Q2 2026 CONMED Corp Earnings Call

July 29, 2026

Speaker #1: And 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.

Speaker #1: These statements represent the forward-looking statements that involve risk 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 that companies' actual results may differ materially from its current expectations.

Speaker #1: 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 #1: Please stand by. Hello and welcome to CONMED Q2 2026 earnings conference call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a Q&A session.

Speaker #1: 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 #1: 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.

Speaker #1: You will also hear management refer to non-GAAP or adjusted measurements during this discussion. While these figures are not a substitute for GAAP measurements, management uses these figures to aid in monitoring the company's ongoing financial performance from quarter to quarter and year to year, on a regular basis, and for benchmarking against other medical technology companies.

Speaker #1: These statements represent the forward-looking statements that involve risk 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 or performance or results the company's actual results may differ materially from its current expectations.

Speaker #1: 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.

Speaker #1: 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 risks and uncertainties that may cause actual results to differ materially.

Speaker #1: These adjusting items are specified in the reconciliation supporting the company's earnings releases posted to the company's website. I would now like to turn the call over to Mr. Pat Beyer, CONMED's President and Chief Executive Officer, please go ahead, sir.

Speaker #1: 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 #1: You will also hear management refer to non-GAAP or adjusted measurements during this discussion. While these figures are not a substitute for GAAP measurements, management uses them to aid in monitoring the company's ongoing financial performance from quarter to quarter and year to year on a regular basis, as well as for benchmarking against other medical technology companies.

Speaker #2: Thank you, Operator. And welcome, everyone, to our second quarter of 2026 earnings call. I'm joined on the line by John Gallagher, a recently appointed Chief Financial Officer.

Speaker #2: Let me provide you with a quick agenda for today's call. I'll begin with a high-level overview of our quarterly financial results, followed by a discussion of the sales performance in our two product lines, and an update on the key product growth drivers within each.

Speaker #1: 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.

Speaker #2: I'll then highlight a few areas of operational progress in recent months, then I'll turn the call over to John, who will walk through our quarterly financial results in greater detail.

Speaker #2: I'll conclude by reviewing our financial guidance for 2026, which we updated in today's press release before opening the call for questions. With that, let's get started with a review of our Q2 financial performance.

Speaker #1: CONMED's President and Chief Executive Officer, please go ahead, sir.

Speaker #2: Thank you, operator, and welcome everyone to our second quarter 2026 earnings call. I am joined on the line by John Gallagher, our recently appointed Chief Financial Officer.

Speaker #2: For avoidance of doubt, all sales growth figures discussed are provided on a year-over-year and constant currency basis. Unless noted otherwise. In the second quarter, we reported net sales of $343.5 million, our net sales increased 0.3% year-over-year on an as-reported basis, and decreased 0.5% on a constant currency basis.

Speaker #2: I'll then highlight a few areas of operational progress in recent months. Then, I'll turn the call over to John, who will walk through our quarterly financial results in greater detail.

Speaker #2: On an organic basis, our net sales increased 6% year-over-year, modestly exceeding the high end of our range of expectations we shared on our last earnings call.

Speaker #2: As a reminder, our organic growth excludes the sales of gastroenterology or GI products in our general surgery product line. Related to the strategic exits we announced previously, as part of our portfolio optimization strategy.

Speaker #2: For avoidance of doubt, all sales growth figures discussed are provided on a year-over-year and constant currency basis, unless noted otherwise. In the second quarter, we reported net sales of $343.5 million. Our net sales increased 0.3% year-over-year on an as-reported basis, and decreased 0.5% on a constant currency basis.

Speaker #2: From a profitability perspective, we delivered adjusted diluted earnings per share of $1.38, an increase of 20% year-over-year. These results were significantly better than the high end of our expectations driven by a 21-cent benefit from tariff refunds that was not contemplated in our second quarter guidance range.

Speaker #2: On an organic basis, our net sales increased 6% year-over-year, modestly exceeding the high end of the range of expectations we shared on our last earnings call.

Speaker #2: Importantly, excluding this benefit, we delivered second quarter earnings per share that exceeded the high end of our guidance range by approximately 3 cents. All in all, we were pleased to deliver strong financial performance in the second quarter.

Speaker #2: As a reminder, our organic growth excludes the sales of gastroenterology, or GI, products in our general surgery product line, related to the strategic exits we announced previously as part of our portfolio optimization strategy.

Speaker #2: With our consolidated results as a backdrop, I'll now discuss the sales performance in our general and orthopedic surgery product lines, and provide an update on our key product growth drivers in each.

Speaker #2: Starting with general surgery. General surgery sales increased 5.3% on an organic basis. By geography, general surgery organic sales increased mid-single digits in the U.S., and increased high single digits internationally.

Speaker #2: From a product line standpoint, our general surgery sales growth was fueled primarily by contributions from Airseal, and Buffalo Filter. I'll now provide an update on these two key growth product offerings for CONMED.

Speaker #2: Starting with Airseal, our advanced insufflation platform. In the robotic surgery market, the team remains focused on driving adoption and utilization of Airseal by leveraging the differentiated nature of our technology and its key role in supporting complex surgical procedure.

Speaker #2: With our consolidated results as a backdrop, I'll now discuss the sales performance in our General and Orthopedic Surgery product lines, and provide an update on our key product growth drivers in each.

Speaker #2: Starting with General Surgery. General Surgery sales increased 5.3% on an organic basis. By geography, General Surgery organic sales increased mid-single digits in the U.S. and increased high single digits internationally.

Speaker #2: Most notably, Airseal's ability to deliver stable, low-pressure insufflation represents a key benefit for surgeons conducting high-acuity cases. Moreover, Airseal has been clinically shown to reduce procedure times and improve visibilities while achieving impressive reductions in both patient postoperative pain and length of stay.

Speaker #2: From a product line standpoint, our general surgery sales growth was fueled primarily by contributions from AirSeal and Buffalo Filter. I'll now provide an update on these two key growth product offerings for CONMED, starting with AirSeal, our advanced insufflation platform.

Speaker #2: These clinical and economic advantages continue to resonate with robotic surgeons, and position Airseal for continued growth as robotic surgery expands across subspecialties, and into ambulatory surgery centers.

Speaker #2: In the robotic surgery market, the team remains focused on driving adoption and utilization of AirSeal by leveraging the differentiated nature of our technology and its key role in supporting complex surgical procedures.

Speaker #2: With respect to ambulatory surgery centers, we saw early success in this area in the second quarter, as we continue to focus on developing our value proposition.

Speaker #2: Most notably, AirSeal’s ability to deliver stable, low-pressure insufflation represents a key benefit for surgeons conducting high-acuity cases. Moreover, AirSeal has been clinically shown to reduce procedure times and improve visibility, while achieving impressive reductions in both patient postoperative pain and length of stay.

Speaker #2: To that end, our team is focused on generating data-specific to ASC economics that we believe will support our continued growth in this site of care.

Speaker #2: Our team also continues to focus on expanding adoption of Airseal in the U.S. laparoscopic market, a significant market opportunity for CONMED going forward. Specifically, we estimate Airseal is used in only 6 to 7 percent of the more than 3 million laparoscopic procedures performed in the U.S.

Speaker #2: These clinical and economic advantages continue to resonate with robotic surgeons and position Airseal for continued growth as robotic surgery expands across subspecialties and into ambulatory surgery centers.

Speaker #2: each year. Our portfolio of published clinical evidence continues to expand as well. In May, Nikhil Vazdef, professor and chair of robotic surgery at the University of Hartfordshire, published the results of a randomized controlled trial comparing Airseal to a competitive system.

Speaker #2: With respect to ambulatory surgery centers, we saw early success in this area in the second quarter, as we continue to focus on developing our value proposition.

Speaker #2: To that end, our team is focused on generating data specific to ASC economics that we believe will support our continued growth in this site of care.

Speaker #2: The trial found that patients treated with Airseal saw less interoperative pain, less blood loss, and shorter procedure times compared to those treated with the competitive system.

Speaker #2: Our team also continues to focus on expanding adoption of AirSeal in the U.S. laparoscopic market, a significant market opportunity for CONMED going forward. Specifically, we estimate AirSeal is used in only 6 to 7 percent of the more than 3 million laparoscopic procedures performed in the U.S. each year.

Speaker #2: Continuing to strengthen our portfolio of clinical support. Airseal was a top contributor to our general surgery growth in the second quarter. Our Airseal growth in Q2 was driven by year-over-year growth in sales of both capital and single-use products, Airseal sales trends also improved sequentially as expected.

Speaker #2: Our portfolio of published clinical evidence continues to expand as well, and May Nikhil Vasdev, Professor and Chair of Robotic Surgery at the University of Hertfordshire, published the results of a randomized controlled trial comparing AirSeal to a competitive system.

