes from Matt Thanks for taking the questions. So I guess I just wanted to ask one on tariffs.
Sort of incrementally or what's the thought process there.
Great question. Thank you for that question to make sure. We're clear. So now this is a consistent so we.
Pat Beyer: Thank you. I want to thank everybody for joining us for our Q3 earnings call. We look forward to a great Q4, and look forward to updating you on 2026 in January. Thank you.
If there was any incremental tariff headwind versus what you expected before.
In the press release, you commented on <unk> in the back half and Q2 and now Youre expecting seven in Q4. So did this become a larger headwind.
We started seeing a couple of quarters ago, we forecasted that Q3 would be about two.
And then Q4 would be about seven.
Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
The reason we have been so accurate with that is because.
Sort of incrementally or what's the thought process there.
Tariffs go into our manufacturing variances, which travel with inventory and then get released in the external P&L with revenue, which for US is about a six month deferral. So the tariffs youre seeing hit the P&L in the back half of 'twenty, five or actually the tariffs from tower.
Great question. Thank you for that question to make sure. We're clear. So this has been consistent so we we started saying a couple quarters ago, we forecast that Q3 would be about <unk>.
In Q4 would be about 7%.
The reason we've been so accurate.
During Q1 and Q2.
Yes.
Tariffs go into our manufacturing variances, which travel with inventory and then get released in the external P&L with revenue, which for US is about a six month deferral. So the tariffs youre seeing hit the P&L and the <unk>.
And so.
That has been consistent with how we projected it so.
Q2 of 2025.
Seven.
And that was being recognized in Q4 of 2025.
Back half of 'twenty.
Great that's super helpful.
Or actually the tariffs from calendar Q1 and Q2.
Thanks for clarifying there and then.
I believe.
And so.
TD five as manufacturer on their quarterly call mentioned, 90% utilization rate of their index later in the quarter. So.
That has been consistent with how we projected it so yes, so Q2 of 2025.
In your view, what keeps that from going to 100% and then where does <unk> fit into the picture there.
Seven.
And that was being recognized in Q4.
Good question this pad here.
Great. That's super helpful. Thanks for clarifying there and then.
If you remember last quarter, we guided that our what we're seeing is between 80 and 90%.
I believe.
<unk> is a manufacturer on their quarterly call mentioned, 90% utilization rate of their interest later in the quarter. So.
Procedure rates with DB <unk> happening.
And what we're seeing is the clinical benefits of <unk>.
In your view, what keeps that from going to 100% and then where does <unk> fit into the picture there.
Remind you those are shorter length of stay reduction of pain.
Are equally applicable to <unk> five that were in Si and what we're seeing is.
Good question this pad here.
Remember last quarter, we guided that our what we're seeing is between 80 and 90% plus.
Early adoption with.
<unk> five is limited because of the commitment the hospitals have to have to do a set number of procedures with DB side and what we're seeing with the total volume of <unk> in the market, it's nearly 90%, but we're able to see is the.
Procedure rates with DB.
Turning.
And what we're seeing is the clinical benefits of our scale.
Remind you those are shorter length of stay reduction of.
Of pain.
Are equally applicable to <unk>, five network and XI and what we're seeing.
Those hospitals that have <unk> five.
Early adoption with.
After the commitment volume that they have to do.
<unk> five is limited because of the commitment that hospitals have to have to do a set number of procedures with DB buy and what we're seeing with the total volume of <unk> in the market.
That range of 80% to 90% so it ties to what we were saying before and I would also just say we're learning everyday on that what.
What is steadfast says when clinicians use <unk> with DB.
Nearly 90%, but we're able to see as those hospitals that have <unk>.
They're getting an enhanced clinical benefits for their patients.
And after the commitment that they have to do.
Thank you.
Our next question comes.
In that range of 80% to 90% so it ties to what we were saying before.
From the line of <unk> Chopra of Wells Fargo. Please go ahead Vic.
