CONMED Corporation (NYSE: CNMD) today announced financial
results for the second quarter ended June 30, 2023.
Second Quarter 2023 Highlights
- Sales of $317.7 million increased 14.6% year over year as
reported and 16.6% in constant currency. Acquisitions contributed
approximately 400 basis points of growth.
- Domestic revenue increased 17.1% year over year.
- International revenue increased 11.7% year over year as
reported and 16.0% in constant currency.
- Diluted net earnings per share (GAAP) were $0.43 compared to
diluted net loss per share (GAAP) of $5.65 in the second quarter of
2022.
- Adjusted diluted net earnings per share(1) were $0.83, an
increase of 9.2% compared to the second quarter of 2022.
“Our team drove excellent growth across both Orthopedics and
General Surgery during the second quarter, building on the momentum
we generated during the first three months of the year,” commented
Curt R. Hartman, CONMED’s Chair of the Board, President, and Chief
Executive Officer. “We remain confident in our ability to grow
above market and continue to deliver clinical innovation to our
customers.”
2023 Outlook
Based on the second quarter results, the Company is raising its
revenue guidance for the full year 2023 and now expects revenue
between $1.230 billion and $1.260 billion, compared to its prior
guidance of between $1.205 billion and $1.250 billion.
The Company now expects full-year 2023 adjusted diluted net
earnings per share(2) in the range of $3.40 to $3.55, compared to
its prior range of $3.30 to $3.50.
The expected impact of foreign currency exchange rates is
unchanged from the Company’s prior guidance.
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 second 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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net sales
$
317,652
$
277,190
$
613,121
$
519,516
Cost of sales
146,962
125,413
287,110
231,748
Gross profit
170,690
151,777
326,011
287,768
% of sales
53.7
%
54.8
%
53.2
%
55.4
%
Selling & administrative expense
129,700
115,826
259,784
218,701
Research & development expense
13,572
11,493
26,110
22,165
Income from operations
27,418
24,458
40,117
46,902
% of sales
8.6
%
8.8
%
6.5
%
9.0
%
Interest expense
9,997
5,928
20,252
10,926
Other expense
-
112,011
-
112,011
Income (loss) before income taxes
17,421
(93,481
)
19,865
(76,035
)
Provision for income taxes
3,689
74,810
4,314
77,281
Net income (loss)
$
13,732
$
(168,291
)
$
15,551
$
(153,316
)
Basic EPS
$
0.45
$
(5.65
)
$
0.51
$
(5.18
)
Diluted EPS
0.43
(5.65
)
0.49
(5.18
)
Basic shares
30,662
29,775
30,587
29,601
Diluted shares
31,795
29,775
31,499
29,601
Sales Summary
(in millions, unaudited)
Three Months Ended June
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
$
140.8
$
120.2
17.1
%
2.7
%
19.8
%
29.4
%
11.0
%
3.8
%
14.8
%
General Surgery
176.9
157.0
12.6
%
1.5
%
14.1
%
12.5
%
12.9
%
5.0
%
17.9
%
$
317.7
$
277.2
14.6
%
2.0
%
16.6
%
17.1
%
11.7
%
4.3
%
16.0
%
Single-use Products
$
264.8
$
230.3
14.9
%
2.0
%
16.9
%
15.7
%
13.9
%
4.5
%
18.4
%
Capital Products
52.9
46.9
12.9
%
2.2
%
15.1
%
25.8
%
3.4
%
3.6
%
7.0
%
$
317.7
$
277.2
14.6
%
2.0
%
16.6
%
17.1
%
11.7
%
4.3
%
16.0
%
Domestic
$
174.7
$
149.2
17.1
%
0.0
%
17.1
%
International
143.0
128.0
11.7
%
4.3
%
16.0
%
$
317.7
$
277.2
14.6
%
2.0
%
16.6
%
Six Months Ended June
