CONMED Corporation Announces Third Quarter 2022 Financial Results

Rhea-AI Summary

CONMED Corporation (NYSE: CNMD) reported a strong Q3 2022 with sales of $275.1 million, a 10.6% increase year-over-year. Domestic revenue surged by 14.2%, while international revenue grew 6.2%. Diluted net earnings per share rose to $1.48 from $0.47 a year prior, although adjusted diluted EPS fell 3.8% to $0.77. The company has narrowed its full-year revenue guidance to between $1.1 billion and $1.115 billion, reflecting a 150 to 180 bps negative impact from foreign exchange. The recent acquisition of Biorez is expected to contribute positively to revenue growth.

Positive

• Sales increased by 10.6% year-over-year to $275.1 million.
• Domestic revenue rose 14.2%, indicating strong demand.
• Diluted EPS improved to $1.48 compared to $0.47 in Q3 2021.

Negative

• Adjusted diluted EPS decreased by 3.8% to $0.77 from $0.80.
• Revenue guidance for 2022 has been narrowed, indicating uncertainty.

LARGO, Fla.--(BUSINESS WIRE)-- CONMED Corporation (NYSE: CNMD) today announced financial results for the third quarter ended September 30, 2022.

Third Quarter 2022 Highlights

• Sales of $275.1 million increased 10.6% year over year as reported and 12.1% in constant currency. Acquisitions contributed approximately 420 basis points of growth.
• Domestic revenue increased 14.2% year over year.
• International revenue increased 6.2% year over year as reported and 9.6% in constant currency.
• Diluted net earnings per share (GAAP) were $1.48, compared to diluted net earnings per share (GAAP) of $0.47 in the third quarter of 2021.
• Adjusted diluted net earnings per share⁽¹⁾ were $0.77, a decrease of 3.8% compared to adjusted diluted net earnings per share of $0.80 in the third quarter of 2021.
• Closed Biorez transaction on August 9, 2022.
• Published ESG Sustainability Report subsequent to quarter end.

“I’m proud that our third quarter results delivered strong top-line growth in a tougher-than-expected environment,” commented Curt R. Hartman, CONMED’s Chair of the Board, President, and Chief Executive Officer. “During the quarter we closed on our acquisition of Biorez, and I am pleased that both our In2Bones and Biorez integrations are off to fantastic starts. I am confident that both of these businesses will add to our future outlook of sustained growth in revenue and profitability.”

2022 Outlook

The Company is narrowing its revenue guidance for the full year 2022 and now expects revenue between $1.1 billion and $1.115 billion compared to its prior guidance of between $1.095 billion and $1.140 billion. Based on recent exchange rates, the Company now expects foreign exchange to have a 150 to 180 bps negative impact on full-year 2022 revenue growth compared to its prior estimate of 100 to 150 bps negative impact.

The Company now expects full-year 2022 adjusted diluted net earnings per share in the range of $3.21 to $3.28, down from the prior range of $3.25 to $3.45.

Supplemental Financial Disclosures

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

Conference Call

The Company’s management will host a conference call today at 4:30 p.m. ET to discuss its third quarter 2022 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,
			2022			2021				2022			2021
Net sales		$	275,088		$	248,827			$	794,605		$	736,665
Cost of sales			123,473			106,521				355,222			324,485
Gross profit			151,615			142,306				439,383			412,180
% of sales			55.1	%		57.2	%			55.3	%		56.0	%
Selling & administrative expense			114,600			104,736				333,302			307,476
Research & development expense			12,767			10,859				34,932			32,203
Income from operations			24,248			26,711				71,149			72,501
% of sales			8.8	%		10.7	%			9.0	%		9.8	%
Interest expense			8,536			8,145				19,462			27,917
Other expense			-			1,127				112,011			1,127
Income (loss) before income taxes			15,712			17,439				(60,324	)		43,457
Provision (benefit) for income taxes			(30,438	)		2,491				46,842			5,359
Net income (loss)		$	46,150		$	14,948			$	(107,166	)	$	38,098
Basic EPS		$	1.51		$	0.51			$	(3.59	)	$	1.31
Diluted EPS			1.48			0.47				(3.59	)		1.19
Basic shares			30,473			29,179				29,892			29,097
Diluted shares			31,103			32,143				29,892			32,020

