CONMED Corp
For the period ended Mar 31, 2025. Filed May 1, 2025.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2025 · Filed May 1, 2025
CNMD$51.50-2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-09-30; filed 2024-10-31.
0000816956-24-000018
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2025-03-31; filed 2025-05-01.
0000816956-25-000011
Item 2. Management's Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 94 previous paragraphs and 89 current paragraphs.
55 unchanged; 30 reworded; 4 added; 9 removed; 0 previous and 0 current paragraphs rearranged.
Tables are not compared: 4 previous and 4 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (4)
Current report
The 20 basis point increase in gross profit margins during the three months ended March 31, 2025 was mainly due to favorable product mix. During the three months ended March 31, 2025 we incurred costs of $3.4 million for the engagement of a consulting firm to evaluate and propose improvements to our supply chain and manufacturing operations. During the three months ended March 31, 2024, we wrote off $1.4 million in inventory, tooling and equipment related to the cancellation of a planned new product line and incurred $0.2 million in severance costs related to the elimination of certain positions.
Current report
•$12.2 million of cash and stock-based compensation costs related to advisory services provided by our former Chief Executive Officer in the three months ended March 31, 2025; and
Current report
Salesforce and commissions, marketing, general & administrative costs and amortization expense in the three months ended March 31, 2025 were in line with the three months ended March 31, 2024 as a percentage of sales.
Current report
•During the three months ended March 31, 2025, we repaid $14.6 million on our term loan.
Removed paragraphs (9)
Previous report
During the latter part of the third quarter of 2024, the path of Hurricane Helene impacted the Company’s manufacturing facility in Largo, Florida and the Company’s distribution center in Lithia Springs, Georgia. The Company prioritizes the safety of its employees, and ceased manufacturing operations at its Largo, Florida facility for approximately 24 hours. Then, during the early part of the fourth quarter of 2024, the path of Hurricane Milton impacted the Company's manufacturing facility in Largo, Florida and we again ceased manufacturing operations for four days. The facilities did not incur any significant damage as a result of these hurricanes, we have confirmed the safety of our employees and the Company has resumed normal operations. We are monitoring the impact these hurricanes had, and may continue to have, on hospitals and surgery centers, as well as supply chain, but cannot quantify the impact at this time.
Previous report
The 130 and 180 basis point increases in gross profit margins during the three and nine months ended September 30, 2024, respectively, were mainly due to favorable product mix as well as during the three and nine months ended September 30, 2023, we incurred costs for the amortization of inventory step-up to fair value of $2.2 million and $6.5 million, respectively, related to the In2Bones acquisition.
Previous report
•$2.1 million in costs related to the termination of distribution agreements during the nine months ended September 30, 2023;
Previous report
•$6.1 million in costs related to the implementation of a new warehouse management system in the nine months ended September 30, 2023. These costs mainly consisted of incremental freight, labor and travel costs as well as professional fees;
Previous report
•$1.6 million in costs consisting of severance related to the elimination of certain positions during the nine months ended September 30, 2023; and
Previous report
•overall decrease in selling and administrative expense as a percentage of sales as we leverage our existing selling and administrative structure.
Previous report
These decreases are offset by $1.9 million and $4.6 million in costs incurred for third party services pertaining to potential issues with certain royalty payments to design surgeons during the three and nine months ended September 30, 2024, respectively.
Previous report
•A decrease in cash flows from inventory as we increased inventory to mitigate supply chain challenges;
Previous report
In February 2024, the Company repaid the remaining $70.0 million then outstanding of the 2.625% Notes through borrowings on our revolving credit facility and issued 0.1 million shares of the Company's common stock.