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
$
272.0
$
227.7
19.4
%
3.3
%
22.7
%
29.2
%
14.3
%
4.9
%
19.2
%
General Surgery
341.1
291.8
16.9
%
2.0
%
18.9
%
17.8
%
14.9
%
6.5
%
21.4
%
$
613.1
$
519.5
18.0
%
2.6
%
20.6
%
21.0
%
14.5
%
5.6
%
20.1
%
Single-use Products
$
514.0
$
431.8
19.0
%
2.6
%
21.6
%
21.8
%
15.5
%
5.7
%
21.2
%
Capital Products
99.1
87.7
13.0
%
2.6
%
15.6
%
15.8
%
10.7
%
4.8
%
15.5
%
$
613.1
$
519.5
18.0
%
2.6
%
20.6
%
21.0
%
14.5
%
5.6
%
20.1
%
Domestic
$
339.3
$
280.4
21.0
%
0.0
%
21.0
%
International
273.8
239.1
14.5
%
5.6
%
20.1
%
$
613.1
$
519.5
18.0
%
2.6
%
20.6
%
Reconciliation of Reported Net
Income (Loss) to Adjusted Net Income
(in thousands, except per share
amounts, unaudited)
Three Months Ended June 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
$
170,690
$
129,700
$
27,418
$
9,997
$
-
$
3,689
21.2
%
$
13,732
$
-
$
13,732
% of sales
53.7
%
40.8
%
8.6
%
EPS
$
0.45
$
0.43
Shares
30,662
1,133
31,795
Acquisition and integration costs(1)
2,173
(303
)
2,476
-
-
492
1,984
Termination of distributor
agreements(2)
-
(2,098
)
2,098
-
-
417
1,681
Software implementation costs(3)
-
(1,797
)
1,797
-
-
357
1,440
Contingent consideration fair value
adjustment(4)
-
636
(636
)
-
-
(126
)
(510
)
$
172,863
$
126,138
$
33,153
$
9,997
$
-
$
4,829
$
18,327
Adjusted gross profit %
54.4
%
Amortization(5)
$
1,500
(7,270
)
8,770
(1,506
)
-
2,490
7,786
As adjusted
$
118,868
$
41,923
$
8,491
$
-
$
7,319
21.9
%
$
26,113
$
-
$
26,113
% of sales
37.4
%
13.2
%
Adjusted diluted EPS
$
0.83
Shares
30,662
1,133
31,795
Convertible note hedges(6)
(214
)
Adjusted diluted shares
31,581
Three Months Ended June 30,
2022
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Other Expense
Tax Expense
Effective Tax Rate
Net Income (Loss)
Basic EPS
Adjustments(11)
Diluted EPS
As reported
$
151,777
$
115,826
$
24,458
$
5,928
$
112,011
$
74,810
-80.0
%
$
(168,291
)
$
-
$
(168,291
)
% of sales
54.8
%
41.8
%
8.8
%
EPS
$
(5.65
)
$
(5.65
)
Shares
29,775
-
29,775
Acquisition and integration costs(1)
349
(2,600
)
2,949
-
-
(1,760
)
4,709
Legal matters(7)
-
(775
)
775
-
-
(462
)
1,237
Convertible note premium on
extinguishment(8)
-
-
-
-
(103,125
)
(61,521
)
164,646
Change in fair value of convertible note
hedges upon settlement(9)
-
-
-
-
(5,460
)
(3,257
)
8,717
Loss on early extinguishment of
debt(10)
-
-
-
-
(3,426
)
(2,044
)
5,470
$
152,126
$
112,451
$
28,182
$
5,928
$
-
$
5,766
$
16,488
Adjusted gross profit %
54.9
%
Amortization(5)
$
1,500
(6,808
)
8,308
(1,036
)
-
2,291
7,053
As adjusted
$
105,643
$
36,490
$
4,892
$
-
$
8,057
25.5
%
$
23,541
$
1,263
$
24,804
% of sales
38.1
%
13.2
%
Adjusted diluted EPS
$
0.76
Shares
29,775
3,820
33,595
Convertible note hedges(6)
(856
)
Adjusted diluted shares
32,739
(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 and legal related costs
associated with the acquisition of In2Bones Global, Inc.
(2) In 2023, the Company incurred costs
related to the termination of distributor agreements.
(3) In 2023, the Company incurred
additional freight, labor and travel costs as well as professional
fees related to the implementation of a warehouse management
software.
(4) In 2023, the Company recorded fair
value adjustments to contingent consideration.
(5) Includes amortization of intangible
assets and deferred financing fees.
