CONMED Corporation (NYSE: CNMD) today announced financial
results for the third quarter ended September 30, 2021.
Third Quarter 2021 Highlights
- Sales of $248.8 million increased 4.6% year over year as
reported and 4.3% in constant currency.
- Domestic revenue increased 1.6% year over year.
- International revenue increased 8.5% year over year as reported
and 7.7% in constant currency.
- Diluted net earnings per share (GAAP) were $0.47, compared to
diluted net earnings per share of $0.23 during the third quarter of
2020.
- Adjusted diluted net earnings per share(1) were $0.80, compared
to adjusted diluted net earnings per share of $0.88 during the
third quarter of 2020.
“We faced a more challenging macro environment during the third
quarter than anticipated, but our organizational resilience enabled
us to grow revenue over the third quarters of both 2020 and 2019,”
commented Curt R. Hartman, CONMED’s Chair of the Board, President,
and Chief Executive Officer. “Our team remains focused on serving
our customers and helping them navigate a difficult environment
while driving continued product innovation to support long-term
growth.”
2021 Outlook
Given the continued uncertainty related to the global pandemic
and the impact on hospitals, the Company is now targeting the lower
end of its previously issued full-year 2021 revenue guidance of
$1.015 billion to $1.035 billion. Based on recent exchange rates,
the Company expects approximately 100 basis points of foreign
exchange headwind to fourth quarter revenue growth.
The Company now expects full-year 2021 adjusted diluted net
earnings per share in the range of $3.18 to $3.23, compared to its
prior range of $3.15 to $3.25.
Supplemental Financial Disclosures
(1) A reconciliation of reported diluted net earnings per share
to adjusted diluted net earnings per share, a non-GAAP financial
measure, appears below.
Conference Call
The Company’s management will host a conference call today at
4:30 p.m. ET to discuss its third quarter 2021 results.
To participate in the conference call, dial 1-844-889-7792
(domestic) or +1-661-378-9936 (international) and refer to the
passcode 6396565.
This conference call will also be webcast and can be accessed
from the “Investors” section of CONMED's website at www.conmed.com.
The webcast replay of the call will be available at the same site
approximately one hour after the end of the call.
A recording of the call will also be available from 7:30 p.m. ET
on Wednesday, October 27, 2021, until 7:30 p.m. ET on Wednesday,
November 3, 2021. To hear this recording, dial 1-855-859-2056
(domestic) or +1-404-537-3406 (international) and enter the
passcode 6396565.
Consolidated Condensed
Statements of Income (Loss)
(in thousands, except per share
amounts, unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net sales
$
248,827
$
237,835
$
736,665
$
609,631
Cost of sales
106,521
104,137
324,485
284,845
Gross profit
142,306
133,698
412,180
324,786
% of sales
57.2
%
56.2
%
56.0
%
53.3
%
Selling & administrative expense
104,736
94,380
307,476
274,721
Research & development expense
10,859
9,936
32,203
28,756
Income from operations
26,711
29,382
72,501
21,309
% of sales
10.7
%
12.4
%
9.8
%
3.5
%
Interest expense
8,145
11,943
27,917
32,938
Other expense
1,127
89
1,127
266
Income (loss) before income taxes
17,439
17,350
43,457
(11,895
)
Provision for income taxes
2,491
10,500
5,359
2,728
Net income (loss)
$
14,948
$
6,850
$
38,098
$
(14,623
)
Basic EPS
$
0.51
$
0.24
$
1.31
$
(0.51
)
Diluted EPS
0.47
0.23
1.19
(0.51
)
Basic shares
29,179
28,583
29,097
28,529
Diluted shares
32,143
29,426
32,020
28,529
Sales Summary
(in millions, unaudited)
Three Months Ended September
30,
% Change
Domestic
International
2021
2020
As Reported
Impact of Foreign
Currency
Constant Currency
As Reported
As Reported
Impact of Foreign
Currency
Constant Currency
Orthopedic Surgery
$ 105.7
$ 102.2
3.5%
