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CONMED Corporation Announces Third Quarter 2023 Financial Results

CONMED Corporation (NYSE: CNMD) today announced financial results for the third quarter ended September 30, 2023.

Third Quarter 2023 Highlights

  • Sales of $304.6 million increased 10.7% year over year as reported and 11.9% in constant currency. Acquisitions contributed approximately 40 basis points of growth.
  • Domestic revenue increased 9.5% year over year.
  • International revenue increased 12.3% year over year as reported and 15.1% in constant currency.
  • Diluted net earnings per share (GAAP) were $0.50 compared to diluted net earnings per share (GAAP) of $1.48 in the third quarter of 2022.
  • Adjusted diluted net earnings per share(1) were $0.90, an increase of 16.9% compared to the third quarter of 2022.

“The third quarter saw our team drive double-digit revenue and earnings growth amid healthy end markets,” commented Curt R. Hartman, CONMED’s Chair of the Board, President, and Chief Executive Officer. “I’m proud of what we’ve accomplished year to date in 2023, particularly that the team has been able to drive above-market revenue growth in both businesses.”

2023 Outlook

Based on the third quarter results, the Company now expects full-year revenue between $1.240 billion and $1.260 billion, compared to its prior guidance of between $1.230 billion and $1.260 billion.

The Company now expects full-year 2023 adjusted diluted net earnings per share(2) in the range of $3.45 to $3.55, compared to its prior range of $3.40 to $3.55.

The expected impact of foreign currency exchange rates remains consistent with the range provided in our original guidance for 2023.

Supplemental Financial Disclosures

(1) A reconciliation of reported diluted net earnings (loss) per share to adjusted diluted net earnings per share, a non-GAAP financial measure, appears below.

(2) Information reconciling forward-looking adjusted diluted net earnings per share to the comparable GAAP financial measures is unavailable to the company without unreasonable effort, as discussed below.

Conference Call

The Company’s management will host a conference call today at 4:30 p.m. ET to discuss its third quarter 2023 results.

To participate in the conference call via telephone, please click here to pre-register and obtain the dial-in number and passcode.

This conference call will also be webcast and can be accessed from the “Investors” section of CONMED's website at www.conmed.com. The webcast replay of the call will be available at the same site approximately one hour after the end of the call.

Consolidated Condensed Statements of Income (Loss)

(in thousands except per share amounts, unaudited)

 

 

 

 

 

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

 

September 30,

 

September 30,

 

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

 

Net sales

 

$

304,578

 

$

275,088

 

$

917,699

 

$

794,605

Cost of sales

 

 

136,519

 

 

123,473

 

 

423,629

 

 

355,222

Gross profit

 

 

168,059

 

 

151,615

 

 

494,070

 

 

439,383

% of sales

 

 

55.2%

 

 

55.1%

 

 

53.8%

 

 

55.3%

Selling & administrative expense

 

 

125,295

 

 

114,600

 

 

385,080

 

333,302

Research & development expense

 

 

12,464

 

 

12,767

 

 

38,574

 

 

34,932

Income from operations

 

 

30,300

 

 

24,248

 

 

70,416

 

 

71,149

% of sales

 

 

9.9%

 

 

8.8%

 

 

7.7%

 

 

9.0%

Interest expense

 

 

10,019

 

 

8,536

 

 

30,271

 

 

19,462

Other expense

 

 

-

 

 

-

 

 

-

 

 

112,011

Income (loss) before income taxes

 

 

20,281

 

 

15,712

 

 

40,145

 

 

(60,324)

Provision (benefit) for income taxes

 

 

4,444

 

 

(30,438)

 

 

8,757

 

 

46,842

Net income (loss)

 

$

15,837

 

$

46,150

 

$

31,388

 

$

(107,166)

 

 

 

 

 

 

 

 

 

Basic EPS

 

$

0.52

 

$

1.51

 

$

1.02

 

$

(3.59)

Diluted EPS

 

 

0.50

 

 

1.48

 

 

0.99

 

 

(3.59)

 

 

 

 

 

 

 

 

 

Basic shares

 

 

30,741

 

 

30,473

 

 

30,638

 

 

29,892

Diluted shares

 

 

31,689

 

 

31,103

 

 

31,563

 

 

29,892

 

Sales Summary

(in millions, unaudited)

 

Three Months Ended September 30,

% Change

Domestic

International

2023

2022

As

Reported

Impact

of

Foreign

Currency

Constant

Currency

 