Reworded paragraphs (30)
Previous wording
•trade protection measures, tariffs and other border taxes, and import or export licensing requirements; and
Current wording
•trade protection measures, tariffs and other border taxes, and import or export licensing requirements;
Previous wording
•pandemics and health crises, and the responses thereto by governments and hospitals, which poses risks to our business, financial condition and results of operations;
Current wording
•pandemics and health crises, and the responses thereto by governments and hospitals;
Previous wording
•the risk of patent, product and other litigation, as well as the cost associated with such litigation;
Current wording
•the risk of patent, product and other litigation, as well as the cost associated with such litigation; and
Previous wording
Our product lines consist of orthopedic surgery and general surgery. Orthopedic surgery consists of sports medicine and lower extremities instrumentation and implants, small bone, large bone and specialty powered surgical instruments as well as imaging systems for use in minimally invasive surgery procedures and service fees related to the promotion and marketing of sports medicine allograft tissue. General surgery consists of a complete line of endo-mechanical instrumentation for minimally invasive laparoscopic and gastrointestinal procedures, smoke evacuation devices, a line of cardiac monitoring products as well as electrosurgical generators and related instruments. These product lines as a percentage of consolidated net sales are as follows:
Current wording
Our product lines consist of orthopedic surgery and general surgery. Orthopedic surgery consists of sports medicine and lower extremities instrumentation and implants, small bone, large bone and specialty powered surgical instruments as well as imaging systems for use in minimally invasive surgery procedures and service fees related to the promotion and marketing of sports medicine allograft tissue. General surgery consists of a complete line of endo-mechanical instrumentation for minimally invasive laparoscopic and gastrointestinal procedures, clinical insufflation, smoke evacuation devices, a line of cardiac monitoring products as well as electrosurgical generators and related instruments. These product lines as a percentage of consolidated net sales are as follows:
Previous wording
A significant amount of our products are used in surgical procedures with approximately 85% of our revenues derived from the sale of single-use products. Our capital equipment offerings also facilitate the ongoing sale of related single-use products and accessories, thus providing us with a recurring revenue stream. We manufacture substantially all of our products in facilities located in the United States and Mexico. We market our products both domestically and internationally directly to customers and through distributors. International sales approximated 43% and 44% of our consolidated net sales during the nine months ended September 30, 2024 and 2023, respectively.
Current wording
A significant amount of our products are used in surgical procedures with approximately 86% of our revenues derived from the sale of single-use products. Our capital equipment offerings also facilitate the ongoing sale of related single-use products and accessories, thus providing us with a recurring revenue stream. We manufacture substantially all of our products in facilities located in the United States and Mexico. We market our products both domestically and internationally directly to customers and through distributors. International sales approximated 43% and 44% of our consolidated net sales during the three months ended March 31, 2025 and 2024, respectively.
Previous wording
The Company has been and continues to be impacted by the macro-economic environment and we are experiencing higher manufacturing and operating costs caused by inflationary pressures and ongoing supply chain challenges. We work with suppliers to mitigate these impacts; however, we expect these challenges to continue through 2024. This will likely impact our results of operations.
Current wording
The Company has been and continues to be impacted by the macro-economic environment and we are experiencing higher manufacturing and operating costs caused by inflationary pressures and ongoing supply chain challenges. We work with suppliers to mitigate these impacts; however, we expect these challenges to continue through 2025. This will likely impact our results of operations and we therefore have engaged a consulting firm to evaluate and propose improvements in our supply chain and manufacturing operations. In addition, our results of operations are expected to be impacted if additional tariffs are placed on imported goods to the United States as well as exporting of products to other countries. See "Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024 for more information.
Previous wording
The Company has not been materially impacted by the conflicts in Ukraine and the Middle East. The Company has no direct operations in these regions with our business limited to selling to third party distributors. Total revenues and accounts receivable associated with sales to third party distributors in these regions are not material to the consolidated condensed financial statements. We will continue to monitor and adjust our business strategy in response to the conflicts in these regions as necessary.
Current wording
The Company has not been materially impacted by the conflicts in Ukraine and the Middle East. The Company has no direct operations in these regions with our business limited to selling to third party distributors. Total revenues and accounts receivable associated with sales to third party distributors in these regions are not material to the consolidated condensed financial statements. We will continue to monitor and adjust our business strategy in response to the conflicts in these regions.
