Operator: Please stand by. Hello, and welcome to CONMED's Q3 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook, its plans, and objectives. These statements represent forward-looking statements that involve risks and uncertainties as those terms are defined under federal securities laws. Investors are cautioned that any such forward-looking statements are not guarantees of future events, performance, or results. The company's actual results may differ materially from its current expectations.
Operator: Please refer to the risks and uncertainties disclosed under the forward-looking information in today's press release, as well as the company's SEC filings for more details on the risks and uncertainties that may cause actual results to differ materially. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call, except as may be required by applicable law. You will also hear management refer to non-GAAP or adjusted measurements during this discussion. While these figures are not a substitute for GAAP measurements, management uses these figures to aid in monitoring the company's ongoing financial performance from quarter to quarter and year to year on a regular basis and for benchmarking against other medical technology companies.
Operator: Reconciliation of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the investor relations portion of our 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.
Pat Beyer: Thank you, operator, and welcome everyone to our Q3 2026 earnings call. I am joined on the line by John Gallagher, our Chief Financial Officer. Let me provide you with a quick agenda for today's call. I will start with a brief overview of our quarterly financial results. Then I will discuss the sales performance in our general and orthopedic surgery product lines, the key product growth drivers within each, and related operational highlights.
Pat Beyer: John will review our financial results in detail, along with our guidance for 2026, which we updated in today's press release. I will then share a few closing remarks before we open the call for questions. With that, let us get started with a review of our financial performance in the Q3. Unless noted otherwise, all sales growth figures discussed are provided on a year-over-year and constant currency basis. We reported net revenue of $335.6 million in the Q3. Our net sales decreased 70 basis points on an as-reported basis and 80 basis points on a constant currency basis. On an organic constant currency basis, our net revenue increased 6.7% year over year.
Pat Beyer: As we have discussed previously, our organic growth excludes the sales of gastroenterology products in our general surgery product line due to our strategic exits of these products as part of our portfolio optimization strategy. Our organic constant currency sales performance was consistent with our expectations for the quarter, which we shared in our last earnings call. In terms of profitability, we generated adjusted diluted EPS of $1.04 for the Q3, which exceeded the high end of our expectations. In short, we were pleased to deliver strong performance in the Q3 on both the top and bottom line.
Pat Beyer: I will now discuss the Q3 sales performance in our general surgery and orthopedic surgery product lines, along with updates on the key product growth drivers in each. Excluding the impact of our strategic GI exits, our sales growth was broad-based across both of our product lines, reflecting strong contributions from our key growth platforms. Sales of our general surgery products increased 6.4% on an organic constant currency basis.
Pat Beyer: By geography, our general surgery growth was driven by 15.5% organic constant currency growth internationally, where we saw impressive performance in both EMEA and APAC regions, coupled with 1.9% growth domestically. By product, AirSeal was the largest driver of our total general surgery sales growth. We also saw notable contributions from direct sales of Buffalo Filter, our surgical smoke evacuation platform. I will now provide an update on these two key growth products, starting with AirSeal, our advanced insufflation platform.
Pat Beyer: We were pleased with our AirSeal sales performance and the improvement in growth trends we experienced in the Q3, as expected. Our AirSeal's growth was driven primarily by stable growth in sales of disposables and strong growth in capital equipment, particularly outside the US. From an operational standpoint, our domestic and international teams remain focused on facilitating the adoption and utilization of AirSeal in both robotic and laparoscopic surgery. In robotic surgery, AirSeal's clinical differentiation in complex high acuity procedures remains central to our commercial efforts. Surgeons performing these cases consistently highlight AirSeal's ability to maintain stable, low-pressure insufflation as a meaningful advantage over conventional insufflation systems. In practice, this translates into real benefits that have been demonstrated in clinical studies, shorter procedure times, clear visualizations, and meaningful reductions in both postoperative pain and length of stay.