As

Reported

As

Reported

Impact

of

Foreign

Currency

Constant

Currency

Orthopedic Surgery

$

124.7

$

118.6

5.1%

1.3%

6.4%

1.3%

7.5%

2.2%

9.7%

General Surgery

 

179.9

 

156.5

15.0%

1.0%

16.0%

12.9%

19.9%

3.9%

23.8%

$

304.6

$

275.1

10.7%

1.2%

11.9%

9.5%

12.3%

2.8%

15.1%

 

Single-use Products

$

253.3

$

231.3

9.5%

1.1%

10.6%

9.3%

9.7%

2.8%

12.5%

Capital Products

 

51.3

 

43.8

17.1%

1.5%

18.6%

10.6%

23.0%

3.2%

26.2%

$

304.6

$

275.1

10.7%

1.2%

11.9%

9.5%

12.3%

2.8%

15.1%

 

Domestic

$

170.5

$

155.7

9.5%

0.0%

9.5%

International

 

134.1

 

119.4

12.3%

2.8%

15.1%

$

304.6

$

275.1

10.7%

1.2%

11.9%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nine Months Ended September 30,

% Change

Domestic

International

2023

2022

As

Reported

Impact

of

Foreign

Currency

Constant

Currency

 

As

Reported

As

Reported

Impact

of

Foreign

Currency

Constant

Currency

Orthopedic Surgery

$

396.6

$

346.3

14.5%

2.7%

17.2%

18.9%

12.1%

4.1%

16.2%

General Surgery

 

521.1

 

448.3

16.2%

1.7%

17.9%

16.1%

16.6%

5.6%

22.2%

$

917.7

$

794.6

15.5%

2.1%

17.6%

16.9%

13.8%

4.6%

18.4%

 

Single-use Products

$

767.3

$

663.1

15.7%

2.1%

17.8%

17.3%

13.6%

4.7%

18.3%

Capital Products

 

150.4

 

131.5

14.3%

2.3%

16.6%

14.0%

14.6%

4.3%

18.9%

$

917.7

$

794.6

15.5%

2.1%

17.6%

16.9%

13.8%

4.6%

18.4%

 

Domestic

$

509.8

$

436.1

16.9%

0.0%

16.9%

International

 

407.9

 

358.5

13.8%

4.6%

18.4%

$

917.7

$

794.6

15.5%

2.1%

17.6%

 

Reconciliation of Reported Net Income to Adjusted Net Income

(in thousands, except per share amounts, unaudited)

 

Three Months Ended September 30, 2023

 

Gross Profit

Selling &

Administrative

Expense

Operating

Income

Interest

Expense

Tax

Expense

Effective

Tax Rate

Net Income

Basic EPS

Adjustments

Diluted EPS

As reported

$

168,059

$

125,295

$

30,300

$

10,019

$

4,444

21.9%

$

15,837

$

-

$

15,837

% of sales

 

55.2%

 

41.1%

 

9.9%

EPS

$

0.52

$

0.50

Shares

 

30,741

 

948

 

31,689

Acquisition and integration costs(1)

 

2,194

 

-

 

2,194

 

-

 

222

 

1,972

Contingent consideration fair value adjustment(2)

 

-

 

(3,150)

 

3,150

 

-

 

320

 

 

2,830

$

170,253

$

122,145

$

35,644

$

10,019

$

4,986

 

$

20,639

Adjusted gross profit %

 

55.9%

Amortization(3)

$

1,500

 

(7,238)

 

8,738

 

(1,546)

 

2,491

 

7,793

As adjusted

$

114,907

$

44,382

$

8,473

$

7,477

20.8%

$

28,432

$

-

$

28,432

% of sales

 

 

37.7%

 

14.6%

Adjusted diluted EPS

$

0.90

Shares

 

30,741

 

948

 

31,689

Convertible note hedges(4)

 

(178)

Adjusted diluted shares

 

31,511

 

 

Three Months Ended September 30, 2022

 

 

 

Gross Profit

Selling &

Administrative

Expense

Operating

Income

Interest

Expense

Tax

Expense

(Benefit)

Effective

Tax Rate

Net Income

Basic EPS

Adjustments(5)

Diluted EPS

As reported

$

151,615

$

114,600

$

24,248

$

8,536

$

(30,438)

-193.7%

$

46,150

$

-

$

46,150

% of sales

 

55.1%

 

41.7%

 

8.8%

EPS

$

1.51

 

$

1.48

Shares

 

30,473

 

630

 

31,103

Acquisition and integration costs(1)

 

2,096

 

(3,706)

 

5,802

 

-

 

35,852

 

(30,050)

$

153,711

$

110,894

$

30,050

$

8,536

$

5,414

 

