UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM
CURRENT REPORT
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| Item 7.01 | Financial Regulation FD Disclosure. |
On November 15, 2022, CONMED Corporation (the “Company”) issued a press release withdrawing its full year 2022 financial outlook as a result of the temporary disruption from a software implementation. The Company also provided its 2023 financial outlook. A copy of this press release is attached hereto as Exhibit 99.1.
On November 15, 2022, Curt R. Hartman, the Company’s Chief Executive Officer, and Todd W. Garner, the Company’s Chief Financial Officer, plan to appear at the Stifel 2022 Healthcare Conference to discuss the Company’s objectives, strategy and recent events, including the issues discussed in the press release. A copy of the Company’s updated investor presentation is attached hereto as Exhibit 99.2.
| Item 8.01 | Other Events. |
In October 2022, the Company implemented new warehouse software, which caused service level disruptions that impacted the Company’s ability to ship certain quantities of finished goods to customers. Although the Company believes that the impact to sales, if any, will be limited to the fourth quarter of 2022, the Company cannot provide assurances that the resolution of service level and shipping disruptions will fully recover these sales in the fourth quarter of 2022 and/or that the warehouse management software implementation will not disrupt the Company’s operations and its ability to fulfill customer orders. Also, these disruptions have caused the Company to incur other costs and expenses in connection with the resolution of the service level and shipping disruptions. To the extent that these disruptions recur and/or persist over time, this could negatively impact the Company’s competitive position and its relationships with its customers and thus could have a material adverse effect on the Company’s business, prospects, results of operations, financial condition and/or cash flows.
The information in this Current Report on Form 8-K that is furnished under “Item 7.01. Financial Regulation FD Disclosure” and Exhibit 99.1 and Exhibit 99.2 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Act of 1934, nor shall they be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.
| Item 9.01 | Financial Statements and Exhibits. |
| (d) | Exhibits |
The following exhibits are included herewith:
| Exhibit No. | Description of Exhibit | |
| 99.1 | Press Release dated November 15, 2022, issued by CONMED Corporation. | |
| 99.2 | Investor Presentation dated November 15, 2022, issued by CONMED Corporation. | |
| 104 | Cover Page Interactive Data File (embedded within the Inline XBRL document). | |
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
| CONMED CORPORATION | ||
| (Registrant) | ||
| By: | /s/ Todd W. Garner | |
| Name: | Todd W. Garner | |
| Title: | Executive Vice President - Finance, Chief Financial Officer | |
Date: November 15, 2022
Exhibit 99.1
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NEWS RELEASE
CONTACT: CONMED Corporation Todd W. Garner Chief Financial Officer 727-214-2975 ToddGarner@conmed.com |
CONMED Corporation Withdraws 2022 Financial Outlook due to Temporary Impact from Software Implementation; Provides 2023 Financial Outlook
LARGO, Fla. – November 15, 2022 – CONMED Corporation (NYSE: CNMD) today announced that due to a temporary disruption resulting from the implementation of new warehouse management software, the Company is withdrawing its previously issued full-year 2022 financial outlook.
In recent weeks, the Company began implementing new software designed to increase the efficiency and performance of its primary distribution facility. The implementation of this new software created shipping disruptions that lasted longer than originally projected. The Company is currently unable to fully assess the impact on fourth-quarter sales and profitability as it continues to incur costs while working to reduce the shipping backlog. Daily shipment volumes have returned to normal levels, and the Company has reduced the shipping backlog from a peak of approximately $35 million last week to approximately $28 million today. The Company believes the backlog of open orders will be shipped in the coming weeks and anticipates the impact to business performance will be limited to the fourth quarter of 2022. The withdrawal of the full-year 2022 financial outlook is solely attributable to the impact of this software implementation.
2023 Financial Outlook
For the full-year 2023, the Company expects reported revenue between $1.170 billion and $1.230 billion and adjusted diluted net earnings per share1 in the range of $3.20 to $3.50.
About CONMED Corporation
CONMED is a medical technology company that provides surgical devices and equipment for minimally invasive procedures. The Company’s products are used by surgeons and physicians in a variety of specialties, including orthopedics, general surgery, gynecology, thoracic surgery, and gastroenterology. For more information, visit www.conmed.com.