Previous wording
The following table presents net sales by product line for the three and nine months ended September 30, 2024 and 2023:
Current wording
The following table presents net sales by product line for the three months ended March 31, 2025 and 2024:
Previous wording
Net sales increased 4.0% and 4.7% in the three and nine months ended September 30, 2024, respectively, compared to the same periods a year ago. The increases during the three and nine months ended September 30, 2024 were primarily due to growth in both the orthopedic surgery and general surgery product lines.
Current wording
Net sales increased 2.9% in the three months ended March 31, 2025 compared to the same period a year ago. The increase during the three months ended March 31, 2025 was due to growth in both the orthopedic surgery and general surgery product lines.
Previous wording
•Orthopedic surgery sales increased 4.7% and 2.1% in the three and nine months ended September 30, 2024, respectively, primarily due to growth in our sports medicine and BioBrace® product offerings.
Current wording
•Orthopedic surgery sales increased 2.5% in the three months ended March 31, 2025 primarily due to growth in our procedure specific, foot and ankle and BioBrace® product offerings.
Previous wording
•General surgery sales increased 3.5% and 6.7% in the three and nine months ended September 30, 2024, respectively, primarily due to growth in our AirSeal® and biliary product offerings.
Current wording
•General surgery sales increased 3.2% in the three months ended March 31, 2025 primarily due to growth in our AirSeal®, Buffalo Filter® and biliary product offerings.
Previous wording
Cost of sales increased to $137.7 million in the three months ended September 30, 2024 as compared to $136.5 million in the three months ended September 30, 2023 and increased to $426.4 million in the nine months ended September 30, 2024 as compared to $423.6 million in the nine months ended September 30, 2023. Gross profit margins increased 130 basis points to 56.5% in the three months ended September 30, 2024 as compared to 55.2% in the three months ended September 30, 2023. Gross profit margins increased 180 basis points to 55.6% in the nine months ended September 30, 2024 as compared to 53.8% in the nine months ended September 30, 2023.
Current wording
Cost of sales increased to $143.5 million in the three months ended March 31, 2025 as compared to $140.3 million in the three months ended March 31, 2024. Gross profit margins increased 20 basis points to 55.3% in the three months ended March 31, 2025 as compared to 55.1% in the three months ended March 31, 2024.
Previous wording
Selling and administrative expense decreased to $99.7 million in the three months ended September 30, 2024 as compared to $125.3 million in the three months ended September 30, 2023, and decreased to $345.6 million in the nine months ended September 30, 2024 as compared to $385.1 million in the nine months ended September 30, 2023. Selling and administrative expense as a percentage of net sales decreased 960 basis points to 31.5% in the three months ended September 30, 2024 as compared to 41.1% in the three months ended September 30, 2023 and decreased 600 basis points to 36.0% in the nine months ended September 30, 2024 as compared to 42.0% in the nine months ended September 30, 2023. The decreases in selling and administrative expense as a percentage of net sales for the three and nine months ended September 30, 2024 were primarily driven by:
Current wording
Selling and administrative expense increased to $148.8 million in the three months ended March 31, 2025 as compared to $123.4 million in the three months ended March 31, 2024. Selling and administrative expense as a percentage of net sales increased 680 basis points to 46.3% in the three months ended March 31, 2025 as compared to 39.5% in the three months ended March 31, 2024. The increase in selling and administrative expense for the three months ended March 31, 2025 was primarily driven by:
Previous wording
•$27.0 million and $42.3 million of income related to fair value adjustments to contingent consideration in the three and nine months ended September 30, 2024, respectively, compared to expense of $3.2 million and $6.9 million in the three and nine months ended September 30, 2023, respectively, see Note 6;
Current wording
•an increase of $10.5 million in costs related to fair value adjustments to contingent consideration ($4.0 million of expense for the three months ended March 31, 2025 compared to $6.5 million of income in the three months ended March 31, 2024), see Note 6.