Let's just say we're learning everyday.
Hey, good afternoon, and thanks for taking the questions congrats on a nice quarter.
What is steadfast says when clinicians use <unk> with DB.
A couple from me so maybe one on just on <unk> I mean, I think you've talked in your comments about.
They're getting an enhanced clinical benefits for their patients.
Excise system, that's being put into international markets need to the afcs I'm just curious how youre thinking about the adoption rate in agencies in the U S and how do we think about international markets and then I had a follow up please.
Thank you.
Our next question comes from the line of Vik Chopra of Wells Fargo. Please go ahead Vic.
Yes, because I think about <unk> size, we know that.
Hey, good afternoon, and thanks for taking the questions congrats on a nice quarter.
<unk> have to have an external insufflator, we know that <unk> have a history of benefiting from the clinical benefits of <unk>.
A couple for me so maybe one on just on <unk> I mean, I think you talked to your comments about.
<unk> is being put into international markets need to the afcs I'm just curious how youre thinking about the adoption rate in agencies in the U S and how you're thinking about international markets and then I had a follow up please.
Note that when <unk> placed in an ASC shorter length of stay really matters, and so that benefit of <unk>, <unk>, which delivers reduction of pain shorter length of stay will play out we believe EMEA at CES and then we'll also play out in the international markets in which we're seeing right now.
Yes.
Think about that size, we know that <unk> have to have an external and some later.
We know the X sides have a history of benefiting from the clinical benefits of <unk>.
Got it that's super helpful and I'm just curious could you. If you can elaborate on the specific initiatives that strengthen your supply changes.
Note that when if and that site is placed in an ASC shorter length of stay really matters and so that benefit of <unk>, which delivered a reduction of pain shorter length of stay will play out we believe EMEA at CES and then we'll also play out in the international markets in which we're seeing right now.
By change in the third quarter, and how you intend to either maintain or enhance these improvements through 2026. Thank you.
Vic.
We started talking about it at the end of last year that we had we had to improve our supply chain specifically in our orthopedic world.
Got it that's super helpful and I'm just curious if you can elaborate on the specific initiatives that strengthen your supply changes.
We commented in quarter, one we had an outside consultants come in and help US we've made progress in quarter. One we made progress in quarter, two and quarter. Three we had record manufacturing volumes for our orthopedic products and lost so we had a record reduction and the critical skus associated.
By change in the third quarter, and how you intend to either maintain or enhance these improvements through 2026. Thank you.
We started talking about it at the end of last year that we had we had to improve our supply chain specifically in our orthopedic world.
Getting our recompete business back on offense.
We commented in quarter, one we had an outside consultants come in and help us with.
I would characterize it as we made progress we're not there yet we expect to make continued progress in quarter four and the key things, we're working on our systems and enhancements to our procurement our planet and our production area.
We've made progress in quarter, one we made progress in quarter, two and quarter.
Quarter, three we had record manufacturing volumes for our orthopedic products and so we had a record reduction and the critical skus associated to getting our orthopedics business back on offense.
Thank you.
Next question.
From the line of young Li of Jefferies. Please go ahead.
I would characterize it as we made progress we're not there yet we expect to make continued progress in quarter four and the key things, we're working on our systems and enhancements to our procurement our planet and our production area.
Alright, great.
No questions.
Was wondering if you can.
Okay.
Sort of the U.
<unk>.
<unk>.
Non robotic laparoscopic.
<unk>.
Thank you. Our next question comes from the line of young Li of Jefferies. Please go ahead.
You guys have been making any headway in that channel and then also maybe a similar question to support.
Alright, great.
No in vivo to robotics and pathways.
Taking our questions.
Was wondering if you can.
Hugo <unk>.
Thank you Pete.
Mike Asia.
Sort of.
U S <unk> non robotic laparoscopic entity.
I'm, just wondering how <unk> rates for those categories.
