All right, why don't we kick this session off? Good morning, everyone. Welcome to day two of the Jefferies New York Healthcare Conference. My name is Young Li, one of the med tech analysts on the U.S. team. Pleased to be joined by management from CONMED. We have Curt Hartman, Chair of the Board, President, and CEO, and Todd Garner, EVP and CFO. This will be a moderated Q&A session. Gentlemen, welcome, and thanks for coming. Thanks for having us, Young. I guess to start maybe a little bit high level, you know, CONMED aspires to be a low double-digit organic growing company. You have four growth assets. Wanted to hear your latest thoughts on the growth algorithm driven by those four businesses, and, you know, if you think, the four assets can push you to be a low double-digit organic grower. Sure. Let me start on that, and I'm sure Todd will weigh in as you talk more about the outlook here. We aspire truly to grow faster than the markets we serve. We've talked about an algorithm that's composed of growing with the market rate, the underlying market rate, organic R&D being additive to that effort, and then ultimately, M&A can be a second level of growth, and I think that's the business we've built. If you look at the underlying markets we serve, depending on your math, and there is no pure data on this, the markets grow 4-6, 5-7. So by virtue of that, it would say we're gonna grow in the upper high single digits. Now, we've commented the last couple years that the portfolio we currently have, with the additions of BioBrace and foot and ankle business on top of the other parts of the portfolio that have been built over time, probably lean us more towards the low double digits. We think that's kind of representative of the underlying portfolio and puts us in a position to continue to grow faster than the markets we serve. I don't know, Todd, if you have- Yeah, and that's certainly what we did in 2023. You know, the guidance for this year is 8%-10%, you know, to Curt's point. So whether it's high singles or low doubles, it really... And we've always said the caveat there is a healthy market, right? As Curt says, if the market's 4%-6%, 5%-7%, then, you know, we've got a better shot at hitting that double-digit mark. If the market's a little soft, obviously we'll be a little softer. But the guidance for the current year is 8%-10%. Last year, we were organically in the low double digits. You know, that's kind of the ballpark of where we're living right now. All right. Excellent. I guess maybe just focusing on some of these growth assets. So, you know, in general surgery, the AirSeal business gets outsized attention. It's the biggest of the four growth assets. It's margin accretive. You know, over the past year, there have been some overhang on the stock just due to a competitive launch. You know, we've since seen the new product from Intuitive, which answered a lot of the technical debates. Wanted to hear a little bit about, you know, what do you think about their insufflation device, and how does it stack up against AirSeal? Yeah, interesting question, and very topical. Number one, we respect all our competitors. This is a tough industry, and it, it demands innovation. It demands constant innovation in addressing unmet customer needs. It's pretty early in their launch, and I think ultimately the market will decide that question about their product versus our product, and, and I'm not one to comment on our competitors' products. What I will say about AirSeal is the, the thing that is consistent, no matter who's launching a new product, is the millions of patient lives served, the unbelievable volume of clinical studies around low pressure, reduction in pain, reduction in length of stay, reduction in length of surgery. There's no one in the marketplace that has the data around clinical insufflation that CONMED Corporation has. That is not gonna change no matter who comes into the marketplace. We'll let the market sort out what's going on with the next insufflator that's introduced into the marketplace. But what we know and what we talked about going back to Q2 of 2023 is all the value that AirSeal brings each and every day on a global basis to this, whether it's robotic surgery or, or laparoscopic surgery. That has not changed, so... All right, so I guess, you know, when you showed your initial 24 guidance, you assumed that half the AirSeal conversion rate versus historical for robotic placements. Can you maybe talk a little bit about, you know, how you came to that assumption, how conservative that is, and, you know, just to clarify, that for both new Xis as well as DV5s? Yeah, so I'll answer the end first. No, this, it would only be applicable to their- to the new robot, right? There's no, there's no reason to think that the attachment rate on the Xi would change. Yeah, so we said that, you're right, back in January. That was before anything had been launched. It was actually before the competitor had said anything directly about the product. So, you know, we're, as Curt said, it's still very early. I think, I still think that's probably a decent guess, and we have to see how the market plays out to see. But we would expect some headwind from the new product, but it should only be relevant to the new product. Okay, got it. I mean, the ramp is, you know, but potentially important for AirSeal, the DV5 ramp, that is. You know, if we assume the DV5 ramps at a similar rate to Xi when they launched, or maybe even a little bit faster, I