Speaker #2: With that being said, the level of Airseal growth in the quarter was lower than we had expected. Looking ahead, we continue to expect improving Airseal growth trends in the second half of 2026, albeit at a lower rate than our prior guidance assumed.

Speaker #2: The trial found that patients treated with AirSeal experienced less intraoperative pain, less blood loss, and shorter procedure times compared to those treated with the competitive system.

Speaker #2: Importantly, we remain confident in Airseal's ability to deliver high single-digit to low double-digit growth long-term. Given its compelling clinical and economic benefits across both robotic and laparoscopic procedures, the established advantages of low single-digit pressure in complex surgery, and the multiple opportunities we have to drive further expansion and utilization including in the U.S.

Speaker #2: laparoscopic market, ambulatory surgery centers, and international markets to name a few. Our confidence in the long-term outlook for Airseal is further supported by a new clinical indication for our Airseal robotic solution, which we announced publicly ahead of our participation in the Society of Robotic Surgery annual meeting.

Speaker #2: With that being said, the level of AirSeal growth in the quarter was lower than we had expected. Looking ahead, we continue to expect improving AirSeal growth trends in the second half of 2026, albeit at a lower rate than our prior guidance assumed.

Speaker #2: Importantly, we remain confident in AirSeal's ability to deliver high single-digit to low double-digit growth long-term, given its compelling clinical and economic benefits across both robotic and laparoscopic procedures, the established advantages of low single-digit pressure in complex surgery, and the multiple opportunities we have to drive further expansion and utilization—including in the US laparoscopic market, ambulatory surgery centers, and international markets, to name a few.

Speaker #2: Our Airseal robotic solution is now indicated for use with intuitives 8 hex cannulas, in addition to its existing indication for their 8 round cannulas.

Speaker #2: The 8 hex cannulas were introduced with DV5, and are currently compatible across X, XI, and DV5. This now means that Airseal robotic solution can be used across intuitives multi-port portfolio.

Speaker #2: Securing this expanded indication represents an important milestone. It enables us to provide increased clarity in the market regarding the use of our product with intuitives complementary robotic technologies, specifically market Airseal for use with intuitives hex cannulas, and support current and prospective customers with clear product communication and compatibility data.

Speaker #2: Our confidence in the long-term outlook for AirSeal is further supported by a new clinical indication for our AirSeal robotic solution, which we announced publicly ahead of our participation in the Society of Robotic Surgery annual meeting.

Speaker #2: Our AirSeal robotic solution is now indicated for use with Intuitive's 8 mm hex cannulas, in addition to its existing indication for their 8 mm round cannulas.

Speaker #2: In collaboration with the team at Intuitive, our team conducted extensive engineering and technical compatibility testing throughout the first half of 2026 to support this expanded indication.

Speaker #2: The 8-hex cannulas were introduced with DV5 and are currently compatible across X, XI, and DV5. This now means that the AirSeal robotic solution can be used across Intuitive's multi-port portfolio.

Speaker #2: Importantly, both companies are issuing letters to their respective customers to inform them of this indication and its implications. I'm proud of this collaborative achievement as we work to support surgeons through the continued evolution of robotic-assisted surgery.

Speaker #2: Securing this expanded indication represents an important milestone. It enables us to provide increased clarity in the market regarding the use of our product with Intuitive’s complementary robotic technologies, specifically marketing AirSeal for use with Intuitive’s HEX cannulas, and support current and prospective customers with clear product communication and compatibility data.

Speaker #2: Moving to an update on Buffalo Filter, our smoke evacuation platform, and the other key driver in our general surgery growth. Sales of our direct smoke evacuation portfolio delivered year-over-year growth in the second quarter, exceeding the high single-digit to low double-digit range we continue to expect longer-term.

Speaker #2: This performance more than offset modest declines in our OEM smoke evacuation portfolio. As a reminder, we continue to prioritize direct smoke evacuation, which puts us closer to the customer and carries a stronger margin profile than OEM.

Speaker #2: Buffalo Filter represents one of our most compelling long-term growth opportunities, with multiple tailwinds including expanding legislation requiring the use of surgical smoke evacuation systems.

Speaker #2: Moving to an update on Buffalo Filter, our smoke evacuation platform and the other key driver in our general surgery growth. Sales of our direct smoke evacuation portfolio delivered year-over-year growth in the second quarter, exceeding the high single-digit to low double-digit range we continue to expect longer term.

Speaker #2: To that end, we were pleased to see the states of Michigan and Maryland recently enact legislation to this effect. Michigan's law applies to facilities that provide surgical procedures using heat-related equipment, likely to generate surgical smoke.

Speaker #2: It requires them to develop and implement a policy requiring the use of a smoke evacuation system by July 23, 2027. Maryland's law requires all healthcare facilities to adopt and implement smoke evacuation policies by January 1, 2028.

Speaker #2: Buffalo Filter represents one of our most compelling long-term growth opportunities, with multiple tailwinds, including expanding legislation requiring the use of surgical smoke evacuation systems.

Speaker #2: With the addition of Michigan and Maryland, there are now a total of 22 U.S. states with smoke-free operating room laws covering approximately 57% of the U.S.

Speaker #2: population. We also see evidence of continued activity on this front, including more than 10 additional states with bills on this subject entered, and pending passage.

Speaker #2: This is a testament to the efforts of medical societies, like AORN, which continue to advocate for legislation as well as the clear benefits of surgical smoke evacuation.

Speaker #2: As a reminder, an estimated 90% of surgical procedures create smoke, and Buffalo Filter has been shown in clinical studies to filter 99.9997% of toxic smoke molecules.

Speaker #2: We were pleased with our direct smoke performance internationally as well, and continue to see early commercial traction in Europe, Canada, and Australia. On the new product front, our next-generation evacuator, PlumeSafe X5, continues to garner positive feedback for its smaller footprint, quieter operation, and faster smoke clearance, further strengthening our position in the market, including with ambulatory and outpatient settings.

Speaker #2: With the addition of Michigan and Maryland, there are now a total of 22 U.S. states with smoke-free operating room laws, covering approximately 57% of the U.S. population.

Speaker #2: We also see evidence of continued activity on this front, including more than 10 additional states with bills on this subject entered and pending passage.

Speaker #2: This is a testament to the efforts of medical societies like AORN, which continue to advocate for legislation, as well as the clear benefits of surgical smoke evacuation.

Speaker #2: As a reminder, we estimate that the global smoke evacuation market represents a $1 billion opportunity. Given our performance and continued progress globally, we portfolio to continue to deliver solid growth as we penetrate this market opportunity longer-term.

Speaker #2: As a reminder, an estimated 90% of surgical procedures create smoke, and Buffalo Filter has been shown in clinical studies to filter 99.9997% of toxic smoke molecules.

Speaker #2: Shifting now to our orthopedic surgery product line. Orthopedic surgery sales increased 6.8%. By geography, our international orthopedic sales increased 10.8%, driven by broad-based growth in each of our major geographic regions, with particular strength in APAC and EMEA in the second quarter.

Speaker #2: Domestic orthopedic sales were essentially flat in the second quarter, which was lower than expected. During the second quarter, we continued to strengthen our commercial organization.

Speaker #2: As a reminder, we estimate that the global smoke evacuation market represents a $1 billion opportunity. Given our performance and continued progress globally, we expect our direct smoke evacuation portfolio to continue to deliver solid growth as we penetrate this market opportunity longer term.

Speaker #2: To be clear, our U.S. orthopedic team is back on offense and positioned to return to growth. By product, BioBrace are reinforced bioinductive implant was a top contributor to our total orthopedic surgery sales growth in the second quarter.

Speaker #2: I'll now provide a brief update on BioBrace. We are continuing to see BioBrace used across a wide range of orthopedic and foot and ankle procedures, most prominently in rotator cuff repairs.

Speaker #2: Rotator cuff repairs represent our largest single-procedure opportunity with an estimated $1 million rotator cuff surgeries performed in the United States annually. Published clinical research highlights that rotator cuff repair outcomes are still suboptimal, with re-tear rates estimated anywhere between 30 to above 50%.

Speaker #2: To be clear, our US orthopedic team is back on offense and positioned to return to growth. By product, BioBrace are reinforced bioinductive implant was a top contributor to our total orthopedic surgery sales growth in the second quarter.

Speaker #2: Both the Academy of Orthopedic Surgeons and the broader surgeon community agree that improving patient outcomes for rotator cuff procedures is an important unmet clinical need.

Speaker #2: No patient wants to go into an elective rotator cuff surgery, knowing they have a one-in-three chance or potentially worse of requiring a second surgery after a re-tear.

