Great. Thanks, everyone. Very happy to introduce our next session. I'm Robbie Marcus, the MedTech analyst at J.P. Morgan. We have Pat Beyer, CEO of CONMED. He's going to do a presentation followed by some Q&A. Pat?
Thanks, Robbie, and thank you for joining me here today to give me an opportunity to share with you the CONMED story. I've had my first year as a CEO at CONMED. On day 13 as a CEO of CONMED last year, I got to present at J.P. Morgan, so I'm officially a veteran here on the second time I'm presenting. Forward-looking statements. Share with you the CONMED vision. This is something CONMED continues to line up and feels incredibly proud about. We empower health care providers worldwide to deliver exceptional outcomes to patients. And there's a focus behind this vision, and we've evolved it over time, but it hasn't changed for a number of years. And we stand behind people, both the team that CONMED has and the patients and providers we support, the products and the focus on innovative clinical solutions.
We believe, importantly, that we should be a profitable organization for our shareholders going forward. As I share with you who CONMED is, I want you to look on the left-hand side here. There's balance where we think balance should exist. There's balance in our portfolio. About 58% of our portfolio is our general surgery business, and 42% are orthopedics business. There's balance in geography. 57% of our business comes from the United States, 43% comes from international. There's focus where we would like focus. 86% of our portfolio and our sales comes from single-use products. It allows us for durable growth and stable growth when you have a portfolio like that. On the right-hand side, we're sharing with you our midterm outlook of where we think our growth will come from.
The bottom says we expect our growth to be in the 4%-9% range in the midterm. Our general surgery business will grow between 5% and 11%, and orthopedics between 4% and 8%. The majority of our growth is going to come from the two largest pieces of that pie. AirSeal and our direct smoke evacuation will be high single-digit to double-digit growth, and our sports medicine business will be mid-single digits to high single digits growth. I would call out that our BioBrace and that portfolio there. The good news is our biggest pieces of our pie and our fastest pieces of our pie are also our most profitable and where our biggest margin profile is. I would also tell you our GI business is in that green segment there, which is other declining to flat.
CONMED has a history of consistent delivering both on the top line, as you see our revenue growth. We're going to finish this year between $1.365 billion and $1.372 billion, and also on the bottom line adjusted EPS. So a history of consistent delivering. I would call out we're cognizant that we've had a couple of hiccups in recent years. We had the WMS issue with our warehouse in 2022, and in 2024, we missed guidance twice, and in 2025, we spent a lot of time building back credibility, and there's been an incredible amount of focus on our foundation and on our future. Who is the best CONMED today, and what is the best CONMED going forward? I want to share with you our three high-growth platforms. Last year at J.P. Morgan, I talked about four high-growth platforms. These are our growth drivers.
We've rolled in our Foot & Ankle business into the platform of BioBrace because we really want to talk about platforms, not individual segments, and I'm going to share more about each one of these platforms right now. First of all, our AirSeal portfolio. It benefits clinically our patients by reducing the length of stay and reducing pain. Patients leave the hospital faster with less pain. From a provider side, the hospital actually shorter length of stay is better for their economic returns, and for the clinicians, shorter length of stay is better for them, and they actually are able to operate faster with a stable pneumoperitoneum that they're able to operate on clinically. We also want to, as we look at our AirSeal portfolio, two large markets there.
The robotic market, which we know well of, and we've talked about the space there in the robotic portfolio and our partnership with Intuitive. We know that there's been some concern with the dV5, the recent Intuitive launch of their new robot. We have stated publicly that our attachment rate to the dV5 is between 10% and 20%, and that continues to hold. The Xi attachment rate, which is their historical robot, we continue to be in the 35% range. But we're not just a robotic clinical insufflation company. We also believe there's an incredible opportunity to improve patient outcomes in the laparoscopy area. This is an area where approaching 3 million plus procedures are done annually, and we have between 6% and 7% market share there. So another incredible growth opportunity for CONMED there.