Previous wording
Research and development expense increased to $13.6 million in the three months ended September 30, 2024 as compared to $12.5 million in the three months ended September 30, 2023, and increased to $41.3 million in the nine months ended September 30, 2024 as compared to $38.6 million in the nine months ended September 30, 2023. As a percentage of net sales, research and development expense increased 20 basis points to 4.3% in the three months ended September 30, 2024 as compared to 4.1% in the three months ended September 30, 2023 and increased 10 basis points to 4.3% in the nine months ended September 30, 2024 as compared to 4.2% in the nine months ended September 30, 2023. Spend as a percentage of sales was mainly driven by the timing of research and development projects.
Current wording
Research and development expense decreased to $12.9 million in the three months ended March 31, 2025 as compared to $13.6 million in the three months ended March 31, 2024. As a percentage of net sales, research and development expense decreased 40 basis points to 4.0% in the three months ended March 31, 2025 as compared to 4.4% in the three months ended March 31, 2024. Spend as a percentage of sales was mainly driven by the timing of research and development projects.
Previous wording
Interest expense decreased to $9.3 million in the three months ended September 30, 2024 from $10.0 million in the three months ended September 30, 2023 and decreased to $28.4 million in the nine months ended September 30, 2024 from $30.3 million in the nine months ended September 30, 2023. The weighted average interest rates on our borrowings decreased to 3.15% in the three months ended September 30, 2024 as compared to 3.17% in the three months ended September 30, 2023. The weighted average interest rates on our borrowings increased to 3.18% in the nine months ended September 30, 2024 as compared to 3.13% in the nine months ended September 30, 2023. The decrease in interest expense in the three months ended September 30, 2024 was driven by lower weighted average borrowings outstanding and lower weighted average interest rates during 2024. The decrease in interest expense in the nine months ended September 30, 2024 was driven by lower weighted average borrowings outstanding during 2024.
Current wording
Interest expense decreased to $8.3 million in the three months ended March 31, 2025 from $9.6 million in the three months ended March 31, 2024. The weighted average interest rates on our borrowings decreased to 2.90% in the three months ended March 31, 2025 as compared to 3.18% in the three months ended March 31, 2024. The decrease in interest expense in the three months ended March 31, 2025 was driven by lower weighted average borrowings outstanding and lower weighted average interest rates during 2025.
Previous wording
Income tax expense has been recorded at an effective tax rate of 13.2% for the three months ended September 30, 2024 compared to 21.9% for the three months ended September 30, 2023. Income tax expense has been recorded at an effective tax rate of 17.4% for the nine months ended September 30, 2024 compared to 21.8% for the nine months ended September 30, 2023. The lower effective tax rates for the three and nine months ended September 30, 2024 were primarily the result of the higher income in 2024 incurring a lower percentage of tax expense and income related to the fair value adjustments to contingent consideration which is not subject to federal tax. The three months ended September 30, 2024 included discrete income tax expense from stock option exercises which increased the effective tax rate by 0.1% and discrete income tax benefit from finalizing the 2023 federal tax return which decreased the effective tax rate by 2.1%. The three months ended September 30, 2023 included discrete income tax benefit from stock option exercises which reduced the effective tax rate by 0.3% and discrete income tax benefit from finalizing the 2022 federal tax return which decreased the effective tax rate by 7.4%. The nine months ended September 30, 2024 included discrete income tax expense from stock option exercises which increased the effective tax rate by 0.1%, discrete income tax benefit related to acquired federal research credits which decreased the effective tax rate by 0.3% and discrete income tax benefit from finalizing the 2023 federal tax return which decreased the effective tax rate by 1.0%. The nine months ended September 30, 2023 included discrete income tax benefit from stock option exercises which decreased the effective tax rate by 3.7%, discrete income tax benefit from finalizing the 2022 tax return which decreased the effective tax rate by 3.7%, and discrete income tax expense from foreign related taxes which increased the effective tax rate by 0.9%. A reconciliation of the United States statutory income tax rate to our effective tax rate is included in our Annual Report on Form 10-K for the year ended December 31, 2023 under Note 9 to the consolidated financial statements.