Speaker #2: Bearing this in mind, using BioBrace for augmented rotator demonstrated a 94% healing rate in patients at high risk of re-tear. Our traction in this procedure category speaks to both the strength of our existing clinical data across over 30 published studies along with the updated AAOS guidelines strongly recommending augmentation in rotator cuff repair.

Speaker #2: Rotator cuff repairs represent our largest single-procedure opportunity, with an estimated 1 million rotator cuff surgeries performed in the United States annually. Published clinical research highlights that rotator cuff repair outcomes are still suboptimal, with re-tear rates estimated anywhere between 30% to above 50%.

Speaker #2: Both the Academy of Orthopedic Surgeons and the broader surgeon community agree that improving patient outcomes for rotator cuff procedures is an important unmet clinical need.

Speaker #2: Both of which continue to support surgeon adoption. Additionally, we are now one year into the launch of BioBrace RC, which is designed to streamline the use of BioBrace in rotator cuff repairs.

Speaker #2: No patient wants to go into an elective rotator cuff surgery knowing they have a one in three chance—or potentially worse—of requiring a second surgery after a re-tear.

Speaker #2: Our observations over the past year of commercialization have reinforced that BioBrace RC enables surgeons to augment their rotator cuff repairs more consistently and efficiently, generating stronger surgeon interest and using BioBrace when an augment is needed.

Speaker #2: Bearing this in mind, using BioBrace for augmented rotator cuff repairs has clinically demonstrated a 94% healing rate in patients at high risk of re-tear.

Speaker #2: As a because it brings added mechanical strength and facilitates accelerated healing from its bioinductive properties. Other biologics and techniques that fail to provide this level of support can lead to re-tearing and incomplete healing.

Speaker #2: Our traction in this procedure category speaks to both the strength of our existing clinical data—across more than 30 published studies—along with the updated AAOS guidelines strongly recommending augmentation in rotator cuff repair.

Speaker #2: With these advantages in mind, our team continues to observe that surgeons who gain experience using BioBrace and see the benefits of its use in their cases tend to become dedicated long-term users.

Speaker #2: While we remain in the initial years of commercialization, we see BioBrace's potential to improve the standard of care in sports medicine procedures and believe it will remain an important driver of our long-term growth.

Speaker #2: In addition to driving growth across our general and orthopedic surgery product lines, and continuing to advance our key growth drivers, we also made important operational progress and other key areas this quarter, including: executing our portfolio optimization strategy, improving our supply chain, bolstering our balance sheet, and strengthening both our leadership team and board of directors.

Speaker #2: As a reminder, BioBrace is differentiated because it brings added mechanical strength and facilitates accelerated healing from its bioinductive properties. Other biologics and techniques that fail to provide this level of support can lead to re-tearing and incomplete healing.

Speaker #2: I'll now take a moment to touch on each of these, starting with our portfolio optimization strategy and the completed exit from our gastroenterology product offerings.

Speaker #2: While we remain in the initial years of commercialization, we see BioBrace's potential to improve the standard of care in sports medicine procedures, and we believe it will remain an important driver of our long-term growth.

Speaker #2: Following a comprehensive review of our portfolio, we are announced our intent to exit our GI product offerings at the end of last year. In the first quarter of 2026, we closed the sale of certain GI assets and in the second quarter, we completed the sale of the remaining GI portfolio.

Speaker #2: In addition to driving growth across our general and orthopedic surgery product lines, and continuing to advance our key growth drivers, we also made important operational progress in other key areas this quarter, including executing our portfolio optimization strategy, improving our supply chain, bolstering our balance sheet, and enhancing our board of directors.

Speaker #2: In conjunction with the second quarter transaction, we've entered into a manufacturing services agreement to continue producing certain GI products for the buyer over the next 12 months, ensuring continuity for our customers through the transition.

Speaker #2: With this chapter now closed, we've sharpened our focus on our strongest growth opportunities, which lie in our core markets: minimally invasive, robotic and laparoscopic surgery, smoke evacuation, and the surgical treatment of orthopedic soft tissue repair further positioning ConMed for long-term value creation.

Speaker #2: I'll now take a moment to touch on each of these, starting with our portfolio optimization strategy and the completed exit from our gastroenterology product offerings.

Speaker #2: With respect to our efforts to improve our supply chain, our team has made clear progress over the last year. Specifically, we've strengthened our service levels, reduced backorders to their lowest levels in years, and reduced age-critical backorders while building greater stability across our network.

Speaker #2: In conjunction with the second quarter transaction, we've entered into a manufacturing services agreement to continue producing certain GI products for the buyer over the next 12 months ensuring continuity for our customers through the transition.

Speaker #2: I'm proud to say we've progressed from our former state of recovery and remediation; we're now in a strong position to take care of our customers and grow our business, and our team is primarily focused on driving operational enhancements now.

Speaker #2: With this chapter now closed, we've sharpened our focus on our strongest growth opportunities, which lie in our core markets. Minimally invasive, robotic and laparoscopic surgery, smoke evacuation, and the surgical treatment of orthopedic soft tissue repair further position us to compete for long-term value creation.

Speaker #2: Looking ahead, we'll continue to invest in building an efficient and resilient supply chain for the future by continuing to enhance our planning, sourcing, service, and inventory systems.

Speaker #2: With the goal of supporting growth, margin expansion, and reliable customer service, over the long term. In terms of strengthening our balance sheet, we refinanced our debt during the second quarter consistent with the intention we communicated in our last earnings call, specifically in June, we secured a new senior secured terminal facility of $450 million.

Speaker #2: With respect to our efforts to improve our supply chain, our team has made clear progress over the last year. Specifically, we've strengthened our service levels, reduced backorders to their lowest levels in years, and reduced age-critical backorders, while building greater stability across our network.

Speaker #2: I'm proud to say we've progressed from our former state of recovery and remediation. We're now in a strong position to take care of our customers and grow our business, and our team is primarily focused on driving operational enhancements now.

Speaker #2: That will expire in 2030. We used a proceeds from this facility along with the borrowings from our revolving credit facility to repurchase $645.2 million of convertible notes for $637.2 million that would have matured in June 2027.

Speaker #2: Lastly, during the second quarter, we enhanced both our board of directors and leadership team with the addition of key personnel. In May, we announced the appointment of Selene Martin and Jeff Mervis, who joined our board with deep global medtech leadership experience and a track record of scaling complex businesses.

Speaker #2: With the goal of supporting growth, margin expansion, and reliable customer service over the long term. In terms of strengthening our balance sheet, we refinanced our debt during the second quarter, consistent with the intention we communicated in our last earnings call. Specifically, in June, we secured a new senior secured term loan facility of $450 million that will expire in 2030.

Speaker #2: Selene has had a more than 30-year career at Johnson & Johnson, most recently leading J&J's medtechs, cardiovascular, and specialty solutions group. Jeff spent nearly 30 years at Boston Scientific, most recently as EVP in global president of peripheral interventions.

Speaker #2: We used the proceeds from this facility, along with borrowings from our revolving credit facility, to repurchase $645.2 million of convertible notes for $637.2 million that would have matured in June 2027.

Speaker #2: In June, we were pleased to announce the appointment of John Gallagher, as our chief financial officer effective July 15. During the first half of 2026, ConMed conducted a comprehensive search process supported by a leading executive search firm to identify our next CFO.

Speaker #2: Lastly, during the second quarter, we enhanced both our Board of Directors and leadership team with the addition of key personnel. In May, we announced the appointment of Selene Martin and Jeff Mervis, who joined our Board with deep global med tech leadership experience and a track record of scaling complex businesses.

Speaker #2: I was closely involved in this process alongside our board as we worked to identify a candidate with strong financial experience and leadership capabilities who would be a good steward of our stockholders' interests and a valuable resource to our leaner senior leadership team.

Speaker #2: Selene has had a more than 30-year career at Johnson & Johnson, most recently leading J&J's MedTech, Cardiovascular, and Specialty Solutions group. Jeff spent nearly 30 years at Boston Scientific, most recently as EVP and Global President of Peripheral Interventions.

Speaker #2: I'm pleased to say we found that in John Gallagher. John brings nearly three decades of financial leadership experience, most recently serving as CFO of two public healthcare companies.

Speaker #2: In June, we were pleased to announce the appointment of John Gallagher as our Chief Financial Officer, effective July 15. During the first half of 2026, CONMED conducted a comprehensive search process, supported by a leading executive search firm, to identify our next CFO.

Speaker #2: Sertara and Cue Health. He also spent nine years at Becton Dickinson, including as SVP and CFO of BD's medical segment. John's combination of public company financial leadership and healthcare expertise along with his track record of leading global finance organizations make him an excellent fit for ConMed.