Pat Beyer: This combination of clinical performance and economic value is what keeps robotic surgeons choosing AirSeal. With this in mind, our team is focused on leveraging these advantages to establish AirSeal as the preferred insufflation solution for complex robotic procedures, regardless of the site of care and underlying robotic platform. We continue to see success on this front, which gives us confidence in its growth trajectory as robotic surgery adoption continues to expand. With respect to specific operational highlights during the quarter, in late July, we announced a new expanded US clinical indication for our AirSeal robotic solution, which is now indicated for use with Intuitive's 8-millimeter hex cannulas. This expanded indication enables our sales professionals to market AirSeal directly to the growing base of hospitals and surgeons adopting Intuitive's da Vinci 5 robotic surgical platform.
Pat Beyer: It also provides prospective customers with the compatibility data they need as they evaluate AirSeal alongside this robotic surgical platform. This data was generated through joint testing conducted between the teams at CONMED and Intuitive, and I'm pleased with the continued collaboration between our organizations. Our team has been focused on educating current and prospective customers on this development in recent months.
Pat Beyer: While it is early, we believe this expanded indication will provide our customers clarity and confidence on the joint use of these products and procedures. We also continue to leverage and expand our portfolio of clinical and economic evidence. Specifically, our team is raising awareness globally of AirSeal's competitive advantages by leveraging the results of a recently published study by Professor Nikhil Vasdev. As a reminder, this study detailed a randomized controlled trial comparing AirSeal to a widely used competing insufflator.
Pat Beyer: It found that patients treated with AirSeal experienced more favorable outcomes in intraoperative pain, blood loss, and procedure time. Professor Vasdev has presented his experience and findings of more favorable outcomes at multiple robotic surgery conferences around the world, including the Society of Robotic Surgery conferences in both the United States and India. Our team also made significant progress towards building out our data set in the ambulatory surgery center setting. We aim to utilize this data to further strengthen our value proposition and support our future growth in ambulatory surgery centers. Turning to laparoscopic surgery. As we have discussed in the past, we remain significantly underpenetrated in the US market, with AirSeal estimated to be used in only 6% to 7% of the more than 3 million laparoscopic procedures performed annually.
Pat Beyer: With this in mind, our team is focused on prioritizing specific laparoscopic procedure categories where AirSeal is likely to have a maximal clinical and economic impact, giving us the right to win. Our execution here is becoming more targeted as we implement procedure-specific training for our commercial teams, strengthen our relationship with key clinicians, and generate related clinical and economic evidence. Stepping back, given our performance and progress in the Q3, we remain confident in AirSeal's long-term growth trajectory. Our conviction is further supported by multiple factors, including AirSeal's differentiated clinical and economic value proposition, the substantial untapped opportunity that remains ahead of us across the global robotic and laparoscopic surgery markets, and the focused execution of our global team. Moving to an update on Buffalo Filter, our smoke evacuation platform.
Pat Beyer: As I mentioned earlier, we saw strong contributions in the Q3 from sales of our direct smoke evacuation portfolio, with year-over-year growth within the high single-digit to low double-digit range we expect annually over the long term. This performance was moderated by a decrease in sales to our OEM smoke evacuation customers. As we have discussed previously, our strategic focus remains on our direct smoke evacuation portfolio, given its stronger margin profile and closer proximity to the end user.
Pat Beyer: As a reminder, we estimate the global smoke evacuation market represents a $1 billion opportunity, and the unmet clinical need remains clear. An estimated 90% of surgical procedures generate smoke, creating a potentially hazardous environment for both clinicians and patients. Against this backdrop, we continue to see meaningful activity from both legislators and medical societies working to address this issue, which remains an important long-term tailwind for Buffalo Filter.
Pat Beyer: To that end, during the Q3, Michigan enacted a law requiring facilities that perform surgical procedures with equipment likely to generate smoke to implement a smoke evacuation policy by July 2027. Just this past week, Pennsylvania enacted a law requiring hospitals and ambulatory surgery centers to use smoke evacuation devices during all procedures that generate hazardous smoke. This legislation will require facilities to implement the related program and policies before the end of January 2027. With these developments, there are now a total of 23 states with smoke-free operating room laws covering approximately 60% of the United States population. Buffalo Filter remains well-positioned in this evolving market, with clinical studies demonstrating its ability to filter out virtually all toxic surgical smoke.
Pat Beyer: Our team is preparing to leverage these and other recent legislative tailwinds by engaging and educating affected facilities in each state, and we continue to see activity building, with more than 10 additional states currently considering similar legislation. Given this recent traction and significant runway, we expect our direct smoke evacuation portfolio to deliver strong, durable growth both in 2026 and longer term. Shifting now to our orthopedic surgery product line. Our orthopedic surgery organic constant currency sales increased 7.2% in the Q3.
