CNMD - Earnings call transcript Q2 2022

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Operator

Good day, and thank you for standing by. Welcome to the Second Quarter Fiscal Year 2022 CONMED Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker’s presentation, there will be a question-and-answer session. [Operator Instructions] I would now like to hand the conference over to CONMED for a brief announcement. ahead. go Please

Unidentified Company Representative

everyone. Good afternoon,

those refer materially and objectives, cause the defined release and future of from its uncertainties filings uncertainties may are or conference for by during call current federal results, company to and Investors expectations. company's remind call, forward-looking update the plans law. let under regarding SEC may involve be events, statements securities actual risks today's to company's and begins, Please obligation actual that differ required The call, guarantees this under discussed management forward-looking that uncertainties as and press information more during its any the this in be applicable and comments financial you to represent and that disclosed will details are forward-looking risks other its that materially. any any not may the the Before outlook differ laws. me disclaims statements which except as be may statements as the results well cautioned such terms as results are forward-looking risks statements on performance making that

this to refer non-GAAP You hear will also management adjusted discussion. measurements certain during

its to website. specified company's reconciliations quarter-to-quarter While medical from adjusting adjusted be special and other to the are earnings and not the management excluding Adjusted normal or against year-to-year of that aid basis to per by the these supporting measurements, releases a for considered the ongoing a companies. company, figures benchmarking of income performance figures on are uses net in outside company's earnings These these in substitute company GAAP company's posted for financial items ongoing monitoring operations. and the technology the the credits income measure share regular are or charges

Executive Officer, completed, Curt of Hartman? Mr. Board, for to Chief announcements Hartman, turn opening the these the With President I Chair CONMED's and remarks. required will call over

Curt Hartman

second you, earnings Chief you afternoon With Todd on Julie. CONMED's me Financial and XXXX quarter and Howard for Vice is us Officer. and call. thank President Executive call Thank Good Garner, for joining the

have to Additionally, Pat of Global us. join I asked CONMED Beyer, Orthopaedics and International today President

InXBones today of felt be the beneficial. closing with integration the I our his and progress would Given participation

Total Our in for were your increase weeks increase open quick our plan of as with of is I will results. to $XXX.X you by growth. the on constant quarter for and million the second update the our provide $XXX.X share then best InXBones of currency. quarter the basis, representing On start currency notes. an We'll to quarter at a X% $XX.X million, most provide second quarter representing $XXX.X second results sales to to XXXX XXXX. organic loss worth million convertible of built primarily of earnings net the extinguishment it's million, quarter an momentum XXXX. compares net the income totaled throughout our our of constant couple business. X.X% first during against noting our overall results, an quarter of in outlook perspective due of This ownership call reported, quarter, From these and the sales finished a GAAP We our questions. the year-over-year of an second came reviewing X.X% of overview of

America. and increased net markets States that $X.XX Canada to staffing recorded surgical of that diluted of impact and income earnings market, XX.X% per to Europe, Excluding performances surgical million second Outside volumes adjusted our levels during special quarter. Latin year-over-year. perspective the strong In we the items adjusted several our United continue is year-over-year States, in $XX.X include net affected increased the comparability, our X% United share

compliment to close which is mid-June was I plan, on strong been well-developed with want early I and integration days team work the executed pleased former this Obviously continues off very integration with the a encouraging. a employees deal Finally, have and InXBones very but the the on the to of entire transaction. along start. InXBones more

on the side, their noncommercial more we the and discuss the in continue summary, shortages debt integration instrument, call quarter success In and on and with of solid the pressures. Pat? a give in we business. I'll to as surgery, new now staff, who On also very inflationary second which Pat us will to pleased in on turn as overview over labor surgical as quarter impact continued material executed the forward delivered Overall, an shortages will Todd look results we I'm navigate focus to well InXBones' very detail. our and of and the the delivered building half. influence the

