Good day, and thank you for standing by. Welcome to CONMED's Second Quarter Fiscal 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook, its plans and objectives. These statements represent the forward-looking statements that involve risks and uncertainties as those terms are defined under the federal securities laws. Investors are cautioned that any such forward-looking statements are not guarantees of future events, performance or results. The company's actual results may differ materially from its current expectations. Please refer to the risks and other uncertainties disclosed under the forward-looking information in today's press release, as well as the company's SEC filings, for more details on the risks and uncertainties that may cause actual results to differ materially. The company disclaims any obligation to update any forward-looking statements that may be discussed during this call, except as may be required by applicable law. You will also hear management refer to non-GAAP or adjusted measurements during this discussion. While these figures are not a substitute for GAAP measurements, management uses these figures to aid in monitoring the company's ongoing financial performance from quarter-to-quarter and year-to-year on a regular basis and for benchmarking against other medical technology companies. Adjusted net income and adjusted earnings per share measure the income of the company, excluding credits or charges that are considered by the company to be special or outside its normal ongoing operations. These adjusting items are specified in the reconciliation supporting the company's earnings releases posted to the company's website. With these required announcements completed, I will turn the call over to Pat Beyer, President and Chief Executive Officer, for opening remarks. Mr. Beyer?

Thank you, Latif. Good afternoon, and thank you for joining us for CONMED's Second Quarter 2025 Earnings Call. With me on the call is Todd Garner, Executive Vice President and Chief Financial Officer. I'll provide a brief overview of the financial and operating performance for the second quarter as well as an update on our priorities and our growth drivers. Todd will then provide a more detailed analysis of our financial performance and guidance as well as our updated view on the impact of tariffs. We will then open the call to your questions. I'll start by quickly reviewing our second quarter results. Total sales for the quarter were $342.3 million, which came in slightly above the high end of our guidance range on year-over- year growth of 3.1% as reported and 2.9% in constant currency. Sales growth was driven by worldwide general surgery sales of 4.4%. Worldwide orthopedic sales grew 0.8% year-over-year. We are confident our supply chain initiatives can accelerate growth in orthopedics as well as move into 2026. We will discuss these initiatives in more detail later on in my prepared remarks. From an earnings perspective, excluding special items that affected comparability, our adjusted net income of $35.6 million increased 16.4% year-over-year, and our adjusted diluted net earnings per share of $1.15 increased 17.3% year-over-year. Importantly, we believe the work we are doing with our supply chain, the ongoing review of our portfolio and the investments we are making behind our 4 key growth drivers support a mid-single-digit to high single-digit revenue growth profile for the business over the longer term. I will now discuss each of these topics, starting with our 4 key growth drivers: AirSeal, Buffalo Filter, BioBrace and Foot & Ankle. I'll begin with AirSeal. This platform remains the largest single contributor to our…

Thank you, Pat. All sales growth numbers I reference today will be given in constant currency. The reconciliation to GAAP numbers is included in our press release. As usual, we have included an investor deck on our website that summarizes the results of the quarter and our financial guidance. For the second quarter of 2025, our total sales increased 2.9% year-over-year. For Q2, our sales in the U.S. increased 2.8% versus the prior year quarter and our international sales grew 2.9%. Total worldwide orthopedics sales grew 0.8% in the second quarter. In the U.S., orthopedic sales decreased to 0.8% and internationally orthopedic sales increased 1.8%. Total worldwide general surgery sales increased 4.4% in the quarter. U.S. general surgery sales grew 4.3%, while internationally general surgery sales increased 4.7%. Now let's move to the expense side of the income statement. We will discuss expenses and profitability in the second quarter, excluding special items which are detailed in our press release. Adjusted gross margin for the second quarter was 56.5%, which is 120 basis points higher than the prior year quarter and consistent with our expectations. We continue to make progress on back order with the numbers headed in the right direction. Research and development expense for the second quarter was 4.1% of sales, 10 basis points lower than the prior year quarter. Second quarter adjusted SG&A expenses were 37.1% of sales, 20 basis points higher than the prior year. On an adjusted basis, interest expense was $6.4 million in the second quarter. The adjusted effective tax rate in Q2 was 24.8%. Second quarter GAAP net income was $21.4 million compared to $30.0 million in 2024. GAAP earnings per diluted share were $0.69 this quarter compared to $0.96 a year ago. Excluding the impact of special items discussed earlier, in the second…

Our first question comes from the line of Mike Matson of Needham & Company.

This is Joseph on for Mike. Maybe just starting with Buffalo Filter, was just wondering if you guys have seen any increased competition or pressure in the market just given all the legislative tailwinds. Have you seen any large players out there?

Joseph, we have not seen any new players other than the ones we continue to compete with. The market continues to grow, we announced the 19th state in the United States just passed legislation, North Carolina, but the competition remains the same.

Okay, that's helpful. And then I guess, maybe just a concern, I guess, around where your capacity is at, supply chain restraints, where is that kind of going together with sales force expansion? I know you guys usually talk about sales force expansion maybe around the beginning of the year. I'm not sure if you guys have talked about it in 2025 yet, so I was just kind of curious your view on that.

Let me have both questions. Let's start with the -- getting our supply chain fixed and back on offense there. We're making progress. We've made progress in the first half. Again, we're focused on planning, production and procurement. We are finished quarter 2 with lower back order and lower SKUs on back order and expect to be finishing 2025 in a much better position. From a standpoint of adding sales professionals, we typically add them in the second half to be ready to kick off a new year with an expanded sales force. But to be honest, we typically add sales reps dynamically throughout the year. As we lose sales professionals where we have opportunities, we continue to add them where the sales territory becomes open. And when new products are expanding and moving throughout the year, we add sales professionals where it makes sense, be that the geography has the opportunity to do them. And we will continue to add sales professionals as our business grows.