Pat Beyer: By geography, this performance was driven by 12.7% constant currency growth internationally, reflecting broad-based growth across all of our major international regions. Our international growth more than offset a 1.7% decrease in domestic orthopedic sales. Our US performance continued to reflect the impact of actions taken earlier this year to strengthen our commercial organization, which we discussed on our Q2 call.
Pat Beyer: As a result of these actions, we continue to believe we are better positioned to drive stable long-term growth in our orthopedic surgery product line. Importantly, our year-over-year growth trends in US orthopedic sales improved on both a 2 and 3-year basis in the Q3. By product, our reinforced bioinductive implant, BioBrace, was a key driver in our orthopedic surgery sales growth in the quarter, particularly the impressive performance delivered by our international team. I will now provide a brief update on BioBrace. We continue to see the traction globally as our team works to raise awareness of the product and its clinical benefits, most notably its ability to provide both mechanical strength to protect repairs and reduce stress on healing tissue and bioinductive properties to promote tissue growth, supporting the body's natural healing process.
Pat Beyer: The powerful combination of these two attributes allow our sales representatives to confidently recommend BioBrace for prospective customers' toughest cases, most notably rotator cuff repairs, where roughly a third to half of procedures are estimated to result in re-tear. As a reminder, BioBrace has clinically demonstrated a 94% healing rate when used to augment rotator cuff repair in high-risk patients. The American Academy of Orthopedic Surgeons clinical practice guidelines also now strongly recommend the use of bioinductive implants to augment these procedures. Support that provides an important tailwind for adoption, given the estimated 1 million rotator cuff repair procedures performed annually in the United States alone. We continue to see that clinicians who trial BioBrace for such challenging cases and experience the strong outcomes they are able to achieve tend to adopt and utilize the product over the long term.
Pat Beyer: Beyond our existing markets, we continue to expand access to BioBrace globally. Most notably, during Q3, our international team secured regulatory clearance for BioBrace in Brazil, an important step in extending the reach of this platform. Taken together, we remain confident that BioBrace's differentiated clinical profile and expanding global footprint position it to remain a durable, long-term growth driver for our orthopedic surgery product line. With that, I'll turn the call over to John, who will walk you through our Q3 financial results in greater detail and review our updated guidance.
John Gallagher: Thank you, Pat. Given Pat's detailed discussion of our sales results in Q3, I will begin my remarks at the gross profit line. Unless otherwise noted, my commentary will focus on our non-GAAP results during Q3 2026, with all growth rates on a year-over-year basis. 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 Q3 results and updated financial guidance on the investor relations section of our website. Q3 adjusted gross profit was consistent with the prior year period. Adjusted gross margin was 56.4%, an increase of 40 basis points, driven primarily by favorable product mix. Adjusted operating expenses were essentially flat, with a 20 basis point decrease in adjusted SG&A expense and a 1% decrease in adjusted R&D expense.
John Gallagher: Our adjusted operating margin was 15.4%, an increase of 20 basis points. Adjusted interest expense was $10.5 million in Q3, compared to $6.3 million last year. The increase in our adjusted interest expense in Q3 2026 reflects the impact of our recent debt refinancing activities. As a reminder, during Q2 2026, we drew down 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. The adjusted effective tax rate in Q3 was 23.5%, compared to 25.5% last year. Adjusted net income was $31.4 million, or $1.04 per diluted share, compared to $33.4 million or $1.08 per diluted share in 2025.
John Gallagher: As Pat mentioned, our Q3 adjusted EPS results exceeded the low and high-end expectations we outlined on our Q2 earnings call by $0.06 and $0.01 respectively. We generated $46.4 million of free cash flow in Q3 2026, a decrease of 3.6% year over year. Turning to a review of our balance sheet and financial condition. As of 30 September 2026, CONMED had cash of $48 million, total debt obligations of $815.9 million, and additional available borrowing capacity of $468.5 million.
