CONMED Corporation (NYSE: CNMD) today announced financial
results for the first quarter ended March 31, 2023.
First Quarter 2023 Highlights
- Sales of $295.5 million increased 21.9% year over year as
reported and 25.1% in constant currency. Acquisitions contributed
approximately 570 basis points of growth.
- Domestic revenue increased 25.4% year over year.
- International revenue increased 17.8% year over year as
reported and 24.7% in constant currency.
- Diluted net earnings per share (GAAP) were $0.06, a decrease of
87.2% compared to the first quarter of 2022.
- Adjusted diluted net earnings per share(1) were $0.66, a
decrease of 5.7% compared to the first quarter of 2022.
“I am proud of our team for driving excellent first quarter
results and staying focused on serving our customers,” commented
Curt R. Hartman, CONMED’s Chair of the Board, President, and Chief
Executive Officer. “Our strong first quarter provides a very solid
start to the year, and the team is focused on execution and
delivering on our increased outlook.”
2023 Outlook
Based on the first quarter results, the Company is raising its
revenue guidance for the full year 2023 and now expects revenue
between $1.205 billion and $1.250 billion, compared to its prior
guidance of between $1.170 billion and $1.220 billion. This range
continues to include an expected headwind from foreign exchange of
between 150 and 200 basis points.
The Company now expects full-year 2023 adjusted diluted net
earnings per share(2) in the range of $3.30 to $3.50, compared to
its prior range of $3.20 to $3.45. This range continues to include
an expected headwind from foreign exchange of between $0.20 and
$0.25.
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.
(2) Information reconciling forward-looking adjusted diluted net
earnings per share to the comparable GAAP financial measures is
unavailable to the company without unreasonable effort, as
discussed below.
Conference Call
The Company’s management will host a conference call today at
4:30 p.m. ET to discuss its first quarter 2023 results.
To participate in the conference call via telephone, please
click here to pre-register and obtain the dial-in number and
passcode.
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.
Consolidated Condensed
Statements of Income
(in thousands except per share
amounts, unaudited)
Three Months Ended
March 31,
2023
2022
Net sales
$
295,468
$
242,327
Cost of sales
140,147
106,336
Gross profit
155,321
135,991
% of sales
52.6
%
56.1
%
Selling & administrative expense
130,083
102,875
Research & development expense
12,539
10,672
Income from operations
12,699
22,444
% of sales
4.3
%
9.3
%
Interest expense
10,255
4,998
Income before income taxes
2,444
17,446
Provision for income taxes
625
2,471
Net income
$
1,819
$
14,975
Basic EPS
$
0.06
$
0.51
Diluted EPS
0.06
0.47
Basic shares
30,511
29,428
Diluted shares
31,204
35,155
Sales Summary
(in millions, unaudited)
Three Months Ended March
31,
% Change
Domestic
International
2023
2022
As
Reported
Impact
of
Foreign
Currency
Constant
Currency
As
Reported
As
Reported
Impact
of
Foreign
Currency
Constant
Currency
Orthopedic Surgery
$
131.2
$
107.5
22.0
%
4.0
%
26.0
%
29.0
%
18.2
%
6.1
%
24.3
%
General Surgery
164.3
134.8
21.9
%
2.5
%
24.4
%
24.0
%
17.1
%
8.4
%
25.5
%
$
295.5
$
242.3
21.9
%
3.2
%
25.1
%
25.4
%
17.8
%
6.9
%
24.7
%
Single-use Products
$
249.3
$
201.5
23.7
%
3.2
%
26.9
%
28.9
%
17.3
%
7.1
%
24.4
%
Capital Products
46.2
40.8
13.0
%
3.3
%
16.3
%
5.5
%
19.8
%
6.2
%
26.0
%
$
295.5
$
242.3
21.9
%
3.2
%
25.1
%
25.4
%
17.8
%
6.9
%
24.7
%
Domestic
$
164.6
$
131.2
25.4
%
0.0
%
25.4
%
International
130.9
111.1
17.8
%
6.9
%
24.7
%
$
295.5
$
242.3
21.9
%
3.2
%
25.1
%
Reconciliation of Reported Net
Income to Adjusted Net Income
(in thousands, except per share
amounts, unaudited)
Three Months Ended March 31,
2023
Gross
Profit
Selling &
Administrative
Expense
Operating
Income
Interest
Expense
Tax
Expense
Effective
Tax Rate
Net
Income
Basic
EPS
Adjustments
Diluted
EPS
As reported
$
155,321
$
130,083
$
12,699
$
10,255
$
625
25.6
%
$
1,819
$
-
$
1,819
% of sales
52.6
%
44.0
%
4.3
%
EPS
$
0.06
$
0.06
Shares
30,511
693
31,204
Acquisition and integration costs(1)
2,096
(448
)
2,544
-
654
1,890
Restructuring and related costs(2)
2,035
(1,578
)
3,613
-
930
2,683
Software implementation costs(3)
-
(4,259
)
4,259
-
1,096
3,163
Contingent consideration fair value
adjustments(4)
-
(4,436
)
4,436
-
1,141
3,295
$
159,452
$
119,362
$
27,551
$
10,255
$
4,446
$
12,850
Adjusted gross profit %
54.0
%
Amortization(5)
$
1,500
(7,265
)
8,765
(1,506
)
2,530