Sales Summary
(in millions, unaudited)
	Three Months Ended September 30,
						% Change
													Domestic			International
		2022		2021		As Reported		Impact of Foreign Currency		Constant Currency			As Reported			As Reported		Impact of Foreign Currency		Constant Currency
Orthopedic Surgery	$	118.6	$	105.7		12.2	%	1.8	%	14.0	%		20.4	%		7.6	%	2.8	%	10.4	%
General Surgery		156.5		143.1		9.4	%	1.3	%	10.7	%		11.8	%		4.0	%	4.5	%	8.5	%
	$	275.1	$	248.8		10.6	%	1.5	%	12.1	%		14.2	%		6.2	%	3.4	%	9.6	%
Single-use Products	$	231.3	$	200.9		15.1	%	1.6	%	16.7	%		18.8	%		10.2	%	3.8	%	14.0	%
Capital Products		43.8		47.9		-8.5	%	1.2	%	-7.3	%		-9.0	%		-8.0	%	2.3	%	-5.7	%
	$	275.1	$	248.8		10.6	%	1.5	%	12.1	%		14.2	%		6.2	%	3.4	%	9.6	%
Domestic	$	155.7	$	136.4		14.2	%	0.0	%	14.2	%
International		119.4		112.4		6.2	%	3.4	%	9.6	%
	$	275.1	$	248.8		10.6	%	1.5	%	12.1	%

	Nine Months Ended September 30,
						% Change
													Domestic			International
		2022		2021		As Reported		Impact of Foreign Currency		Constant Currency			As Reported			As Reported		Impact of Foreign Currency		Constant Currency
Orthopedic Surgery	$	346.3	$	320.8		8.0	%	1.0	%	9.0	%		7.1	%		8.4	%	1.7	%	10.1	%
General Surgery		448.3		415.9		7.8	%	0.9	%	8.7	%		8.3	%		6.6	%	3.0	%	9.6	%
	$	794.6	$	736.7		7.9	%	0.9	%	8.8	%		8.0	%		7.7	%	2.2	%	9.9	%
Single-use Products	$	663.1	$	597.3		11.0	%	1.0	%	12.0	%		11.0	%		11.0	%	2.3	%	13.3	%
Capital Products		131.5		139.4		-5.6	%	0.9	%	-4.7	%		-7.8	%		-3.7	%	1.7	%	-2.0	%
	$	794.6	$	736.7		7.9	%	0.9	%	8.8	%		8.0	%		7.7	%	2.2	%	9.9	%
Domestic	$	436.1	$	404.0		8.0	%	0.0	%	8.0	%
International		358.5		332.7		7.7	%	2.2	%	9.9	%
	$	794.6	$	736.7		7.9	%	0.9	%	8.8	%

Reconciliation of Reported Net Income to Adjusted Net Income
(in thousands, except per share amounts, unaudited)
	Three Months Ended September 30, 2022
	Gross Profit			Selling & Administrative Expense			Operating Income			Interest Expense			Other Expense			Tax Expense/ (Benefit)			Effective Tax Rate		Net Income			Basic EPS		Adjustments(4)			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 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(2)	$	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 notes hedges(3)																														(45	)
Adjusted Diluted Shares																														31,058
	Three Months Ended September 30, 2021
	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	$	142,306		$	104,736		$	26,711		$	8,145		$	1,127		$	2,491		14.3	%	$	14,948				$	-		$	14,948
% of sales		57.2	%		42.1	%		10.7	%
EPS																								$	0.51				$	0.47
Shares																									29,179		2,964			32,143
Loss on early extinguishment of debt(5)		-			-			-			-			(1,127	)		281					846
	$	142,306		$	104,736		$	26,711		$	8,145		$	-		$	2,772				$	15,794
Adjusted gross profit %		57.2	%
Amortization(2)	$	1,500			(6,796	)		8,296			(3,410	)		-			2,798					8,908
As adjusted				$	97,940		$	35,007		$	4,735		$	-		$	5,570		18.4	%	$	24,702				$	-		$	24,702
% of sales					39.4	%		14.1	%
Adjusted Diluted EPS																													$	0.80
Shares																									29,179		2,964			32,143
Convertible notes hedges(3)																														(1,244	)
Adjusted Diluted Shares																														30,899
(1) In 2022, the Company incurred inventory step-up adjustments associated with the acquisition of In2Bones Global, Inc. and consulting fees, legal fees and other integration related costs associated with the acquisitions of In2Bones Global, Inc. and Biorez, Inc.
(2) Includes amortization of intangible assets, deferred financing fees and debt discount.
(3) Non-GAAP adjusted dilutive weighted average shares outstanding exclude dilution that is expected to be offset by the Company’s convertible notes hedge transactions.
(4) 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.
(5) In 2021, the Company incurred costs related to a loss on early extinguishment and third party fees associated with the seventh amended and restated senior credit agreement.