Speaker #2: I was closely involved in this process alongside our board as we worked to identify a candidate with strong financial experience and leadership capabilities, who would be a good steward of our stockholders' interests and a valuable resource to our leaner senior leadership team.

Speaker #2: As a reminder, Todd Gardner will remain with us as an advisor until November to ensure a smooth transition. I'm proud of the level of talent we've been able to attract with our recent appointments and I'd like to take the opportunity on today's call to welcome Selene Jeff and John to our team.

Speaker #2: I'm excited to partner with them as we focus on delivering strong execution and creating long-term value for our shareholders. With that, I'll turn the call over to John, who will walk you through our second quarter financial results in greater detail.

Speaker #2: Sertara and Cue Health. He also spent nine years at Becton Dickinson, including as SVP and CFO of BD's Medical segment. John's combination of public company financial leadership and healthcare expertise, along with his track record of leading global financial organizations, makes him an excellent fit for CONMED.

Speaker #1: Thank you, Pat. I'm excited to join the ConMed team and pleased to have strong quarterly performance to outline on today's call. Before I do that, I'd like to take a moment to talk about joining ConMed.

Speaker #1: For me, the decision to join ConMed was about products, culture, and people. My initial views on ConMed's products are favorable, particularly the growth drivers in AirSeal, Buffalo Filter, and BioBrace.

Speaker #2: As a reminder, Todd Garner will remain with us as an advisor until November to ensure a smooth transition. I'm proud of the level of talent we've been able to attract with our recent appointments and I'd like to take the opportunity on today's call to welcome Selene Jeff and John to our team.

Speaker #1: I believe those key products are highly differentiated and target large market opportunities which presents the potential for compelling growth as the company increases penetration.

Speaker #1: That's an opportunity for shareholder value creation and something that I want to be a part of. Culture and people were also part of the decision.

Speaker #1: During the vetting process, I spent considerable time with the board and members of the management team and while I've only been in the seat for two weeks, and haven't met everyone by any stretch, I can see the strong focus among the team on the opportunity to create shareholder value.

Speaker #1: For me, the decision to join CONMED was about products, culture, and people. My initial views on CONMED's products are favorable, particularly the growth drivers in AirSeal, Buffalo Filter, and BioBrace.

Speaker #1: So let's get into the numbers now. Given Pat's detailed discussion of our sales results in the second quarter, I will begin my remarks on the gross profit line.

Speaker #1: Unless otherwise noted, my commentary will focus on our non-GAAP results during the second quarter of 2026, with all growth rates on a year-over-year basis.

Speaker #1: I believe those key products are highly differentiated and target large market opportunities, which presents the potential for compelling growth as the company increases penetration.

Speaker #1: Our earnings press release issued today includes reconciliations to the most comparable figures presented in accordance with GAAP. We also have included a supplemental slide deck reviewing our second quarter results and updated financial guidance on the investor relations section of our website.

Speaker #1: That's an opportunity for shareholder value creation and something that I want to be a part of. Culture and people were also part of the decision.

Speaker #1: During the vetting process, I spent considerable time with the Board and members of the management team, and while I've only been in the seat for two weeks and haven't met everyone by any stretch, I can see the strong focus among the team on the opportunity to create shareholder value.

Speaker #1: Second quarter adjusted gross profit increased 5.6%. Adjusted gross margin was 59.5% and increased of 300 basis points. The increase was driven primarily by an 8.5 million benefit from tariff refunds recognized during the quarter, representing approximately $250 basis points year-over-year.

Speaker #1: So let's get into the numbers now. Given Pat's detailed discussion of our sales results in the second quarter, I will begin my remarks at the gross profit line.

Speaker #1: Unless otherwise noted, my commentary will focus on our non-GAAP results during the second quarter of 2026, with all growth rates on a year-over-year basis.

Speaker #1: Excluding the tariff refund benefit, gross margin increased 50 basis points year-over-year driven by favorable product mix and positive foreign currency impact. Adjusted operating expenses increased 1.5%.

Speaker #1: Our earnings press release issued today includes reconciliations to the most comparable figures presented in accordance with GAAP. We have also included a supplemental slide deck reviewing our second quarter results and updated financial guidance on the investor relations section of our website.

Speaker #1: The increase in operating expenses was driven by a 1.5% increase in adjusted SG&A expense and a 2% increase in adjusted R&D expense. Our adjusted operating margin was 18.2% compared to 15.7% in the prior year period and increase of 250 basis points year-over-year.

Speaker #1: Second quarter adjusted gross profit increased 5.6%. Adjusted gross margin was 59.5%, an increase of 300 basis points. The increase was driven primarily by an $8.5 million benefit from tariff refunds recognized during the quarter, representing approximately 250 basis points year over year.

Speaker #1: Excluding the aforementioned tariff refund benefit, our adjusted operating income and operating margin were essentially flat year-over-year modestly better than our expectations. Adjusted interest expense was 6.8 million dollars in the second quarter compared to 6.4 million dollars last year.

Speaker #1: Excluding the tariff refund benefit, gross margin increased 50 basis points year over year, driven by favorable product mix and positive foreign currency impact. Adjusted operating expenses increased 1.5%.

Speaker #1: As Pat mentioned, we have completed a refinancing during the quarter drawing on our new 450 million dollar term loan and our existing revolving credit facility to repurchase 645.2 million dollars of our 800 million dollar 2.25% convertible notes ahead of their June 2027 maturity.

Speaker #1: The increase in operating expenses was driven by a 1.5% increase in adjusted SG&A expense and a 2% increase in adjusted R&D expense. Our adjusted operating margin was 18.2%, compared to 15.7% in the prior year period—an increase of 250 basis points year over year.

Speaker #1: This drawdown occurred on June 12th and therefore had an immaterial impact on interest expense in the second quarter. The adjusted effective tax rate in Q2 was 25.2%, modestly higher than we had expected.

Speaker #1: Excluding the aforementioned tariff refund benefit, our adjusted operating income and operating margin were essentially flat year over year, modestly better than our expectations. Adjusted interest expense was $6.8 million in the second quarter compared to $6.4 million last year.

Speaker #1: Adjusted net income was 41.7 million, or $1.38 per diluted share, compared to 35.6 million, or $1.15 per diluted share in 2025. As adjusted EPS included a benefit of approximately 21 cents from the tariff refund received in the period.

Speaker #1: As Pat mentioned, we have completed a refinancing during the quarter, drawing on our new $450 million term loan and our existing revolving credit facility to repurchase $645.2 million of our $800 million 2.25% convertible notes ahead of their June 2027 maturity.

Speaker #1: We generated 34.2 million dollars of free cash flow in the second quarter of 2026 that represented an increase of 46% year-over-year. Turning to a review of our balance sheet and financial condition.

Speaker #1: As of June 30th, 2026, ConMed had cash of $37.3 million. Total debt obligations of $834.2 million. And additional available borrowing capacity of $455.5 million.

Speaker #1: Adjusted net income was $41.7 million, or $1.38 per diluted share, compared to $35.6 million, or $1.15 per diluted share, in 2025. As Pat mentioned earlier, second quarter adjusted EPS included a benefit of approximately $0.21 from the tariff refund received in the period.

Speaker #1: This compares to cash and equivalents of $40.8 million total debt obligations of $834.9 million and available borrowing capacity of $648.5 million as of December 31st, 2025.

Speaker #1: We generated $34.2 million of free cash flow in the second quarter of 2026, which represented an increase of 46% year over year. Turning to a review of our balance sheet and financial condition.

Speaker #1: Our leverage ratio on June 30th, 2026 was 2.9 times. ConMed has made significant progress in terms of deleveraging in recent years. This quarter's refinancing meaningfully reduces our exposure to our convertible debt obligations ahead of their 2027 maturity and gives us a more straightforward capital structure to manage.

Speaker #1: As of June 30, 2026, CONMED had cash of $37.3 million, total debt obligations of $834.2 million, and additional available borrowing capacity of $455.5 million.

Speaker #1: With respect to share repurchases, ConMed has returned a meaningful amount of cash to shareholders. During the first six months of 2026, we repurchased approximately $1 million shares of common stock for a total of $43.7 million.

Speaker #1: This compares to cash and equivalents of $40.8 million, total debt obligations of $834.9 million, and available borrowing capacity of $648.5 million as of December 31, 2025.

Speaker #1: We continue to expect to allocate approximately $61.8 million to share repurchase in 2026. I'll now turn the call back to Pat to discuss our financial guidance.

Speaker #1: Our leverage ratio on June 30, 2026, was 2.9 times. CONMED has made significant progress in terms of deleveraging in recent years. This quarter’s refinancing meaningfully reduces our exposure to our convertible debt obligations ahead of their 2027 maturity and gives us a more straightforward capital structure to manage.

