CONMED's Q3 2025: Contradictions Emerge on AirSeal Utilization, Capital Environment, Tariffs, and Supply Chain

Date of Call: November 5, 2025

Financials Results

• Revenue: $338.0M, up 6.7% YOY (6.3% in constant currency); note: quarter included +100–150 bps from one extra selling day
• EPS: $1.08 adjusted diluted EPS, up 2.9% YOY; GAAP diluted EPS $0.09 vs $1.57 prior year
• Gross Margin: 56.1% adjusted gross margin, down ~40 bps YOY (includes ~20 bps headwind from new tariffs); Q4 guide mid-55% (includes ~150 bps tariff headwind)

Guidance:

• Q4 revenue guided to $363M–$370M (mid-single-digit constant-currency growth; ~100 bps FX tailwind)
• Full-year 2025 revenue guided to $1.365B–$1.372B; FX expected to be essentially neutral for FY25
• Q4 adjusted gross margin expected in mid-55% range (includes ~150 bps tariff headwind)
• Q4 adjusted EPS $1.30–$1.35; full-year adjusted EPS $4.48–$4.53 (narrowed range)
• Board authorized $150M share repurchase program; dividend suspended, targeting at least $25M of repurchases annually

Business Commentary:

• Revenue Growth and Segment Performance:
• CONMED reported total sales of approximately $338 million for Q3, representing 6.7% growth year-over-year and 6.3% growth in constant currency.
• The growth was led by general surgery, which grew 6.9% globally in constant currency, and orthopedics, with 5.3% constant currency growth globally.

• Contributing factors included strong clinical adoption and engagement with BioBrace, expanding legislative mandates for Buffalo Filter, and continued integration of AirSeal in hospital protocols.

  

  Guidance:

  • Q4 revenue guided to $363M–$370M (mid-single-digit constant-currency growth; ~100 bps FX tailwind)
  • Full-year 2025 revenue guided to $1.365B–$1.372B; FX expected to be essentially neutral for FY25
  • Q4 adjusted gross margin expected in mid-55% range (includes ~150 bps tariff headwind)
  • Q4 adjusted EPS $1.30–$1.35; full-year adjusted EPS $4.48–$4.53 (narrowed range)
  • Board authorized $150M share repurchase program; dividend suspended, targeting at least $25M of repurchases annually

  Business Commentary:

• Product Portfolio and Strategy:

• BioBrace and AirSeal were highlighted as core growth drivers, with BioBrace's use expanding across 70-plus distinct procedures, indicating versatility and clinical relevance.
• The ongoing strategic portfolio review aims to sharpen focus, improve margins, and position CONMED for long-term growth, with a focus on minimally invasive robotic and laparoscopic surgery, smoke evacuation, and orthopedic soft tissue repair.

• Early findings suggest opportunities lie in core markets, supported by best-in-class clinical solutions.

  Guidance:

  • Q4 revenue guided to $363M–$370M (mid-single-digit constant-currency growth; ~100 bps FX tailwind)
  • Full-year 2025 revenue guided to $1.365B–$1.372B; FX expected to be essentially neutral for FY25
  • Q4 adjusted gross margin expected in mid-55% range (includes ~150 bps tariff headwind)
  • Q4 adjusted EPS $1.30–$1.35; full-year adjusted EPS $4.48–$4.53 (narrowed range)
  • Board authorized $150M share repurchase program; dividend suspended, targeting at least $25M of repurchases annually

  Business Commentary:

• Shareholder Capital Allocation:

• CONMED suspended its dividend and authorized a new $150 million share repurchase program, with at least $25 million planned annually.
• This change aligns with peer med device companies and enhances financial flexibility, prioritizing share repurchases over dividends.

