Hello everyone, my name is Young Li, one of the MedTech analysts on the U.S. team. Welcome to Day 2 of the Jefferies London Healthcare Conference. Very pleased to be hosting CONMED. So closer to me, we have Pat Beyer. He's the current COO and incoming President and CEO, doing his first public investor event since the announcement three weeks ago. And we have also Todd Garner, EVP and CFO, next to him. Gentlemen, welcome to our conference and thanks for coming. Thanks, Young. All right, great. I guess, you know, maybe for Pat to start. So, you know, you've been with CONMED and Curt for about 10 years now. You were his first hire at CONMED. You know, you held various roles at the company: president of international, president of global ortho. You're the COO now. So, you know, in a way, I'm not expecting a lot of changes with you as the CEO, especially near term. But, you know, you will bring a different perspective, fresh set of eyes, if you will. So what are some of your key priorities, maybe in the first 100 days as CEO? And, you know, how will you be running the business differently, if at all? Young, thank you. And again, I appreciate being able to be here at the Jefferies Conference in London. I would remind people, I joined CONMED 10 years ago. Prior to CONMED, I spent 20 + years in MedTech and always worked for growth companies. The 10 years I've been at CONMED, we've been a growth company. And I'm honored to be the new incoming CEO. And I took the opportunity because I wanted to lead and be part of a growth company. And so my focus going forward will be, how do I continue this course of growth company? And I have a unique opportunity of partnering with Curt for the last couple of months of his tenure to learn and listen to him. And at the same time, I want to bring fresh eyes and fresh perspectives. And so, Young, my first 100 days, I'm going to ask a lot of questions, listen to a lot of answers of the teammates of the CONMED team, the customers and surgeons we serve, and shareholders and investors. And after that 100 days, I'll think about what should change. But what won't change is our passion and my commitment to being part of a growth company. Okay, great. So hopefully we'll be seeing a lot more of you. So I guess maybe to dive into the business a little bit, you know, CONMED has four major growth assets that was made over the past 10 years. You know, you were involved in all of them, but you led the past two ortho deals. Can you maybe talk a little bit at a high level, you know, what's your approach to M&A, thoughts on, you know, the portfolio itself, size of deals, and the attractive markets that you're interested in getting into? Yeah, Young, again, we've done four big acquisitions at CONMED. The spaces we've been focused on is minimally invasive surgery, minimally invasive general surgery, and minimally invasive orthopedic surgery. We think those are great spaces. They're big and they're fast growing. We think the assets and the companies and the people that joined CONMED through those assets have been great deals that we've done. Right now, we think we operate and are in great clinical spaces with great assets that we can heads down and execute forward. At the same time, we're always looking for new innovative technology that can be accretive to the company and be better in our sales reps' hands to help improve patient care. You can expect us to look at all opportunities that exist in the market from an M&A standpoint, while at the same time being responsible to the balance sheet, the P&L, and the shareholders. Okay, great. You know, you're also improving your leverage ratio. You know, it'll be down to like the low to mid threes pretty soon. I guess, can you maybe talk about, you know, at what level will CONMED be going out and being more aggressive on M&A? Sure, yeah. And, you know, that's not. We've never had the leverage ratio be the determining factor on when we do an acquisition. It does work out. If you look at the history that you guys just talked about, you know, we bought AirSeal in 2016 and the leverage went up around five. And then we burnt it down in the next 2-3 years down to the threes. And then in 2019, we bought Buffalo, leverage went up over five. We did burn it down back to three by 2022. And then we did new acquisitions. So it does look like we kind of go from five down to three and then up to five and down to three. But what's actually happening is we constantly keep our eyes open, ears open. You have to be aware of everything that's happening in your space. Successful, growing MedTech companies, like Pat describes, do both, right? You have to be active in acquisitions and you have to be good at organic iteration. And so we've continued to focus on both. In 2022, we did two acquisitions, took our leverage back over five to Young's point. We're now on our way back closer to three. But the determining factor on when to pull the trigger is always about finding the right asset that meets our criteria that is accretive to growth, accretive to margins, and comes at a value, well, has some sort of protection, first of all, so that it's not just an exciting thing to announce and then becomes an anchor