Pat Beyer

June us acquire Thank attracted our you on we a I'm ankle acquisition was call the XXth year. strong that Curt. acquired foot that this leadership the terrific join share confident all opportunity to with you, recent of excited InXBones, and to these that three to team on our to pleased a today which portfolio, closing, a true strong What as and even of reminder progress sales a the a InXBones closed of team. a and market are more company strong Since we've in and platform. had we feel

InXBones impressed We was the organization. first that was R&D the innovation to with of impressed products the breadth continue us the and were its woven the quality offering existing throughout we of portfolio that the of One be the to with the new and both things and attracted pipeline. the in

healthy through the acquisition integration. marketplace ongoing were they InXBones and the That double digits. owned continued momentum we in growing and Before winning

the cross-selling happy scale now as the our is and growing reach far, to additional progress to products. build-out very as opportunities InXBones of and with able the team sales as leverage well structure, see registrations. are over so term, the longer We We the additional due channels expanded international for

the location, in immediately kickoff closing, acquisition of HQ and engagement, of how location, their Florida; extremely congratulate milestones. both progress International kickoffs the integration a well integration of to Lyon Largo of as InXBones went InXBones and with teams the level I'd business leadership. We have well post planned meetings to key integration France. and we meaningful the Both like Turning made of already Orthopedic number USA on started our is high our on

kickoff Our several meetings key the sales leaders, were attended by them we and from of distributors been and received fantastic. our feedback has

business, and positivity with Additionally, Taylor expect. energy the USA running InXBones and CONMED started Alan ankle that the and we CEO foot would our with has

will call about over the when diligence. were as acquisition, to turn As into third we the quarter, we remain now move the InXBones Todd. as our we initial positive I excited and we did

Todd Garner

sales release. I All will reconciliation to Pat. you, included reference is Thank our press The constant be currency. growth in numbers numbers today, given in GAAP

have an that our As of included website usual, our the investor on results summarizes the quarter deck we guidance. updated and

We acquisition Global For total of the the sales increased quarter XXXX. and X.X%. of June the compared X.X% organic second sales QX which closed InXBones on was growth year, in of XXXX, our recognized strongest quarter XX second said was on Curt our million the for quarter. to $X.X quarter second in as last

increased sales X.X% our quarter. versus prior year QX US in the For the

growers. Europe, is growth exacerbated between comps. XXXX. the disparity year international grew and XX.X%, and quarter, grew QX US our markets the China Japan Australia strongest quarter and the and declined of for sales in by international America Latin this Canada modestly. to prior compared Our were The

growth XXXX reminder, XXXX, rates, about mind, comparing since in its when was XXXX As COVID around XXXX was are is that impacted growth well we had our to trend. the OUS With a growing compared lowest talk only baseline QX QX US the year X.X%. to of versus XXXX, which we XXXX world. shutdowns XXXX above the by growth the XX.X%

general growth internationally sales in X.X% growth that Internationally with Orthopedic the revenue revenue rate revenue increased increased sales the US US quarter. a it's the surgery the worldwide General increased second Worldwide grew lighter-than-normal US, revenue Orthopedic surgery quarter. QX XX.X% So XX.X%. grew OUS. rate XX.X%. strong Surgery and shows Total and the X.X%. surprising not in In in declined orthopedics reverse, general X.X% XXXX a

otherwise direct OEM the our Filter the represents many been less Buffalo side. of direct side XX% continues its combined now OEM on of has AirSeal business Filter the AirSeal Buffalo direct The an Buffalo business with and than performance the As and has are order,s a XX%. strong drag lumpy been Filter you combined of Thankfully, in aware, on around to grow Buffalo business. business, Filter