-0.6%
2.9%
-2.5%
7.1%
-0.8%
6.3%
General Surgery
143.1
135.6
5.5%
-0.2%
5.3%
3.3%
10.6%
-0.6%
10.0%
$ 248.8
$ 237.8
4.6%
-0.3%
4.3%
1.6%
8.5%
-0.8%
7.7%
Single-use Products
$ 200.9
$ 190.9
5.3%
-0.4%
4.9%
3.0%
8.4%
-0.8%
7.6%
Capital Products
47.9
46.9
2.0%
-0.4%
1.6%
-4.5%
8.9%
-0.9%
8.0%
$ 248.8
$ 237.8
4.6%
-0.3%
4.3%
1.6%
8.5%
-0.8%
7.7%
Domestic
$ 136.4
$ 134.2
1.6%
0.0%
1.6%
International
112.4
103.6
8.5%
-0.8%
7.7%
$ 248.8
$ 237.8
4.6%
-0.3%
4.3%
Nine Months Ended September
30,
% Change
Domestic
International
2021
2020
As Reported
Impact of Foreign
Currency
Constant Currency
As Reported
As Reported
Impact of Foreign
Currency
Constant Currency
Orthopedic Surgery
$ 320.8
$ 261.9
22.5%
-2.2%
20.3%
19.0%
24.5%
-3.5%
21.0%
General Surgery
415.9
347.7
19.6%
-1.1%
18.5%
18.5%
22.2%
-3.6%
18.6%
$ 736.7
$ 609.6
20.8%
-1.5%
19.3%
18.6%
23.6%
-3.5%
20.1%
Single-use Products
$ 597.3
$ 497.1
20.1%
-1.5%
18.6%
17.4%
23.9%
-3.6%
20.3%
Capital Products
139.4
112.5
23.9%
-1.8%
22.1%
25.4%
22.6%
-3.4%
19.2%
$ 736.7
$ 609.6
20.8%
-1.5%
19.3%
18.6%
23.6%
-3.5%
20.1%
Domestic
$ 404.0
$ 340.5
18.6%
0.0%
18.6%
International
332.7
269.1
23.6%
-3.5%
20.1%
$ 736.7
$ 609.6
20.8%
-1.5%
19.3%
Reconciliation of Reported Net
Income to Adjusted Net Income
(in thousands, except per share
amounts, unaudited)
Three Months Ended September
30, 2021
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Other Expense
Tax Expense
Effective Tax Rate
Net Income
Diluted EPS
As reported
$
142,306
$
104,736
$
26,711
$
8,145
$
1,127
$
2,491
14.3
%
$
14,948
$
0.47
% of sales
57.2
%
42.1
%
10.7
%
Debt refinancing costs (1)
-
-
-
-
(1,127
)
281
846
$
142,306
$
104,736
$
26,711
$
8,145
$
-
$
2,772
$
15,794
Adjusted gross profit %
57.2
%
Amortization(5)
$
1,500
(6,796
)
8,296
(3,410
)
-
2,798
8,908
Adjusted net income
$
97,940
$
35,007
$
4,735
$
-
$
5,570
18.4
%
$
24,702
$
0.80
% of sales
39.4
%
14.1
%
Diluted shares outstanding
30,431
Additional potential dilutive shares from
in-the-money convertible notes(6)
1,712
Diluted shares, as reported
32,143
Convertible note hedges(7)
(1,244
)
Diluted shares, as adjusted
30,899
Three Months Ended September
30, 2020
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Other Expense
Tax Expense/ (Benefit)
Effective Tax Rate
Net Income
Diluted EPS
As reported
$
133,698
$
94,380
$
29,382
$
11,943
$
89
$
10,500
60.5
%
$
6,850
$
0.23
% of sales
56.2
%
39.7
%
12.4
%
Restructuring and related costs (2)
-
(1,009
)
1,009
-
-
(87
)
1,096
Acquisition and integration costs (3)
796
-
796
-
-
(366
)
1,162
Manufacturing consolidation costs (4)
606
-
606
-
-
(352
)
958
$
135,100
$
93,371
$
31,793
$
11,943
$
89
$
9,695
$
10,066
Adjusted gross profit %
56.8
%
Amortization(5)
$
1,500
(6,992
)
8,492
(3,439
)
-
(3,980
)
15,911
Adjusted net income
$
86,379
$
40,285
$
8,504
$
89
$
5,715
18.0
%
$
25,977
$
0.88
% of sales
36.3
%
16.9
%
(1) In 2021, the Company incurred costs
related to a loss on early extinguishment and third party fees
associated with the seventh amended and restated senior credit
agreement.
(2) In 2020, the Company incurred
restructuring costs related to restructuring of our sales
force.
(3) In 2020, the Company incurred
inventory adjustments associated with a prior acquisition.
(4) In 2020, the Company incurred costs
related to the consolidation of certain manufacturing operations.
These costs related to winding down operations at certain locations
and moving production lines to other facilities.
(5) Includes amortization of intangible
assets, deferred financing fees and debt discount.
(6) In 2021, the Company's average share
price exceeded the conversion price of our 2.625% convertible notes
due in 2024 (the "Notes") resulting in additional potential diluted
shares.
(7) Non-GAAP adjusted dilutive weighted
average shares outstanding exclude dilution that is expected to be
offset by the Company's convertible note hedge transactions.
