CONMED Corporation (CNMD) Q3 2026 Earnings Call Transcript

Operator: Please stand by Hello, and welcome to ConMed's Third Quarter of 26 Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Please be advised that today's conference is being recorded.

Unidentified Speaker: 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 risk 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, results. The company's actual results may differ materially from its current expectations. 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 risk 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. 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.

Operator: I would now like to turn the call over to Mr. Patrick J. Beyer, ConMed's president and chief executive officer. Please go ahead, sir.

Patrick J. Beyer: Thank you, operator, and welcome, everyone, to our third quarter 2026 earnings call. I am joined on the line by John E. 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. 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's get started with a review of our financial performance in the third quarter. 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 third quarter. 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. 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 earnings per share of $1.04 for the third quarter. Which exceeded the high end of our expectations In short, we were pleased to deliver strong performance in the third quarter on both the top and bottom line. I will now discuss the third quarter 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, By geography, our general surgery sales 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 2 key growth products starting with AirSeal, our advanced insufflation platform. We were pleased with our AirSeal sales performance and the improvement in growth trends we experienced in the third quarter as expected. Our AirSeal sales 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 remain 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, clearer visualizations, and meaningful reductions in both postoperative pain and length of stay. 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 a 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 da Vinci 5 robotic surgical platform. 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 am 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. 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 randomized controlled trial comparing AirSeal to a widely used competing insufflator. 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. With this in mind, our team is focused on prioritizing specific laparoscopic procedure categories where AirSeal is likely to having 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 third quarter, 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. As I mentioned earlier, we saw strong contributions in the third quarter 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. 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. To that end, during the third quarter, 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. And 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 27. 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. Our team is preparing to leverage these and other recent 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 third quarter. 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 second quarter call. 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 third quarter. 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 and healing tissue and bioinductive properties to promote tissue growth supporting the body's natural healing process. The powerful combination of these 2 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 retear. As a reminder, Biobrace has clinically demonstrated a 94% healing rate when used in. 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. Beyond our existing markets, we continue to expand access to Biobrace globally. Most notably, during the third quarter, 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 positioned it to remain a durable, long term growth driver for our orthopedic surgery product line. With that, I will turn the call over to John. Who will walk you through our third quarter financial results in greater detail and review our updated guidance.

John E. Gallagher: Thank you, Patrick. Given Pat's detailed discussion of our sales results in the third quarter, I will begin my remarks at the gross profit line. Unless otherwise noted, my commentary will focus on our non GAAP results during the third quarter of 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 third quarter results and updated financial guidance on the Investor Relations section of our website.

Unidentified Speaker: Third quarter 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.

John E. Gallagher: 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. Our adjusted operating margin was 15.4%. An increase of 20 basis points. Adjusted interest expense was $10.5 million in the third quarter compared to $6.3 million last year. The increase in our adjusted interest expense in the third quarter of 2026 reflects the impact of our recent debt refinancing activities. As a reminder, during the second quarter of 2026, we drew down on our new $450 million term loan in our existing revolving credit facility to repurchase $645.2 million of our $800 million 2 and a quarter percent convertible notes ahead of their June 2027 maturity. The adjusted effective tax rate in the third quarter 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. As Pat mentioned, our third quarter adjusted EPS results exceeded the low and high end expectations we outlined on our second quarter earnings call by $0.06 and $0.01 respectively. We generated $46.4 million of free cash flow in the third quarter of 2026, a decrease of 3.6% year over year. Turning to a review of our balance sheet and financial condition. As of 09/30/2026, ConMed had cash of $48 million total debt obligations $815.9 million, and additional available borrowing capacity of $468.5 million. This compares to cash and equivalent of $40.8 million total debt obligations $834.9 million, and available borrowing capacity $648.5 million as of 12/31/2025. Our leverage ratio on 09/30/2026 was 2.7 times. Lastly, with respect to share repurchases, during the first 9 months of 2026, we repurchased approximately 1.2 million shares of common stock. For a total of $49.9 million We anticipate allocating $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-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. Specifically, our full year 2026 net revenue guidance now assumes GI revenue of approximately $20 million compared to our prior guidance range of $20 million to $22 million And 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 of $7 million to $7.5 million. 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 the third quarter 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. 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 guide. 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 $4.48 to $4.60. The increase in our non GAAP EPS guidance range reflects our better than expected EPS results in the third quarter. 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 And we expect weighted average shares outstanding of 30.2 million. Lastly, as it relates to the fourth quarter of 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 thousand. Adjusted EPS in the fourth quarter of between $1.23 and $1.30 I will now turn the call back to Patrick to share a few closing thoughts.

