CONMED Reported Sales Go Flat as GI Exit Masks Organic Growth
CONMED's adjusted diluted earnings climbed 20% to $1.38 a share even as reported net sales grew just 0.3% to $343.5 million, a gap driven almost entirely by the completed exit of its GI product line.
CONMED (CNMD), the surgical device maker, reported net sales of $343.5 million for the second quarter, up 0.3% from a year earlier, a sharp deceleration from the 7.9% reported growth posted in the fourth quarter of 2024. Stripping out the effect of the company's exit from its GI product offerings, organic constant-currency sales rose 6.0% in the quarter, and domestic sales, which fell 8.0% as reported, actually grew 2.5% on that same organic basis.
The divergence traces to a strategic decision, first disclosed in the first quarter as a $15.5 million sales headwind, to exit the GI business entirely. That exit closed during the second quarter, producing a cluster of one-time items: a $4.4 million loss and a $5.9 million gain on the sale of the product line, $6.9 million in inventory write-off and rationalization costs, and a $1.9 million gain from terminating a distribution agreement. Investors reading the reported top-line number without adjusting for the exit would see a business stalling; the underlying growth rate says otherwise.
International sales provided the clearer signal, accelerating to 10.8% reported growth (9.9% organic constant currency) from 4.7% in the first quarter, though still below the 17.0% pace logged in the fourth quarter of 2024. Both of CONMED's core segments moved in the same direction: General Surgery, down 7.4% in the first quarter, returned to growth, while Orthopedic Surgery accelerated to 8.2% from 6.8%. Management pointed to growth "across both" segments this quarter, a claim it did not make three months earlier.
Profitability told a mixed story. Gross margin expanded to 57.5% from 55.0% a year earlier, continuing a trend that has held above 57% for three straight quarters, but operating margin compressed to 10.6% from 11.1% as selling and administrative costs kept climbing off a base that pushed full-year 2024 operating margin down to 7.5% from 15.3% in 2023. EBITDA margin, at 17.0% of sales versus 16.4% a year ago, moved in the opposite direction from GAAP operating margin, aligning more closely with the gross-margin gains.
Adjusted diluted earnings per share came in at $1.38, up 20.0% from $1.15 a year earlier and a reacceleration from the first quarter's $0.89, itself a decline from $0.95 in the prior-year period. GAAP diluted EPS of $0.77 rose 11.6% and included a one-time $0.21-a-share benefit from IEEPA tariff refunds that had not appeared in any earlier quarter's disclosures. Interest expense fell to $14.9 million for the first half from $16.1 million a year earlier following a debt refinancing completed in the quarter, reversing the rising-expense trend that had weighed on results since April.
CONMED lowered its full-year 2025 guidance for the second time this year. The company narrowed its net sales range to $1.358 billion-$1.373 billion from $1.350 billion-$1.375 billion, cutting reported growth guidance to a range of -1.2% to -0.1% from -1.8% to 0.0%, and reduced adjusted diluted EPS guidance to $4.48-$4.60 from $4.30-$4.45. Organic constant-currency growth guidance tightened to 5.0%-6.0% from 5.0%-6.5%, issued after an April raise from the original 4.5%-6.0% guide given in January. The estimated drag from the GI exit was trimmed to 6.7% from 7.0%-7.1% previously disclosed.
The quarter also brought CONMED's first leadership transition across five quarters of disclosures. John E. Gallagher took over as chief financial officer effective July 15, succeeding Todd Garner, a change announced June 17 that generated $3.3 million in executive transition costs during the first half. The board added two independent directors, Celine Martin and Jeff Mirviss, effective July 1.