Conmed Earnings Call Balances Headwinds With Guidance

Conmed Corporation ((CNMD)) has held its Q1 earnings call. Read on for the main highlights of the call.

Conmed Corporation’s latest earnings call struck a tone of cautious optimism, as management balanced softer near‑term metrics with clear signs of strategic and operational progress. While reported sales, earnings, and cash flow all declined, leaders highlighted stronger organic growth, better gross margins, and raised revenue guidance as evidence that core platforms are gaining traction.

Upgraded Revenue Outlook Signals Confidence

Conmed lifted its 2026 organic revenue growth target to 5.0%–6.5%, up from 4.5%–6.0%, and nudged reported revenue guidance higher to a range of $1.35 billion to $1.375 billion. Management also projected second‑quarter revenue of $336 million to $340 million, with foreign exchange now expected to add a modest 40 to 50 basis points tailwind.

Orthopedics and BioBrace Extend Growth Streak

Orthopedics remained a bright spot, growing 4.5% worldwide in the first quarter, including 5.5% growth in the U.S. and 3.9% internationally. The business has now notched its third straight quarter of at least mid‑single‑digit growth, helped by BioBrace, which is seeing strong uptake and is backed by more than 30 publications and a large randomized trial.

AirSeal Builds Scale With Large Untapped Market

The AirSeal surgical insufflation platform surpassed 10,000 installed systems, underscoring its expanding footprint. With U.S. laparoscopic penetration still only about 6%–7% of roughly 3 million annual procedures, management cited a long runway and continues to expect high single‑digit to low double‑digit growth over the long term.

Buffalo Filter Benefits From Regulatory Tailwinds

Direct smoke evacuation, led by the Buffalo Filter franchise, grew in the quarter and remains a strategic priority for Conmed. Smoke‑free operating room laws are now in place in 20 U.S. states covering just over half the population, and the PlumeSafe X5 system is gaining traction, particularly in outpatient and ambulatory surgery centers.

Gross Margin Improves on Mix and FX

Adjusted gross margin reached 57.4% in the first quarter, a 100‑basis‑point improvement from a year ago supported by favorable product mix and currency. Management reiterated its goal of improving full‑year gross margin by 50 to 100 basis points, positioning profitability to benefit as scale grows in its higher‑margin platforms.

Capital Allocation Stays Shareholder‑Focused

Conmed repurchased roughly 858,000 shares for $37.4 million in the first quarter, signaling ongoing confidence in its equity value. The company reiterated a disciplined capital allocation framework that prioritizes organic investment, targeted acquisitions tied to core platforms, and continued returns of capital while working to strengthen its balance sheet.

Portfolio Simplification and Supply Chain Gains

The company completed divestitures of its remaining GI product lines, shifting attention toward higher‑growth, higher‑margin areas, and now expects GI revenue of only $14.5 million to $17.5 million in 2026. Supply chain performance improved as Conmed deliberately built inventory to support better service levels, allowing commercial teams to play offense rather than manage shortages.

Sales Impacted by GI Exit but Organic Growth Positive

Total first‑quarter sales were about $317 million, with reported revenue declining between 1.3% and 2.9% year over year depending on the comparison used. The GI divestitures reduced reported sales, but on an organic basis excluding GI, revenue still grew 2.1%, suggesting underlying demand remains intact in continuing businesses.

Adjusted Earnings Under Pressure From Mix Shift

Adjusted net income fell 8.5% year over year to $27.1 million, while adjusted diluted EPS declined 6.3% to $0.89. Management attributed much of the pressure to the exit of higher‑revenue GI product lines and related transition effects, even as they argued that the portfolio shift should enhance growth and margins over time.

General Surgery Softness and OEM Volatility

Worldwide general surgery sales decreased 8.5% year over year, though organic general surgery revenue was roughly flat once GI exits are stripped out. A key drag was the company’s OEM smoke products, which management described as a meaningful and lumpy headwind that weighed on segment performance in the quarter.

Operating Cash Flow and Cash Balance Decline

Operating cash flow dropped sharply to $13.5 million from $41.5 million in the prior year’s quarter, and the cash balance slipped to $35.0 million from $40.8 million at year‑end. Executives pointed to normal seasonality and deliberate working capital investments as the main reasons, rather than any deterioration in business fundamentals.

Working Capital Expanded to Protect Service Levels

Accounts receivable days increased to 65 from 62 a year ago and 60 at the prior year‑end, reflecting slower cash collections. Inventory days climbed to 246 from 222 a year earlier, as Conmed intentionally accumulated more stock to safeguard service levels and avoid product shortages that could disrupt growth.

Higher Operating Expense Ratios Reflect Investment

Adjusted R&D expense rose to 4.8% of sales, up 80 basis points year over year, as Conmed invested more heavily in its key growth platforms. Adjusted SG&A grew to 40.0% of sales, an increase of 130 basis points, though management suggested that the first quarter is likely to represent the high‑water mark for SG&A as a percentage of sales in 2026.

Leverage Rises as Refinancing Weighs on EPS

Long‑term debt increased to $860.2 million, putting leverage at roughly 3.1 times, and the company plans to refinance this year using bank debt instead of issuing new convertible securities. Management cautioned that the shift to bank financing is likely to raise adjusted interest expense and trim full‑year adjusted EPS by at least $0.10.

Guidance Underscores Growth Ambition Despite Headwinds

Conmed reaffirmed adjusted EPS guidance of $4.30 to $4.45 for 2026 and projected second‑quarter adjusted EPS of $1.09 to $1.14, even after accounting for higher interest costs. The company forecasts operating cash flow of $145 million to $155 million, capital expenditures of $20 million to $30 million, around $125 million of free cash flow, and plans to maintain roughly 3 times leverage while continuing share repurchases.

Conmed’s earnings call painted a picture of a company willingly accepting short‑term pain to refocus on higher‑growth, higher‑margin platforms. Investors will need to stomach weaker reported earnings and cash flow near term, but rising organic growth, better margins, and disciplined capital deployment suggest management sees a solid path to long‑term value creation.