Now, statement. let's move the to the expense side of income

lower we and amortization have better XX for gross of than net expenses profitability decrease no tax. matters, basis include and for challenges, of we I'll you, Adjusted anticipated last improvement the a our gross in discuss XX.X%, quarter. amortization second assets we will and financing XXXX items and second of intangible This We discount discussed the better. for than of QX margin that around year QX. in would XX% margin points prior the development stay quarter. XXX estimate our and prices, supply chain materials sales, inflationary we we if the remind year quarter, points quarter was fees charges Research changes, at special Therefore, deferred second but the basis estimate or and gross the quarter, acquisitions, about quarter. remained points excluding the freight for was be that which debt XX debt will of in from the basis prior quarter seen expense X.X% legal that was second margin

year, prior not as the as Our R&D grew much did. but investment over sales

to We expect going of between X% X% forward. R&D continue to be and sales

adjusted of sales, points from of quarter XX on QX was basis an SG&A XXXX. expense, basis XX.X% decrease Second a

expect to in basis, increase was our getting $X.X and coming are expense sales second quarter. the last an returns from on On returns the million over those interest force We summer the expansion adjusted quarters.

quarter. majority will in the our convertible a XXXX. X.XX% of new we the through the notes off acquisition have notes convertible associated and and interest expense the proceeds outstanding and of share Curt an during new of going As the portion rate hedges on interest locking fees to issued pay mentioned, convertible meaningful forward. recent May a refinanced debt using notes and with The impact existing of count of a combination We XXXX

our calculation shares interest $X.X new new average QX We share to fewer mid-quarter expense the us record changed in the be diluted QX. outstanding These million XX.X came in shares Because the million about to about allow million X shares diluted count. down with QX and only from expect the notes count adjusted QX. notes, share to in

the You tax number. have in than tax finally be I've unfortunately XX% to to less was rate higher rate effective to quarter telling the on least And higher The right. at our I a little QX, in you million range. the should QX XX.X% expect X been QX plan been shares XX% adjusted proven being than after quarter communicated future.

We rate to to XX% expect close be the remainder the of year. for tax the

was charges $XXX.X to loss earnings net GAAP million, due GAAP per income convertible This the notes. Second the old extinguishment $X.XX compared share mainly loss with QX, share of XXXX. quarter million net of of quarter $XX.X year the diluted was of a to to a associated compares share $X.XX earnings in per ago. per this GAAP

items million, adjusted earlier, of compared discussed to second we of increase impact special the of reported XX.X% of an income XXXX. Excluding quarter $XX.X net the

of diluted Our net the earnings was increase quarter. to X% compared year QX prior share adjusted per $X.XX, an

Turning to the balance sheet.

XXX balance the million end XXX days as million QX. XX. end quarter to were of days at days March $XX.X to XX March was as Inventory were compared of the days cash end Our XX $XX.X of compared at the Accounts XX. at June XX to compared at receivable quarter of

the inventory change of is convertible fees due quarter $XXX We the build continue versus debt and was March as million supply new to and InXBones of at charges the chain end to the mitigate XX. challenges. Long-term associated $XXX with the to of The notes. acquisition million

in compared a quarter working was of to XXXX. XXXX, XXXX. Our ago. for million to second compared on Cash was operations to on million flow XX. leverage times second X.X million to year quarter $XX.X expenditures quarter increased provided $X.X the June ratio $XX.X difference XX, is March the X.X from Capital the due $X.X million times in The compared were capital the in

financial guidance. to turn let's Now

First let's talk currency. about

back now keeping hedges of Our year. revenue XXX currency their see currency points to immaterial an to the between with headwind But job basis the done recent of part of in we of strengthening XXX the through first dollar, XXXX. and of had the half impact the