Speaker #2: Thanks, John. Beginning with a review of our 2026 financial guidance, which we updated in today's press release. We updated our net sales guidance range to reflect our second quarter results, our updated expectations for revenue contributions from product sales and MSA agreements related to our strategic exits from our GI product offerings in 2026, and to a lesser extent, updated assumptions regarding the impact on our revenue results from changes in foreign currency exchange rates.

Speaker #1: With respect to share repurchases, CONMED has returned a meaningful amount of cash to shareholders. During the first six months of 2026, we repurchased approximately 1 million shares of common stock for a total of $43.7 million.

Speaker #2: Specifically, our full year 2026 revenue guidance now assumes GI revenue in the range of $20 million to $22 million compared to our prior guidance range of $14.5 million to $17.5 million.

Speaker #1: We continue to expect to allocate approximately 61.8 million dollars to share repurchase in 2026. I'll now turn the call back to Pat to discuss our financial guidance.

Speaker #2: Thanks, John. Beginning with a review of our 2026 financial guidance, which we updated in today's press release. We updated our net sales guidance range to reflect our second quarter results our updated expectations for revenue contributions from product sales and MSA agreements related to our strategic exits from our GI product offerings in 2026 and to a lesser extent updated assumptions regarding the impact on our revenue results from changes in foreign currency exchange rates.

Speaker #2: We now expect changes in foreign currency exchange rates to represent a tailwind to gap results of between $7 million to $7.5 million compared to our prior expectation of a tailwind from affects of between $4.4 million to $7.4 million.

Speaker #2: On an organic constant currency basis, we now expect net sales growth of 5% to 6% compared to our prior expectation of 5% to 6.5%.

Speaker #2: Specifically, our full year 2026 revenue guidance now assumes GI revenue in the range of 20 million dollars to 22 million dollars compared to our prior guidance range of 14.5 million dollars to 17.5 million dollars.

Speaker #2: Our updated full year 2026 revenue guidance reflects both our performance in the second quarter and updated outlook for the balance of the year. We have reaffirmed our low-end expectations of 5% organic constant currency growth this year and our level of confidence in the team's ability to deliver at least 5% growth in 2026 has not wavered.

Speaker #2: We now expect changes in foreign currency exchange rates to represent a tailwind to GAAP results of between $7 million and $7.5 million, compared to our prior expectation of a tailwind from FX of between $4.4 million and $7.4 million.

Speaker #2: The high end of our organic growth range continues to reflect the expectation that we'll see improving growth trends on a sequential basis in the third and fourth quarters respectively.

Speaker #2: However, our updated guidance now reflects a more measured pace of improvement in growth trends over the second half of the year. With respect to profitability guidance expect non-gap adjusted diluted earnings per share in the range of $4.48 to $4.60 compared to our prior guidance range of $4.30 to $4.45.

Speaker #2: On an organic constant currency basis, we now expect net sales growth of 5% to 6%, compared to our prior expectation of 5% to 6.5%.

Speaker #2: The increase in our non-gap EPS guidance range was driven by the better-than-expected results in the second quarter, a lower expected headwind to EPS from our GI product line exits, and higher expected contribution to EPS from share repurchase activity to date offset partially by higher interest expense and tax rate assumptions for the full year 2026 period.

Speaker #2: However, our updated guidance now reflects a more measured pace of improvement and growth trends over the second half of the year. With respect to profitability guidance for 2026, we now expect non-GAAP adjusted diluted earnings per share in the range of $4.48 to $4.60, compared to our prior guidance range of $4.30 to $4.45.

Speaker #2: For modeling purposes, our updated financial guidance for 2026 includes the following assumptions. Adjusted gross margin of approximately $57.5% to $58.0% inclusive of the tariff benefit.

Speaker #2: Adjusted interest expense of approximately $33 million in 2026 compared to our prior expectation of $25 million to $27 million. Adjusted effective tax rate of approximately $25% compared to $24.5% previously.

Speaker #2: We expect to generate free cash flow of approximately $115 million compared to approximately $125 million. Lastly, as it relates to the third quarter of 2026, we expect gap net sales of between $334 million and $339 million.

Speaker #2: For modeling purposes, our updated financial guidance for 2026 includes the following assumptions: adjusted gross margin of approximately 57.5% to 58%, inclusive of the tariff benefit.

Speaker #2: Third quarter organic constant currency growth is expected to be in the range of $6.4% to $7.6% excluding expected GI revenue in the range of $3 to $3.6 million.

Speaker #2: Adjusted interest expense of approximately $33 million in 2026, compared to our prior expectation of $25 million to $27 million. Adjusted effective tax rate of approximately 25%, compared to 24.5% previously.

Speaker #2: And an FX impact of approximately 10 basis points. We expect adjusted EPS in the third quarter to be between $98 and $1.03. Stepping back.

Speaker #2: We expect to generate free cash flow of approximately 115 million dollars compared to approximately 125 million dollars previously. Lastly, as it relates to the third quarter of 2026, we expect gap net sales of between 334 million dollars and 339 million dollars.

Speaker #2: This was a quarter of real progress. We delivered financial performance that exceeded our expectations advanced our key growth platforms completed the exit of our GI products refinanced a portion of our debt and added exceptional talent to our board and leadership team.

Speaker #2: Third quarter organic constant currency growth is expected to be in the range of 6.4% to 7.6% excluding expected GI revenue in the range of 3 to 3.6 million dollars and an FX impact of approximately 10 basis points.

Speaker #2: I'm proud of our team's accomplishments in quarter two, and I remain confident that our focused portfolio and differentiated growth drivers position ConMed to deliver durable long-term growth and value for our shareholders as we look forward.

Speaker #2: I'd like to conclude by thanking everyone on the ConMed team for their efforts this past quarter, thanks as well to our customers, suppliers, shareholders, and those on today's call for your support.

Speaker #2: We expect adjusted EPS in the third quarter to be between $0.98 and $1.03. Stepping back, this was a quarter of real progress. We delivered financial performance that exceeded our expectations, advanced our key growth platforms, completed the exit of our GI products, refinanced a portion of our debt, and added exceptional talent to our board and leadership team.

Speaker #2: Operator, we will now open the call for questions.

Speaker #1: Thank you. If you'd like to ask a question, please signal by pressing star 11 on your telephone keypad. If you're using a speakerphone, please make sure you're mute function is turned off to allow your signal to reach our equipment.

Speaker #1: We do ask that you limit yourself to one question and one follow-up. One moment for questions. And our first question comes from Lawrence Beagleson with Wells Fargo.

Speaker #2: I'm proud of our team's accomplishments in Q2, and I remain confident that our focused portfolio and differentiated growth drivers position CONMED to deliver durable, long-term growth and value for our shareholders as we look forward.

Speaker #1: You may proceed.

Speaker #3: Hi. Thanks for taking our questions. So starting off, could you provide color on what you believe drove the air seal below expectations? And based upon your comments, is it fair to assume high single growth this year versus low double digit?

Speaker #2: I'd like to conclude by thanking everyone on the CONMED team for their efforts this past quarter. Thanks as well to our customers, suppliers, shareholders, and those on today's call for your support.

Speaker #2: Hey, thanks for the question again. I'm going to remind us, we're pleased with our Gen Surgery growth in quarter two, 5.3% year over year organic.

Speaker #2: Operator, we will now open the call for questions.

Speaker #2: I also commented in the script air seal was our top contributor to our general surgery growth in the quarter. This is a growth franchise for us.

Speaker #2: We also shared we grew both capital and disposables in quarter two. Our air seal trends improved sequentially and I continue to expect sequential improvements in the second half.

Speaker #1: We do ask that you limit yourself to one question and one follow-up. One moment for questions. And our first question comes from Lawrence Beagleson with Wells Fargo.

Speaker #2: From a long-term growth trajectory of air seal, we continue to believe, and I continue to believe, it is a high single digit, low double digit grower.

Speaker #1: You may proceed.

Speaker #3: Hi, thanks for taking our questions. Starting off, could you provide some color on what you believe drove the AirSeal below expectations? And, based on your comments, is it fair to assume high single-digit growth this year versus low double-digit?

Speaker #3: Okay. Understood. And then maybe looking at BioBrace RC, is there any way you can quantify or at least qualitatively talk to the penetration level there and do you have any insights on their retention rate for users that have used it a handful of times?

Speaker #2: Hey, thanks for the question again. I'm going to remind us that we're pleased with our Gen Surgery growth in Q2—5.3% year-over-year organic.

Speaker #2: I also commented in the script, AirSeal was our top contributor to our general surgery growth in the quarter. This is a growth franchise for us.

Speaker #2: Yeah. Here's what I would say on BioBrace RC. It improves the surgeon's ability to repeatedly deliver rotator cuff repairs consistently. We're continuing to see a strong uptake in it.