  Operational Improvements and Supply Chain:

  • CONMED is progressing in its supply chain improvements, particularly in the orthopedics segment with record manufacturing volumes and reduced critical SKUs.
  • The focus remains on enhancing systems and processes in procurement, planning, and production to support ongoing growth and market demand.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management emphasized confidence and strategic progress: "We remain confident in our ability to deliver both top line growth and margin expansion." Reported sales ~$338M (+6.7% YOY), adjusted net income $33.4M (+~2% YOY), and a $150M repurchase authorization, while highlighting ongoing operational improvements.

Q&A:

• Question from Lilia-Celine Lozada (JPMorgan Chase & Co): Can you talk about what drove the shift in capital allocation to suspend the dividend and should we expect other changes to M&A or debt pay down?
  Response: Reached target leverage (~3.0x) so Board suspended dividend and authorized a $150M buyback, prioritizing repurchases (at least ~$25M annually); no other changes to M&A or debt strategy.

• Question from Lilia-Celine Lozada (JPMorgan Chase & Co): Early thoughts on 2026—supply ability to meet demand and other headwinds/tailwinds?
  Response: No specific 2026 commentary; management will provide 2026 guidance at the appropriate time (Q4 call/next year).

• Question from Anna Runci (Piper Sandler & Co.): Was there any incremental tariff headwind versus prior expectations given commentary on $0.09 in the back half and $0.07 in Q4?
  Response: Tariff impact is consistent with prior forecasts—tariffs hit P&L with ~6-month deferral via inventory; Q4 recognition (~$0.07) reflects calendar Q1–Q2 tariffs.

• Question from Anna Runci (Piper Sandler & Co.): DV5 utilization was ~90%—what keeps that from reaching 100% and how does AirSeal fit?
  Response: AirSeal adoption with DV5 is limited by hospitals' committed DV5 procedure volumes; observed usage sits ~80–90%, but clinical benefits remain clear when AirSeal is used with DV5.

• Question from Vikramjeet Chopra (Wells Fargo Securities, LLC): How are you thinking about AirSeal adoption in ASCs and international markets as Xi systems redeploy?
  Response: Expect AirSeal to gain in ASCs and international markets where Xi/DV5 placements increase because shorter length of stay and pain reductions matter, driving adoption.

• Question from Vikramjeet Chopra (Wells Fargo Securities, LLC): Which initiatives strengthened supply chain in Q3 and how will you maintain/enhance through 2026?
  Response: Engaged an external consultant and implemented systems enhancements across procurement, planning and production; achieved record orthopedic manufacturing volumes and reduced critical-SKU backorders, with continued progress expected in Q4.

• Question from Young Li (Jefferies LLC): Any headway on U.S. AirSeal non-robotic laparoscopic opportunity and attachment rates on non-DV5 robots (Hugo, CMR, Asian systems)?
  Response: AirSeal adoption is expanding in non-DV5 robotic systems internationally and in non-robotic laparoscopic procedures in the U.S.; sizable addressable market (millions of laparoscopic cases) and growing commercial focus.

• Question from Young Li (Jefferies LLC): Thoughts on ortho share loss and ability to recapture share once supply issues are resolved?
  Response: Expect recapture to be gradual—once backorders clear it will take a quarter or two for customers to re-engage and for the salesforce to regain share; sales reps continue supporting available products now.

• Question from Young Li (Jefferies LLC): BioBrace jumped to 70+ procedures from prior ~52—what drove that expansion and where can it go?
  Response: BioBrace's clinical utility in tissue-weakness indications has expanded surgeon adoption across many procedures, naturally increasing applications from the 50s to 70+ as surgeons broaden use.

• Question from Gracia Mahoney (BofA Securities): What are you seeing in the capital environment this quarter and how do you expect trends to progress over the next 12 months?
  Response: Capital markets remain healthy; hospitals continue to invest in capital equipment that improves outcomes and throughput, and we expect continued investment as interest rates decline.

