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CONMED Corp (CNMD)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 revenue was $345.9M (+5.8% YoY; +6.0% constant currency) with GAAP diluted EPS $1.08 and adjusted diluted EPS $1.34; management said performance was generally in line with expectations and guidance .
  • Profitability improved: adjusted gross margin 57.6% (+120 bps YoY) and adjusted operating margin 18.6% (+280 bps YoY), driven by mix and operating leverage; EBITDA $70.5M and adjusted EBITDA $80.0M (23.1% margin) .
  • 2025 guidance initiated: reported revenue $1.344–$1.372B (4–6% CC growth with ~100–120 bps FX headwind) and adjusted EPS $4.25–$4.40 (FX headwind ~$0.15–$0.20); Q1 2025 revenue guide $310–$316M; gross margin and SG&A as % of sales expected similar to 2024 as operations are rebuilt .
  • Key narratives: AirSeal franchise delivered double-digit growth and a record year; Orthopedics still hampered by supply issues but improving; management engaged a top-tier consulting firm to accelerate operational fixes; tariff outcomes excluded from guidance with quantified worst-case exposure .

What Went Well and What Went Wrong

What Went Well

  • Adjusted profitability expanded despite operational challenges: Q4 adjusted gross margin 57.6% (+120 bps YoY) and adjusted operating margin 18.6% (+280 bps YoY), reflecting mix tailwinds and operating leverage .
  • AirSeal saw double-digit growth and a record year across capital and disposables; management expects AirSeal to remain a double-digit grower “for a long time” given clinical advantages in complex procedures .
  • Cash generation and de-leveraging: full-year operating cash flow $167.0M (+33.2% YoY), Q4 CFO $43.3M, year-end leverage ratio 3.35x, long-term debt reduced to $905.1M .
    • Quote: “Our cash engine is strong… we turned 5.3% sales growth for the year into 20.9% growth in adjusted EPS and 33.2% growth in operating cash flow” — CFO Todd Garner .

What Went Wrong

  • Orthopedics below market due to lingering supply challenges; capital products declined in Q4 (–12.4% CC) and Orthopedics grew only +2.4% CC in Q4 .
  • Gross margin progression likely to “go sideways” in 2025 given FX (~50 bps headwind) and near-term investments to fix operations before savings materialize .
  • External risks: tariff uncertainty excluded from guidance; worst-case math implies ~$45M annual impact at 25% on Mexico/Canada flows (or ~$7.5M if limited to value-added), and up to ~$10.5M annualized from China if exemptions lapse and rates rise to 35% starting June .

Financial Results

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$332.1 $316.7 $345.9
Diluted EPS (GAAP) ($USD)$0.96 $1.57 $1.08
Adjusted Diluted EPS ($USD)$0.98 $1.05 $1.34
Adjusted Gross Margin %55.3% 56.5% 57.6%
Adjusted Operating Margin %14.6% 15.5% 18.6%
EBITDA ($USD Millions)$64.95 $83.68 $70.51
Adjusted EBITDA ($USD Millions)$64.59 $64.64 $80.04
EBITDA Margin %19.6% 26.4% 20.4%
Adjusted EBITDA Margin %19.4% 20.4% 23.1%

Segment and Mix (Quarterly):

Segment/MixQ2 2024Q3 2024Q4 2024
Orthopedic Surgery Revenue ($USD Millions)$139.5 $130.5 $139.0
General Surgery Revenue ($USD Millions)$192.6 $186.2 $206.9
Single-use Products ($USD Millions)$279.3 $270.8 $297.3
Capital Products ($USD Millions)$52.8 $45.9 $48.6
Domestic ($USD Millions)$185.4 $183.2 $203.3
International ($USD Millions)$146.7 $133.5 $142.6

Operating & Balance Sheet KPIs:

KPIQ2 2024Q3 2024Q4 2024
Cash from Operations ($USD Millions)$43.3 $51.2 $43.3
Capital Expenditures ($USD Millions)$3.6 $3.4 $4.0
Cash and Equivalents ($USD Millions)$28.9 $38.5 $24.5
Accounts Receivable Days65 66 62
Inventory Days196 224 211
Long-Term Debt ($USD Millions)$965.2 $940.1 $905.1
Leverage Ratio (x)3.8x 3.6x 3.35x

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue (reported)FY 2025N/A$1.344–$1.372B Initiated
Constant Currency Revenue GrowthFY 2025N/A~4%–6% CC; ~100–120 bps FX headwind Initiated
Adjusted Diluted EPSFY 2025N/A$4.25–$4.40; FX headwind ~$0.15–$0.20 Initiated
Q1 Revenue (reported)Q1 2025N/A$310–$316M Initiated
Gross Margin outlookFY 2025N/ASimilar to 2024 given FX and operations rebuild Initiated
SG&A as % of salesFY 2025N/ASimilar to 2024 Initiated
R&D expenseFY 2025N/A4.0%–4.5% of sales Initiated
Adjusted Interest ExpenseFY 2025N/A$27.5–$28.0M Initiated
Adjusted Effective Tax RateFY 2025N/AMid-24% Initiated
Operating Cash FlowFY 2025N/A$130–$140M Initiated
Capital ExpendituresFY 2025N/A$20–$30M Initiated
Free Cash FlowFY 2025N/AAround $110M Initiated
Adjusted EBITDAFY 2025N/A$270–$280M Initiated
Leverage RatioFY 2025 YEN/ABelow 3x by YE 2025 Initiated
Tariffs (excluded from guidance)FY 2025N/AMexico/Canada 25% worst-case ~$45M; or ~$7.5M on value-added; China 10% ~$0.25M/month; 35% from June ~$10.5M annualized Risk disclosed
Dividend per shareQ4/Q1$0.20 (Dec 2024) $0.20 (Feb 2025) Maintained