Yes.
Very good question I'll try to take in two parts on it I think I heard your question number one.
You guys have been making any headway in that.
<unk> Channel and then also maybe a similar question to support.
Sure.
There are appeal attachment.
Now in <unk> robotic and pathways Hugo.
Internationally. The robots that are internationally that are not <unk>. There was a recent meeting in Strasbourg, France that was the international or the global Society robotic surgery. There are a number of robotic systems that are coming into the market.
Hugo TMR.
Mike Asia.
I'm, just wondering how <unk> rates for those categories.
Vik good question I'll try to take it in two parts on it I think I heard your question number one.
It leads us to believe.
Eric.
There is a future for robotic surgery outside of <unk> and outside of intuitive.
Catchment.
Internationally. The robots that are internationally that are not <unk>. There was a recent meeting in Strasbourg, France that was the international Global Society robotic surgery. There are a number of robotic systems that are coming into the market.
And then also.
Salutes the work that intuitive has done in pioneering the clinical benefits of robotic surgery.
DB five as you know has to have in either it has an integrated into tighter there.
It leads us to believe.
Robotic systems that aren't <unk> five has to have a insufflator that attaches to it in the international space, We're seeing <unk>, where the clinical benefits are well known again would remind you shorter length of stay reduction in pain are also being used in the non <unk>.
There is a future for robotic surgery outside of <unk> and outside of intuitive.
And then also.
Salutes the work that intuitive has done in pioneering the clinical benefits of robotic surgery.
D D. Five as you know has to happen either it has an integrated into tighter there.
Thanks.
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.
Robotic systems that aren't TV five half to half insufflator that attaches to it in the international space, We're seeing <unk>, 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 <unk>.
We commented I think last quarter. There is over 2 million procedures that are done laparoscopically.
There are longer cases that are done also laparoscopically.
Thanks.
The clinical benefit of <unk> is being used and we're seeing more and more of a benefit.
We also pivot to your other question on the United States, We continue to see a strong opportunity in the laparoscopic area the non robotic procedures.
Driving from our United States commercial teams into that area.
Sorry about that I said back sorry about that.
We commented I think last quarter, there were 2 million procedures that are done laparoscopically.
Yes.
No worries.
It's an honor to be confused for VIX.
There are longer cases that are done also laparoscopically.
I will make it.
In London.
The clinical benefit of <unk> is being used and we're seeing more and more of a benefit.
Okay.
<unk>.
Just a follow up I guess.
Driving from our United States commercial teams into that area.
Got it.
Orthopedics.
Yes.
Kind of two parter.
Sorry about that I said back sorry about that.
Maybe following up.
Yes.
Yes.
Or so.
No worries.
Supply question can you maybe comment a little bit about your latest thoughts on.
Honored to be confused for VIX.
I'll make it.
In London.
Share loss.
Okay, Yes.
The recapture share once these supply chain issues are resolved hopefully by year end or early next year and then on.
Congrats Dan you're correct.
Just a follow up I guess.
Got it.
You bet.
Kind of two parter.
<unk>.
Maybe following up.
Thank you said 70 plus procedures.
Or so.
Yes.
Supply question can you maybe comment a little bit about your latest thoughts on.
Pretty big Joan I think last quarter, you called out 52.
What triggers such a big chunk.
Share loss in Europe.
Okay.
The recapture share once these supply chain issues are resolved hopefully by year end or early next year and then on bio brace.
Okay.
Okay.
John two things, so again, thats too little bit hard to hear you again.
Again plan on the number of procedures.
Thank you said 70 plus procedures.
The beauty of bio brace is it has a clinical indication.
Yes.
Pretty big Joan I think last quarter, you called out 52.
Tissue weakness exists it's approved to be used.
What triggers such a big chunk type of prediction.
Okay.
And then has the clinical benefit of strength and healing, which allows for surgeons to continue to expand and use it.