mean, two years, it'll still be less than 2% of the Intuitive install base. I guess it's fair to assume that you don't see major disruptions from the 90%+ base Xi AirSeal business? Yeah, I think that's fair. I, you know, we encourage people to do math, as you're starting to do there, Young. There's lots of opportunity for AirSeal. AirSeal, as Curt kind of talked about, the clinical effectiveness, still really under-penetrated, dramatically in the non-robotic space. Still, lots of opportunity in the robotic space, and as you said, our current relationship in the robotic space, should be very durable. Okay. And then you know, I'm kind of assuming the early adopters of DV5 will be sort of friend and family accounts, luminary hospitals and surgeons, and I, I would assume, you know, they're more likely to buy the full stack DV5 system. You know, when do you think we can see more normalized attachment rates? Yeah, I think early adopters here are certainly probably some of their key opinion leaders. I think that would be very normal in med tech with high, high technology products like a robot. And they'll roll those out, and they'll do whatever their launch cadence is till they get to full market release. You know, as it goes back to the question you commented on earlier, if you look at historical, how their rollout is, it could take a while for them to get a volume of robots out in the marketplace. That doesn't-- There's nothing in that statement that slows us from continuing to sell AirSeal, continuing to demonstrate the clinical benefits of AirSeal, robotic or non-robotic procedure, doesn't matter, and continue to compete in the marketplace, which we have done every day since we acquired AirSeal in 2016. So I, I can't answer your question. That's more of a question for them about their rollout, and their launch plan, and the math. What I know is we have a great device with millions of patient lives impacted by the technology, and that's not gonna change. Okay, great. So the US AirSeal business is more tied to robotics, but I think OUS, you're still able to grow 20%+ without being as levered to robotics. I guess, you know, is the selling process different, OUS versus US? Can that OUS model be replicated in the US? Yeah, maybe just comment on the OUS success. Yeah, it's a great point. When we bought SurgiQuest, which was the name of the company that had the AirSeal product in 2016, they were 100% attached to Intuitive procedures in the U.S. And, you know, we have, as you know, CONMED's roughly 50% OUS, and so we gave it to our OUS sales force. They didn't have, back then, especially, they didn't have the wake of the robot to live behind. The only thing that's really different is when you're coming behind a $2 million robot, and, you know, AirSeal is a premium device in the market. It's a $30,000 capital expenditure for the box, and then it's about $175 per procedure, and that's roughly 2x, maybe a little more than 2x, what the competition is. And so when you're coming in behind a $2 million robot, a $30,000 box for the premium device on the market is kind of a rounding error, and so it's they are just less economically sensitive customers in the US. OUS, when you're when you're walking into trying to replace their standard insufflator that they're they are all used to and they've all been using, and you're telling them, "You really should pay double or more of what you're paying to have this premium device," the features, the outcomes are the same in both robotic and non-robotic. But it's a little longer you have to be a little sharper on your economic story. You have to defend that value a little more, and so it's we already know how to do it, to your point, Young. We've been doing it for eight years. We have all the materials. You know, there's not a new story to tell here. As the U.S. reps, naturally, as the opportunity in their territory slows for any reason, we already know how to arm them with the ability and the materials and the skills to go into more areas of opportunity, and that's been happening gradually over the last few years in the U.S. There's certainly a lot of opportunity there for them to go get if they need to. Okay, understood. So I guess, you know, in the OUS, I think da Vinci procedures last year were around 750,000. How big is the OUS laparoscopic market, and how fast is it growing? Yeah. So the over... You know, again, not 100% accurate data, but the global laparoscopic market is measured somewhere north of 10 million annual procedures. So it's a very large market. If you use traditional U.S., OUS splits, you would say more of that is in the U.S. The reality is, in laparoscopic procedures, there's more outside the U.S. It's one of those unique procedures that more occur outside the U.S. than do in the U.S. So it's a very large market, measured in millions of procedures annually. So it's a wonderful opportunity, and I keep repeating myself on the clinical benefit. The clinical studies over time, the volume of patients measured in millions, are what drives the technology.... that there is no second in this category. That is what drives the technology, that is what allows a sales rep, medical professional to understand what the benefit of this technology is and why they should embrace it. And again, to Todd's point about the international market, there wasn't a robotic wake to follow. So it was building that clinical evidence, it was presenting that economic value analysis, along with that clinical evidence to