This is a clinical solution that has been to date used in over eight million procedures. Annually, over a million patients a year leave the hospital after being treated with an AirSeal. We're in over 4,000 facilities around the world and in over 80 countries. Our second growth driver is Buffalo Filter, and this is advanced smoke evacuation. We believe this market today is in the $300-$350 million range. We believe it is going to $1 billion. We know better today what's in the toxic smoke that comes in the operating room. We also know how to remove that smoke, and that's the benefit of clinical smoke evacuation. CONMED has a system that has unparalleled efficacy. We filter 99.9997% of the toxic molecules that come from smoke. Our tailwinds are going to come from two areas.
The number of the first area is legislation globally, both in the United States and in international markets around the world. We know the clinical benefit and the harm that can happen to caregivers treating patients. Legislation is happening around the world, and the United States in 2025, the 20th state passed legislation, and that meant over 51% of the population in the United States is now covered by legislation. The second area that's driving smoke evacuation is the clinical validation. Over three million procedures happen annually. On average, between three and four caregivers are in an operating procedure at a time. That means 12 million caregivers annually are protected from using systems like Buffalo Filter. We have two differentiating factors in our system. First of all, is the filter I talked about, which is the filtration we have with Buffalo Filter and the 99% efficacy.
The other areas are new PlumeSafe X5 smoke evacuator. It's proven to be faster and easier to pull smoke away from the operating room site and from the surgical site. We feel good about the Buffalo Filter smoke evacuation system. Our third growth driver is BioBrace. In the world of sports medicine tissue repair, there's two dynamics that are critical for the tissue to repair itself. One is biologic interface integration, and one is mechanical strength. BioBrace is the only FDA-approved technology that is approved for both areas. In the world of sports medicine, over 3.7 million procedures happen annually. You see at the bottom here, the large three markets that we address are ACL, rotator cuff, and Achilles. As we look at BioBrace specifically, I mentioned to you that we're the only implant that's FDA-cleared for both mechanical reinforcement and bioinductivity.
BioBrace is actually approved for anywhere in the United States soft tissue weakness exists. BioBrace to date has been used in over 70 procedures. In addition, for the broad indication, we've worked hard to make the procedure more reproducible. In 2025, we launched our BioBrace RC, which is our new delivery device. This allows surgeons to operate faster, more reproducibly, and it allows a broader spectrum of surgeons to repair the rotator cuff with BioBrace. As you think about clinical validation, our BioBrace portfolio has 14 peer-reviewed publications. We're currently engaged in an RCT of 268 procedures. We expect to finish enrollment in 2026, and we expect to have publication in 2027. Another very important item that happened in 2025 is the United States American Academy of Orthopaedic Surgeons issued a guideline.
They said, "We recommend augmentation for rotator cuff repair." And it has made a significant improvement in surgeons in the United States moving towards accepting augmenting rotator cuffs. You're seeing on the right-hand side, if you remember the prior slide, failure in rotator cuffs and failure in ACL repair is in the 20% and 30%. Our published repair rates on the rotator cuff have been 94%, and our published repair on the ACL has been 98.6%. So we feel good about our growth drivers, and we work hard. We have a strong cash engine. And we know that in 2022, we acquired BioBrace, and we acquired our In2Bones Corporation that we bought in 2022. I mentioned last year at J.P. Morgan, one of our goals in an area that we had to address was the concern shareholders might have and investors might have around our leverage.
We had committed in 2025 to get that to below three. We achieved that one quarter early and achieved it at the end of quarter three. CONMED has financial strength in lowering leverage, durable cash flow. We also announced in 2025 that we were suspending the dividend, and we would be moving that back to share repurchasing. As we think about where are we investing our cash, it's in two areas. You would expect and want us to invest in organic innovation and ensuring we have our supply chain and our manufacturing appropriately managed and continuing to advance our commercial organization. That's the organic side. On the inorganic side, we continue to look at opportunities that exist on the outside for new technologies and new companies in the clinical spaces where we're currently operating. In December of 2025, CONMED announced that we were exiting the GI business.
We did it for the right strategic decisions about the company. It allowed us to focus on our growth drivers and the markets around laparoscopy and on sports medicine repair, but it created some moving pieces in a number of the analyst models, and so we decided this morning, and we decided at J.P. Morgan to give preliminary guidance for 2026, and I'm going to start on the revenue side. We're guiding in 2026 with preliminary guidance on the top line of $1.345-$1.375 billion. How do we back into that? We start with our organic constant currency revenue $1.423-$1.450 billion. We're guiding four to six top line growth. We then announced the GI divestiture, and that reduces that top line by $78-$82 million. We've got some tailwind of foreign currency FX of $0-$7 million, which is 50 basis point tailwind.
