컨메드(CNMD) 2026년 3분기 실적발표 콘퍼런스 콜: 자체 성장률 6.7% 달성, 가이던스 범위 축소

핵심 요약

• 2026년 3분기 순매출은 3억 3,560만 달러로, 보고 기준 0.7%, 고정환율 기준 0.8% 감소했습니다. 철수한 소화기내과 제품을 제외한 고정환율 기준 자체 매출은 6.7% 증가했습니다.
• 조정 희석 EPS는 1.04달러로 전년 동기의 1.08달러 대비 감소했습니다. 조정 영업이익률은 15.4%로 20bp 확대되었습니다.
• 일반 외과의 고정환율 기준 자체 매출은 에어실 및 버펄로 필터 직판 매출 성장에 힘입어 6.4% 증가했습니다. 정형외과 매출은 바이오브레이스의 주요 기여로 7.2% 성장했습니다.
• 해외 실적은 견조세를 유지했습니다. 미국 외 지역에서 고정환율 기준으로 일반 외과는 15.5%, 정형외과는 12.7% 성장했습니다. 미국 내 일반 외과 매출 성장은 1.9%에 그쳤으며, 미국 정형외과 매출은 1.7% 감소했습니다.
• 콘메드는 전분기 대비 개선 속도가 완만해질 것이라는 점을 반영하여 2026년 고정환율 기준 자체 매출 성장률 가이던스 범위를 기존 5.0%~6.0%에서 5.0%~5.5%로 축소했습니다. 조정 EPS 가이던스는 기존 4.48~4.60달러에서 4.54~4.61달러로 상향 조정되었습니다.
• 경영진은 2026년 잉여현금흐름을 약 1억 1,500만 달러, 연간 자사주 매입 규모를 약 6,200만 달러로 예상하고 있습니다.

주요 재무 데이터

콘메드는 2026년 첫 9개월 동안 4,990만 달러를 투입해 약 120만 주를 자사주로 매입했습니다. 분기 말 기준 이용 가능한 차입 한도는 4억 6,850만 달러였습니다.

사업 및 영업 실적

일반 외과

일반 외과 부문의 고정환율 기준 자체 매출은 6.4% 증가했습니다. 해외 시장의 15.5% 성장이 미국 내의 완만한 성장률(1.9%)을 상쇄했습니다.

에어실이 가장 큰 기여를 했습니다. 특히 해외 시장에서의 강력한 자본재 장비 성장과 안정적인 소모품 매출에 힘입어 매출 성장률은 한 자릿수 후반에서 두 자릿수 초반 범위로 가속화되었습니다.

콘메드는 에어실 로봇 솔루션을 인투이티브의 8밀리미터 헥스 카뉴라와 함께 사용할 수 있도록 미국 내 적응증을 확대했습니다. 경영진은 이것이 다빈치 5 플랫폼을 도입하는 병원 및 외과 의사들을 대상으로 한 마케팅에 도움이 된다고 설명했습니다.

회사는 또한 미국 복강경 수술 시장에서 에어실의 침투율이 여전히 낮다는 점을 강조했습니다. 경영진은 연간 300만 건 이상의 복강경 수술 중 에어실이 사용되는 비중은 6%~7%에 불과한 것으로 추정합니다. 이에 따라 에어실이 임상적·경제적 가치를 가장 잘 제공할 수 있는 복잡하고 중증도가 높은 수술을 주 목표로 영업 활동을 펼치고 있습니다.

버펄로 필터 연기 배출 장치의 직판 매출은 경영진의 장기 목표치인 한 자릿수 후반에서 두 자릿수 초반 범위 내에서 성장했습니다. 다만 이는 OEM 고객 대상 매출 감소로 일부 상쇄되었습니다. 콘메드는 마진이 더 높고 최종 사용자와의 접점이 가깝다는 이유로 직판 사업에 계속 주력하고 있습니다.

경영진은 미시간주와 펜실베이니아주에서 새로 시행된 수술실 연기 제거(smoke-free) 법안을 언급했습니다. 현재 미국 인구의 약 60%를 커버하는 총 23개 주에 관련 법안이 도입되어 있으며, 10개 이상의 주에서 유사한 법안 도입을 검토 중입니다.

정형외과

정형외과 부문의 고정환율 기준 자체 매출은 7.2% 증가했습니다. 해외 매출은 12.7% 증가한 반면, 콘메드가 미국 영업 조직 개편을 지속함에 따라 미국 내 매출은 1.7% 감소했습니다.