John Gallagher: 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 31 December 2025. Our leverage ratio on 30 September 2026 was 2.7 times. Lastly, with respect to share repurchases, during the first nine months of 2026, we repurchased approximately 1.2 million shares of common stock for a total of $49.9 million.
John Gallagher: We anticipate allocating approximately $62 million to share repurchase in the full year of 2026. Turning to a review of our 2026 financial guidance, which we updated in today's press release. We updated our net sales guidance range today based on updated expectations for revenue contributions from product sales and the MSA agreement related to our strategic exit from our GI product offerings in 2026, and updated assumptions regarding the impact on our revenue results from changes in foreign currency exchange rates.
John Gallagher: Specifically, our full year 2026 net revenue guidance now assumes GI revenue of approximately $20 million, compared to our prior guidance range of $20 to $22 million. Changes in foreign currency exchange rates are now expected to represent a tailwind to GAAP results of approximately $9 million, compared to our prior expectation of a tailwind from FX of between $7 to $7.5 million.
John Gallagher: On an organic constant currency basis, we now expect net sales growth of 5% to 5.5%, compared to our prior expectation of 5% to 6%. Our updated full year 2026 revenue guidance also reflects both our performance in Q3 and updated outlook for the balance of the year. Specifically, we reaffirm the low end of our organic constant currency growth range and remain confident in our team's ability to deliver at least 5% organic constant currency growth in 2026.
John Gallagher: We narrowed the high end of our organic constant currency growth range to reflect a more measured pace of sequential improvement in our growth trends compared to what was assumed in our prior guidance. With respect to profitability guidance for 2026, we now expect non-GAAP adjusted diluted earnings per share in the range of $4.54 to $4.61, compared to our prior guidance range of $4.48 to $4.60.
John Gallagher: The increase in our non-GAAP EPS guidance range reflects our better-than-expected EPS results in Q3. For modeling purposes, our updated financial guidance for 2026 now assumes adjusted gross margin of approximately 57.5%, adjusted interest expense of approximately $33.7 million in 2026, compared to our prior expectation of approximately $33 million. Adjusted effective tax rate of approximately 24.5%, compared to 25% previously. We expect to generate free cash flow of approximately $115 million. We expect weighted average shares outstanding of 30.2 million. Lastly, as it relates to Q4 2026, our guidance implies the following. GAAP net sales of between $364 million and $370 million. This represents organic constant currency growth in the range of 5.1% to 6.8%, excluding expected GI revenue of approximately $3.7 million, and an FX tailwind of approximately $650,000. Adjusted EPS in Q4 of between $1.23 and $1.30.
John Gallagher: I'll now turn the call back to Pat to share a few closing thoughts.
Pat Beyer: Thanks, John. In summary, Q3 was a quarter of solid execution for CONMED. We delivered 6.7% net revenue growth on an organic constant currency basis, fueled by balanced contributions from both general and orthopedic surgery. AirSeal, Buffalo Filter direct smoke evacuation, and BioBrace served as the driving engines of our sales growth in their respective product lines. Our performance across the P&L enabled us to deliver adjusted EPS that exceeded our expectations. More broadly, our progress to date this year leaves us well positioned going forward. Following the strategic exits of our GI products, our organization is increasingly focused on the markets where we see the greatest long-term opportunity: minimally invasive surgery, smoke evacuation, and orthopedic soft tissue repair. Our three key growth platforms in each market continue to gain share as we expand into new regions and clinical settings.
Pat Beyer: With an enhanced focus on our key markets, differentiated growth platforms, and a strong balance sheet, we look forward to driving continued execution on our growth strategy as we close out 2026. 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 joining us on today's call for your continued support. Operator, we will now open the call for questions.
Operator: Thank you. If you would like to ask a question, please signal by pressing star 11 on your telephone keypad. If you're using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. We do ask that you limit yourself to one question and one follow-up. We'll pause for a moment while we compile our Q&A roster. Our first question comes from Vik Chopra with BMO Capital Markets. Your line is open.
Anton Heldmann: Hi, Pat and John, it's Anton Helbin on for Vik. Thanks for taking our questions. I guess, John, I was hoping you could talk a bit more about the full year guidance update. At the midpoint, the sales guidance is moving lower by $2.5 million more than the $800K Q3 sales shortfall. Can you kind of bridge us to the change in the Q4 outlook? What specifically changed relative to your expectations heading into the quarter?