Speaker #2: We also shared that we grew both capital and disposables in Q2. Our AirSeal trends improved sequentially, and I continue to expect sequential improvements in the second half.

Speaker #2: We're continuing to see an increase in new users. And we're continuing to see those users that use BioBrace RC have durable attachment with us.

Speaker #2: They continue to use it over and over again. We're pleased with the BioBrace RC launch.

Speaker #2: From a long-term growth trajectory of AirSeal, we continue to believe—and I continue to believe—it is a high single-digit to low double-digit grower.

Speaker #3: Thank you.

Speaker #1: Thank you. Our next question comes from Travis Steed with Bank of America Securities. You may proceed.

Speaker #4: Hey. Thanks for the question. Maybe a higher level question to start. You got a new CFO. You've announced some pretty well-regarded board members. And just kind of curious how you think of the strategy of ConMed might change or how you think about creating shareholder value differently going forward.

Speaker #2: Yeah. Here's what I would say on BioBrace RC. It improves the surgeon's ability to repeatedly deliver rotator cuff repairs consistently. We're continuing to see a strong uptake in it.

Speaker #2: Yeah. I think going forward as I think about ConMed's strategy, we're focused on our strongest growth opportunities. Minimally invasive robotic and laparoscopic surgery, smoke evacuation, and surgical treatment of orthopedic soft tissue repair.

Speaker #2: We're continuing to see an increase in new users and we're continuing to see those users that use BioBrace RC have durable attachment with us.

Speaker #2: I'm excited to have John as our new CFO. We talked about our balance sheet being strong and being able to look at both an M&A and an organic approach to an offense on innovation.

Speaker #2: They continue to use it over and over again. We're pleased with the BioBrace RC's launch.

Speaker #3: Thank you.

Speaker #1: Thank you. Our next question comes from Travis Feet with Bank of America Securities. You may proceed.

Speaker #2: And excited to have two new board members that bring strong solid intense industry experience with innovative technology, medical device companies. And I like where we're at.

Speaker #4: Hey. Thanks for the question. Maybe a higher level question to start. You got a new CFO. You've announced some pretty well-regarded board members. And just kind of curious how you think of the strategy of CONMED might change or how you think about creating shareholder value differently going forward.

Speaker #2: I'm excited about the discoveries we've made through our strategic review and like our path towards success.

Speaker #4: Great. Makes sense. And then I did want to ask on kind of EPS margins in the second half. The tariff refund was 21 cents in the quarter.

Speaker #2: Yeah. I think going forward as I think about CONMED strategy, we're focused on our strongest growth opportunities. Minimally invasive robotic and laparoscopic surgery, smoke evacuation, and surgical treatment of orthopedic soft tissue repair.

Speaker #4: Beat earnings 6 cents ex the tariff refund. But the full year guide only went up 17 cents. So I just wanted to make sure I understand kind of the delta between the beat tariff refund and the change in the full year guide.

Speaker #4: And if the offset was just the air seal piece.

Speaker #2: I'm excited to have John as our new CFO. We talked about our balance sheet being strong and being able to look at both an M&A and an organic approach to an offense on innovation.

Speaker #5: Yeah. This is John. So happy to be here, of course. And thanks for your question. That included me as a part of it. But the so let me do the bridge on EPS.

Speaker #2: And excited to have two new board members that bring strong solid intense industry experience with innovative technology medical device companies. And I like where we're at.

Speaker #5: So at the low end, what we're seeing is an 18 cent increase. And the stair steps on that are 21 cents related to the tariff refund, as you called out.

Speaker #2: I'm excited about the discoveries we've made through our strategic review and like our path towards success.

Speaker #5: We have better than expected operational results in Q2, which is worth about 8 cents. Then on the GI product line, so we have less of a headwind there.

Speaker #4: Great. Makes sense. And then I did want to ask on kind of EPS margins in the second half. The tariff refund was 21 cents and in the quarter beat earnings 6 cents ex the tariff refund.

Speaker #5: So that's worth 5 cents of an increase, as well as some tailwind from share repo activity of 2 cents. Then partially offsetting that is interest expense, which is minus 15 pennies.

Speaker #4: But the full year guide only went up 17 cents. So I just want to make sure I understand kind of the delta between the beat tariff refund and the change in the full year guide and if the offset was just the air seal piece.

Speaker #5: As well as we made an adjustment to the tax rate a little bit higher, which is worth about 3 cents. So that's what.

Speaker #5: Yeah. This is John. So happy to be here, of course. And thanks for your question. That included me as a part of it. But the so let me do the bridge on EPS.

Speaker #4: Great. That's helpful.

Speaker #5: That's what bridges it. It's not related to air seal. It's more related to financing activities.

Speaker #5: So at the low end, what we're seeing is an 18 cent increase and the stair steps on that are 21 cents related to the tariff refund as you called out.

Speaker #4: Makes sense. That's helpful. Thank you. And look forward to working with you.

Speaker #5: Likewise. Thank you.

Speaker #1: Thank you. Our next question comes from Young Li with Jeffries. You may proceed.

Speaker #5: We have better-than-expected operational results in Q2, which is worth about $0.08. Then on the GI product line, we have less of a headwind there.

Speaker #6: All right. Great. Thanks for taking our questions. I guess John looking forward to working with you. Congrats. First question is air seal, you mentioned is a lot of different channels and opportunities that you can expand into US lab, ASCs, OUS channels.

Speaker #5: So that's worth 5 cents of an increase, as well as some tailwind from share repo activity of 2 cents. Then partially offsetting that is interest expense, which is a minus 15 pennies as well as we made an adjustment to the tax rate a little bit higher, which is worth about 3 cents.

Speaker #6: I guess I'm kind of curious, what do you need to do to get those markets going? More data, more rep training, things like that.

Speaker #5: So that's what.

Speaker #4: Great. That's helpful.

Speaker #5: That's what bridges it. It's not related to AirSeal; it's more related to financing activities.

Speaker #6: And when can we see some inflections and growth from those differentiated channels?

Speaker #4: Makes sense. That's helpful. Thank you. And look forward to working with you.

Speaker #5: Likewise. Thank you.

Speaker #2: Yeah. Young, again, I'm going to remind you. And I know you know this. We grew in quarter one. We grew faster in quarter two.

Speaker #1: Thank you. Our next question comes from Young Lee with Jeffries. You may proceed.

Speaker #2: We have multiple growth trajectories in air seal. First of all, robotic. We have air seal insufflators around the world in multiple robotic companies systems.

Speaker #6: All right. Great. Thanks for taking our questions. I guess, John, looking forward to working with you—congrats. First question is AirSeal: you mentioned there are a lot of different channels and opportunities that you can expand into—U.S. lab, ASCs.

Speaker #2: And in the United States and ASCs. So the advancing of the robotic opportunity is in practice. In addition, we're continuing to advance that cause in laparoscopy.

Speaker #6: OUS channels. I guess I'm kind of curious what do you need to do to get those markets going? More data, more rep training, things like that.

Speaker #2: And we've stated we're in between 6 and 7 percent of the 3 million laparoscopic procedures. What we're advancing is stronger clinical relationships and data in those key areas of laparoscopy like colorectal and gynecology which can benefit from the advancement of clinical insufflation.

Speaker #6: And when can we see some inflections and growth from those differentiated channels?

Speaker #2: Yeah. Again, I'm going to remind you, and I know you know this: we grew in Q1. We grew faster in Q2. We have multiple growth trajectories in AirSeal.

Speaker #2: So we're advancing those strongly. And you're going to continue to see air seal to continue to grow faster and more consistently going forward along that trajectory.

Speaker #2: First of all, robotic. We have AirSeal insufflators around the world in multiple robotic companies' systems, and in the United States and ASCs. So the advancing of the robotic opportunity is in practice.

Speaker #6: All right. Got it. Very helpful. I guess another question is kind of higher level. Just a utilization question in general. It's a topic of debate.

Speaker #6: But just kind of curious, are you seeing any impacts from lower ACA exchange enrollments or trade downs in some of the plans? Or do you have expectations of some impacts in second half of the year or beyond?

Speaker #2: In addition, we're continuing to advance that cause in laparoscopy and we've stated we're in between 6 and 7 percent of the 3 million laparoscopic procedures.

Speaker #2: What we're advancing is stronger clinical relationships and data in those key areas of laparoscopy like colorectal and gynecology which can benefit from the advancement of clinical insufflation.

Speaker #2: We are not seeing our procedure volumes and patient volumes changing, quite honestly. They're consistent to procedures. We support. And the approach of patients globally to come to us through their healthcare system we have not seen any volume changes.