Reconciliation of Reported Net
Income (Loss) to Adjusted Net Income
(in thousands, except per share
amounts, unaudited)
Nine Months Ended September
30, 2021
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Other Expense
Tax Expense
Effective Tax Rate
Net Income
Diluted EPS
As reported
$
412,180
$
307,476
$
72,501
$
27,917
$
1,127
$
5,359
12.3
%
$
38,098
$
1.19
% of sales
56.0
%
41.7
%
9.8
%
Restructuring and related costs (1)
-
(414
)
414
-
-
109
305
Debt refinancing costs (2)
-
-
-
-
(1,127
)
281
846
$
412,180
$
307,062
$
72,915
$
27,917
$
-
$
5,749
$
39,249
Adjusted gross profit %
56.0
%
Amortization(7)
$
4,500
(20,323
)
24,823
(10,557
)
-
8,653
26,727
Adjusted net income
$
286,739
$
97,738
$
17,360
$
-
$
14,402
17.9
%
$
65,976
$
2.14
% of sales
38.9
%
13.3
%
Diluted shares outstanding
30,380
Additional potential dilutive shares from
in-the-money convertible notes(8)
1,640
Diluted shares, as reported
32,020
Convertible note hedges(9)
(1,213
)
Diluted shares, as adjusted
30,807
Nine Months Ended September
30, 2020
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Other Expense
Tax Expense
Effective Tax Rate
Net Income (Loss)
Diluted EPS
As reported
$
324,786
$
274,721
$
21,309
$
32,938
$
266
$
2,728
-22.9
%
$
(14,623
)
$
(0.51
)
% of sales
53.3
%
45.1
%
3.5
%
Plant underutilization costs (3)
6,586
-
6,586
-
-
739
5,847
Product rationalization costs (4)
2,169
(2,095
)
4,264
-
-
460
3,804
Restructuring and related costs (1)
1,087
(3,133
)
4,220
-
-
259
3,961
Acquisition and integration costs (5)
2,253
(1,192
)
3,445
-
-
356
3,089
Manufacturing consolidation costs (6)
3,993
-
3,993
-
-
485
3,508
$
340,874
$
268,301
$
43,817
$
32,938
$
266
$
5,027
$
5,586
Adjusted gross profit %
55.9
%
Amortization(7)
$
4,500
(20,947
)
25,447
(9,936
)
-
1,795
33,588
Adjusted net income
$
247,354
$
69,264
$
23,002
$
266
$
6,822
14.8
%
$
39,174
$
1.33
% of sales
40.6
%
11.4
%
Diluted shares, as reported
28,529
Effect of dilutive shares assuming net
earnings(10)
859
Diluted shares, as adjusted
29,388
(1) In 2021, the Company incurred
restructuring costs related to restructuring of our sales force. In
2020, the Company incurred restructuring costs related to a
voluntary separation arrangement with employees as a result of the
COVID-19 pandemic and restructuring of our sales force.
(2) In 2021, the Company incurred costs
related to a loss on early extinguishment and third party fees
associated with the seventh amended and restated senior credit
agreement.
(3) In 2020, the Company incurred a charge
related to plant underutilization due to abnormally low production
as a result of decreased sales caused by the COVID-19 pandemic.
(4) In 2020, the Company performed an
analysis of product lines and determined certain catalog numbers,
principally related to capital equipment, would be discontinued and
consolidated into existing product offerings resulting in a charge
to cost of sales. The Company also wrote-off related field
inventory used for customer demonstration and evaluation of the
discontinued products to selling and administrative expense.
(5) In 2020, the Company incurred
inventory adjustments associated with a prior acquisition and
severance and integration costs mainly related to the Buffalo
Filter, LLC acquisition.
(6) In 2020, the Company incurred costs
related to the consolidation of certain manufacturing operations.
These costs related to winding down operations at certain locations
and moving production lines to other facilities.
(7) Includes amortization of intangible
assets, deferred financing fees and debt discount.
(8) In 2021, the Company's average share
price exceeded the conversion price of our 2.625% convertible notes
due in 2024 (the "Notes") resulting in additional potential diluted
shares.
(9) Non-GAAP adjusted dilutive weighted
average shares outstanding exclude dilution that is expected to be
offset by the Company's convertible note hedge transactions.
(10) Diluted share count used in Diluted
EPS, as adjusted, for the nine months ended September 30, 2020
adjusts for shares assuming net earnings.