John Gallagher: Yeah. Hi, Anton. Happy to do that. For avoidance of any doubt, there are two things that changed as it relates to the revenue guidance that we put out there. The first of which is FX. So we made an update to FX. It's now a tailwind of $9 million. It was $7 to $7.5 million. The second is GI. GI, we now have at $20 million, and it was $20 to $22 million. So when you exclude those items, then we are very confident in at the low end of the range being at least 5% organic constant currency revenue growth for the year. Up at the high end, which I think is where your question was going, of how do you move lower then?
John Gallagher: Up at the high end of the range, we previously had an implied Q4 revenue growth on a constant currency organic basis of 8.1%, and that was too high based on the performance that we saw in Q3. So in Q3, we did 6.7% organic constant currency revenue growth. When we look at that and the visibility we have for the rest of the year, then we felt more comfortable. The implied, by the way, at the high end of the range, the implied Q4 is a 6.8%. So it's more in line with the performance that we saw in Q3. Here we are with a couple of months left in the year. We felt more comfortable tightening the range, but have very high confidence in achieving at least 5% organic constant currency revenue growth.
Anton Heldmann: Great. Pat, maybe one for you. The US general surgery business is a bit softer than what we were kind of thinking. It sounds like perhaps the OEM smoke evacuation business was the driver here. Can you talk a little bit more about your visibility into the OEM smoke evacuation, like ordering dynamics, and whether we have kind of reached trough levels? What kind of gets that kind of improving from here?
Pat Beyer: Anton, you are right in your assumption that the global general surgery business was up 6.4%, and we were really pleased with it. US general surgery business was up 2%. Smoke evacuation was up strong. AirSeal was up strong in the US. It was OEM Buffalo Filter. To remind you, we acquired the OEM Buffalo Filter business when we purchased the Buffalo Filter franchise. Our strategy is to focus on our direct business. It is higher margin, it is closer to the customer, and we can control and enjoy that dynamic with the direct business better by going direct. We continue to have an OEM business. We are working with our OEM partners to understand more of that supply chain.
Pat Beyer: Quite honestly, it will be more variable for us as OEM suppliers decide what they are doing with their business, which is one of the reasons why we specifically call it out, Anton.
Anton Heldmann: Appreciate the color. Thanks, guys.
Operator: One moment for our next question. Our next question comes from Lawrence Biegelsen with Wells Fargo. Your line is open.
Ross Osborne: Hi, this is Ross Osborne on for Larry. Thanks for taking our questions. Starting with ortho domestic, what inning do you think you guys are in with getting sales productivity back to a normal rate? How should we think about your domestic ortho growth rate exiting this year and next?
Pat Beyer: Hi, Ross. Good question. Again, similar to the previous answer, I would just go, listen, our global orthopedic business had a really good Q3. We were up 7.2%. We also called out in our Q2 call, our US orthopedic performance will reflect the actions we are undertaking to improve our commercial organization. I can tell you that is the reason why our US orthopedic business kind of took a sideway movement and declined a little bit in the Q3. But we believe our US orthopedic product line is better positioned for stable long-term growth as the result of it.
Pat Beyer: What inning we are in? I would probably go halves versus innings. We know last night's game went to the 12th inning, so I do not want to draw this out. We have made a lot of progress in the Q1 and Q2 of this year, making the changes. Q3, we made even more. Right now, our focus is onboarding and operationalizing our distributors so that we can be back to driving growth. We believe we will exit this year in a position where H1 next year, we are driving growth in the United States back in the guideline and what we should be doing.
John Gallagher: As far as the growth rate, Ross, you were asking about the growth rate. We highlighted in the prepared remarks that the growth trends are improving. Despite what we saw in the quarter-on-quarter performance in US ortho, we are seeing improvement in the growth trends. That is giving us some confidence as we approach the end of the year.
Ross Osborne: Makes sense. Then in your prepared remarks, you cited AirSeal as underpenetrated, 6% to 7% of LAP procedures. What is the process for prioritizing which procedure types or specialties to target next, and what procedure category is the current focus for expanding beyond that 6% to 7% base?