바이오브레이스는 특히 해외 시장에서 핵심 성장을 이끌었습니다. 경영진은 기계적 강도와 생체유도 특성의 결합뿐만 아니라, 고위험 환자의 회전근개 수복술에 보강용으로 사용했을 때 임상적으로 입증된 94%의 치유율을 강조했습니다.

바이오브레이스는 해당 분기 중 브라질에서 규제 당국의 승인을 받았습니다. 또한 동유럽, 중동, 한국, 중국, 인도 및 캐나다 등의 일부 시장에서도 허가를 받았으며, 해외 승인은 적응증에 따라 다릅니다.

경영진 가이던스

2026년 4분기의 경우 경영진은 GAAP 순매출을 3억 6,400만~3억 7,000만 달러로 예상하고 있습니다. 이는 약 370만 달러의 소화기내과 매출과 약 65만 달러의 환율 관련 순풍을 제외할 때 5.1%~6.8%의 고정환율 기준 자체 성장을 의미합니다. 조정 EPS는 1.23~1.30달러로 예상됩니다.

리스크 및 관전 포인트

• 경영진이 이전 예상보다 전분기 대비 개선 속도가 완만할 것으로 전망함에 따라 연간 자체 성장률 가이던스의 상단이 하향 조정되었습니다.
• 3분기 실적은 해외 대리점 주문 시점의 수혜를 입었으나, 경영진은 이러한 혜택이 4분기에 반복될 것으로 가정하지 않고 있습니다. 회사는 3분기 고정환율 기준 자체 매출 가이던스 하단을 150만 달러 초과 달성했으나, 이 수치를 4분기 전망에 이월 반영하지는 않았습니다.
• 미국 정형외과 매출은 영업 조직 개편 이후 콘메드가 대리점을 온보딩하고 본격 운영하는 과정에 있어 여전히 역성장을 기록했습니다.
• OEM 버펄로 필터 수요는 OEM 파트너사의 사업 및 공급망 결정에 따라 발주가 이루어지므로 변동성이 유지될 수 있습니다.
• 3분기 총이익률은 마진이 낮은 해외 대리점 매출 믹스와 개별적인 운영 및 재고 관련 항목의 영향을 받았습니다.
• 경영진은 관세 조건이 변경될 수 있음을 인정하면서도, 관세 환급을 제외한 관세 영향이 EPS에 약 0.35달러 수준일 것이라는 기존 추정치를 유지했습니다.
• 리파이낸싱으로 인해 이자비용이 증가했습니다. 경영진은 금리가 현 수준을 유지할 경우 2026년 하반기 런레이트가 실적 모델링의 합리적인 기준이 될 것이라고 밝혔습니다.

애널리스트 Q&A 주요 내용

경영진은 연간 자체 성장률 가이던스 상단을 하향한 이유에 대해 4분기 전망을 3분기 실적 흐름과 보다 부합하도록 반영했기 때문이라고 설명했습니다. 이전 전망은 4분기 고정환율 기준 자체 성장률을 8.1%로 내다봤으나, 수정된 상단 기준으로는 6.8%를 의미합니다.

미국 정형외과 사업과 관련해 경영진은 지난 3분기 동안 영업 조직 개편이 진행되었다고 설명했습니다. 현재는 대리점 온보딩 및 운영 정상화에 주력하고 있으며, 올해 말 또는 2027년 상반기 중에 매출을 성장세로 돌아서게 하는 것을 목표로 하고 있습니다.

에어실의 경우 모든 복강경 수술 기회를 한꺼번에 공략하기보다는 대장항문, 비뇨기과, 산부인과, 비만대사 수술 등 복잡한 복강경 및 로봇 수술에 우선순위를 두고 있습니다.

자본 배분과 관련해 존 갤러거 최고재무책임자(CFO)는 재고, 이자비용, 운전자본 관리 및 비경상 현금 지출 축소를 통해 현금 창출력을 개선할 수 있는 기회를 제시했습니다. 또한 콘메드는 매출 성장에 기여하는 M&A에 대한 의지가 있으며, 2027년 자본 배분에 대한 보다 구체적인 계획은 4분기 실적 발표회에서 공유할 예정이라고 덧붙였습니다.