Okay.
So John two things side, but again thats too little bit hard to hear you again.
<unk> extended indications, where they haven't been normally able to use that.
Again plan on the number of procedures.
The beauty of buyer brace is it has a clinical indication.
With other products on the market.
It's just the expansion from the 15th to the 60 to 70 is just a natural evolution of time, where surgeons continue to see clinical application for it.
Tissue weakness exists.
Approved to be used.
And then has the clinical benefit of strength and healing, which allow us for surgeons to continue to expand and use it.
With respect to the orthopedic sales force taking market share.
<unk> extended indications, where they haven't been normally able to use that.
And getting back on offense I would just continue to say.
With other products on the market.
Our customers are.
And the expansion from the <unk> to the 60 to 70 is just a natural evolution of time, where surgeons continue to see clinical application for it.
They're not using a number of our products.
They're not available for them to use doesn't mean, our sales professionals are in those cases supporting other products that are available to them and our sales professionals are doing a great job continue to sell what they can sell and support clinical cases, but I would also tell you our expectation.
With respect to the orthopedic sales force taking market share.
And getting back on offense I would just continue to say.
Our customers are.
They're not using a number of our products because they are not available for them to use doesn't mean, our sales professionals are in those cases supporting other products that are available right now.
<unk> is not the moment we get.
Off of back order that we again to immediately start taking more market share we believe it'll be a.
Transactional of period of time, where it will take a quarter or two for those customers to again open their eyes to our sales force and the opportunity for them to use combat problems.
And our sales professionals are doing a great job continue to sell what they can sell and support clinical cases, but I would also tell you our expectation is not the moment we get.
Thank you. Our next question comes from the line of Travis Steed Bofa Securities. Please go ahead.
Off of back order.
Again to immediately start taking more market share we believe it'll be a.
Yes.
Transactional period of time, where it will take a quarter or two for those customers to again open their eyes to our sales force and the opportunity for them to use comments Roberts.
Hey, this is great Shannon for Tavis and my first question I, just wanted to ask a little bit on the capital environment and what Youre seeing.
<unk>.
This quarter in those trends and then how you expect.
We've progressed over the next 12 months.
Thank you. Our next question comes from the line.
Yeah.
Hum.
Here we are.
Travis Steed Bofa Securities. Please go ahead Travis.
We're not again, we're seeing 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 improved volume throughput through the operating room, which is the space. We operate in which is surgical procedures and I think what we're seeing.
Hey, this is Greg on for Tavis.
My first question I, just wanted to ask a little bit on the capital environment and what Youre seeing there.
This quarter in those trends and then how you expect the sort of <unk>.
Progressing over the next 12 months.
Going into next year also as interest rates come down a continued flow of that.
Okay.
Pat here.
We're not again, we're seeing healthy capital market, we're not seeing our capital slowdown we're seeing hospitals continue to invest in capital equipment that improves patient outcomes and improved volume throughput through the operating room, which is the space, we operate in which is surgical procedures.
Great. Thank you.
And then maybe just one follow up on.
Margins I know you guided flat for margins in 'twenty five and 'twenty.
$20 million of annual savings from the operational improvements.
How do you think this support margin and maybe the next year.
What we're seeing going into next year also as interest rates come down a continued flow of that.
Puts and takes.
In SG&A and R&D.
Great. Thank you.
Thank you.
And then maybe just one follow up on.
Okay Alright.
Yes.
Margins I know you guided flat for margins and 25 and $20 million of annual savings from the operational improvements.
Thanks.
Duration is I get that right.
That's correct.
Okay.
So we're going to talk about 2006 in 2006 that Youre right.
How do you think this support margin expansion and maybe the next year as well puts and takes.
Have been making improvements as Pat said we.
Can you is that we expect to see tens of millions of dollars overall.
SG&A and R&D.
Thank you.
Looking forward.
Of course, none of those things that work against a range of new tariffs grocer.