• Question from Gracia Mahoney (BofA Securities): How do the $20M+ operational savings support margin expansion and what are puts/takes for SG&A and R&D?
  Response: Management expects tens of millions in savings from operational improvements (will help margins) but noted tariffs offset some benefits; detailed 2026 margin impact will be provided with 2026 guidance.

• Question from Joseph Conway (Needham & Company, LLC): Can you give more color on orthopedics' improved growth in the quarter—major drivers?
  Response: Orthopedics growth driven by BioBrace momentum and improved operations—reduced backorders and better service levels helped growth, though work continues.

• Question from Joseph Conway (Needham & Company, LLC): Can you plot out the backlog improvement timeline—what inning are we in?
  Response: Management characterized recovery as in the second half of the game (roughly mid-to-late innings), signaling meaningful progress but several quarters still required to fully resolve supply issues.

Contradiction Point 1

AirSeal Utilization and Market Opportunity

It directly impacts expectations regarding the adoption and market share of a key product, which could influence revenue projections and investor confidence.

Has the tariff headwind increased more than expected compared to last quarter's guidance? - Anna Runci (Piper Sandler & Co., Research Division)

2025Q3: Hospitals have commitments for DV5 usage. After those, AirSeal adoption is in the 80%-90% range. - Patrick Beyer(CEO)

How did the Xi attachment rate for AirSeal change with the introduction of DV5? - Xuyang Li (Jefferies LLC)

2025Q2: Our AirSeal utilization, we think Xi attachment rate has trended up, from about 1/3 to above 35% over the last decade. - Todd Garner(CFO)

Contradiction Point 2

Capital Environment and Investment Trends

It involves differing statements about the capital environment and investment trends, which are critical for understanding the company's financial health and growth prospects.

How is the capital environment currently positioned and what evolution do you expect over the next 12 months? - Gracia Mahoney (BofA Securities, Research Division)

2025Q3: Capital market remains healthy, with hospitals investing in equipment that improves patient outcomes, expected to continue into next year. - Patrick Beyer(CEO)

Can you discuss capital allocation trends and the impact of tighter hospital budgets? - Lilia-Celine Breton Lozada (JPMorgan Chase & Co)

2025Q2: No significant slowdown from hospitals. Tough comparables, new distributors, and supply chain challenges impacted capital flow. Capital demand remains strong, and the portfolio is robust. - Patrick Beyer(CEO)

Contradiction Point 3

Tariff Impact on Financials

It highlights inconsistencies in the reported financial impact of tariffs, which could affect investor understanding of the company's financial health.

Has the tariff headwind grown more significant than anticipated since last quarter's guidance? - Anna Runci (Piper Sandler & Co., Research Division)

2025Q3: Tariffs started affecting our manufacturing variances last year, impacting 2025 results. The $0.07 headwind in Q4 is from tariffs in Q2 of 2025. - Todd Garner(CFO)

Can you explain the contribution margins and pricing strategies for your product segments, considering inflation? - Michael Cherny (Bank of America)

2025Q1: Tariffs on steel and other components are expected to have approximately a $0.03 impact on earnings per share in 2025. - Gary Schlack(CFO)

Contradiction Point 4

Supply Chain Challenges and Resolution

It involves expectations regarding the resolution of supply chain issues, which directly impact operational performance and revenue projections.

How are you planning to meet demand next year, and are there key headwinds or tailwinds to consider? - Lilia-Celine Lozada(JPMorgan Chase & Co, Research Division)

2025Q3: We're not guiding yet for 2026. No specific headwinds or tailwinds to call out at this time. - Todd Garner(CFO)

Your 4-6% constant currency growth guidance for 2025 contrasts with the CONMED midpoint growth rate of 6.5%. Where is the delta coming from? - Phil unnamed(Piper Sandler)

2024Q4: Our most significant disappointment in 2024 was that we didn't make as much progress as we'd hoped on resolving the supply chain challenges that our results were facing. And we recognize how frustrated that was to our customers and to our investors. - Todd Garner(CFO)