EPS the headwind For estimate incremental between XXX approximately to the an we of currency be adjusted points. year full and is a to headwind driving XXX XXXX, compared basis quarter currency to revenue ago. $X.XX From perspective,

investor billion of represents revenue old due are We from provided the the to of with range by growth to detail guidance to X% the $X.XXX we of the This billion lowering So XX%. associated guidance currency and in range $X.XXX billion our revenue for $X.XXX $XX a billion. the $X.XXX organic pieces constant of year new to call. currency, our million between this deck range

challenges give the call. ranges for guidance helpful XXXX. a the our also new range investor top represents Because the guidance we of moving of currency the adjusted includes for of QX. EPS bottom growth are This and adjusted the a this from XX% of $X.XX to cost to also guidance This deck would range all our operational year be in detail prior the inclusive We $X.XX. of XX% $X.XX to of impact. updated and $X.XX range range between pieces thought lowering We've line from EPS pieces, provided of despite negative and it to associated the clear $X.XX with

revenue to $X.XX environment $XXX cash QX to are lowering be in between challenges poses in None And industry including and unique health numbers. we We macro $X.XX. adjusted The the us. expect be of between entire million like care QX us expect that million. EPS reported current $XXX and impacting

we challenges essentially with all latest its ability are remove cost our dealing are currency move. and soften to the unprecedented However,

business I'll are short-term, that. business of and of remains and on revenue expect the We some in back the we our are to about at strongest against example long-term and And excited strengthening In challenges focused improved by organic the QX we'd they that, most of our QX InXBones provide. this quarter growth is can XXXX our of like the QX, acquisition health recent subside questions engine grew we will we X.X% to call Howard. double-digits. and When strong. margin and and the momentum the profitability hand And the open point, with to to cost it grow your

Operator

from from Our the [Operator Rick comes of question first line Thank you. Instructions] or comment Stifel. Wise

Your line open. is

Rick Wise

on -- All and strong third fourth your you the of right to you said expand could just both your Todd both. maybe emphasized about And momentum. I'll start you Maybe comments business comments expanded quarters of, drivers with on emphasizes more color you us assume of growing starts that momentum the could sales maybe it double-digits, sort give the a force. I Curt little that. But

it better tell to that. But were particularly particular Just narrow? talk to what broad-based? help it products you you're alluded geographies You is about we about or us thinking as that is understand it trying Is us?

Curt Hartman

Yes.

combination of I think Rick. it's a things

portfolio. feel I a building been they where think That's how wasn't We the are good getting built expansions about years. traction. sales we force over they're we think have That pretty good the overnight. product

coming side On at a big launch the with started to the Orthopedic that be new Academy were the of products demonstration product business, we to going market. of the year

-- then company and we surgery Filter have highlight all paced a pretty to portfolio Buffalo really these strength is And offering. now. the On across side, robust AirSeal offerings. by are global And the the really right broad-based we general pretty tried as

specific one to wouldn't point I thing. So

those. its quarter year third be then and last a fair the And COVID and think I fourth to challenged. combination equitable here were of all

seen. double-digit the that built. to will business against is soft coming a underlying start to is that but I staff And surgeries the to surgical delaying all hopeful as a that ability that So nice of But growth shortages subside a we're momentum be remains slowly are completed be has think the for comparable.

and banking continue things marketplace hoping best surgical to on of of a not status thinking their the we're that So and terms little will do that. teams in that kind healthier be We're staff. gets quo our

Rick Wise

business got of did, ortho is on for the up things cited integration is and a follow surgeons just extremely sort People understand like feedback. coming InXBones many sounds line be But outlook spoke to and to clear importance also it, all -- loved sales about. reps breadth the the Curt, a expand And but you basal the opportunity. big late to and to what have They prospects force me the the InXBones. of that discussions great opportunity those a current that's out that we was wrote take to and emphasize to big to driven. couple of going of, of It comments. updated like number stage talk on it? June you're How of you sales to how from better pediatrics this we months perspective? that the just outlook the in going going force about going your a I'd well. now thoughts and product are grow Can it they there the you're

Curt Hartman

and a as sales expanding Outside us broader the US would we of it And is outlook market the the it's he's we've force. about registrations with And XX on and businesses into to alluded think a as coverage direct is in with distributor long-term hope the a and run agenda way the sales CONMED building And everything who the all and it fundamentally and direction And the and more within or just days those directionally the we're would and getting his of lot product force innovation Pat way Alan sitting run building. items gives approvals I Stephane continued for in. runs product focus hope. international. things Yes, moving and Pat about and think deeper as optimism here we'll appropriate I is those got the other we that appropriate.