$

16,100

Adjusted gross profit %

 

55.9%

Amortization(3)

$

1,500

 

(7,193)

 

8,693

 

(1,488)

 

2,484

 

7,697

As adjusted

$

103,701

$

38,743

$

7,048

$

7,898

24.9%

$

23,797

$

-

$

23,797

% of sales

 

37.7%

 

14.1%

Adjusted diluted EPS

$

0.77

Shares

 

30,473

 

630

 

31,103

Convertible note hedges(4)

 

(45)

Adjusted diluted shares

 

31,058

 

(1) In 2023, the Company incurred charges related to the amortization of inventory step-up to fair value associated with the acquisition of In2Bones Global, Inc. In 2022, the Company incurred charges related to the amortization of inventory step-up to fair value and consulting fees, legal fees, and other integration costs associated with the acquisitions of In2Bones Global, Inc. and Biorez, Inc.

(2) In 2023, the Company incurred expense related to the fair value adjustments of contingent consideration.

(3) Includes amortization of intangible assets and deferred financing fees.

(4) Non-GAAP adjusted dilutive weighted average shares outstanding exclude dilution that is expected to be offset by the Company’s convertible notes hedge transactions.

(5) The Company adopted ASU 2020-06, effective January 1, 2022. As a result of the adoption, the Company is required to compute diluted EPS using the if-converted method. Under the if-converted method, the numerator is adjusted for interest expense applicable to its convertible notes (net of tax) and the denominator includes additional common shares assuming conversion premium and principal portion of the notes (when permitted or required) are settled in shares. Subsequent to June 6, 2022, the Company is required to settle the principal value of its convertible notes in cash.

 

Reconciliation of Reported Net Income (Loss) to Adjusted Net Income

(in thousands, except per share amounts, unaudited)

 

Nine Months Ended September 30, 2023

Gross Profit

Selling &

Administrative

Expense

Operating

Income

Interest

Expense

Other

Expense

Tax

Expense

Effective

Tax Rate

Net

Income

Basic

EPS

Adjustments

Diluted EPS

As reported

$

494,070

$

385,080

$

70,416

$

30,271

$

-

$

8,757

21.8%

$

31,388

$

-

$

31,388

% of sales

 

53.8%

 

42.0%

 

7.7%

EPS

$

1.02

$

0.99

Shares

 

30,638

 

925

 

31,563

Acquisition and integration costs(1)

 

6,463

 

(752)

 

7,215

 

-

 

-

 

1,369

 

5,846

Termination of distributor agreements(2)

 

-

 

(2,098)

 

2,098

 

-

 

-

 

417

 

1,681

Restructuring and related costs(3)

 

2,035

 

(1,578)

 

3,613

 

-

 

-

 

930

 

 

2,683

 

 

 

Software implementation costs(4)

 

-

 

(6,056)

 

6,056

 

-

 

-

 

1,453

 

4,603

Contingent consideration fair value adjustment(5)

 

-

 

(6,949)

 

6,949

 

-

 

-

 

1,334

 

5,615

$

502,568

$

367,647

$

96,347

$

30,271

$

-

$

14,260

 

$

51,816

Adjusted gross profit %

 

54.8%

Amortization(6)

$

4,500

 

(21,773)

 

26,273

 

(4,558)

 

-

 

7,511

 

 

23,320

As adjusted

$

345,874

$

122,620

$

25,713

$

-

$

21,771

22.5%

$

75,136

$

-

$

75,136

% of sales

 

 

37.7%

 

13.4%

Adjusted diluted EPS

$

2.39

Shares

 

30,638

 

925

 

31,563

Convertible note hedges(7)

 

(152)

Adjusted diluted shares

 

31,411

 

 

Nine Months Ended September 30, 2022

Gross Profit

Selling &

Administrative

Expense

Operating

Income

Interest

Expense

Other

Expense

Tax

Expense

Effective

Tax Rate

Net

Income

(Loss)

Basic

EPS

Adjustments(12)

Diluted EPS

As reported

$

439,383

$

333,302

$

71,149

$

19,462

$

112,011

$

46,842

-77.7%

$

(107,166)

$

-

$

(107,166)

% of sales

 

55.3%

 

41.9%

 

9.0%

EPS

$

(3.59)

 

$

(3.59)

Shares

 

29,892

 

-

 

29,892

Acquisition and integration costs(1)

 

2,445

 

(6,306)

 

8,751

 

-

 

-

 

34,092

 

(25,341)

Legal matters(8)

 

-

 

(775)

 

775

 

-

 

-

 