7,741
As adjusted
$
112,097
$
36,316
$
8,749
$
6,976
25.3
%
$
20,591
$
-
$
20,591
% of sales
37.9
%
12.3
%
Adjusted diluted EPS
$
0.66
Shares
30,511
693
31,204
Convertible note hedges(6)
(64
)
Adjusted diluted shares
31,140
Three Months Ended March 31,
2022
Gross Profit
Selling & Administrative
Expense
Operating Income
Interest Expense
Tax Expense
Effective Tax Rate
Net Income
Basic EPS
Adjustments(7)
Diluted EPS
As reported
$
135,991
$
102,875
$
22,444
$
4,998
$
2,471
14.2
%
$
14,975
$
1,715
$
16,690
% of sales
56.1
%
42.5
%
9.3
%
EPS
$
0.51
$
0.47
Shares
29,428
5,727
35,155
$
135,991
$
102,875
$
22,444
$
4,998
$
2,471
$
14,975
Adjusted gross profit %
56.1
%
Amortization(5)
$
1,500
(6,562
)
8,062
(880
)
2,160
6,782
As adjusted
$
96,313
$
30,506
$
4,118
$
4,631
17.5
%
$
21,757
$
1,715
$
23,472
% of sales
39.7
%
12.6
%
Adjusted diluted EPS
$
0 .70
Shares
29,428
5,727
35,155
Convertible note hedges(6)
(1,412
)
Adjusted diluted shares
33,743
(1) In 2023, the Company incurred charges
related to the amortization of inventory step-up to fair value
associated with the acquisition of In2Bones Global, Inc. and
integration costs and professional fees associated with the
acquisitions of In2Bones Global, Inc. and Biorez, Inc.
(2) In 2023, the Company incurred
consulting fees related to an operational cost improvement
initiative and severance related to the elimination of certain
positions.
(3) In 2023, the Company incurred
additional freight, labor and travel costs as well as professional
fees related to the implementation of a warehouse management
software.
(4) In 2023, the Company incurred expense
related to the fair value adjustments to contingent
consideration.
(5) Includes amortization of intangible
assets and deferred financing fees.
(6) Non-GAAP adjusted dilutive weighted
average shares outstanding exclude dilution that is expected to be
offset by the Company’s convertible notes hedge transactions.
(7) The Company adopted ASU 2020-06,
effective January 1, 2022. As a result of the adoption, the Company
is required to compute diluted EPS using the if-converted method.
Under the if-converted method, the numerator is adjusted for
interest expense applicable to its convertible notes (net of tax)
and the denominator includes additional common shares assuming
conversion premium and principal portion of the notes (when
permitted or required) are settled in shares. Subsequent to June 6,
2022, the Company is required to settle the principal value of its
convertible notes in cash.
Reconciliation of Reported Net
Income to EBITDA & Adjusted EBITDA
(in thousands, unaudited)
Three Months Ended
March 31,
2023
2022
Net income
$
1,819
$
14,975
Provision for income taxes
625
2,471
Interest expense
10,255
4,998
Depreciation
4,057
4,032
Amortization
13,877
12,799
EBITDA
$
30,633
$
39,275
Stock based compensation
5,726
4,463
Acquisition and integration costs
2,544
-
Restructuring and related costs
3,613
-
Software implementation costs
4,259
-
Contingent consideration fair value
adjustments
4,436
-
Adjusted EBITDA
$
51,211
$
43,738
EBITDA Margin
EBITDA
10.4
%
16.2
%
Adjusted EBITDA
17.3
%
18.0
%
About CONMED Corporation
CONMED is a medical technology company that provides devices and
equipment for surgical procedures. The Company’s products are used
by surgeons and other healthcare professionals 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 risk factors discussed in the
Company's Annual Report on Form 10-K for the full year ended
December 31, 2022. 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 generally accepted accounting
principles 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 income tax
expense; 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, income tax expense, effective
income tax rate, net income, diluted shares and diluted net
earnings 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.
We are unable to present a quantitative reconciliation of our
expected diluted net earnings per share to expected adjusted
diluted net earnings per share as we are unable to predict with
reasonable certainty and without unreasonable effort the impact and
timing of acquisition, integration and other charges. The financial
impact of these items is uncertain and is dependent on various
factors, including timing, and could be material to our
consolidated condensed statements of income.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20230426005748/en/
CONMED Corporation Todd W. Garner Chief
Financial Officer 727-214-2975
ToddGarner@conmed.com
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