to you Pat think to I business. So our of would basic the will else just how you more it's that? cooking going anything we're run if add

Pat Beyer

and that under been invest the in business, and other And business we're we force I our offense structure, follow that that them. sales an with experience and and going that. with platform Again has business innovate think on think accelerate scale our we is running doing to our a our can with Curt. responsibly passion the offense No, the we've which have we of sides

Rick Wise

you. Thank

Curt Hartman

Rick. Thanks,

Operator

Thank you.

comes of the comment line question Marcus next line JPMorgan. Mr. from Marcus, open. your from Our Robbie is from

Robbie Marcus

my through quarter. the walk Great. I to in guidance. It dynamics. get margins a third third the get question. for looks of to you're need down range fourth Thanks big for XX% that some quarterly Todd, It SG&A taking hoping quarter could was gross to and But you helpful step with probably in to guidance. EPS was us really like going

way walk maybe two is do the So think you just one, And how through there? get right about? that us to

Todd Garner

– at returns good probably the to continue QX already like to I didn't the But those $X share least is said SG&A investments. expect if your in is to from going for – QX up, to we're acquisition complicated There's go margin models interest Yes. to in really million course. debt, XX.X where shares next because Gross share in XX% numbers. be in of be and like the so get our pieces you'll than six moving expense per of have live is you that's we I But count probably probably said, range quarter that are you new up that we properly then expense going from what should and and where where probably notes. convertible is going months. we Robbie. from a few you the not is think some probably the about Interest averaged get didn't and should be. I And the model pick – judicious the think in you'll we adjust million while $X.X model changes help million less And one count your

hopefully, major will hopefully the and those rest of your pieces So models work.

Robbie Marcus

sense. some in have could guidance start it can't premature a if a of XXXX all on hopefully, to it all It's little but asking makes here Yes. to thought we and plug I'll headwinds. fast. I I maybe these just – spend minute for be that about I'll

incremental. them of Some are

a to might of below structural trend thinking about are do or next normal operating be of probably for do these expansion or and margin potential you a will look some year Some likely year, they're here? them abate like How headwinds XXXX. into be of closer given think back to you we stay it think headwinds here some while. get And to that going you stay the are these

Todd Garner

going on months to XXXX right for helpful telling the I'm you headwind Terrific Unfortunately, talk be I If try Robbie. what's question. where is no I again, everybody's look, not I can. you're are six where currency that I'll all prepared XXXX, make that's next There's about not mind. and But But sure say way quantify year. for January. I know We're would anything as going you. to is tell goes. in the I'm rates early, current about you then stayed right think currency don't you already XXXX as think headwind a it currency through into I to a I'm now, know. going

probably least in I our in time for the positive. probably pricing think at lifetimes, history pricing turns maybe first Medtech's or

to So that gross help a profit. will be

mix a continues right? gross margin. to Everything tailwind, growing be a nicely higher much latest that. example at also that's of really Our comes the is InXBones

So do some you when And tailwind. normalize. to into when long And that's does how ease last? does get this – chain the start And up. supply environment. this rates then provides freight that And inflationary

back days at four about continue change our that of – order day order sales. days you that quarter from our in or of We're is actually many XX% of to order, ago I've in of due we're a which lowest that two of think a a back is peers. quarter now sales days told I current I is interesting back we back four at What's the order. later, that in competitive were We heard

where on can't So lines up. dramatically now increased order back competition actually our our provide orders driving that's and the have some product

order. days three at sales days be we'd four sales without at sit and of of but we that So back currently

when pick days tell up to extra big will sales. starts When that and have that right? to those can't you change I impact, a and you that's – going of So alleviate,

duration year. of so, And costs inflation gross XX% into rate XX% it's biggest margin. just predict in hard remain that's the are And would and the where then I -- really to the those tax that expect so we're course next to today. And factor go range, of seeing probably is what to we as

much So XXXX. I you with more know help to don't how

Robbie Marcus

all that’s Thanks No, the taking questions. helpful. it. I for appreciate

Todd Garner

bet. You

Operator

you. Thank

Our next comes comment the America. of line Bank Mr. or line question Travis your is Steed Steed, open. of from from