shortly thereafter. So there's got to be some level of protection either through know-how or IP. And then the last filter is, is there value for CONMED shareholders? You can't give all the value to the seller. And so that's what we're constantly looking for. Just because we get down to a three leverage number doesn't mean we're going to go buy the best thing we can find in that moment. We will stay true to our filters and hurdles. And when we find the right next asset, we'll pull the trigger on it. All right, great. So I guess, why don't we dive into some of these assets? So I guess starting with AirSeal, I think you mentioned on the 3Q call, there wasn't any slowdown in the U.S. capital AirSeal sales or disposables. You know, there's some competitive overhang from the DV5 launch earlier this year. You know, you reported two quarters of good results now following the DV5 launch. You know, when do you feel like you've kind of seen enough from the field results that the DV5 competitive threat wouldn't materialize? Yeah, this is a hot topic. I think it's probably the biggest overhang on the stock. And I just, I want to just clarify, and I know you understand this, Young, but for the listeners, I want to clarify the overhang from the new entrant into insufflation is a market perception. We have not seen any impact to our business yet. We have multiple opportunities with AirSeal beyond just the DV5s. Today, 60% of our AirSeal revenue comes through robotic procedures. 40% comes through non-robotic procedures. So the threat isn't, or the new entrant is on the robotic side. They have an enormous installed base, approximately 9,000 robots are in the market today that do not have integrated insufflation. Those 9,000 robots will continue to need a third-party insufflator. We get about a third of those procedures today. I've seen a few sell-side models on what the new robot, how the new robot is going to grow with their current base. Again, the current base not having integrated insufflation. In the models I've seen so far, the Xi, which is the legacy robot, they're going to continue to sell that. In the models I've seen so far, the Xi footprint is bigger at the end of those models than it is today. They have both their new product growing substantially and their existing products growing. Those existing products need a third-party insufflator. As we see the future of AirSeal, we know that robotics over time will become a smaller share of our revenue, which has been happening. That trend has been happening. That will continue to happen. The non-robotic side will become a bigger part of where our revenue comes from. But even in the robotic share, we will have some attachment to DV5, granted it may be less than our attachment with Xi, but we already know that that will not be a zero number. We will be attached, we will get use, we are getting use today with the DV5. We will continue to get good participation with the Xi, and then we will continue to grow the non-robotic side. So we are very confident that AirSeal's growth is going to be durable, be double digits for a long time. Okay, that's very comprehensive. Appreciate that. I guess, you know, since the DV5 launch, can you maybe talk a little bit about, you know, are you doing anything different in terms of selling? Are there different types of accounts or customers that you are sort of pivoting to and more focused on? Yeah, go ahead. You know, Todd mentioned the opportunity for clinical insufflation and the clinical benefit for the patients is broad in the hospitals. So our sales reps walk into every hospital and look for the best clinical opportunity they have to improve patient care, i.e., hospitals wanting to buy that. Internationally, we've had a long history of selling clinical insufflation, AirSeal into the laparoscopic area. The United States sales reps are now moving more into that space as they see those opportunities, and surgeons are seeing that benefit in laparoscopy and are pulling those sales reps in there. So long way of saying, Young, yes, we are seeing sales reps in the United States start moving more into the laparoscopy space. On the other side, the more robots that get into the market internationally, we're having our international reps move into the Xi procedures that weren't there before. It's kind of a win-win geographically for us. Okay, seems like some sort of cross-pollination where, you know, you're taking the selling process from OUS into the U.S. channel and maybe vice versa. Yeah, I guess maybe if you can comment on that a little bit more, I guess, how's the, in the U.S. market, how different is it selling into robotic accounts versus the laparoscopic accounts? What are the key differences, you know, selling times, account size, things like that? Two things. Selling into the robotic space is often done on the back of a robot being sold. So you have a $1 million+ asset being sold to the hospital, and it's relatively easy for the sales rep to collaborate with that robot being installed in the hospital. On the laparoscopic side, you have the opportunity to sell to many more procedures. The volume is much larger, but you have to touch more clinicians. You have