That's how we get to our organic preliminary guidance. On the EPS side, we're guiding $4.25-$4.45. How do we get to that? Same way. Our organic constant currency is from $4.93-$5.08. Foreign currency is again a tailwind, $0.05-$0.10. We announced that we were suspending the dividend and that we would use that $25 million for share repurchase. That's a $0.07 tailwind. We then have organic without tariffs of $5.10-$5.20. You then take the incremental tariff impact over 2025, and it's $0.35-$0.30, which is organic without tariffs $4.75-$4.90. And then you add the impact of the GI divestitures, which is $0.50 to $4.45. So hopefully that's clear. And hopefully it brings some clarity as we're rolling into the end of January on the preliminary guidance CONMED's sharing for 2026.
We continue to be responsible on the ESG side and continue to be pragmatic here. This is the fourth year we'll be publishing a sustainability report. We've hired a dedicated headcount to manage this responsibly and continue to do the right thing here, so as we roll into 2026, I'm proud to share with you CONMED's drive to win, not just as an organization, but also as a leadership team. We're focusing on leveraging our growth drivers. These are high-growth, high-margin products. We're focused on optimizing our portfolio and making portfolio review a way of life at CONMED, continuing to focus on optimizing it. We exited the GI business for the right reasons so that we could align resources strategically around minimally invasive surgery, smoke evacuation, and orthopedic soft tissue repair. I talked about in 2025 focusing on the foundations. Transforming our supply chain is one of those.
I announced at the end of quarter three that we had made progress in our supply chain. We'll announce in our quarter four earnings more information on that, but it continues to be a focus. And we will continue to drive supply chain transformation focused on resiliency, predictability, scalability, and efficiency. And we'll continue to be focused on strengthening our balance sheet to enhance the ability to drive growth and provide shareholder returns. So with that, I'd like to close it. Thank you very much for your time. And Robbie, I will open it up to you to come ask some questions for me and Todd.
Great. Maybe we could start with the guidance for 2026. Fair to say you reaffirmed 2025. Is it fair to assume it's somewhere in the range of the guidance as we think about growth rates into 2026? And thinking about 2025 exit rates? Right.
Still, I mean, this is business day six of the year, right? So we feel good about the guidance we gave for Q4. We did not provide any Q4 results with this, but as Pat said, we wanted to give a preliminary framework for 2026 to make sure people were in the right place, and in a couple of weeks, we'll announce the full results of Q4 and all the typical granularity we give around the full year guidance, so we had updated our numbers for the fourth quarter announcement, and we'll talk about that in a second, but we were kind of at the lower end of your EPS range, so I'm happy to see the range a little above that.
Can you walk us through sort of some of the puts and takes into the guidance? What gets better? What gets worse? What's a headwind to tailwind in 2026 that we should consider in the model?
Yeah. The two big headwinds are, of course, the dilution that comes with the GI exit. And you'll notice, I'm sure you picked up, that it's a little better a month later than we said a month ago. It was slightly better. And then, of course, tariffs. The full impact of a full year of tariffs was between an incremental $0.30-$0.35. And so those are the two big headwinds that keep our EPS a little lower than last year. As Pat walked through, if you take those two big pieces out, the organic business is very strong. So even at that mid-single-digit revenue growth rate, our margin tailwind is real. We've been talking about that for a number of years.
That continues to offset the macro challenges that we're getting, especially this year from tariffs. We did think you weren't alone, Robbie, in that we could see that 26 was looking a little better than people were translating. That was one of the reasons to kind of get everybody in the right framework heading into Q4 earnings in a couple of weeks. Maybe we could talk about the gastroenterology product line exit. What drove that? Are there any offsets you can see in the near term to help replace that earnings power?
Two things. What drove it? Hopefully, I framed that in the presentation. Our strategic review highlighted to us a couple of things. Number one, our growth drivers really were our growth drivers: AirSeal, Buffalo Filter, and BioBrace. Number one.