Patrick J. Beyer: Thanks, John. In summary, Q3 was a quarter of solid execution for ConMed, 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. And our performance across the P and 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. And our 3 key growth platforms in each market continue to gain share as we expand into new regions, and clinical settings. 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 would 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. 11 on your telephone keypad. If you are 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 1 question and 1 follow-up. We will pause for a moment while we compile our Q&A roster. Our first question comes from Vikramjeet Chopra with BMO Capital Markets. Your line is open.

Anton Hellbent: Hi, Patrick and John. it is Anton Hellbent on for Vic. 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 of sales guidance is moving lower by $2.5 million more than the $800k third quarter sales shortfall. Can you kind of bridge us to the change in the fourth quarter outlook? What specifically changed relative to your expectations heading into the quarter?

John E. Gallagher: Yeah. Hi, Anton. Happy to do that. it is. For avoidance of any doubt, there are 2 things that change. As it with. 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 is now a tailwind of $9 million. It was $7 to $7.5. And then 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, you know, we are 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 and how do you move lower, then 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. 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. And the implied, by the way, at the high end of the range, the implied Q4 is a 6.8%. So it is more in line with where we saw the performance that we saw in Q3, and here we are with a couple of months left in the year. We felt more comfortable tightening the range, but I have very high confidence in achieving at least 5% organic constant currency revenue growth.

Anton Hellbent: Great. And then, Patrick, maybe 1 for you. The US general surgery business is a bit softer than what we were kind of thinking. It sounds like perhaps the OEM kind of smoke evacuation business was the driver here. Can you talk a little bit more about your visibility into the OEM kind of smoke evacuation ordering dynamics and whether we have kind of reached trough levels and what kind of gets that improving from here?

Patrick J. Beyer: Anton, you. you are right in your assumption that you know, 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. And 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. Continue to have an OEM business. We are working with our OEM partners to understand more of that supply chain, but quite honestly, it will be more variable for us as OEM suppliers decide what they are doing with their business. Which is 1 of the reasons why we specifically call it out, Anton, I appreciate the color. Thanks, guys.

Operator: 1 moment for our next question. Our next question comes from Larry Biegelsen with Wells Fargo. Your line is open.

Ross Osborn: Hi. This is Ross Osborn on for Larry. Thanks for taking our questions. So starting with the ortho domestic, what inning do you think you guys are in with getting sales productivity back to a normal rate? And how should we think about your domestic ortho growth rate exiting this year and next?

Patrick J. Beyer: Ross, good question. Again, kind of similar to the previous answer. Would just go, listen. Our global orthopedic business had a really good Q3. We were up 7.2%. We also called out in our second quarter 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 sideways movement and declined a little bit in the third quarter. But we believe our US orthopedic product line is better positioned for stable long term growth as the result of it. What inning we are in? You know, I would probably go half versus innings. We know last night's game went to the 12th inning, and so do not wanna draw this out. We have made a lot of progress in the first and second quarter of this year making the changes. Third quarter, 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 in first half next year, for driving growth in the United States back in line and what we should be doing.

John E. Gallagher: And as far as the growth rate, Ross, so you were asking about the growth rate. So you know, we highlighted in the prepared remarks that the growth trends are improving. So you know, despite what we saw in the quarter on quarter performance in US ortho, we are seeing improvement in the growth trend. So that is giving us you know, some confidence as we approach the end of the year.

Ross Osborn: Makes sense. And then in your prepared remarks, you cited AirSeal is 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?

Patrick J. 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. 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. And 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 in 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. Great. Thanks for taking our questions.

Operator: 1 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 my questions. I was just hoping to follow-up on Anton's question on the high end of the range coming down by 50 basis points. Is that how much of that is related to the OEM Buffalo Filter business versus the I guess, I guess, a little slowness in terms of getting the ortho franchise back to kind of where you want it from a growth perspective. And then I do have a follow-up. Thanks.