(6) Non-GAAP adjusted dilutive weighted
average shares outstanding exclude dilution that is expected to be
offset by the Company’s convertible notes hedge transactions.
(7) In 2022, the Company incurred costs
related to a legal settlement.
(8) 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.
(9) 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.
(10) 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.
(11) 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 Adjusted Net Income
(in thousands, except per
share amounts, unaudited)
Six Months Ended June 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
$
326,011
$
259,784
$
40,117
$
20,252
$
-
$
4,314
21.7
%
$
15,551
$
-
$
15,551
% of sales
53.2
%
42.4
%
6.5
%
EPS
$
0.51
$
0.49
Shares
30,587
912
31,499
Acquisition and integration costs(1)
4,269
(752
)
5,021
-
-
1,147
3,874
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)
-
(3,799
)
3,799
-
-
1,014
2,785
$
332,315
$
245,501
$
60,704
$
20,252
$
-
$
9,275
$
31,177
Adjusted gross profit %
54.2
%
Amortization(6)
$
3,000
(14,535
)
17,535
(3,012
)
-
5,020
15,527
As adjusted
$
230,966
$
78,239
$
17,240
$
-
$
14,295
23.4
%
$
46,704
$
-
$
46,704
% of sales
37.7
%
12.8
%
Adjusted diluted EPS
$
1.49
Shares
30,587
912
31,499
Convertible note hedges(7)
(138
)
Adjusted diluted shares
31,361
Six Months Ended June 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
$
287,768
$
218,701
$
46,902
$
10,926
$
112,011
$
77,281
-101.6
%
$
(153,316
)
$
-
$
(153,316
)
% of sales
55.4
%
42.1
%
9.0
%
EPS
$
(5.18
)
$
(5.18
)
Shares
29,601
-
29,601
Acquisition and integration costs(1)
349
(2,600
)
2,949
-
-
(1,760
)
4,709
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
$
288,117
$
215,326
$
50,626
$
10,926
$
-
$
8,237
$
31,463
Adjusted gross profit %
55.5
%
Amortization(6)
$
3,000
(13,370
)
16,370
(1,916
)
-
4,451
13,835
As adjusted
$
201,956
$
66,996
$
9,010
$
-
$
12,688
21.9
%
$
45,298
$
2,978
$
48,276
% of sales
38.9
%
12.9
%
Adjusted diluted EPS
$
1.45
Shares
29,601
4,774
34,375
Convertible note hedges(7)
(1,134
)
Adjusted diluted shares
33,241
(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 and legal related costs
associated with the acquisition of In2Bones Global, 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
additional freight, labor and travel costs as well as professional
fees related to the implementation of a warehouse management
software.
(5) In 2023, the Company incurred expense
related to the fair value adjustments 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
Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Net income (loss)
$
13,732
$
(168,291
)
$
15,551
$
(153,316
)
Provision for income taxes
3,689
74,810
4,314
77,281
Interest expense
9,997
5,928
20,252
10,926
Depreciation
4,164
4,059
8,222
8,090
Amortization
13,900
13,266
27,777
26,065
EBITDA
$
45,482
$
(70,228
)
$
76,116
$
(30,954
)
Stock based compensation
6,422
5,755
12,148
10,218
Acquisition and integration costs
2,476
2,949
5,021
2,949
Termination of distributor agreements
2,098
-
2,098
-
Restructuring and related costs
-
-
3,613
-
Software implementation costs
1,797
-
6,056
-
Contingent consideration fair value
adjustment
(636
)
-
3,799
-
Legal matters
-
775
-
775
Convertible notes premium on
extinguishment
-
103,125
-
103,125
Change in fair value of convertible notes
hedges upon settlement
-
5,460
-
5,460
Loss on early extinguishment of debt
-
3,426
-
3,426
Adjusted EBITDA
$
57,639
$
51,262
$
108,851
$
94,999
EBITDA Margin
EBITDA
14.3
%
-25.3
%
12.4
%
-6.0
%
Adjusted EBITDA
18.1
%
18.5
%
17.8
%
18.3
%
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, 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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version on businesswire.com: https://www.businesswire.com/news/home/20230726547398/en/
CONMED Corporation Todd W. Garner Chief
Financial Officer 727-214-2975
ToddGarner@conmed.com
CONMED (NYSE:CNMD)
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