Number two, for a company our size, we were probably in too many spaces. And so to be able to focus on our growth drivers, it made sense to exit the GI. So to replace what we lost in GI won't happen in one year, but the ability to invest in high-margin, fast-growing categories like AirSeal, Buffalo Filter, and BioBrace, over time, we will make that up.
Are there any other distribution agreements in the business that we should be aware of that might come under strategic review? Or maybe said another way, are there any other assets you don't have full ownership of at CONMED?
Oh, boy. At any time we distribute products and we don't have full ownership, but they're not of the magnitude that was in the GI business. That was an outlier for us.
Okay. That was the largest by far? Yeah.
Great.
And maybe as you think about the portfolio optimization, right, what are some of the key things? You're in a lot of businesses. So when you think about, is it just, does this make strategic sense for us? Does it make financial sense to us? Are there certain minimum return thresholds that'll trigger in or out of the business?
Maybe just walk us through the reasons behind the strategic review and some of the preliminary findings along the way and how you're thinking about forward findings moving forward.
Sure. Again, so I've been at CONMED 10 years, going on 11. First year as CEO, I wanted to pause and reflect to what businesses were we in? What businesses should we stay in? And the strategic review highlighted where we make money, where our highest return businesses were, where our biggest growth opportunities were.
And so our focus today and our strategic decisions are around where are our categories and where are our segments where we can have segment leadership, high growth, high margin, high growth opportunities. And that's really what we're driving at. And the space around soft tissue repair in the sports medicine world and laparoscopy are the two areas where we're driving at with the smoke evacuation right now.
So as you're coming out of 2025, there were some supply issues in the lower extremity business, and that business was progressively getting better each quarter. Where do you stand with that now, and how do you feel about that business going into 2026?
Yeah. At the end of quarter three, and I'm going to stay on what we disclosed at the end of quarter three, we made progress in our supply chain challenges.
Our orthopedic business grew in the low fours in quarter three. This is a segment that's growing between five and seven, so we were behind the market. We know that, but we have made progress there, and I think what you can expect is for us to continue to make progress on the supply chain challenges we had and continue in 2026 to move into more offense on that. I would also just comment, BioBrace did not have the supply chain challenges. So as you think about the sports medicine side, while our sales professionals weren't able to go on offense on many of the sports medicine products, they were still and taking care of surgeons and treating patients with BioBrace, and so they're front and center, solving clinical issues for the surgeon for when we are back on offense to rebuild that credibility.
Did that help with relationships? Obviously, if you're unable to fill the whole order, you generally lose the sale. But if you're still selling into the accounts on certain things, did that BioBrace help you retain accounts and sales better than without it?
It did. Yeah. Exactly right.
Maybe if we talk on BioBrace, this is something CONMED has been talking about for a number of years. Now, the doc feedback continues to be really positive. Where are we in terms of a run rate of this business, and when do we start to see a hockey stick of sales growth here? Right. I think you were getting some published data pretty soon in 2026, and that can help a good amount. We've had a lot of independent doc publications. I see AAOS each year.
So the feedback is great, but I feel like this should be a much bigger product in the future. How do you get it there?
Well, when we bought BioBrace in August of 2022, we said two critical pieces were going to be needed to expand sales. One was the instrument to make the procedure easier, and we launched that in July of 2025, BioBrace RC. The next one was clinical data, and that's our 268-patient RCT that will finish in 2026 and publish in 2027. But Robbie, I think the way that you will see that play out in absolute dollars and go, "Wow, it's making an impact," is our sports medicine growth that you'll see.
Because we don't publish the results of BioBrace as a standalone, but as you see the sports medicine portfolio get bigger and grow faster, know that that's an engine that's driving that.
Is that something we can see immediately in 2027 upon publication?
Well, I think that will play a result, but I would also say clinical data is coming in three ways. Surgeons get clinical data by treating a patient, watching that patient perform after six months, after a year, and then they're seeing a benefit. So every surgeon validates clinical efficacy on their own. They also get clinical efficacy through societies. The American Academy of Orthopaedic Surgeons saying, "We recommend augmentation," really helps on the clinical validation of that. I think the data that we will publish in 2027 will differentiate CONMED from the market tremendously. AirSeal gets a lot of attention. It's a great product.