to encourage slash convince more clinicians that clinical insufflation matters to them. And so the selling cycle can be a little bit longer on the laparoscopic side, but the upside is bigger. There's bigger deals, but they're longer to come to fruition. And the only thing I would add there, Young, is for everybody to understand the benefits of AirSeal are the same, right? So all the reasons that the robotic customer wants to use AirSeal, which is 50% reduction length of stay, lower pressure, more stable working space during the procedure, less risk of the space collapsing and causing issues. All of those benefits apply to the non-robotic procedure as well. But it is more of an economic sale because instead of following, to Pat's point, a $2 million robot, you're going in and saying, "Hey, doc, you know, this is $100 more per procedure. And here's all the benefits you get for that $100." So it is, you have to be sharper on those economic benefits and the value provided because it, so it can be a little longer sales cycle, but the benefits all still apply. We've seen, like we said, I mean, our growth has been faster on the non-robotic side than it has been on the robotic side. It's been strong in both, but it's actually, we're growing better on the non-robotic side than we are on the robotic side. So we know how to do this and all the benefits applied on both sides. Okay, great. So I mean, AirSeal is clinically differentiated. You know, it seems AirSeal adds even more clinical value to the longer and more complex procedures. Are you seeing a different mix of procedures in DV5 accounts right now? No, I think what we're seeing is the same. So it's always been the case for AirSeal because it is the premium product on the market. It is those longer, more complex procedures where those benefits of AirSeal shine through the most. If you've got a quick, you know, if you've got a 20-minute procedure that's close to the surface and it's pretty common and everybody does it, you know, think about like an appendectomy, you know, for example, you probably don't need all the benefits of AirSeal. But if you're doing a hysterectomy or a prostatectomy or a nephrectomy, it's hard for the standard insufflators to come anywhere close to the experience you get with AirSeal. And so that's where we see the use with, in today, that's where AirSeal is used the most. That's what we're seeing on these early results with the DV5, where they're returning to using AirSeal, is on those deeper, longer, more complex procedures as well. That makes total sense and it's consistent kind of with the past and we think it'll be consistent in the future. Okay, great. So you know, it seems like the AirSeal business is still doing really well. I did get some questions following the 3Q results on your capital business. You know, I think you mentioned it was tough comps, but it looked like it sort of decelerated a little bit. Can you maybe expand upon the tough comps a little bit and sort of break out why the capital business was what it was for 3Q? Yeah, so if you go back and look at 2023, we had really strong growth, you know, double- digit, strong double- digit growth rates all through 2023. Part of that was two things. We had our warehouse issue in 2024 that built up a backlog of orders that then cleared in 2023. At the same time, we were making big improvements on the warehouse shipments. We also, along with the rest of the industry, were making big improvements on our supply chain and backorder, which started with the pandemic and bled all the way into and through 2022, and in 2023, we all started being able to get those backorder products out of supply chain issues and into customers' hands, so specifically to Q3, in Q3 of 2023, we finally got the chips and circuit boards we needed for a lot of our electrosurgery power units that are capital. And so we had a huge quarter in kind of, for the first time in months, we could finally sell those. And so that was. That's the noise that's up against the capital comparator in Q3. We'll see a little bit more of that in Q4 as Q4 2023 continued to sell capital. And hopefully as we move into 2025, we'll have less noise, less noise like that in the comparable. Okay, great. Why don't we switch gears a little bit? So, you know, another exciting product in the portfolio, the Buffalo Filter business. There were some transitory quality issues in Q2, but it seems like you made a lot of progress in addressing it in 3Q. I guess, you know, when do you expect that to return to normalized growth? And you know, can you comment on the competitive environment for smoke evac as well? Sure. Yeah, the smoke opportunity is enormous. You know, we think that market today is somewhere between $300 million-$350 million, probably. We are, we still believe we're the market leader. I think we think Stryker is also doing really well there. From a market perspective, if you do the math on the need for this solution and the opportunity, you get into multiple billions of market opportunity, which we believe is real. So as this market goes from $300 million-$350 million into the billions, there's room for many winners. And we fully expect to be one of those