Travis Steed

Thanks the in quarter great and clear, guidance guess to evening, FX. change be the taking looks I all just only for the like Good year. for margin you took guys. the the of -- just was last first question. It medicine quarter all, basically

how of takes So all XXX kind just roll already of are are or like those trying I just just to make the talk think and six right, want months, through is pressure. these extra the points off other margin that's an it pressures exactly companies making it sure some and long in given that what's of through to And to then balance P&L? basis what sheet embedded on months, headwind three

Todd Garner

Yeah.

you're to currency yes, The right. only. So today exactly was guidance change

So points and we So XXXX better the basis XXX if last was they've but probably to we the talked currency would I I of bit did change inflationary take our only little levels, a XXX costs we say were a about which gross costs, be XXXX worse medicine still were we think gotten Travis about would talked went that we and pressures to today. The basis freight today. still last the at incrementally a quarter, those at simply points talked margin is remain. material right? lot since guidance our for quarter indexed looked

roll does is good guess better? your when and it as I as mean, So that mine. when get does off

months, levels through to -- and will how returns to its into work market-driven forces. XXXX expect. way when the flow the inventory months availability to it for X-ish and rational that's freight return and P&L when to and five that should then -- take external material So that's the does it you Then cost six

Travis Steed

has helpful. lot you maybe for unknowns natural points XX of getting, be on been that underlying questions. we that can could assumptions No, your Okay. just environment the When achieve Thanks kind of if a are headwinds? helpful gross you've -- hospital too? that's some that I XXXX, taking own capital think there their talk still the then the obviously to the expansion margin bake ability XXX but comments don't would spending about Curt And and know on of that basis then year for in about any to you a

Todd Garner

Sure.

our is about on and biggest and the XX% mix talked XX% business margin. range margin of which better. added again, accretive greater are So in XX% tailwind Buffalo and growing that both and before at -- very margin. those the is we've gross then InXBones And we've now nicely than or And AirSeal is the

a dollar significant So amount margins. but to sales a contribution contribution, a smaller from

which the drivers And talk Curt, provide to growth us tailwind want inflationary capital helping those the so mix the about capital? to are you want despite challenges. you the

Curt Hartman

to and capital capital Travis, on perform Yeah, I'd needed our items just sorry. required surgery. are it's dollars I'm everybody end of that the environment, remind on the is also smaller in terms the purchase absolute

surgery, have capital don't do our you don't if You items.

softening capital seen the in not point in any at we've for So this demand time. tremendous

point outside which appetite. was external And US But regarding from well. good capital very QX if remains based different a anything their hearing I on we in not market. think this capital in the quarter as to seen, to had to be customers it's it continue great the going I'm see time, as markets of

Travis Steed

Thanks for that.

Operator

Thank you. Needham open. & is from Matson question [Operator comment the Instructions] Our Mike line Mr. next or your of Mr. Matson, line Company. comes from

Mike Matson

comments surgery. comp see on had Orthopedics a you Thanks versus any questions. if there the the issue similar US growth taking I general that while in what than about faster General time was difference you OUS to I Surgery said rates, for remember wanted the one and my to Orthopedics Yeah. it a about between them? but first just I business. is This Maybe grew the had