It has a very high attach rate and usage with surgical robotics with the older generation. The new surgical robot has an integrated insufflator and probably a lower utilization rate going forward. How are you thinking about AirSeal's growth over time, and how long can it be a growth asset for? Because despite all the investor rumblings, it's still a growth asset for CONMED and growing nicely above corporate average with good margins. So how long do you think that can continue for, and how is it performing versus your expectations? Robbie, you said it well.
Again, we think AirSeal is a high single-digit, low double-digit grower. The attachment rate of DV5 is between 10% and 20%. The attachment rate of XI is between 35% and 40%, and we see the opportunity in laparoscopy. I also think the opportunity in AirSeal is a million procedures a year.
What other areas and what other technology and what other shine can come from that that helps us get other products sold into that space? That's one of the leverage points about having a growth platform that we can build off of.
My understanding is the vast majority of sales come from surgical robotics right now. What do you have to do to move into laparoscopic surgery, and what stage are you in right now?
Yeah. We would say about 60% of our sales are robotic, 40% is laparoscopy. Nothing drives action like necessity. And so in the United States, the necessity of the dV5 is challenging our sales professional to drive harder in the laparoscopy. And we're beginning to make more headways in the United States. We know we've been successful internationally for a number of years in that.
Is there a big delta in growth rate?
If I look at 2025, let's say year to date, has laparoscopic been growing faster than surgical?
Yeah. So the issue is we sell SKUs to hospitals, and they can use them in either laparoscopic or robotic. So we don't actually get a report that tells us where they were used. So the best we have is estimates from our sales force, who's close to the customer. So it's hard to track that granularly quarterly. But what we can say is laparoscopic has grown faster than robotic simply from the fact that when we bought this company in 2016, it was all U.S. revenue, and it was all robotic. It was all attached to robotics. And so if we're right that about 60% today is attached to robotics, by definition, that means the laparoscopic mix has grown faster than the robotic mix over that time period.
So we know that that's where the big opportunity is. And as Pat said in his presentation, we estimate we're only about 6%-7% penetrated there. And so that's a huge opportunity. All the benefits are the same. The financial benefits are the same. Clinical benefits are the same. And so we just need to develop those muscles in the U.S. that our O.U.S. folks have demonstrated to be very successful at selling into that channel. And that is happening, as Pat said. The U.S. team is getting more adept at making those sales into that channel.
Do you think it's just been a priority or focus issue? I mean, it's been much easier to just sell into the surgical robotic channel and that was doing so well. Is that the reason?
Pat said nothing drives behavior like necessity, right?
And that business, it was very intelligent for SurgiQuest was the name of the company we bought in 2016. They had a premium device that was twice as expensive as the competition. They made the strategic decision that we're going to run behind a $2 million robot and say, "Hey, customer, you just paid $2 million to have better procedures. Here's a $30,000 box that will improve all of those procedures." And so that was a very happy place to live for a sales rep for a long time. It still is. There's still a lot of opportunity there. It's still a very good place to be. And those robotic procedures need AirSeal. And so we are still very much attached to and invested in and connected to that space.
But as that attachment rate goes from 35-40, as Pat said, down to 10-20, sales reps don't want to make less money. We don't want to sell less product. And so it drives us to this other part of the opportunity where we have spent not enough time leading up till now.
Maybe if we touch on your third priority growth driver with Buffalo Filter. In the past, you've talked about $300 million opportunity going to $2 billion, I believe, opportunity. That's a pretty big jump. So maybe walk us through how you get from point A to point B. Yeah.
You would describe it. We're learning fast in this market. We would say it's a billion dollar plus now, not two. 51%, and we're pretty close on the $300-$350 million dollar today. 20 states in the U.S. have legislation and 51% of the population.
Internationally, Canada, Nordic, and Australia have legislation for the most part. So we think just purely mathematically, as other countries take off legislation and hospital systems embrace improving the care of their caregivers, that market will move from $350 million to $1 billion pretty smoothly.
How split is this between U.S. and outside U.S.?