경영진은 잠재적 전략적 행보에 대한 시장 소문에 관해 답변을 거부했습니다. 또한 콘메드가 에어실, 버펄로 필터, 바이오브레이스를 중심으로 최소 침습 수술, 연기 배출, 정형외과 연조직 수복 사업에 계속 집중하고 있음을 재확인했습니다.

실적 발표 콜 전문

전체 실적 발표 컨퍼런스 콜 녹취록

경영진 발표

Operator

Hello, and welcome to CONMED's Third Quarter of 2026 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 forward-looking statements that involve risks and uncertainties as those terms are defined under 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 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. Reconciliation of those non-GAAP financial measures to the most comparable measures calculated and presented in accordance with GAAP are available in the earnings press release on the Investor Relations portion of our website.

I would now like to turn the call over to Mr. Pat Beyer, CONMED's President and Chief Executive Officer. Please go ahead, sir.

Patrick Beyer

Thank you, operator, and welcome, everyone, to our third quarter of 2026 earnings call. I'm joined on the line by John Gallagher, our Chief Financial Officer.

Let me provide you with a quick agenda for today's call. I'll start with a brief overview of our quarterly financial results. Then I'll discuss the sales performance in our General and Orthopedic Surgery product lines, the key product growth drivers within each and related operational highlights. John will review our financial results in detail along with our guidance for 2026, which we updated in today's press release. I'll then share a few closing remarks before we open the call for questions.

With that, let's get started with a review of our financial performance in the third quarter. Unless noted otherwise, all sales growth figures discussed are provided on a year-over-year and constant currency basis. We reported net revenue of $335.6 million in the third quarter. Our net sales decreased 70 basis points on an as-reported basis and 80 basis points on a constant currency basis.

On an organic constant currency basis, our net revenue increased 6.7% year-over-year. As we've discussed previously, our organic growth excludes the sales of gastroenterology products in our General Surgery product line due to our strategic exits of these products as part of our portfolio optimization strategy.

Our organic constant currency sales performance was consistent with our expectations for the quarter, which we shared in our last earnings call. In terms of profitability, we generated adjusted diluted earnings per share of $1.04 for the third quarter, which exceeded the high end of our expectations. In short, we were pleased to deliver strong performance in the third quarter on both the top and bottom line.

I'll now discuss the third quarter sales performance in our General Surgery and Orthopedic Surgery product lines, along with updates on the key product growth drivers in each. Excluding the impact of our strategic GI exits, our sales growth was broad-based across both of our product lines, reflecting strong contributions from our key growth platforms.

Sales of our General Surgery products increased 6.4% on an organic constant currency basis. By geography, our General Surgery growth was driven by 15.5% organic constant currency growth internationally, where we saw impressive performance in both EMEA and APAC regions, coupled with 1.9% growth domestically. By product, AirSeal was the largest driver of our total General Surgery sales growth. We also saw notable contributions from direct sales of Buffalo Filter, our surgical smoke evacuation platform.

I'll now provide an update on these 2 key growth products, starting with AirSeal, our advanced insufflation platform. We were pleased with our AirSeal sales performance and the improvement in growth trends we experienced in the third quarter as expected. Our AirSeal growth was driven primarily by stable growth in sales of disposables and strong growth in capital equipment, particularly outside the U.S.

From an operational standpoint, our domestic and international teams remain focused on facilitating the adoption and utilization of AirSeal in both robotic and laparoscopic surgery.

In robotic surgery, AirSeal's clinical differentiation in complex high-acuity procedures remain central to our commercial efforts. Surgeons performing these cases consistently highlight AirSeal's ability to maintain stable, low-pressure insufflation as a meaningful advantage over conventional insufflation systems.

In practice, this translates into real benefits that have been demonstrated in clinical studies, shorter procedure times, clear visualizations and meaningful reductions in both postoperative pain and length of stay. This combination of clinical performance and economic value is what keeps robotic surgeons choosing AirSeal.

With this in mind, our team is focused on leveraging these advantages to establish AirSeal as the preferred insufflation solution for complex robotic procedures regardless of the site of care and underlying robotic platform. We continue to see success on this front, which gives us confidence in its growth trajectory as robotic surgery adoption continues to expand.

With respect to specific operational highlights during the quarter, in late July, we announced a new expanded U.S. clinical indication for our AirSeal robotic solution, which is now indicated for use with Intuitive's 8-millimeter hex cannulas. This expanded indication enables our sales professionals to market AirSeal directly to the growing base of hospitals and surgeons adopting Intuitive's da Vinci 5 robotic surgical platform. It also provides prospective customers with the compatibility data they need as they evaluate AirSeal alongside this robotic surgical platform.