Reconciliation of Reported Net Income (Loss) to Adjusted Net Income
(in thousands, except per share amounts, unaudited)
	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(8)			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 costs(1)		2,445			(6,306	)		8,751			-			-			34,092					(25,341	)
Legal matters(2)		-			(775	)		775			-			-			(462	)				1,237
Convertible notes premium on extinguishment(3)		-			-			-			-			(103,125	)		(61,521	)				164,646
Change in fair value of convertible notes hedges upon settlement(4)		-			-			-			-			(5,460	)		(3,257	)				8,717
Loss on early extinguishment of debt(5)		-			-			-			-			(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
	Nine Months Ended September 30, 2021
	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	$	412,180		$	307,476		$	72,501		$	27,917		$	1,127		$	5,359		12.3	%	$	38,098					$	-		$		38,098
% of sales		56.0	%		41.7	%		9.8	%
EPS																								$	1.31					$		1.19
Shares																									29,097			2,923				32,020
Restructuring and related costs(9)		-			(414	)		414			-			-			109					305
Loss on early extinguishment of debt(5)		-			-			-			-			(1,127	)		281					846
	$	412,180		$	307,062		$	72,915		$	27,917		$	-		$	5,749				$	39,249
Adjusted gross profit %		56.0	%
Amortization(6)	$	4,500			(20,323	)		24,823			(10,557	)		-			8,653					26,727
As adjusted				$	286,739		$	97,738		$	17,360		$	-		$	14,402		17.9	%	$	65,976					$	-		$		65,976
% of sales					38.9	%		13.3	%
Adjusted Diluted EPS																														$		2.14
Shares																									29,097			2,923				32,020
Convertible note hedges(7)																																(1,213	)
Adjusted Diluted Shares																																30,807
(1) In 2022, the Company incurred inventory step-up adjustments associated with the acquisition of In2Bones Global, Inc. and consulting fees, legal fees and other integration related costs associated with the acquisitions of In2Bones Global, Inc. and Biorez, Inc.
(2) In 2022, the Company incurred costs related to the settlement of litigation.
(3) 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.
(4) 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.
(5) 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. In 2021, the Company incurred costs related to a loss on early extinguishment and third party fees associated with the seventh amended and restated senior credit agreement.
(6) Includes amortization of intangible assets, deferred financing fees and debt discount.
(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) 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.
(9) In 2021, the Company incurred restructuring costs related to restructuring of our sales force.

Reconciliation of Reported Net Income (Loss) to EBITDA & Adjusted EBITDA
(in thousands, unaudited)
	Three Months Ended							Nine Months Ended
	September 30,							September 30,
		2022			2021				2022			2021
Net income (loss)	$	46,150		$	14,948			$	(107,166	)	$	38,098
Provision (benefit) for income taxes		(30,438	)		2,491				46,842			5,359
Interest expense		8,536			8,145				19,462			27,917
Depreciation		3,938			3,778				12,028			12,519
Amortization		13,689			13,432				39,754			40,747
EBITDA	$	41,875		$	42,794			$	10,920		$	124,640
Stock based compensation		5,754			4,327				15,972			12,003
Acquisition costs		5,802			-				8,751			-
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		-			1,127				3,426			1,127
Restructuring and related costs		-			-				-			414
Adjusted EBITDA	$	53,431		$	48,248			$	148,429		$	138,184
EBITDA Margin
EBITDA		15.2	%		17.2	%			1.4	%		16.9	%
Adjusted EBITDA		19.4	%		19.4	%			18.7	%		18.8	%

About CONMED Corporation

CONMED is a medical technology company that provides surgical devices and equipment for minimally invasive procedures. The Company’s products are used by surgeons and physicians 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 the 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 risks posed to the Company’s business, financial condition, and results of operations by the COVID-19 global pandemic and the various government responses to the pandemic, including deferral of surgeries, reductions in hospital and ambulatory surgery center operating volumes, disruption to potential supply chain reliability; any assumptions underlying any of the foregoing as well as the risk factors discussed in the Company's Annual Report on Form 10-K for the full year ended December 31, 2021. 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 (benefit); 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20221026005907/en/

CONMED Corporation

Todd W. Garner

Chief Financial Officer

727-214-2975

ToddGarner@conmed.com

Source: CONMED Corporation

FAQ

What were CONMED's Q3 2022 financial results?

CONMED reported Q3 2022 sales of $275.1 million, a 10.6% increase year-over-year. Diluted EPS was $1.48.

What is CONMED's updated revenue guidance for 2022?

The company expects revenue between $1.1 billion and $1.115 billion for full-year 2022.

How did CONMED's domestic and international revenues perform in Q3 2022?

Domestic revenue grew by 14.2%, while international revenue increased by 6.2% year-over-year.

What impact did foreign exchange have on CONMED's revenue growth?

Foreign exchange is expected to have a 150 to 180 bps negative impact on full-year 2022 revenue growth.