Speaker #2: So we're advancing those strongly, and you're going to continue to see AirSeal continue to grow faster and more consistently going forward along that trajectory.

Speaker #6: All right. Great. Thank you.

Speaker #6: All right. Got it. Very helpful. I guess another question just kind of higher level. Just a utilization question in general. It's a topic of debate.

Speaker #1: Thank you. Our next question comes from Vik Chopra with BMO Capital Markets. You may proceed.

Speaker #7: Good evening, Pat. Hi, John. It's Anton on for Vic. Thanks for taking our questions. Maybe first hey, Pat. Maybe first on air seal. Maybe just help us think through this now expanding compatibility with DV5 a bit more.

Speaker #7: How meaningful is the expanded DV5 hex cannula indication from a revenue standpoint? Will this increase your current kind of 10 to 20 percent attachment rate on DV5?

Speaker #2: We are not seeing our procedure volumes and patient volumes changing, quite honestly. They're consistent to the procedures we support, and the approach of patients globally to come to us through their healthcare systems. We have not seen any volume changes.

Speaker #7: And how quickly could that happen?

Speaker #2: First of all, I'd say we are excited for this new indication. It is a positive signal to customers, patients, and clinicians around the world that these two companies ConMed and Intuitive are focused on surgeon choice and patient outcomes.

Speaker #6: All right. Great. Thank you.

Speaker #1: Thank you. Our next question comes from Vic Chopra with BMO Capital Markets. You may proceed.

Speaker #2: So we're excited about that. I would also say we knew this was coming. And it has been included in our guidance. It is a good thing.

Speaker #7: Good evening, Pat. Hi, John. It's Anton on for Vic. Thanks for taking our questions. Maybe first—hey, Pat—maybe first on AirSeal. Maybe just help us think through this now, expanding compatibility with DV5 a bit more.

Speaker #2: It's in our guidance. And it's one of the many things that's going to help us continue to grow our business faster. In the air seal franchise.

Speaker #7: How meaningful is the expanded DV5 hex cannula indication from a revenue standpoint? Will this increase your current kind of 10 to 20 percent attachment rate on DV5 and how quickly could that happen?

Speaker #7: All right. Great. And then maybe another question on international. The performance was really impressive. Better than we were kind of expecting across the board.

Speaker #7: Can you talk a bit more about what was driving the performance there? Is there anything one-time and how should we be thinking about that momentum heading into the second half as comps get a little bit more challenging?

Speaker #2: Yeah. A couple of things I would say. You'd remember we had a very strong quarter four 2025 correspondently. We had a slower quarter internationally in quarter one.

Speaker #2: So we're excited about that. I would also say we knew this was coming, and it has been included in our guidance. It is a good thing.

Speaker #2: It's in our guidance and it's one of the many things that's going to help us continue to grow our business faster. In the air seal franchise.

Speaker #2: And we've had a really strong quarter here and it was across both general surgery and orthopedics. The growth drivers internationally are the same as they are in the United States.

Speaker #7: All right, great. And then maybe another question on international. The performance was really impressive—better than we were kind of expecting across the board.

Speaker #2: Air seal, BioBrace, and Smoke Evacuation we have a really strong team internationally excited about where we're at and where we're going. We know it can be a little more dynamic with growth rates as we work through distributors.

Speaker #7: Can you talk a bit more about what was driving the performance there? Is there anything one time and how should we be thinking about that momentum heading into the second half as comps get a little bit more challenging?

Speaker #2: And some of their own supply chain challenges as they order products from us in a different time frame. Can cause our sales to go up and down a little bit more.

Speaker #2: But quarterly directionally, we feel good about the business there and continue to feel optimistic about our growth trajectories.

Speaker #2: Yeah, a couple of things I would say. You'd remember we had a very strong Q4 2025 correspondingly. We had a slower quarter internationally in Q1 and we've had a really strong quarter here, and it was across both general surgery and orthopedics.

Speaker #7: Great. Thanks again.

Speaker #2: Yeah. Thank you.

Speaker #1: Thank you. Our next question comes from Mike Matson with Needham and Company. You may proceed.

Speaker #2: The growth drivers internationally are the same as they are in the United States: AirSeal, BioBrace, and smoke evacuation. We have a really strong team internationally and are excited about where we're at and where we're going.

Speaker #2: Yeah. Thanks. So just with regard to air seal, I know that Intuitive and DaVinci's pretty dominant and most of the robots out there are one of theirs.

Speaker #2: We know it can be a little more dynamic with growth rates as we work through distributors, and some of their own supply chain challenges as they order products from us in a different time frame.

Speaker #2: But there are a lot of emerging companies out there. Medtronic, J&J, have robots now. And there's a bunch of Chinese companies etc. So are you are there any plans to make air seal compatible with any of these other robots?

Speaker #2: Can cause our sales to go up and down a little bit more. But quarterly directionally, we feel good about the business there and continue to feel optimistic about our growth trajectories.

Speaker #2: Particularly in the ASC setting, I know there's a few companies targeting ASCs with different types of robots that maybe a little more suitable for that setting.

Speaker #7: Great. Thanks again.

Speaker #2: Yeah. Thank you.

Speaker #2: Great question, Mike. I was at the surgical robotics society meeting last week in Florida. And it is I was at the meeting also last year in Strasbourg.

Speaker #1: Thank you. Our next question comes from Mike Madsen with Needham and Company. You may proceed.

Speaker #2: Yeah, thanks. So, just with regard to AirSeal, I know that Intuitive and da Vinci are pretty dominant, and most of the robots out there are one of theirs.

Speaker #2: And this is a really dynamic meeting. And the ConMed insufflation booth was loud and proud in the middle of a number of outstanding robotic companies.

Speaker #2: But there are a lot of emerging companies out there. Medtronic and J&J have robots now, and there's a bunch of Chinese companies, etc. So, are there any plans to make AirSeal compatible with any of these other robots?

Speaker #2: It was excited to be there. And I would tell you, every robotic surgery system needs an insufflator. ConMed's focus is continuing to be the best.

Speaker #2: And our clinically superior insufflation system is proving to be that. We can be used in any robot and I want to confirm we've had air seals installed around the world on multiple robotic platforms.

Speaker #2: Particularly in the ASC setting, I know there are a few companies targeting ASCs with different types of robots that may be a little more suitable for that setting.

Speaker #2: And I commented earlier. That includes the US and the ASC environment.

Speaker #2: Great question, Mike. I was at the Surgical Robotics Society meeting last week in Florida, and I was also at the meeting last year in Strasbourg. This is a really dynamic meeting.

Speaker #6: Okay. Got it. I just wanted to make sure that there wasn't any FDA clearances or anything like that required to make it compatible with those other systems.

Speaker #2: And the CONMED insufflation booth was loud and proud in the middle of a number of outstanding robotic companies. It was excited to be there.

Speaker #2: No. There is not any. Most robotic systems actually have to have an independent insufflator used with them.

Speaker #2: And I would tell you every robotic surgery system needs an insufflator. ConMed's focus is continuing to be the best and our clinically superior insufflation system is proving to be that.

Speaker #6: Okay. All right. And then just I mean, I saw the tariff rebate and it's great that you got that. But there's also been some changes to the tariff rates lately.

Speaker #6: What's the outlook for the latest tariff rates? Is it basically similar to what you were expecting before?

Speaker #2: We can be used in any robot and I want to confirm we've had air seals installed around the world on multiple robotic platforms and I commented earlier.

Speaker #5: It is. Hey, it's John here. So thanks for the question. The expectation continues to be the same. On tariffs for the year as far as we had cooked in 35 cents of full year 2026 EPS headwind related to tariff.

Speaker #2: That includes the U.S. and the ASC environment.

Speaker #6: Okay. Got it. I just wanted to make sure that there wasn't any FDA clearances or anything like that required to make it compatible with those other systems.

Speaker #5: Now, the refund that we received of course was separate and was related to the previous year. So the 35 cents remains intact. And the update that we had to the guidance was related to the to the refund that we received related to tariffs paid in 2025.

Speaker #2: No, there is not any. Most robotic systems actually have to have an independent insufflator used with them.

Speaker #6: Okay, all right. And then, just—I mean, I saw the tariff rebate, and it's great that you got that, but there's also been some changes to the tariff rates lately.

Speaker #6: Okay. Thank you.

Speaker #1: Thank you. Our next question comes from Robbie Marcus with JP Morgan. You may proceed.

Speaker #6: What's the outlook for the latest tariff rates? Is it basically similar to what you were expecting before?

Speaker #4: Oh, great. I'll also offer my welcome and congratulations on the role. I was wondering I don't think anyone asked yet the lowering of the organic sales growth rate at the high end of the guide.