(462)

 

1,237

Convertible note premium on extinguishment(9)

 

-

 

-

 

-

 

-

 

(103,125)

 

(61,521)

 

164,646

Change in fair value of convertible note hedges upon settlement(10)

 

-

 

-

 

-

 

-

 

(5,460)

 

(3,257)

 

8,717

Loss on early extinguishment of debt(11)

 

-

 

-

 

-

 

-

 

(3,426)

 

(2,044)

 

5,470

$

441,828

$

326,221

$

80,675

$

19,462

$

-

$

13,650

 

$

47,563

Adjusted gross profit %

 

55.6%

 

 

Amortization(6)

$

4,500

 

(20,563)

 

25,063

 

(3,404)

 

-

 

6,934

 

 

21,533

 

 

As adjusted

$

305,658

$

105,738

$

16,058

$

-

$

20,584

23.0%

$

69,096

$

2,978

$

72,074

% of sales

 

38.5%

 

13.3%

Adjusted diluted EPS

$

2.22

Shares

 

29,892

 

3,392

 

33,284

Convertible note hedges(7)

 

(771)

Adjusted diluted shares

 

32,513

(1) In 2023, the Company incurred charges related to the amortization of inventory step-up to fair value associated with the acquisition of In2Bones Global, Inc., and integration costs and professional fees associated with the acquisitions of In2Bones Global, Inc. and Biorez, Inc. In 2022, the Company incurred charges related to the amortization of inventory step-up to fair value and consulting fees, legal fees, and other integration costs associated with the acquisitions of In2Bones Global, Inc. and Biorez, Inc.

(2) In 2023, the Company incurred costs related to the termination of distributor agreements.

(3) In 2023, the Company incurred consulting fees related to an operational cost improvement initiative and severance related to the elimination of certain positions.

(4) In 2023, the Company incurred incremental freight, labor and professional fees related to the implementation of a warehouse management software.

(5) In 2023, the Company incurred expense related to the fair value adjustment of contingent consideration.

(6) Includes amortization of intangible assets and deferred financing fees.

(7) Non-GAAP adjusted dilutive weighted average shares outstanding exclude dilution that is expected to be offset by the Company’s convertible notes hedge transactions.

(8) In 2022, the Company incurred costs related to a legal settlement.

(9) In 2022, the Company incurred costs related to the conversion premium on the repurchase and extinguishment of $275.0 million of its 2.625% Convertible Notes.

(10) In 2022, the Company incurred costs related to the settlement of convertible notes hedge transactions associated with the repurchase and extinguishment of $275.0 million of its 2.625% Convertible Notes.

(11) In 2022, the Company incurred costs related to the write-off of deferred financing fees associated with the repurchase and extinguishment of $275.0 million of its 2.625% Convertible Notes and term loan paydown.

(12) The Company adopted ASU 2020-06, effective January 1, 2022. As a result of the adoption, the Company is required to compute diluted EPS using the if-converted method. Under the if-converted method, the numerator is adjusted for interest expense applicable to its convertible notes (net of tax) and the denominator includes additional common shares assuming conversion premium and principal portion of the notes (when permitted or required) are settled in shares. Subsequent to June 6, 2022, the Company is required to settle the principal value of its convertible notes in cash. Adjustments in 2022 are applicable on a non-GAAP basis only since GAAP results are in a loss position and therefore exclude dilutive potential shares.

Reconciliation of Reported Net Income (Loss) to EBITDA & Adjusted EBITDA

(in thousands, unaudited)

 

 

 

 

 

 

Three Months Ended

 

Nine Months Ended

 

September 30,

 

September 30,

 

2023

 

2022

 

2023

 

2022

 

 

 

 

 

 

 

 

Net income (loss)

$

15,837

 

$

46,150

 

$

31,388

 

$

(107,166)

Provision (benefit) for income taxes

 

4,444

 

 

(30,438)

 

 

8,757

 

 

46,842

Interest expense

 

10,019

 

 

8,536

 

 

30,271

 

 

19,462

Depreciation

 

3,926

 

 

3,938

 

 

12,148

 

 

12,028

Amortization

 

13,947

 

 

13,689

 

 

41,724

 

 

39,754

EBITDA

$

48,173

 

$

41,875

 

$

124,288

 

$

10,920

 

 

 

 

 

 

 

 

Stock based compensation

 

6,186

 

 

5,754

 

 

18,334

 

 

15,972

Acquisition and integration costs

 

2,194

 

 

5,802

 

 

7,215

 

 

8,751

Contingent consideration fair value adjustment

 

3,150

 