convince customers, and that is the algorithm. It's candidly not super complicated. It's the same algorithm we use in the U.S. when we've captured all the robotic share. And, you know, nirvana in AirSeal is to say that hospital, both robotic and laparoscopically, is 100% AirSeal, and we have those centers because the technology and the underlying clinical outcomes are what drive that. That's where, you know, if you want 100% market share, that's what you go after, doing that. It's not one or the other. It's leveraging the clinical value to get total conversion to AirSeal. Just one final point that I should have made, and actually it was kind of in your question, Young, but just to confirm, yeah, we do grow just as fast OUS, with much less mix of robotic than as we do in the U.S. So there's no difference in growth rate in whatever channel you're in. Okay, understood. I guess maybe a question on the ASC channel. Was kinda curious, you know, how big is the ASC channel exposure for AirSeal currently? Will that become a bigger market or a growth driver in the future? Yeah, I hear people talking about channels, and I think if you talked in the day of a life of a medical professional sales rep, they go where the patient is, whether it's the ASC, the hospital. Today, there is not a huge volume of laparoscopic procedures being done outside of the hospital setting. But if that were to occur, it's not a big deal to have the rep show up at the ASC. So I can't give you an exact number on it, Young, but if that's where the procedure volumes move to, that's where we'll be at. Okay. Let's see. I guess maybe just switching gears away from AirSeal. Buffalo Filter, you know, it's another high growth asset. It, there's some smoke evac legislation right now in maybe 16, 17 states, thereabouts. It's almost half the U.S. population represented, 40+% of the hospitals. And, you know, it does seem like, you know, once a state gets positive legislation, that can impact the growth rate a little bit. Can you level set us on, you know, what are the latest on the legislative updates? And, you know, when we can see more bills that gets passed or enacted. Sure. I think the most recent update was the state of Minnesota had approval at somewhere in the middle of May, with an effective date of January 1, 2025. So legislation does continue to move through the various states. You have to dig into the legislation to understand the value and the teeth in that legislation, but it is moving forward, and our data would say that once a state has legislation in place, there is some window of time, there's approval, there's the effective date, and then there's the measurement, when those health systems get measured on their compliance. And it's somewhere along that journey where the growth rates, the purchasing activity starts to pick up. So our data would show that, when states pass legislation, volumes do increase. It's just a matter of time. Candidly, if you've been in an operating room where they're not evacuating smoke, you understand the issues around that. I think the biggest impediment to smoke evacuation adoption is you're asking the surgeon to change something, and surgeons are trained meticulously on a process and a procedure, and the way they learned it, you know, their job is to manufacture a well patient, and I'm asking them to change their routine. So you have to really embrace the education for them, and that's why we love the Buffalo Filter platform. It was a small company focused solely on smoke evacuation, going to every surgical community, the spine surgeon, the hip and knee surgeon, and keep in mind, these are open procedures. The neurosurgeon, the dermatologist office, and creating the devices that are comfortable in the hand of the person doing the procedure. It's not one device fits all, it's we have a device for the hip and knee doc, we have a device for the spine doc, we have a device for the neuro doc. Importantly, we have the highest plume capture rate, which if your goal is to take smoke out of the room, you ought to have a really high plume capture rate, and there's no one that's anywhere close to our plume capture rate. There's a lot of people who push a button and say, "That's the easy button. We're capturing smoke." But you have to really measure that, and we believe we have that to a T, and the best solution in the marketplace. Okay, I guess, you know, where do you think smoke evac penetration currently sits today, and where do you think it can realistically go to? Yeah, we think it might just be moving out of the single digits into the double digits. We might, you know, we might be right about that 10% mark of penetration would be kind of our estimate. Still very, very early days. All right. Switching gears to the orthopedic side. So, BioBrace, you know, that product is highly differentiated. It's still in the early stages of growth, seems to be doing pretty well. You're expanding the number of indications currently. Can you maybe level set us on how many indications it's currently being used in now that you know of, and, maybe update of thoughts on the TAM? Yeah, I think, we had a surgeon present at AAOS back in March, who, through presentation and data collection, indicated over 40 different applications of the technology to date. I don't know if that number has changed since that point in time, but it's a, it's a very broad application of procedures. Obviously, the two largest markets are our rotator cuff and ACL augmentation, and