Reconciliation of Reported Net
Income (Loss) to EBITDA & Adjusted EBITDA
(in thousands, unaudited)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2021
2020
2021
2020
Net income (loss)
$
14,948
$
6,850
$
38,098
$
(14,623
)
Provision for income taxes
2,491
10,500
5,359
2,728
Interest expense
8,145
11,943
27,917
32,938
Depreciation
3,778
4,383
12,519
13,617
Amortization
13,432
13,580
40,747
40,973
EBITDA
$
42,794
$
47,256
$
124,640
$
75,633
Stock based compensation
4,327
3,532
12,003
10,119
Plant underutilization costs
-
-
-
6,586
Product rationalization costs
-
-
-
4,264
Restructuring and related costs
-
1,009
414
4,220
Manufacturing consolidation costs
-
606
-
3,993
Acquisition and integration costs
-
796
-
3,445
Debt refinancing costs
1,127
-
1,127
-
Adjusted EBITDA
$
48,248
$
53,199
$
138,184
$
108,260
EBITDA Margin
EBITDA
17.2
%
19.9
%
16.9
%
12.4
%
Adjusted EBITDA
19.4
%
22.4
%
18.8
%
17.8
%
About CONMED Corporation
CONMED is a medical technology company that provides surgical
devices and equipment for minimally invasive procedures. The
Company’s products are used by surgeons and physicians in a variety
of specialties, including orthopedics, general surgery, gynecology,
thoracic surgery, and gastroenterology. For more information, visit
www.conmed.com.
Forward-Looking Statements
This press release and the associated conference call may
contain forward-looking statements based on certain assumptions and
contingencies that involve risks and uncertainties, which could
cause actual results, performance, or trends to differ materially
from those expressed in the forward-looking statements herein or in
previous disclosures. For example, in addition to general industry
and economic conditions, factors that could cause actual results to
differ materially from those in the forward-looking statements may
include, but are not limited to, the risks posed to the Company’s
business, financial condition, and results of operations by the
COVID-19 global pandemic and the various government responses to
the pandemic, including deferral of surgeries, reductions in
hospital and ambulatory surgery center operating volumes,
disruption to potential supply chain reliability, as well as the
risk factors discussed in the Company's Annual Report on Form 10-K
for the full year ended December 31, 2020 and listed under the
heading Forward-Looking Statements in the Company’s most recently
filed Form 10-Q. Any and all forward-looking statements are made
pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 and relate to the Company’s
performance on a going-forward basis. The Company believes that all
forward-looking statements made by it have a reasonable basis, but
there can be no assurance that management’s expectations, beliefs
or projections as expressed in the forward-looking statements will
actually occur or prove to be correct.
Supplemental Information - Reconciliation of GAAP to Non-GAAP
Financial Measures
The Company supplements the reporting of its financial
information determined under accounting principles generally
accepted in the United States (GAAP) with certain non-GAAP
financial measures, including percentage sales growth in constant
currency; adjusted gross profit; cost of sales excluding specified
items; adjusted selling and administrative expenses; adjusted
operating income; adjusted interest expense; adjusted other
expense; adjusted income tax expense (benefit); adjusted effective
income tax rate; adjusted net income, adjusted diluted shares and
adjusted diluted net earnings per share (EPS). The Company believes
that these non-GAAP measures provide meaningful information to
assist investors and shareholders in understanding its financial
results and assessing its prospects for future performance.
Management believes percentage sales growth in constant currency
and the other adjusted measures described above are important
indicators of its operations because they exclude items that may
not be indicative of, or are unrelated to, its core operating
results and provide a baseline for analyzing trends in the
Company’s underlying business. Further, the presentation of EBITDA
is a non-GAAP measurement that management considers useful for
measuring aspects of the Company’s cash flow. Management uses these
non-GAAP financial measures for reviewing the operating results and
analyzing potential future business trends in connection with its
budget process and bases certain management incentive compensation
on these non-GAAP financial measures.
Net sales on a constant currency basis is a non-GAAP measure.
The Company analyzes net sales on a constant currency basis to
better measure the comparability of results between periods. To
measure percentage sales growth in constant currency, the Company
removes the impact of changes in foreign currency exchange rates
that affect the comparability and trend of net sales. To measure
earnings performance on a consistent and comparable basis, the
Company excludes certain items that affect the comparability of
operating results and the trend of earnings. These adjustments are
irregular in timing, may not be indicative of past and future
performance and are therefore excluded to allow investors to better
understand underlying operating trends.
Because non-GAAP financial measures are not standardized, it may
not be possible to compare these financial measures with other
companies' non-GAAP financial measures having the same or similar
names. These adjusted financial measures should not be considered
in isolation or as a substitute for reported sales growth, gross
profit, cost of sales, selling and administrative expenses,
operating income, interest expense, other expense, income tax
expense, effective income tax rate, net income (loss), diluted
shares and diluted net earnings (loss) per share, the most directly
comparable GAAP financial measures. These non-GAAP financial
measures are an additional way of viewing aspects of the Company’s
operations that, when viewed with GAAP results and the
reconciliations to corresponding GAAP financial measures above,
provide a more complete understanding of the business. The Company
strongly encourages investors and shareholders to review its
financial statements and publicly filed reports in their entirety
and not to rely on any single financial measure.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211027005940/en/
CONMED Corporation Todd W. Garner Chief
Financial Officer 727-214-2975
ToddGarner@conmed.com
CONMED (NYSE:CNMD)
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