Our next question comes from the line Robbie Marcus of JPMorgan.

This is Lily on for Robbie. Maybe I'll start with capital. That came in a bit softer than what we were thinking. So can you talk a bit to the trends that you're seeing there? And is there any impact that you've seen in the quarter or that you're expecting moving forward from tighter hospital budgets?

Good question. Let me start with we're not seeing, in general, a slowdown from hospitals. The capital market continues to be what it has been. When we look at our specific capital comparables versus prior year, you're probably seeing 3 things. Number one, in 2024, there was a competitive recall in the insufflation market and we saw our numbers were probably more robust than they normally would have been in that period. We also had a number of new distributors on the international side in 2024 that started up. So you saw a higher capital flow last year on that. And our supply chain has also impacted our capital flow a little bit this year. So all in all, one side, capital demand from hospitals continues to be strong. We had some tough comparables and our supply chain is challenging our current capital ability to sell. But outside of that, we continue to have a capital portfolio we're proud of and expect capital to continue to have the same trends going forward as it has in prior years.

Got it. That's helpful. And then just as a follow-up, can you talk a bit about how you're feeling generally about your share position in ortho in light of these supply constraints? And to what extent do you think that any share loss that you may have seen has been sticky just given it's been a few quarters of disruption? And so how would you characterize your share position evolving over the last few months?

Well, from a pure number standpoint, we're not taking the share that we would like, and we know that our growth has not -- is lower than the actual market growth. So from a pure number standpoint, we've lost market share. The good news is with a platform like BioBrace, we're still driving forward and we're on offense there. We're continuing to be seen as an innovative orthopedic company globally. Our sales professionals continue to be in operating rooms solving clinical issues and our sales forces are continuing to be ready to get on offense when our supply chain challenges mitigate over at the second half of the year. So on one hand, we have lost market share this year. The numbers say that. On the other side, our innovation from new products continues to roll out and our BioBrace platform continues to put us in a good position going forward.

Our next question comes from the line of Matthew O'Brien of Piper Sandler.

This is [ Anna ] on for Matt. I just wanted to ask on the guide here. You guys beat on revenues but are only raising the bottom end of the guide, especially when considering FX improvements. Could you just help us understand the perspective maybe on the next 2 quarters as it relates to the top line?

Yes. Thanks, [ Anna ]. We've delivered the first half pretty much in line with what we thought. And as we look at the back half, our guidance today shows a little bit, we expect gradual improvement in the growth rate. As Pat said, we don't expect the same kind of capital headwinds in the back half that we had in the front half. But we see kind of gradual, hopefully steady improvement as we work through the rest of the year. And that led us to provide the guidance we did today, which is keeping the reported range the same, even though to your point, you're absolutely correct that currency did get a little easier. So brought the bottom end up, kept the top end the same, and that's how we're going to move into the back half.

Got it. And then just on EPS, you raised the guide there. Is that primarily just due to margin improvements or more so on like the FX tariff side of things?

Yes. If you look at the $0.09 raise from what we said a quarter ago, about $0.03 is from FX, about $0.03 is from tariffs and about $0.03 is from performance and operations. And so it's kind of all 3 of those add up to $0.09.

Our next question comes from the line of Young Li of Jefferies.

I guess to start, maybe just on the new AirSeal disclosures. Wondering if you can put that into perspective a little bit. I think the Xi attachment rate is 35% to 40%. How did that change versus before the introduction of DV5?

Yes. That's been trending up really over the last decade. And so it was -- we talked about it being about 1/3 of procedures a few years ago, then it was closer to 35%, and now we're north of 35%. So that's just been a very consistent increased adoption and usage rate that we've seen with robotics and AirSeal.

All right. Great. And then just following up on the DV5 comments, 10% to 20% utilization. I'm kind of curious what type of procedures typically are -- I guess, are these procedures being used because the DV5 system doesn't have their own insufflation product on it? Or is it being used because of more complex procedures and the clinicians are choosing AirSeal for those type of procedures on DV5?

Yes, Young, it's the latter. And so just to maybe remind you, DV5 has an integrated insufflator that's supplied with the robot. The more complex procedures where the surgeon understands the benefit of single digit low-pressure insufflation will improve patient outcomes through less pain and shorter length of stay. Those procedures such as a laparoscopic prostatectomy, the surgeon is actually asking the hospital to have the AirSeal brought into the procedure. And we're seeing between 10% to 20% of the DV5 procedures are actually the surgeon is saying, I want to use single digit low-pressure AirSeal for those procedures. And it's -- we're a little over a year out now with DV5 in the marketplace. We're learning more every day, and this is an opportunity for us to update you on what we're seeing real time.

I would now like to turn the conference back to Pat Beyer for closing remarks. Sir?

Thank you. Again, I would again like to reiterate what we said. We feel really strong about our growth outlook going forward. We're excited to get off of back order in the second half of the year and move on offense on our orthopedic side. And we're thankful to be able to have 4 strong growth drivers in our portfolio and excited about the team CONMED has to deliver aggregate growth for our shareholders in the future. And so thank you, everybody, for joining us on the call.

This concludes today's conference call. Thank you for participating. You may now disconnect.