Pat Beyer: Ross, it is a really good question, and in previous calls, I have tried to lay that out a little bit. We know where in our robotic procedures we are getting the highest uptake, and it is complex, high acuity, longer procedures. Those procedures like colorectal, urology, gynecology, bariatrics. What we have done is we have looked at the penetration rate we have in laparoscopy versus robotic, and we are under-penetrated in laparoscopy.
Pat Beyer: So we know from a 6% to 7% current penetration, if we could have the same penetration rate that we have in robotic, it would be a significant move for us. So we are very targeted on the surgeon groups we are bringing our clinical insufflation to in the laparoscopic market, and we are very targeted how we train our sales force on, do not go after 100% initially opportunities in laparoscopic. It is our targeted opportunities we are going at.
Ross Osborne: Great. Thanks for taking our questions.
Operator: One moment for our next question. Our next question comes from Matthew O'Brien with Piper Sandler. Your line is open.
Matthew O'Brien: Afternoon. Thanks for taking the questions. I was just hoping to follow up on Anton Helbin's question on the high end of the range coming down by 50 basis points. How much of that is related to the OEM Buffalo Filter business versus the, I guess, a little slowness in terms of getting the ortho franchise back to where you want it from a growth perspective? I do have a follow-up. Thanks.
John Gallagher: Well, actually the way to think about it is, we are tightening from the high end of the range from 6% down to 5.5%, so we are taking it down 50 basis points. The thing to focus on there is the performance that we saw in Q3 was aided by a very strong international. You saw that in the report and in the prepared remarks. We know that our international business is largely a distribution-oriented business. We saw some timing of distributor orders that benefited Q3, and as we look at the H2 of the year, we remain on track for international performance. We basically are not underwriting that to repeat again in Q4. It is one of the key items related to why is the high end of the guide coming down from 6% to 5.5%?
Matthew O'Brien: Okay. Maybe I will follow up offline. The other piece is the domestic franchise. I know you are saying Buffalo Filter did pretty well. Direct smoke did well. AirSeal did well. I am just thinking about competing in these markets, and what kind of evidence you are starting to see that some of your adjustments are working between those franchises, between the orthopedic franchises. I think about some of your competition there, which is really, really strong. Is there anything you can point us to from an evidentiary perspective that it is starting to work? Because again, it feels like a little bit of the modest guide down on the top line is related to maybe some competitive challenges as you are going up against some pretty big players. Thanks so much.
Pat Beyer: Matt, as I think and we think about the United States market, it is a big market. Certainly, it is competitive, but it is a market we can and should win in. When I look at general surgery specific, we had strong growth in Buffalo Filter. We met our guidance range, and AirSeal continues to do well there. Our direct smoke, as I said, did well. When we look at Buffalo Filter OEM, it does not hit international, so we get all of the headwind in the US. On the orthopedic side, our BioBrace is strong and doing well.
Pat Beyer: Our portfolio, the same portfolio that continues to do well internationally, should be doing better in the United States, which is one of the reasons we are doubling down on the commercial organization and the sales force. We know that our trends are improving.
Pat Beyer: When we look at the year-to-year growth over two and three years to normalize for quarter comp dynamics, our trends are getting better. While we certainly agree with you, we never want a decline in the business. We are getting better, and we believe the trends prove that we should be a growth business in the United States, not just in the gen surg side, but also in our orthopedic business. We are certainly holding ourselves accountable to that and our teams accountable to that.
Operator: Thank you. One moment for our next question. Our next question comes from Mike Matson with Needham & Company. Your line is open.
Mike Matson: Yeah, thanks. Just wanted to ask one on BioBrace. You mentioned the OUS sales. Curious, of the countries where you are selling your orthopedic products, how many of them are you selling BioBrace in currently? How does the labeling and the way that you are able to market it compare to the US market? I guess pricing for that matter as well. Is it a lower price outside the US?
Pat Beyer: Good question, Mike. BioBrace internationally, first of all, and you are right to call that difference out. In the United States, we are approved for anywhere soft tissue weakness exists. Internationally, it is by indication. So we have studies going on to get our BioBrace solution approved in the rotator cuff, in the knee, and in the Achilles area. Today it is approved in Canada, in some of our Eastern European and our Middle East markets, in Korea, in China, in India, and in Brazil, but for the rotator cuff. Where it is approved, we are getting really strong uptake. So the clinical differentiation of strength and healing is resonating. On the price side, the price is different in every market around the world. As you would expect it to be in many orthopedic businesses.