John E. Gallagher: So, actually, the way to think about it is it was. We are bringing. 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, so you saw that in the report and in the prepared remarks. Some of that was a benefit, and 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 second half of the year, we remain on track for international performance, but we basically are not underwriting that to repeat again in Q4. So it is 1 of the key items related to why is the high end of the guide coming down from 6% to 5.5%? Okay.

Matthew O'Brien: Maybe I will follow-up offline. The other piece is the domestic franchise. You know, I know you are saying Buffalo did pretty well. Direct Buffalo did well. AirSeal did well. I am just thinking about you know, competing in these markets and the.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 is just it just. It feels like a little bit of that. Of the guide the modest guide down on the top line is related to maybe some, you know, competitive challenges as you are going up against some pretty big players?

Patrick J. Beyer: Matthew, as we think, 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 in AirSeal continues to do well there. And 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 on the orthopedic side, our Biobrace Is Strong And Young Well. and our portfolio, the same portfolio that Continues To Do Well Internationally, Should be doing better In The United States. Which is 1 of the reasons we are doubling down on the commercial organization and the sales force. We know that our trends are improving. So when we look at the year to year growth over a 2, and 3 years to normalize for quarter comp dynamics, our trends are getting better. So while we certainly agree with you, we never wanna 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 general surgery side, but also in our orthopedic business. We are certainly holding ourselves accountable to that and our teams accountable to that. Thank you.

Operator: 1 moment for our next question. Our next question comes from Mike Matson with Needham and Company. Your line is open.

Mike Matson: Yes, thanks. So just wanted to ask 1 on BioBrace. You mentioned the OUS sales. So curious of the countries where you are selling your orthopedic products, you know, how many of them are you selling BioBrace in currently? And, you know, how does the labeling and kind of the way that you are able to market it compare to The US market? And I guess pricing for that matter as well, is it a lower price outside The US?

Patrick J. Beyer: Good question, Mike. Again, so 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 and the knee and in the Achilles area. it is approved in Canada, and some of our Eastern European and our Middle East markets, in Korea, in China, in India, and in Brazil. But for the rotator cuff. And where it is approved, we are getting really strong uptake. So the clinical differentiation of strength and healing is resonating. And on the price side, the price is different in every market around the world and so the. As you would expect it to be, in many orthopedic businesses.

Mike Matson: Okay. that is helpful and then for AirSeal. So I apologize if you did mention this, and I missed it, but, yeah, you have talked about targeting that it would grow high single digits to low double digits and I heard you. Your commentary on Buffalo Filter being in that range if you exclude the OEM business. Was AirSeal also in that range? In the quarter?

Patrick J. Beyer: So at the same 3 quick things on AirSeal. We were really pleased with the AirSeal sales performance in quarter 3. We said in quarter 2, we would accelerate the growth and we did as we expected. It grew both disposables and capital and accelerated. And, yes, we said it would be a high single digit low double digit business. It grew in that range. Okay, great. Thank you.

Operator: 1 moment for our next question. Our next question comes from Robbie Marcus with JP Morgan. Your line is open.

Robert Marcus: Great. Thanks for taking the questions. 2 for me. First, I wanted to-- I did not hear anything about the progress on the strategic update. You know, 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.

Patrick J. Beyer: Robbie, what I have said and what we have said publicly is, number 1, there was a rumor we do not comment on rumors. What I would say is I can see why somebody would be attracted to ConMed. You know, we just grew organic constant currency growth. 6.7%. And in 2025, ConMed heightened our focus. We exited the GI business, We aligned our execution around 3 focused 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 gonna play, and how are we going to win? Step 2 is this refining our multiyear 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. And so that is consistent with what I have tried to say in the past and we do not comment on rumors.