that's where our sales force is very focused. We recently opened up the foot and ankle channel for the product, which it is just a very natural fit and a natural call point now that we have, well, I guess it's been two years now that we have a foot and ankle business. And the total addressable market, I think it's, just to be candid, I think it's still sorting itself out. If you assume that the annual volume of ACLs and rotator cuffs, not 100% of them are candidates, the smaller tears, not necessarily a technology you'd put in place. But if you use mid-size and larger and assume that that's half the market, I think you're easily talking a multi-billion dollar market, and that's excluding any of the other indications that the technology will find a home in. So it's a very, very nice size market. Okay. You know, so far growth has outpaced your expectations, and it should really inflect further following the randomized two-year data release. What's the latest update on the data and timing and, you know, how do you think that can impact broader adoption? Yeah, the business has done well relative to our original model and estimate, estimates, and we talked about that in 2022 and 2023. The study, these are long studies, and you wanna do them right. And the study will—and there are multiple studies. I keep saying study. There are multiple studies, but we'll probably see data towards the end of 2025, first half of 2026, that will be meaningful, we believe. Obviously, we have to wait to see the data, but that's the current pathway we're on. Todd, I don't know if you have any other- No, I would just point out, as Curt said, you know, there's data building now, right? Yeah. There was a predicate device in the market that has had broad acceptance. So there certainly are some customers who really want that randomized clinical trial. But between now and when that comes out, we expect kind of a cascade of just more experience, more positive results that to mirror what we've already seen. And so I'm not sure that that study date is like a light switch. But you know, for some geographies and for certain customers, you know, that will be meaningful. But between now and then, there'll be lots of data that continues to validate the effectiveness of the product. Okay, got it. And then I guess on foot and ankle, you know, that business has performed really well since you acquired it. More recently, there's been a little bit of growing pains as the founder retired, and as CONMED, there's more late-stage integration work. Seems like the second half growth should get back on track. Can you maybe give us an update there and sort of the level of confidence on that recovery timeline? Yep, you framed it accurately. That is the expectation. We've had some supply issues late last year that have kinda lingered into the start of this year. We expect to be through those as we get to the back half of the year, and we expect that to be a double-digit grower for the year. Okay, and, you know, foot and ankle is a competitive space. It's high growth and still fragmented. I guess, you know, what about your products and portfolio or the pipeline that's compelling or differentiated, and, are you benefiting from cross-selling as well? Yeah. Part of the reason, if you go back to the thesis on why In2Bones, it was a comprehensive portfolio with a very productive innovation engine, and that has continued. So we didn't buy a single product line. We bought a comprehensive Foot & Ankle, including a total ankle implant. So we have the full portfolio covered, and that R&D team continues to put new products in the market. And if you were at AAOS, you saw a few of those coming out of the team. In terms of cross-selling, I mentioned earlier, BioBrace is now available to that sales channel. Some of the other products that are legacy orthopedics business focused on sports medicine had drifted into soft tissue repair in the lower extremities. We've moved some of those products into the foot and ankle business as well, and then it's just fundamentally more eyes in the marketplace. When you look at the addition of a sales force and you're calling on customers, you're getting more dialogue of what's going on, and those local rep relationships start to build, and they start to help each other. So that's another form of synergy in the med tech marketplace. So we're seeing all that, and we're very excited. I think it was a great addition to the portfolio and one that we're, as Todd said, we have expectations for as we look out into the future, many years. Okay, and then the two deals in the summer of 2022, they were EPS dilutive initially, and, you know, you're currently investing for growth. But just kinda curious, the margin updates there, is it EPS neutral now? Have they turned accretive yet? Oh, yeah, they're accretive in 2024. Yeah. Okay, great. And then I guess following up on margins, I mean, you previously put out a target of around 60% by end of 2025. Since then, there's a little bit of push outs, stuff like FX impacted that timeline. When do you think you'll hit 60% and the level of confidence in getting there? Yeah, we're on a great trend and a great slope. Whether we're there at the end of 2025, which I haven't given up hope on, or whether that happens a quarter or two later, you know, we're on a great slope and a nice tailwind, from mix for our margins. Okay, great. I think we're out of time. Really appreciate the time and the discussion today. Thank you so much. Thanks, Young.