Speaker #5: It is. Hey, it's John here. So thanks for the question. The expectation continues to be the same on tariffs for the year as far as we had cooked in 35 cents of full year 2026 EPS headwind related to tariffs.

Speaker #4: Just maybe walk us through the rationale and what prompted that.

Speaker #5: Now, the refund that we received, of course, was separate and was related to the previous year. So, the $0.35 remains intact. And the update that we had to the guidance was related to the refund that we received related to tariffs paid in 2025.

Speaker #2: Yeah. Robbie, if you think about it and at the end of quarter one, we had a second half guide of growth to be in the I'm pulling up my numbers here for the second half.

Speaker #6: Okay. Thank you.

Speaker #1: Thank you. Our next question comes from Robbie Marcus with JP Morgan. You may proceed.

Speaker #2: To be between I want to say almost 9%, Robbie, and after a second quarter that we grew 6%. And we knew that we had a second half that was going to have to accelerate.

Speaker #3: Oh, great. I'll also offer my welcome and congratulations on the role.

Speaker #6: Thank ank you.

Speaker #3: I was wondering—I don't think anyone has asked yet—about the lowering of the organic sales growth rate at the high end of the guide. Could you maybe walk us through the rationale and what prompted that?

Speaker #2: But I thought it was prudent to lower the second half top end. What was a billion 350 to a billion 344. So we actually lowered the top end by 6 million.

Speaker #2: Yeah, Robbie, if you think about it, at the end of quarter one, we had a second-half guide for growth to be in the—I'm pulling up my numbers here for the second half.

Speaker #2: We have a second half guidance that says we've got to grow in the 6% plus range. We've just grown 6%. We believe we have a strong approach towards the 6% in the second half.

Speaker #2: And I remain confident in our ability for the total year to grow 5%.

Speaker #4: Great. The other one I wanted to ask on was free cash flow. It's down about 20 million year over year. There are a couple of cash costs you're excluding.

Speaker #2: To be between I want to say almost 9%, Robbie, and after a second quarter that we grew 6% and we knew that we had a second half that was going to have to accelerate but I thought it was prudent to lower the second half top end what was a billion 350 to a billion 344.

Speaker #4: In the adjustments, how are you thinking about free cash flow for the year and what's the right conversion rate for the business moving forward?

Speaker #4: Thanks a lot.

Speaker #2: So we actually lowered the top end by 6 million. We have a second half guidance that says we've got to grow in the 6% plus range we've just grown 6%.

Speaker #5: Yeah. Thanks. So on free cash flow, it's primarily working capital. That's driving the down year on year and versus the previously guided number. So that's the primary driver.

Speaker #2: We believe we have a strong approach toward the 6% in the second half, and I remain confident in our ability for the total year to grow 5%.

Speaker #5: We also have interest expense and some movement on the tax rate. I don't it's early days for me. I don't have the what the typical conversion is.

Speaker #3: Great. The other one I wanted to ask on was free cash flow. It's down about 20 million year over year. There are a couple of cash costs you're excluding.

Speaker #5: On free cash flow. But what I've seen certainly in the two weeks that I've been here is we've got a strong cash flow organization.

Speaker #3: In the adjustment, how are you thinking about free cash flow for the year and what's the right conversion rate for the business moving forward?

Speaker #5: There is likely some opportunity as we look at working capital inventory at the company. And that's certainly an area of focus. But overall, the strong cash flow of the company is helpful in supporting the deleveraging efforts that we've had underway.

Speaker #3: Thanks a lot.

Speaker #5: Yeah. Thanks. So on free cash flow, it's primarily working capital that's driving the down year on year and versus the previously guided number. So that's the primary driver.

Speaker #2: Yeah. Robbie, we've lost this path here. We've also talked about our focus on taking care of our customers. And ensuring we didn't allow inventory to hold us back from doing that.

Speaker #5: We also have interest expense and some movement on the tax rate. I don't—it's early days for me. I don't have what the typical conversion is.

Speaker #2: I also commented that now our operations team is focused on optimization and improving some of those areas. And so you should expect inventory going forward to improve.

Speaker #5: On free cash flow — but what I've seen, certainly in the two weeks that I've been here, is we've got a strong cash flow organization.

Speaker #4: Thanks a lot.

Speaker #1: Thank you. Our next question comes from Matthew O'Brien with Piper Sandler. You may proceed.

Speaker #7: Great. Hi. This is Anna on from Matt. Thanks for taking your questions here. Just two from us. Firstly, on Ortho. The headline number was nice, but seems like domestically things were a bit short of what you're expecting.

Speaker #2: Yeah. Robbie, we've lost this path here. We've also talked about our focus on taking care of our customers. And ensuring we didn't allow inventory to hold us back from doing that.

Speaker #7: So just if you could elaborate a bit more on some of the puts and takes there. And then maybe within that, any additional comments you could provide on a shift in mix, maybe between ASCs and the inpatient setting.

Speaker #2: I also commented that now our operations team is focused on optimization and improving some of those areas, and so you should expect inventory, going forward, to improve.

Speaker #2: Gotcha. Good question. So again, let's level set ourselves. Ortho sales increased 6.8% globally. International was 10.8. And domestic was essentially flat or US I also want to give you some context.

Speaker #3: Thanks a lot.

Speaker #1: Thank you. Our next question comes from Matthew O'Brien with Piper Sandler. You may proceed.

Speaker #2: Our US orthopedic business has grown mid-single digits five of the last eight quarters and three of the last four. This is one out of the three of the four that we didn't grow.

Speaker #7: Great. Hi. This is Ana on from Matt. Thanks for taking your questions here. Just two from us. Firstly, on Orso, the headline number was nice but seems like domestically things were a bit short of what you're expecting.

Speaker #2: And in the second quarter, the our US business had some strategic activities where we were looking to strengthen our commercial organization to position for growth.

Speaker #2: So we took some actions. It caused our growth to pause. We are on offense and we expect it to continue to grow. And your thoughts on ASC growth and volume versus the acute care hospital setting?

Speaker #2: You're right on there. More and more sports medicine procedures and more and more total joint orthopedic procedures are moving to the ASC setting. We continue to see that.

Speaker #2: Gotcha. Good question. So again, let's level-set ourselves. Ortho sales increased 6.8% globally. International was 10.8%, and domestic—essentially the US—was flat. I also want to give you some context.

Speaker #7: Great. Thank you. And then I guess just to double down on the volume commentary that you provided earlier, I appreciate you said nothing's changed to date, that you're seeing.

Speaker #2: Our US orthopedic business has grown mid-single digits in five of the last eight quarters, and in three of the last four. This is one out of the three of the four that we didn't grow.

Speaker #7: But what are your expectations for surgical volumes for the rest of the year and just sort of how that's implemented into the guide? Thanks.

Speaker #2: And in the second quarter, our US business had some strategic activities where we were looking to strengthen our commercial organization to position for growth.

Speaker #2: Yeah. Our expectations is surgical volumes will continue to be as they were. Again, we have again, we see the news in the publications that come out and some would challenge surgical volumes are going to go lower.

Speaker #2: So we took some actions. It caused our growth to pause. We are on offense, and we expect it to continue to grow. And your thoughts on ASC growth and volume versus the acute care hospital setting?

Speaker #2: Some challenge surgical volumes are going up. But we continue to see healthy trends from our customers.

Speaker #2: You're absolutely right. More and more sports medicine procedures, as well as total joint orthopedic procedures, are moving to the ASC setting. We continue to see that trend.

Speaker #1: Thank you. I would not like to turn the call back over to Pat Beyer for any closing remarks.

Speaker #7: Great, thank you. And then I guess, just to double down on the volume commentary that you provided earlier—I appreciate you said nothing's changed to date that you're seeing.

Speaker #2: Thank you very much. I want to reiterate ConMed had a strong second quarter. Our financial results were strong and we accomplished a lot operationally and organizationally to continue to advance our cause to improve patient outcomes and to deliver long-term shareholder value.

Speaker #7: But what are your expectations for surgical volumes for the rest of the year and just sort of how that's implemented into the guide? Thanks.

Speaker #2: I want to thank you all for joining us on this call today.

Speaker #5: Thanks, everybody.

Speaker #2: Some challenge surgical volumes are going up. But we continue to see healthy trends from our customers.

Speaker #1: Thank you. I would now like to turn the call back over to Pat Beyer for any closing remarks.

Speaker #2: Thank you very much. I want to reiterate that CONMED had a strong second quarter. Our financial results were strong, and we accomplished a lot operationally and organizationally to continue advancing our cause to improve patient outcomes and deliver long-term shareholder value.

Speaker #2: I want to thank you all for joining us on this call today.

Speaker #5: Thanks, everybody.

Q2 2026 CONMED Corp Earnings Call

Request DemoDemo

Conmed

Earnings