Robert 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 E. Gallagher: Yeah. Hi, Robbie. So we were. As 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, you know, some timing of distributor orders internationally. Would have us pointed more towards the lower end of that. But overall, you know, we. The. Our growth rate expectations as we look at international remain intact for the second half. So we are not gonna comment on 2027. But we look forward to updating you on the next call related to that we have, you know, very high confidence at the low end of this range here We tightened a bit based on some timing related to Q3 international And, you know, and you saw us do 6.7% in Q3. Any puts and takes on the P and L to think about into next year without specific guidance? I mean, mentioned interest expense. I think that is that is an area that is higher now. So when you look at second half interest expense, then, you know, 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. So second half interest expense assuming flat interest rates to where we are right now, would be a would be a good modeling point. Thanks a lot. The other, you know, the other 1 to call out too, Robbie, is you know, we. During 2026, we have, we have had the impact of GI in our EPS. So, like, when we are thinking about down the p and 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. So that is a bit, you know, that. 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. Thank you.

Operator: 1 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%. So just wanted to make sure I understood the puts and takes on gross margin for this year.

John E. Gallagher: Yeah. Thanks for the question. 2 things on gross margin as it relates to the 3 results. 1 is international mix. So you saw the strong performance that we have been referencing on international. Distributor oriented business, slightly lower gross margin. So the so the strong mix that we had in Q3 is, is a partial driver. The other 1 is on. In Q3, we are impacted by some discrete operations and inventory items. And when taken, excuse me, when taken together, those. that is what positioned us below the outlook that we have of 50 to 100 basis points. Keep in mind, that the guidance, 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 is helpful. I do not know if there is a way to quantify. You talked about the order timing. Benefiting Q3. Not repeating in Q4. Any way to quantify that And then anything on tariffs, it with Section 301. 301 likely coming at some point in the near term?

John E. Gallagher: Yeah. I will take the first 1 first, or the last 1 first. On the tariffs, no change. We had said before and during 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. And the other order if you do not mind, say the other 1 more time. The order timing. Just curious the quantification on the order timing It called the benefit of Q3. Did not. it is not gonna repeat in Q4. Just did not know how much that helped. This quarter on Q3. Yeah. Yeah. To be specific, because I think that is where some of the other questions were going. To be specific, you know, 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. Okay. Sounds good. Thank you.

Operator: 1 moment for our next question. Our next question comes from Young Lee with Jefferies. Your line is open.

Young Li: All right. Great. Thanks for taking the question. I guess a quick follow-up on the prior question. In terms of OUS, contributions, the positive timing contribution, Can you maybe break out the impact for ortho versus general surgery?

John E. Gallagher: We have not made that breakout. I mean, you can see that both businesses on a global basis grew you know, well into the mid single bordering high single digit growth rates. That was in both ortho and in general surgery. A lot of that was driven internationally as you saw, so you can kind of take it from there, but we have not broken it out.

Young Li: Okay. Got it. Then I guess 1 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 buyback. But what are your thoughts on the M and A environment valuations, and when would you be ready or interested in doing another deal either tuck in or bigger.

John E. Gallagher: Yeah. Yeah. So you know, we are. I am gonna lay out the specifics on the Q4 call about capital allocation, but maybe a few thoughts, like to your point, a few thoughts as I have gotten started here. I mean, 1 is around the free cash flow. Profile. ConMed's historically been a strong free cash flow generator. In fact, has achieved greater than 90% free cash flow conversion in 7 of the last 10 years. Even with that in mind, though, the free cash flow conversion has touched down a bit in the in the last 12 to 18 months. So 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 nonrecurring cash spend that we have. So 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 in the near term. So that is that is 1 observation, 1 point. Another, you mentioned this, leverage. Leverage has been coming down. We are below 3x. Our net leverage is 2.7x now. that is good. Gonna free up some capacity. But the interest expense, as we talked about, is high. So as you look at the capital structure and you contemplate how much debt or kind of debt, then there is, you know, and we also have a draw on our on our revolving credit facility. Young know, there is an opportunity to think about the debt stack and what that capital structure will look like going forward. And then maybe the other observation would be around share repurchase. We have done, as we mentioned in the prepared remarks, we bought back about $50 million of shares year 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 2x what the dividend was. So taking, you know, taking all these together, these are the, you know, these are the inputs, if you will, that I am thinking about some observations that I have made And 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. Thank you.

Operator: I am not showing any further questions at this time. And that concludes our conference call today. Thank you for your participation. You may now disconnect.