Mike Matson: Okay, that is helpful. For AirSeal, I apologize if you did mention this and I missed it, but you have talked about targeting or expecting it to grow high single digits to low double digits. I heard your commentary on Buffalo Filter kind of being in that range if you exclude the OEM business. Was AirSeal also in that range in the quarter?
Pat Beyer: To say three quick things on AirSeal. We were really pleased with the AirSeal sales performance in Q3. We said in Q2 we would accelerate the growth, and we did as we expected. It grew both disposables and capital and accelerated. Yes, we said it would be a high single digit, low double digit business. It grew in that range.
Mike Matson: Okay, great. Thank you.
Operator: One moment before our next question. Our next question comes from Robbie Marcus with JPMorgan. Your line is open.
Robbie Marcus: Oh, great. Thanks for taking the questions. Two for me. First, I did not hear anything about the progress on the strategic update. You had mentioned in some releases that you were evaluating strategic action for the company. Would love to just get the latest on interest and thoughts on that, and then I have a follow-up.
Pat Beyer: Robbie, what I have said and what we have said publicly is, number 1, there was a rumor, and we do not comment on rumors. What I would say is, I can see why somebody would be attracted to CONMED. We just grew organic constant currency growth 6.7%. In 2025, CONMED heightened our focus. We exited the GI business. We aligned our execution around 3 focus markets, minimally invasive surgery, smoke evacuation, orthopedic soft tissue repair. So we are focused on 3 markets, and we are executing strongly around 3 growth drivers, AirSeal, Buffalo Filter, and BioBrace. That is kind of step 1. Where are we going to play and how are we going to win?
Pat Beyer: Step 2 is this refining our multi-year plan of what are our execution, what are our actions around M&A opportunities, and how are we going to win and maximize our growth opportunity and optimize our profitability. That is consistent with what I have tried to say in the past, and we do not comment on rumors.
Robbie Marcus: Got it. As you think about the exit rate here, somewhere in that upper mid-single digit organic sales growth range, is that the right place to be as we think about moving into 2027? We obviously have half a year higher of the new interest rate, but any other puts and takes you would highlight into 2027? Is that the right run rate to use on top line? Thanks.
John Gallagher: Yeah. Hi, Robbie. Pat just said, we were pleased with 6.7% organic constant currency revenue growth in the quarter. You saw the tightening on the guide basically gets the high end of the implied Q4 to approximately in that range. It is at 6.8% at the high end. As I mentioned, some timing of distributor orders internationally would have us pointed more towards the lower end of that. Overall, our growth rate expectations as we look at international remain intact for the H2. We are not going to comment on 2027 today. We look forward to updating you on the next call related to that. We have very high confidence at the low end of this range here. We tightened a bit based on some timing related to Q3 international. You saw us do 6.7% in Q3.
Robbie Marcus: Any puts and takes on the P&L to think about into next year without specific guidance?
John Gallagher: You mentioned interest expense. I think that is an area that is higher now. When you look at H2 interest expense, that is the right way to think about it, given that we did not have a refi in place for Q1 and for most of Q2. H2 interest expense, assuming flat interest rates to where we are right now, would be a good modeling point.
Robbie Marcus: Thanks a lot.
John Gallagher: The other one to call out too, Robbie, is during 2026, we have had the impact of GI in our EPS. When we are thinking about down the P&L and EPS growth, it is important to note that full year EPS this year is flat, and we are jumping over $0.45 of a headwind related to GI. That is a bit of a tailwind as we look at next year. We do not expect that to repeat. We expect it to happen on a partial year, but not on a full year basis like we have seen.
Operator: Thank you. One moment for our next question. Our next question comes from Travis Steed with Bank of America. Your line is open.
Travis Steed: Hey, thanks for the question. Gross margin, a little light versus street, and guide also ticked down a little lower to the low end of the 57.5% to 58%. Just wanted to make sure I understood the puts and takes on gross margin for this year.