 

-

 

 

6,949

 

 

-

Termination of distributor agreements

 

-

 

 

-

 

 

2,098

 

 

-

Restructuring and related costs

 

-

 

 

-

 

 

3,613

 

 

-

Software implementation costs

 

-

 

 

-

 

 

6,056

 

 

-

Legal matters

 

-

 

 

-

 

 

-

 

 

775

Convertible notes premium on extinguishment

 

-

 

 

-

 

 

-

 

 

103,125

Change in fair value of convertible notes hedges upon settlement

 

-

 

 

-

 

 

-

 

 

5,460

Loss on early extinguishment of debt

 

-

 

 

-

 

 

-

 

 

3,426

Adjusted EBITDA

$

59,703

 

$

53,431

 

$

168,553

 

$

148,429

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

EBITDA Margin

 

 

 

 

 

 

 

EBITDA

 

15.8%

 

 

15.2%

 

 

13.5%

 

 

1.4%

Adjusted EBITDA

 

19.6%

 

 

19.4%

 

 

18.4%

 

 

18.7%

About CONMED Corporation

CONMED is a medical technology company that provides devices and equipment for surgical procedures. The Company’s products are used by surgeons and other healthcare professionals in a variety of specialties including orthopedics, general surgery, gynecology, thoracic surgery, and gastroenterology. For more information, visit www.conmed.com.

Forward-Looking Statements

This press release and associated conference call may contain forward-looking statements based on certain assumptions and contingencies that involve risks and uncertainties, which could cause actual results, performance, or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. For example, in addition to general industry and economic conditions, factors that could cause actual results to differ materially from those in the forward-looking statements may include, but are not limited to the risk factors discussed in the Company's Annual Report on Form 10-K for the full year ended December 31, 2022, listed under the heading Forward-Looking Statements in the Company’s most recently filed Form 10-Q and other risks and uncertainties, which may be detailed from time to time in reports filed by CONMED with the SEC. Any and all forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate to the Company’s performance on a going-forward basis. The Company believes that all forward-looking statements made by it have a reasonable basis, but there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct.

Supplemental Information - Reconciliation of GAAP to Non-GAAP Financial Measures

The Company supplements the reporting of its financial information determined under generally accepted accounting principles in the United States (GAAP) with certain non-GAAP financial measures, including percentage sales growth in constant currency; adjusted gross profit; cost of sales excluding specified items; adjusted selling and administrative expenses; adjusted operating income; adjusted interest expense; adjusted other expense; adjusted income tax expense; adjusted effective income tax rate; adjusted net income, adjusted diluted shares and adjusted diluted net earnings per share (EPS). The Company believes that these non-GAAP measures provide meaningful information to assist investors and shareholders in understanding its financial results and assessing its prospects for future performance. Management believes percentage sales growth in constant currency and the other adjusted measures described above are important indicators of its operations because they exclude items that may not be indicative of, or are unrelated to, its core operating results and provide a baseline for analyzing trends in the Company’s underlying business. Further, the presentation of EBITDA is a non-GAAP measurement that management considers useful for measuring aspects of the Company’s cash flow. Management uses these non-GAAP financial measures for reviewing the operating results and analyzing potential future business trends in connection with its budget process and bases certain management incentive compensation on these non-GAAP financial measures.

Net sales on a constant currency basis is a non-GAAP measure. The Company analyzes net sales on a constant currency basis to better measure the comparability of results between periods. To measure percentage sales growth in constant currency, the Company removes the impact of changes in foreign currency exchange rates that affect the comparability and trend of net sales. To measure earnings performance on a consistent and comparable basis, the Company excludes certain items that affect the comparability of operating results and the trend of earnings. These adjustments are irregular in timing, may not be indicative of past and future performance and are therefore excluded to allow investors to better understand underlying operating trends.

Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies' non-GAAP financial measures having the same or similar names. These adjusted financial measures should not be considered in isolation or as a substitute for reported sales growth, gross profit, cost of sales, selling and administrative expenses, operating income, interest expense, other expense, income tax expense (benefit), effective income tax rate, net income (loss), diluted shares and diluted net earnings (loss) per share, the most directly comparable GAAP financial measures. These non-GAAP financial measures are an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures above, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.

We are unable to present a quantitative reconciliation of our expected diluted net earnings per share to expected adjusted diluted net earnings per share as we are unable to predict with reasonable certainty and without unreasonable effort the impact and timing of acquisition, integration and other charges. The financial impact of these items is uncertain and is dependent on various factors, including timing, and could be material to our consolidated condensed statements of income.

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