winners. And so we definitely think there's strong growth opportunities here for a long time. We do expect that business to return to double-digit growth again. And we've had, to Young's point, 2024 hasn't been what we want it to be, but we have that quality issue behind us. We believe that the smoke business should be a healthy double- digit grower for a lot of years. Okay. And then switching to the orthopedic side. So In2Bones, there were some supply issues early in the year. You saw leadership change as you integrated that business more. You know, how's the current state of the supplies and the business? You know, when do you think it can return to above market growth? And you know, do you still think it's a business that can grow at 2x market rates? Young Li and I take that again. We acquired the In2Bones company in June of 2022. This is a foot and ankle specific business that had been growing double digits. It was about $35 million-$36 million. As we acquired that company, we started to integrate it into the CONMED organization and we're integrating it, obviously, for more scalability than it had. And so as we were scaling it up, clearly we ran into some supplier and some vendor challenges from capacity. We think we've worked through most of those. We believe this market continues to be fast growing and we think it's a big market. We believe we've made progress on the supply chain and the clinical products still remain super exciting to the foot and ankle surgeons around the world. And so our expectations are we will be back to growing twice the market in 2025. Okay, great. And then another key asset is the BioBrace product. So I think now it's probably being used in 40+ indications and we're seeing more and more surgeon experience data. I think your trial got pushed out a little bit, but you know, the business is still growing very well without the data. Just kind of curious, you know, what are your expectations for growth in that business and you know, how can your trial data, you know, improve that? Young, you're right. So 40+ indications and I would remind everybody, BioBrace is approved by the FDA for the repair of anywhere tissue weakness exists. And so we are seeing presentations and publications in multiple disciplines in orthopedic surgery. We have a two-pronged approach to growing this market opportunity. Number one is we're continuing to advance the clinical platform. We've launched new sizes to the BioBrace implant and we're continuing to look at new technology around surgeon enablement to allow the procedure to happen easier and better. On the clinical study side, yes, the one study that we are looking at, which is a 248 patient prospective randomized clinical trial, is moved into 2027. At the same time, we've had our first peer-reviewed publication happen in orthopedic surgery in the last month. It was for a massive rotator cuff repair trial from Dr. Sean McMillan from the Rothman Institute. He studied 49 patients over a period of a year time. I would remind everybody, massive rotator cuff repairs fail in certain publications over 94%. His survival rate after a year of those 49 patients was 94%, almost the inverse, and so we're seeing publications and presentations happen almost daily on the technology there and still feel really good about it, Young. All right, great. Maybe turning to margins a little bit. You know, you had a goal of getting to 60% gross margins. You know, that got pushed out a little bit. Wanted to hear your updated thoughts on when you think you can get there. Yeah, so we don't have a new date for that, but we do have, I think, one of the better gross margin growth stories in MedTech. And that comes from, so these four growth drivers that we've talked about here, those all are accretive to the company margins. And because those are growing faster than the rest of the portfolio, it just provides a mixed tailwind in margins. So we definitely believe we're on our way to 60, but we haven't put a new date on when that'll happen yet, Young. Okay. Yeah, I mean, we can sort of back into the growth algo on the top line. Can you maybe comment a little bit about the EPS algo, you know, how much drop through to the bottom line and where do you think EPS growth can be versus revenue growth? Yeah, again, I think on the bottom line, we have again one of the better growth stories in MedTech. Part of that is because we're starting behind, right, so we have catching up to do, and a lot of that has to do with scale. It takes a certain scale and size and talent to compete in this world, in the MedTech World, and so we believe that our infrastructure can support a much higher revenue base. We will continue to invest and make sure that we stay a high growth company, as Pat describes, and I think the good ratio that people should think about is basically 2x the sales growth, so whatever we're going to grow on the top, we believe we ought to be able to do 2x that growth rate on the bottom. Now, granted, we've done a little better than that recently, but I think the sustainable view of how you should think about CONMED is grow about 2x on the bottom what we do on the top. All right, excellent. I think that's all.