| 1 | We are unable to present a quantitative reconciliation of our expected diluted net earnings per share to expected adjusted diluted net earnings per share as we are unable to predict with reasonable certainty and without unreasonable effort the impact and timing of acquisition-related and other charges. The financial impact of these items is uncertain and is dependent on various factors, including timing, and could be material to our Consolidated Statements of Comprehensive Income (Loss). |
Forward-Looking Statements
This press release may contain forward-looking statements based on certain assumptions and contingencies that involve risks and uncertainties, which could cause actual results, performance, or trends to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. For example, in addition to general industry and economic conditions, factors that could cause actual results to differ materially from those in the forward-looking statements may include, but are not limited to, the risks posed to the Company’s business, financial condition, and results of operations by the COVID-19 global pandemic and the various government and other responses to the pandemic, including deferral of surgeries, reductions in hospital and ambulatory surgery center operating volumes, disruption to potential supply chain reliability, as well as the risk factors discussed in the Company’s Annual Report on Form 10-K for the full year ended December 31, 2021, listed under the heading Forward-Looking Statements in the Company’s most recently filed Form 10-Q, and the risks associated with the timing and costs related to the software implementation as further described in the risk factors listed in the Current Report filed on Form 8-K on November 15, 2022. Any and all forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate to the Company’s performance on a going-forward basis. The Company believes that all forward-looking statements made by it have a reasonable basis, but there can be no assurance that management’s expectations, beliefs or projections as expressed in the forward-looking statements will actually occur or prove to be correct.
Supplemental Information - Reconciliation of GAAP to Non-GAAP Financial Measures
The Company supplements the reporting of its financial information determined under generally accepted accounting principles in the United States (GAAP) with certain non-GAAP financial measures, including adjusted diluted net earnings per share. The Company believes that these non-GAAP measures provide meaningful information to assist investors and shareholders in understanding its financial results and assessing its prospects for future performance. Management believes these adjusted measures are important indicators of its operations because they exclude items that may not be indicative of, or are unrelated to, its core operating results and provide a baseline for analyzing trends in the Company’s underlying business. Management uses these non-GAAP financial measures for reviewing the operating results and analyzing potential future business trends in connection with its budget process and bases certain management incentive compensation on these non-GAAP financial measures.
To measure earnings performance on a consistent and comparable basis, the Company excludes certain items that affect the comparability of operating results and the trend of earnings. These adjustments are irregular in timing, may not be indicative of past and future performance and are therefore excluded to allow investors to better understand underlying operating trends.
Because non-GAAP financial measures are not standardized, it may not be possible to compare these financial measures with other companies’ non-GAAP financial measures having the same or similar names. adjusted diluted net earnings per share should not be considered in isolation or as a substitute for diluted net earnings (loss) per share, the most directly comparable GAAP financial measure. Non-GAAP financial measures are an additional way of viewing aspects of the Company’s operations that, when viewed with GAAP results and the reconciliations to corresponding GAAP financial measures above, provide a more complete understanding of the business. The Company strongly encourages investors and shareholders to review its financial statements and publicly filed reports in their entirety and not to rely on any single financial measure.
Investor Presentation Curt R. Hartman Chair of the Board, President, and Chief Executive Officer Todd W. Garner Executive Vice President and Chief Financial Officer November 15, 2022 Exhibit 99.2
Forward-Looking Information This presentation contains forward-looking statements based on certain assumptions and contingencies that involve risks and uncertainties. The forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 and relate to the Company's performance on a going-forward basis. The forward-looking statements in this presentation involve risks and uncertainties which could cause actual results, performance or trends, to differ materially from those expressed in the forward-looking statements herein or in previous disclosures. For example, in addition to general industry and economic conditions, factors that could cause actual results to differ materially from those discussed in the forward-looking statements in this presentation include, but are not limited to, the risks posed to the Company’s business, financial condition, and results of operations by the COVID-19 global pandemic and the various government responses to the pandemic, including deferral of surgeries, reductions in hospital and ambulatory surgery center operating volumes, disruption to potential supply chain reliability; any assumptions underlying any of the foregoing, as well as the risk factors discussed in the Company's Annual Report on Form 10-K for the full year ended December 31, 2021 and other risks and uncertainties which may be detailed from time to time in reports filed by CONMED with the SEC, including the risks associated with the timing and costs related to the software implementation as further described in the risk factors listed in the Current Report filed on Form 8-K on November 15, 2022. Management has disclosed adjusted financial measurements in this presentation that present financial information that is not in accordance with generally accepted accounting principles in the United States (GAAP). The Company analyzes net sales on a constant currency basis to better measure the comparability of results between periods. To measure earnings performance on a consistent and comparable basis, the Company excludes certain items that affect the comparability of operating results and the trend of earnings. These adjustments are irregular in timing, may not be indicative of past and future performance and are therefore excluded to allow investors to better understand underlying operating trends. These measurements are not a substitute for GAAP measurements. Investors should consider adjusted measures in addition to, and not as a substitute for, or superior to, financial performance measures prepared in accordance with GAAP.