John Gallagher: Yeah. Thanks for the question. Two things on gross margin as it relates to the Q3 results. One is international mix. You saw the strong performance that we've been referencing on international distributor-oriented business, slightly lower gross margin. So the strong mix that we had in Q3 is a partial driver. The other one is in Q3, we were impacted by some discrete operations and inventory items. When taken together, that's what positioned us below the outlook that we have of 50 to 100 basis points. Keep in mind, though, that the full year guidance that we have, although ticked down a bit for the reasons I stated, is still on a full year basis, will achieve 50 to 100 basis points of gross margin expansion with and without the refund.
Travis Steed: Okay. That's helpful. I don't know if there's a way to quantify, you talked about the order timing benefiting Q3, not repeating in Q4, any way to quantify that? Then anything on tariffs, with Section 232 likely coming at some point in the near term?
John Gallagher: Yeah. I'll take the last one first. On the tariffs, no change. We had said before and throughout the year that about a $0.35 impact, ignoring the tariff refunds. We continue to see that. To your point, we may see some changes coming, but for the moment, no change to the $0.35.
Travis Steed: The order-
John Gallagher: If you don't mind, say the other one one more time.
Travis Steed: The order timing, just curious the quantification on the order timing. The benefit of Q3 is not going to repeat in Q4. Just to know how much that helped this quarter on Q3.
John Gallagher: Yeah. To be specific, because I think that's where some of the other questions were going. To be specific, we beat the low end of our Q3 organic constant currency revenue guidance by $1.5 million. We did not roll that through into the Q4 guide.
Travis Steed: Okay. Sounds good. Thank you.
Operator: One moment for our next question. Our next question comes from Young Li with Jefferies. Your line is open.
Young Li: All right, great. Thanks for taking the question. I guess just a quick follow-up on the prior question. In terms of OUS contributions, the positive timing contributions, can you maybe break out the impact for ortho versus gen surg?
John Gallagher: We haven't made that breakout. You can see that both businesses on a global basis grew well into the mid-single bordering high single digit growth rates. That was in both ortho and in gen surg. A lot of that was driven internationally, as you saw. You can kind of take it from there, but we haven't broken it out.
Young Li: Okay, got it. I guess one more, just wanted to hear your updated thoughts on capital allocation and M&A priorities. Definitely seems like the focus near term is more on deleveraging and buybacks. What are your thoughts on the M&A environment valuations, and when would you be ready or interested in doing another deal, either tuck-in or a bigger one?
John Gallagher: Yeah. I am going to lay out the specifics on the Q4 call about capital allocation, but maybe a few thoughts, to your point, a few thoughts as I have gotten started here. One is around the free cash flow profile. CONMED has historically been a strong free cash flow generator. In fact, has achieved greater than 90% free cash flow conversion in seven of the last 10 years. Even with that in mind, though, the free cash flow conversion has touched down a bit in the last 12 to 18 months. I think there is opportunity there. I think there is opportunity in inventory. I think there is opportunity on interest expense. I think there is opportunity as it relates to other working capital and some non-recurring cash spend that we have.
John Gallagher: That strong cash generator profile is important, and I think it is a key strength to the company, and it also represents an opportunity for some enhancement in the near term. That is one observation, one point. Another, you mentioned this, leverage. Leverage has been coming down. We are below three times. Our net leverage is 2.7 times now. That is good. It is going to free up some capacity. But the interest expense, as we talked about, is high. As you look at the capital structure and you contemplate how much debt or what kind of debt, and we also have a draw on our revolving credit facility. There is an opportunity to think about the debt stack and what that capital structure will look like going forward. Then maybe the other observation would be around share repurchase.
John Gallagher: We have done, as we mentioned in the prepared remarks, we have bought back about $50 million of shares here to date. We anticipate doing $62 million, as we had committed earlier in the year. That is meaningful return of cash to shareholders that is greater than two times what the dividend was. Taking all of these together, these are the inputs, if you will, that I am thinking about, some observations that I have made. On the Q4 call, we will roll out some specifics as it relates to 2027. But you can see that a lot of the comments and observations that I have talked about here are related to freeing up cash, and we do have an appetite for looking at revenue growth accretive M&A opportunities.
Operator: Thank you. I am not showing any further questions at this time. That concludes our conference call today. Thank you for your participation. You may now disconnect.