Yes.
Thanks.
<unk> did I get that right, yes, that's correct.
Once again, we will give.
26 guidance when we do our Q4 call.
Okay.
So we're going to talk about 2006 in 2006 that Youre right.
Thank you.
Have been making improvements as Pat said we.
Our next question.
Come from the line of Mike Matson of Needham <unk> Company. Your line is open mic.
We expect to see.
Brian.
Overall.
Of course, there's things that work against that right the new tariffs.
Yeah, Hey, guys. This is Joseph on for Mike, maybe just on <unk>.
Yes, we will.
Orthopedics.
26 guidance.
I saw that it looks like improved growth growth in the U S and internationally.
Our Q4 call.
Thank you.
I just wanted to see but maybe just give more color on.
Our next question.
Come from the line of Mike Matson of Needham <unk> Company. Your line is open mic.
That improvement in the quarter, what are you seeing there and what were the major drivers in the quarter.
Yeah, Hey, guys. This is Joseph on for Mike.
Sure. Good question again, I'd call out two things <unk> continues to do well.
Just on <unk>.
Orthopedics.
<unk> is a great growth platform not just in our sports medicine portfolio, but also on our portfolio.
I saw that it looks like improved growth growth in the U S and internationally.
I just wanted to see but maybe just give more color on.
And it's doing great things for us.
That improvement in the quarter, what are you seeing there and what were the major drivers in the quarter.
That also.
Combined with improving reduction in back order and improving service levels on the operation side are allowing us to take some incremental step forward in growth.
Sure. Good question again, I'd call out two things <unk> continues to do well.
But I would again just call out we're not declaring victory there on the operation front and continue to expect progress in quarter four.
Bruce has a great growth platform not just in our sports medicine portfolio, but also on our portfolio.
Okay, and then I guess, just a quick follow up.
And it's doing great things for us.
That also.
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 timeline wise, maybe what inning of the improvement are we in.
Bind with improving reduction in back order and improving service levels on the operation 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 operation front and continue to expect progress in quarter four.
Yes, that'd be helpful.
Well I'm going to hopefully this isn't the world series game that went through the <unk> labs.
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 timeline wise, maybe what inning of the improvement are we in.
Yeah.
We are in the second half of the game.
I am not sure if we're in the sixth or seventh day rate, but we're certainly in the 567. So we're in the second half I don't want to declare victory.
Theres more innings to play here.
Alright.
Yes, that'd be helpful.
So good about our progress I feel good about our commitment I feel great about our learnings and it's now just time and we don't supply chain can take quarters as vendors turn on and make progress and it doesn't happen overnight.
Well I'm going to hopefully this isn't the world series game that went through the <unk> labs.
Yes.
We're in the second half of the game.
I'm not sure if warranted sixth or seventh the rate, but we're certainly in the 567. So we're in the second half we wanted declared victory.
Feel good about our progress here.
Thanks, very much congrats on the quarter.
Thank you.
Theres more innings to play here.
Yeah.
Thank you I would now like to turn the conference back to Pat buyer for closing remarks, Sir.
So good about our progress I feel good about our commitment.
Great about our learnings. It's now just time and we now supply chain can take quarters as <unk>.
Thank you I, just I want to thank everybody for joining us for our quarter three earnings call. We look forward to a great fourth quarter and look forward to updating you on 2026.
Lenders turn on and make progress and it doesn't happen overnight.
Feel good about our progress there.
In January thank you.
Thanks, very much congrats on the quarter.
This concludes today's conference call. Thank you for participating and you may now disconnect.
Thank you.
Thank you I would now like to turn the conference back to Pat buyer for closing remarks, Sir.
Thank you I, just I want to thank everybody for joining us for our quarter three 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.
Okay.
[music].
Okay.
Yes.
[music].
Okay.
[music].
Okay.
[music].
So.
Hum.
[music].
Yeah.