Current wording
Income tax expense has been recorded at an effective tax rate of 21.3% for the three months ended March 31, 2025 compared to 22.5% for the three months ended March 31, 2024. The lower effective tax rate for the three months ended March 31, 2025 was primarily the result of recording discrete benefits related to changes in unrecognized tax benefits. The three months ended March 31, 2025 included discrete income tax benefit related to acquired federal research credits which decreased the effective tax rate by 8.9% and discrete income tax expense from stock option exercises which increased the effective tax rate by 2.2%. The three months ended March 31, 2024 included discrete income tax benefit related to acquired federal research credits which reduced the effective tax rate by 1.4% and discrete income tax expense from stock options which increased the effective tax rate by 0.4%. A reconciliation of the United States statutory income tax rate to our effective tax rate is included in our Annual Report on Form 10-K for the year ended December 31, 2024 under Note 9 to the consolidated financial statements.
Previous wording
Our liquidity needs arise primarily from capital investments, working capital requirements and payments on indebtedness under the seventh amended and restated senior credit agreement. We have historically met these liquidity requirements with funds generated from operations and borrowings under our revolving credit facility. In addition, we have historically used term borrowings, including borrowings under the seventh amended and restated senior credit agreement to finance our acquisitions. We also have the ability to raise funds through the sale of stock or we may issue debt through a private placement or public offering.
Current wording
Our liquidity needs arise primarily from capital investments, working capital requirements and payments on indebtedness under the seventh amended and restated senior credit agreement. We have historically met these liquidity requirements with funds generated from operations, borrowings under our revolving credit facility and issuances of debt in the capital markets. In addition, we have historically used term borrowings, including borrowings under the seventh amended and restated senior credit agreement and borrowings under separate loan facilities, in the case of real property purchases, to finance our acquisitions, including payments of contingent consideration. We also have the ability to raise funds through the sale of stock or we may issue debt through a private placement or public offering.
Previous wording
Our net working capital position was $358.7 million at September 30, 2024. Net cash provided by operating activities was $123.6 million in the nine months ended September 30, 2024 compared to net cash provided by operating activities of $69.0 million in the nine months ended September 30, 2023, generated on net income of $98.7 million and $31.4 million for the nine months ended September 30, 2024 and 2023, respectively. Significant changes in assets and liabilities affecting operating cash flows in the nine months ended September 30, 2024 include the following:
Current wording
Our net working capital position was $355.9 million at March 31, 2025. Net cash provided by operating activities was $41.5 million in the three months ended March 31, 2025 compared to net cash provided by operating activities of $29.1 million in the three months ended March 31, 2024, generated on net income of $6.0 million and $19.7 million for the three months ended March 31, 2025 and 2024, respectively. Significant changes in assets and liabilities affecting operating cash flows in the three months ended March 31, 2025 include the following:
Previous wording
•An increase in cash flows from accounts payable due to the timing of payments; and
Current wording
•A decrease in cash flows from accounts payable due to the timing of payments; and
Previous wording
•A decrease in cash flows from accrued compensation and benefits as a result of higher incentive compensation payments in the nine months ended September 30, 2024 compared to the same period a year ago.
Current wording
•Accrued compensation and benefits resulted in a lower use of cash in the three months ended March 31, 2025 compared to the same period a year ago as a result of lower incentive compensation payments.
Previous wording
Net cash used in investing activities in the nine months ended September 30, 2024 decreased $6.1 million from the same period a year ago primarily due to capital expenditures being lower at $9.0 million in the nine months ended September 30, 2024 compared to $14.2 million in the same period a year ago.
Current wording
Net cash used in investing activities in the three months ended March 31, 2025 increased $0.9 million from the same period a year ago. Capital expenditures were $3.8 million in the three months ended March 31, 2025 compared to $2.0 million in the same period a year ago.