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Supply chain in OrthopedicsQ2: Sports Med & Foot/Ankle constrained; suppliers closed; plan to recover by late year . Q3: Hurricanes Helene/Milton disrupted Largo; Orthopedics U.S. +7.4% amid recovery .Still below-market; engaged top-tier consulting firm to accelerate fixes; expect temporary margin drag as processes are rebuilt .Improving, but slower than planned; operational rebuild underway.
AirSeal franchiseQ2: Capital unit sales strong; surgeons returning to AirSeal with new robot post trials . Q3: Continued strong U.S. capital and disposables; international strength .Record year; double-digit growth in Q4; expected to remain double-digit grower; clinical benefits emphasized .Durable double-digit growth; expanding laparoscopy use.
Gross margin outlookQ2: FY 2024 GM improvement 100–150 bps; Q4 ~57% expected . Q3: Q4 gross margin ~57% reiterated .2025 GM likely similar to 2024 given FX (~50 bps headwind) and operations investments before savings .Near-term pause; long-term mix tailwind intact.
Tariffs/MacroQ3: Noted hurricane-driven procedure deferrals and IV fluid shortages .Guidance excludes tariffs; quantified worst-case impacts for Mexico/Canada and China timelines .Elevated policy risk; mitigation options outlined.
Buffalo Filter (smoke evacuation)Q2: Transitory quality issue in Q2, improving . Q3: Recovery toward normal trend .18 U.S. states enacted/approved legislation; bullish on product line .Regulatory tailwinds building.
R&D execution/BioBraceQ2: BioBrace launch support; clinical program robust .14 peer-reviewed publications; 9 clinical studies; 268-patient randomized study readout expected end-2026 .Strengthening clinical evidence; long-term differentiation.
Capital allocationQ3: Deleveraging focus; leverage 3.6x .Target <3x by YE 2025; stay active on M&A but prioritize debt paydown absent compelling assets .Deleveraging bias; disciplined M&A.

Management Commentary

  • “We are laser-focused on resolving the remaining supply challenges for our Orthopedic business and strengthening our operations… our key growth drivers, including AirSeal, Buffalo Filter, BioBrace and our Foot & Ankle portfolio.” — CEO Patrick Beyer .
  • “Adjusted gross margin for the fourth quarter was 57.6%… we believe it reflects the long-term mix tailwind we have in our portfolio.” — CFO Todd Garner .
  • “We would not be surprised if gross margins… in 2025 were at a similar level to 2024… it is possible that this effort is a drag on margins before the savings are realized.” — CFO Todd Garner .
  • “AirSeal had another year of strong double-digit growth, with record capital and disposable sales…” — CEO Patrick Beyer .
  • “We recently engaged a top-tier consulting firm… turn our operations from an area of weakness into an area of strength.” — CEO Patrick Beyer .

Q&A Highlights

  • Guidance conservatism: Management is “not getting ahead of ourselves” on 2025 revenue (4–6% CC) given 2024 disappointments and ongoing operations work; expects to earn credibility to guide higher as Orthopedics returns to offense .
  • AirSeal trajectory: Double-digit growth in Q4; expected to continue double-digit for the foreseeable future across robotic and laparoscopy use cases .
  • Pricing and tariffs: Pricing currently neutral to slightly positive; passing tariff costs to hospitals would be difficult due to contracts; guidance excludes tariff impacts .
  • Capital allocation: Focus on deleveraging below 3x by YE 2025; opportunistic M&A only for compelling assets .
  • EPS cadence: Revenue and EPS should “travel together”; Q1 headwinds include fewer selling days and heavier FX .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS and revenue was unavailable at time of request due to S&P Global rate limits. As a result, formal beat/miss vs consensus cannot be determined here. Values would normally be retrieved from S&P Global.

Key Takeaways for Investors

  • Mix-led margin engine intact: Despite Orthopedics supply headwinds, adjusted margins expanded meaningfully; near-term 2025 margins may pause due to operational investments, but long-term mix tailwinds remain supportive .
  • AirSeal remains a core growth pillar: Double-digit growth and record year underscore durability; continued adoption in complex robotic and laparoscopic procedures supports sustained growth .
  • Orthopedics on a repair path: Consulting engagement and focus on supply predictability aim to turn operations into a strength; watch quarterly progress in Sports Med and Foot & Ankle to gauge trajectory .
  • 2025 setup is cautious but achievable: 4–6% CC revenue growth, adjusted EPS $4.25–$4.40 with FX headwinds; Q1 guide $310–$316M reflects fewer selling days and FX .
  • Policy risk is non-trivial: Tariff outcomes could be material under worst-case scenarios; management outlined quantification and potential mitigations (sourcing, sterilization logistics, U.S. capacity) .
  • Balance sheet flexibility improving: Strong cash generation, declining debt, and projected leverage <3x by YE 2025 enable selective capital deployment .
  • Dividend steady at $0.20/share, signaling confidence in cash flow and balance sheet stability while operational fixes proceed .

Additional Relevant Press Releases (Q4-related)

  • Q4 and full-year 2024 earnings press release (February 5, 2025) — detailed financials and 2025 outlook .
  • Quarterly cash dividend maintained at $0.20/share (December 10, 2024; February 25, 2025) .