Curt Hartman

we We of business -- the had Orthopedics XX% outside is US. have our

it's that and of a registration. we typically a and done deck cadence, force longer bit international really markets see sales our is little performance we've in which sometimes products things those into You new expansion, strong combination investor Orthopedics new had product the all getting

start he's and new is US the business business. the October in work. quarter, for we responsibility good a new there. the pure still to doing our quarters is largely tissue of a takes and nice that a ahead. the moving So cadence them sign soft very XXXX and sports and momentum going Pat had we get little is the that of it had the good to business driving for new pure very really overall category, in team day-to-day longer and confident repair think to do work medicine and activity But in responsible And US Orthopedics a which our has anchor market. direction Obviously, I'm the brought while forward underneath underlying team product since here more

Mike Matson

Okay. just like I Filter the portion the forward? OEM drag Buffalo the Thanks. but-- outlook for sounds expectation only Filter Buffalo XX% of know the Filter It and of of that a on a on of What's the growth little or And then business. business it's the of combined was AirSeal bit Buffalo overall. that going

Todd Garner

Yes. last book And actually from Matt, kind about order the of was them. before as we've talked QX strong this

get the as quite easier bit QX. move a we now so comps And past

on be going what does. business. direct the OEM we're continue the judge will the The to our it but to business is, but business focus -- is So what business direct on

Mike Matson

Thank it. you. got Okay,

Operator

you. Thank

Mr. next or Sandler. O'Brien, line of from Piper O'Brien from comes Our is line comment question Matt your the open.

Matt O'Brien

okay? Can me hear you guys

Curt Hartman

can. We

Matt O'Brien

Okay. All right.

Sorry something's system. this going on new with

that. for apologies So,

and you lot next finer meaningful right the of increases operating saying in of starting here the abate and the in I So, or because top pressures that we're I turn is because is far on structure pretty that got Are start year, we should pressures just year that's modeling just inflationary the and to just point of see linger inventory starting now. put QX to maybe to it kind some the a want of if next see as as to you've going going QX Street it all just QX the happen. maybe of don't margins to expense to a business think or in Todd --

period? how income can helpful flow for from of what over if some So, us it'd sheet to be the just the about to how time sense think statement kind you balance things give through

Todd Garner

Yes.

six for to on are this locked XXXX. inventory rest the five have at now of we months hand point, because we of in fairly So,

those a have view of should be. I pretty So, where good margins

right? depends and gets changed beyond whenever it in -- happens so when our whenever world crest projecting and freight go -- today, after one be start five Then that material that. in not though the if inflation the will I'm real costs. in external they recognized starts things down when Matt And that to go starting right? six rates what So, that that months on down to But to P&L

requisite freight think assume now Freight that any to should a So, pretty little -- little the -- we to if rates start probably I in the of But were And changes bit. cost. they following what moderate months inflationary price haven't do yet. bit seen oil and in freight real that but the pressures a we we've a -- ago. material really those seen three we similar better little -- decline oil are as where -- so haven't is well, just

gotten have months think from incrementally ago. those three I worse

if external so is in before will is which And our the they things margins they a and be P&L. there my not and shows get like hopefully the -- delay then seems will from can above goes shortly a But have couple yes, gross that by saying that of this where we're get could, stabilized that but better, control. margins here better, get worst so, quarters better. up But

Matt O'Brien

like for Okay. a Street little It next too seems to me high then. probably year

don't then make part you think the much to of bigger grew and that. to of be here, Buffalo getting said out And know our molehill now. take care AirSeal of and Okay, a a business a we'll I Curt around I XX%. smoke want I it's but mountain

it's well what's a I would that in I'm going assuming to above less probably XX% So it's little not hear more about than a market. little bit that. love on

to starting the it position categories bit bigger some You've think a anyway. still of one about pending of impact that of states competition. market that bunch more you little their is gauges got players the about those see rattling categories a are healthy? much mandating or are that more now to there Are are I are some in There's -- those

a bit. doing still to little you're to if in So if -- starting healthy, the creeping some you're well is market would competition maybe still or just see hear love