Previous wording
Net cash used in financing activities in the nine months ended September 30, 2024 was $99.9 million compared to net cash used in financing activities of $51.7 million during 2023. Below is a summary of the significant financing activities impacting the change during the nine months ended September 30, 2024 compared to 2023:
Current wording
Net cash used in financing activities in the three months ended March 31, 2025 was $28.4 million compared to net cash used in financing activities of $17.0 million during 2024. Below is a summary of the significant financing activities impacting the change during the three months ended March 31, 2025 compared to 2024:
Previous wording
•During the nine months ended September 30, 2024, we paid $48.1 million in contingent consideration related to the In2Bones and Biorez acquisitions.
Current wording
•During the three months ended March 31, 2025, we paid $7.2 million in contingent consideration related to the Biorez acquisition compared to $26.9 million related to the Biorez and In2Bones acquisitions in the same period a year ago.
Previous wording
•During the nine months ended September 30, 2024, we had net cash proceeds of $5.0 million related to stock issued under employee plans compared to $16.5 million in the same period a year ago.
Current wording
•During the three months ended March 31, 2025, we had net cash proceeds of $0.5 million related to stock issued under employee plans compared to $1.1 million in the same period a year ago.
Previous wording
•During the nine months ended September 30, 2024, we repaid the remaining $70.0 million outstanding on the 2.625% Notes.
Current wording
•During the three months ended March 31, 2024, we repaid the remaining $70.0 million outstanding on the 2.625% Notes.
Previous wording
•During the nine months ended September 30, 2024, we had net borrowings on our revolving line of credit of $34.0 million, compared to net payments of $48.0 million in the same period a year ago.
Current wording
•During the three months ended March 31, 2024, we had net proceeds on our revolving line of credit of $86.0 million.
Previous wording
Our cash balances and cash flows generated from operations may be used to fund strategic investments, business acquisitions, working capital needs, research and development, common stock repurchases and payments of dividends to our shareholders. Management believes that cash flow from operations, including cash and cash equivalents on hand and available borrowing capacity under our seventh amended and restated senior credit agreement, will be adequate to meet our anticipated operating working capital requirements, debt service, funding of capital expenditures, dividend payments and common stock repurchases in the foreseeable future. In addition, management believes we could access capital markets, as necessary, to fund future business acquisitions.
Current wording
Our cash balances and cash flows generated from operations may be used to fund strategic investments, business acquisitions, including contingent consideration payments, working capital needs, research and development, common stock repurchases and payments of dividends to our shareholders. Management believes that cash flow from operations, including cash and cash equivalents on hand and available borrowing capacity under our seventh amended and restated senior credit agreement, will be adequate to meet our anticipated operating working capital requirements, debt service, funding of capital expenditures, dividend payments and common stock repurchases in the foreseeable future. In addition, management believes we could access capital markets, as necessary, to fund future business acquisitions.
Previous wording
The Company is also being impacted by the macro-economic environment and we are experiencing higher manufacturing and operating costs caused by inflationary pressures and ongoing supply chain challenges. We continue to monitor our spending and expenses in light of these factors. However, we may need to take further steps to reduce our costs, or to refinance our debt. See “Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2023, for further discussion.
Current wording
We are also being impacted by the macro-economic environment and we are experiencing higher manufacturing and operating costs caused by inflationary pressures and ongoing supply chain challenges. We continue to monitor our spending and expenses in light of these factors. However, we may need to take further steps to reduce our costs, or to refinance our debt. See “Item 1A. Risk Factors" in our Annual Report on Form 10-K for the year ended December 31, 2024, for further discussion.
Previous wording
There were $114.6 million in borrowings outstanding on the term loan facility as of September 30, 2024. There were $36.0 million in borrowings outstanding under the revolving credit facility as of September 30, 2024. Our available borrowings on the revolving credit facility at September 30, 2024 were $547.4 million with approximately $1.6 million of the facility set aside for outstanding letters of credit.
Current wording
There were $100.0 million in borrowings outstanding on the term loan facility as of March 31, 2025. There were no borrowings outstanding under the revolving credit facility as of March 31, 2025. Our available borrowings on the revolving credit facility at March 31, 2025 were $583.4 million with approximately $1.6 million of the facility set aside for outstanding letters of credit.