CONMED Vision Empower healthcare providers worldwide to deliver exceptional outcomes for patients. Focus behind the Vision People, Products, Profitability
Objectives for Our Shareholders Aggregate growth and profitability over the long term to significantly increase the valuation of the company Increase our market share in large and attractive markets Deliver above-market revenue and profitability growth over the long term
Higher-Growth Products Continuing to Shift the Mix of the Portfolio to Higher-Growth Products 2015 * YTD Sep 2019 * YTD Sept 2022 Products Declining 79% 17% 16% Products Growing Single Digits 21% 48% 42% Products Growing Double Digits 0% 35% 42% * Denotes latest disclosure of this metric at J.P. Morgan Conference, January 2020 (pre-pandemic)
Navigating Temporary Challenges to an Improved Engine Q4 Update: Implemented a Warehouse Management Software System in Q4 2022 that will increase capacity and efficiency Shipping delays resulting from this implementation have been longer than anticipated but should be contained to Q4 2022 The Company is withdrawing its 2022 financial outlook Shipping backlog peaked at approximately $35 million last week and currently stands at approximately $28 million Financial Outlook for 2023: Reported revenue between $1.170 billion and $1.230 billion Adjusted EPS between $3.20 and $3.50
Orthopedics: Large, Attractive Markets Category Description Market Size and Competitors Dollar Value of 1 Market Share Point Sports Medicine Devices for repair of soft tissue injuries in joints $4.4 to $4.6 Billion ~$45M Arthrex DePuy Mitek (J&J) Smith & Nephew Stryker Zimmer Biomet Allograft Tissue Exclusive commercial rights to MTF allograft tissue $375 to $425 Million Allosource LifeNet RTI ~$4M Powered Instruments Surgical drills and saws with related single-use accessories $1.4 to $1.6 Billion Stryker DePuy Synthes (J&J) Medtronic (Midas Rex / Xomed) Zimmer Biomet ~$15M Surgical Visualization High-definition surgical visualization systems to enable minimally invasive arthroscopic surgery $1.8 to $2.0 Billion ~$19M Stryker Arthrex Karl Storz Olympus Richard Wolf Smith & Nephew Foot and Ankle Comprehensive portfolio includes implants, fracture systems, biologics, and related hardware $4.4 to $4.6 Billion ~45M Stryker DePuy Synthes (J&J) Arthrex Paragon 28 Treace Total Orthopedics 60% to 70% in Surgery Centers in the U.S. ~$128M ~13% growth for total company 2022 Sept YTD 74% Recurring, single-use revenue
General Surgery: Large, Attractive Markets Category Description Market Size and Competitors Dollar Value of 1 Market Share Point Access A platform of devices and accessories to create and enter the surgical working space in minimally invasive procedures $1.4 to $1.6 Billion ~$15M Ethicon (J&J) Applied Medical Stryker Medtronic Olympus Karl Storz Medtronic Olympus Karl Storz Energy RF energy to affect tissue by cutting, sealing, or causing hemostasis in open or minimally invasive procedures. Smoke evacuation and filtration to support the surgical environment $2.7 to $2.9 Billion ~$28M Medtronic Ethicon (J&J) Olympus Stryker Cooper Surgical ERBE Stryker Cooper Surgical Ethicon (J&J) Instruments Instruments and accessories for minimally invasive laparoscopic, open, and robotic approaches $1.5 to $1.7 Billion ~$16M Karl Storz Aesculap Stryker Endoscopic Technologies Therapeutic and diagnostic endoscopic products used by Gastroenterologists $3.0 to $3.2 Billion ~$31M Boston Scientific Cook Medical Cantel Olympus Merit Endotek STERIS Olympus Merit Endotek STERIS Critical Care Single-use devices for monitoring cardiac activity and other patient care devices $0.8 to $1.0 Billion ~$9M 3M Company Cardinal Total General Surgery 90% to 95% in Hospitals ~$99M ~10% growth for total company 2022 Sept YTD 91% Recurring, single-use revenue
Environmental, Social and Governance (ESG) Together We Are Making A Difference for a Better Tomorrow Environmental Chihuahua, Mexico plant has held the Clean Industry Certification since 2015 Utica, New York plant is ISO 14001 certified 100% LED lighting at Utica and Chihuahua plants Social Partners with United Way and TEAMFund to serve communities globally where we do business Over 90% of employees participated in the Gallup Q12 Employee Engagement Survey Women make up 51% of our global workforce Governance 33% gender diversity on Board of Directors Committee Chair rotation every five years 100% Independent Standing Board Committee Report posted on October 7, 2022. View the report now on: CONMED.com
Closing Thoughts Intense focus on solving unmet needs for healthcare customers drives increased market share Large and attractive markets provide CONMED with ample opportunities for above-average revenue and profitability growth Aggregating growth over the long term can drive meaningful shareholder value At CONMED, we are focused on doing things the right way and being good corporate citizens