I think it probably mirrors our revenue. I think CONMED is a pretty balanced smoke evacuation globally.
Okay. There has been a lot of movement, particularly in the U.S. with legislation. I know it can often take up to two, three years for that. Once legislation, the light switch goes on, they have a long time to start complying with it. Where are we in terms of those 20-something states? And how many do you think are fully compliant as of now? And how much more is there to go over the 26, 27, 28?
Wow.
I don't think any are 100% compliant. It happens in various measures. We have seen between three and four states roll every year. We don't think it's going to go from 20 to 50 in two years. We think it's going to go slowly like that and expect to move it. The big states, Texas, California, Florida, that's where it might go from 20 states to 23, but the population will go from 51 to 70, and so that's what we need. We need the big states moving.
This is a market you have the branded, and you have the OEM business. The OEM business has been lagging the branded business for some time now. Do you think that can pick up and part B, any threats from competition you're seeing in the smoke evacuation market? Robbie, fair question.
Again, I think our - and we call out in our pie chart - our direct smoke evacuation business with our AirSeal business is high single digits, double digits. And so we're really focused on that. We have a number of vendors who value our clinical portfolio, and we OEM it to them, and we partner with them. At the same time, our focus is supporting our sales professionals and the direct business going forward. And we'll probably see that OEM business slowly go away over time.
As you think about cash flow and your capital allocation priorities, your leverage has come down over time. You eliminated the dividend, and that, quite honestly, puts you in line with most of your peers in medical devices. You were a standout with the dividend there. How are you thinking about your capital allocation priorities and where most of the cash will go over the coming years?
Yeah. There's been no change, although we did change the dividend policy, of course. There's been no change to our capital allocation priorities. We're well aware that all successful med tech companies have grown through both organic and inorganic activities. And so we have continued to keep our eyes open and ears open to compelling assets that are out there that would improve the portfolio, the long-term strength of the portfolio. Our filters have not changed. They are accretive to revenue growth with some durability, either patent protection or know-how or something that makes that durable. Needs to be accretive to gross margins, maybe not on day one, but a clear line of sight to accretive from a margin perspective. And then it has to be at a value—you can't give all the value to the seller. There has to be value for the CONMED shareholder.
So those filters haven't changed. Those filters are the same when our leverage was over five. They're the same when our leverage is below three. The filters don't change with leverage. So we will continue to look for compelling assets. In the meantime, we do expect to drive leverage down. And now we have the benefit of the board has approved a new share repurchase program, which we're excited about. Now that leverage is at a manageable level defined by the market, we would like to be opportunistic and be buyers of our stock at this level. But of course, that's a balance, right? We don't really want our leverage to go up. And so thankfully, we have a great cash engine. And so we'll have those choices. And anyway, so there's been no change in how we see capital allocation.
So, maybe I can end asking on optimizing the portfolio. And we saw an exit, a subtraction in December. The first few years I followed CONMED, there were lots of additions, and then there was a pause in between. Do you think we're going to see more additions or more subtractions in 2026?
I wouldn't put a window on one year. I would say we're a growth company. We're driven to grow and driven to win. And so you will see more additions than subtractions going forward by nature of we're going to grow. And the markets and the portfolios we're in are growth. The categories and the segments we're in are growing, and we have a great opportunity to add to them as opposed to subtracting.
And maybe just to clarify on the share repurchase, there's already some built into 2026 guidance. I think it's $0.07.
Do you think there's potential room, let's say M&A doesn't present itself in 2026? Is there additional room if shares remain attractive to you to go above and beyond the $0.07? For sure.
And I'm super glad you asked that question. The $0.07 that's included and called out in the guidance is literally the numeric impact from we've been spending about $25 million in a dividend. So that is putting that $25 million into share repurchase. That's where the $0.07 comes from, is just the $25 million. So you can't back into how much we're planning on spending the whole year. That is simply what happens to EPS by instead of putting the money in the dividend, putting it into share repurchase.
So let's think of that as an absolute minimum of share repurchase in 2026. It could be well above that.
That's correct.
Great.
I don't think we have time for another question. Thanks for a great discussion. Thanks, everybody, for joining us.
Thanks, Robbie.
Thanks, Robbie. Thank you, everybody.