Curt Hartman

full notwithstanding appetite Matt It's implementation change still business. very smoke Elimination a go our there's of well. -- to as challenges has offering the would if And a is well the been well been I really of down is up outside hospital said. Filter feel still direct remains program. the doing elimination hospitals, staff issues The that smoke I down high. tell doing And Smoke beneficial Buffalo state-by-state you at any for I shortage good way doing of and about legislative OEM The It's the candidly. it's interruption, US. the we've the in long a slow US.

in saying not We're smoke form work CONMED I'm We our market-leading very way good position. shape portfolio. is continue going off have maintain of to any market-leading And backing to we feel still that position. or that a the about hard So, to position.

Matt O'Brien

Okay. Great to hear. Thanks so much.

Operator

Thank you.

Mishan Our line Matthew Mishan, Capital. from comment your KeyBanc open. Standby. line next or the from comes question is of

Matthew Mishan

Thank you taking the questions. for

on one first much the thank on at Filter. of color Buffalo for composition this OEM Just, in very you me, point the

their curious the customers drag, whether on if your any a about market it's previous the focus now been business, and why solution? your in of that's are with own primary Just just

Curt Hartman

with We're previous not have the aware of any customers. Well, of we contracts customers. the

down. has It's the and So, what that buy the under we up any haven't lost contracts. been they contract

own acquired market. an their I'm than Filter I'm other But existing when who's the into say, we have us They acquisition I that, One an else product of brought who's not aggressive. were anybody more They line. it. wouldn't from did a So, company aware buying direct aware anybody been of product of Buffalo portfolio. from

Todd Garner

Yes. it's levels. simple as Matt, I inventory think as

product XXXX and huge With people for be to last in of remember, a everything that up think the demand mean half up than gangbusters Delta them -- everybody a a expected back I there's like if so, huge downs I ordered vaccines you -- ended I standpoint. simple. their strong and and stocked when back think demand up lot XXXX we're And function going the than hit, lot be the I really of half being. out last people I I from the inventory. they've an hit really year it's a XXXX. then, course, assuming and growing shelves end And of Curt But of to it think market, of half are because back of through different buying -- faster said, think Omicron ups We then is line and probably summer, inventory, of think been this thought and is it's know everybody burning need for And it. a

Matthew Mishan

you Okay. Thank XXXX. And you on know I answering about talk then, don't to just -- for that. want

a should that about at see rates But just current and spoke we think You would where into of headwind about earlier. FX remains year, little if kind from unwinding bit it? next we how hedges

Todd Garner

well -- Well, we you'd are everybody, the see we -- remind I'll naturally it around are pretty world. hedged

So, have footprint. we have also business, a significant where we

of hedge that then so, synthetically And we business hedged we in. we currencies major well all our and are pretty naturally do

hedges. revenue We have

our yet those XXXX over purchased people not bills hedges. and the all protecting outlined that's contracts near-term due XXXX. hedges yet. today have this last with impact us it's have three impact talking were come and The cost volatility. those the XXXX -- actually we move because We But the And for currency recent on about that on is having have months earlier of determined, why this -- been year eventually from even been still other they not

it's currency so, say But XXXX didn't never today. to and everything prepared bottom, today. it's to but headwind you where top it for and where me that impossible the for XX for right you a I'm quantify assume be I the not know that And But, go. if froze months, move next for going to quantify both for you would currency, is on that think it's that you to safe now

Matthew Mishan

you Thank right. All much. very

Operator

Thank the time. over in to queue you. I'm turn I'd the to showing no remarks. back like for management any this at closing questions additional conference

Curt Hartman

Thank you. and look Howard, for and with you everybody to the forward you joining evening, we us in thank this call for Thank again future. you, the speaking

Operator

today's in you thank participating for gentlemen, and conference. This concludes. Ladies

Everyone disconnect. have now day. may wonderful Speakers standby. You a

CONMED (CNMD) 28 Jul 222022 Q2 Earnings call transcript