This data was generated through joint testing conducted between the teams at CONMED and Intuitive, and I'm pleased with the continued collaboration between our organizations. Our team has been focused on educating current and prospective customers on this development in recent months. While it is early, we believe this expanded indication will provide our customers clarity and confidence on the joint use of these products and procedures.

We also continue to leverage and expand our portfolio of clinical and economic evidence. Specifically, our team is raising awareness globally of AirSeal's competitive advantages by leveraging the results of a recently published study by Professor Nikhil Vasdev.

As a reminder, this study detailed a randomized controlled trial comparing AirSeal to a widely used competing insufflator. It found that patients treated with AirSeal experienced more favorable outcomes in intraoperative pain, blood loss and procedure time. Professor Vasdev has presented his experience and findings of more favorable outcomes at multiple robotic surgery conferences around the world, including the Society of Robotic Surgery Conferences in both the United States and India.

Our team also made significant progress towards building out our data set in the ambulatory surgery center setting. We aim to utilize this data to further strengthen our value proposition and support our future growth in ambulatory surgery centers.

Turning to laparoscopic surgery. As we have discussed in the past, we remain significantly underpenetrated in the U.S. market with AirSeal estimated to be used in only 6% to 7% of the more than 3 million laparoscopic procedures performed annually.

With this in mind, our team is focused on prioritizing specific laparoscopic procedure categories where AirSeal is likely to have a maximal clinical and economic impact, giving us the right to win. Our execution here is becoming more targeted as we implement procedure-specific training for our commercial teams, strengthen our relationship with key clinicians and generate related clinical and economic evidence.

Stepping back, given our performance and progress in the third quarter, we remain confident in AirSeal's long-term growth trajectory. Our conviction is further supported by multiple factors, including AirSeal's differentiated clinical and economic value proposition, the substantial untapped opportunity that remains ahead of us across the global robotic and laparoscopic surgery markets and the focused execution of our global team.

Moving to an update on Buffalo Filter, our smoke evacuation platform. As I mentioned earlier, we saw strong contributions in the third quarter from sales of our direct smoke evacuation portfolio with year-over-year growth within the high single-digit to low double-digit range we expect annually over the long term.

This performance was moderated by a decrease in sales to our OEM smoke evacuation customers. As we've discussed previously, our strategic focus remains on our direct smoke evacuation portfolio given its stronger margin profile and closer proximity to the end user.

As a reminder, we estimate the global smoke evacuation market represents a $1 billion opportunity and the unmet clinical need remains clear and an estimated 90% of surgical procedures generate smoke, creating a potentially hazardous environment for both clinicians and patients.

Against this backdrop, we continue to see meaningful activity from both legislators and medical societies working to address this issue, which remains an important long-term tailwind for Buffalo Filter. To that end, during the third quarter, Michigan enacted a law requiring facilities that perform surgical procedures with equipment likely to generate smoke to implement a smoke evacuation policy by July 2027.

And just this past week, Pennsylvania enacted a law requiring hospitals and ambulatory surgery centers to use smoke evacuation devices during all procedures that generate hazardous smoke. This legislation will require facilities to implement the related programs and policies before the end of January 2027.

With these developments, there are now a total of 23 states with smoke-free operating room laws covering approximately 60% of the United States population. Buffalo Filter remains well positioned in this evolving market with clinical studies demonstrating its ability to filter out virtually all toxic surgical smoke.

Our team is preparing to leverage these and other recent legislative tailwinds by engaging and educating affected facilities in each state, and we continue to see activity building with more than 10 additional states currently considering similar legislation. Given this recent traction and significant runway, we expect our direct smoke evacuation portfolio to deliver strong durable growth, both in 2026 and longer term.

Shifting now to our Orthopedic Surgery product line. Our Orthopedic Surgery organic constant currency sales increased 7.2% in the third quarter. By geography, this performance was driven by 12.7% constant currency growth internationally, reflecting broad-based growth across all of our major international regions. Our international growth more than offset a 1.7% decrease in domestic orthopedic sales.

Our U.S. performance continued to reflect the impact of actions taken earlier this year to strengthen our commercial organization, which we discussed on our second quarter call. As a result of these actions, we continue to believe we are better positioned to drive stable long-term growth in our Orthopedic Surgery product line.

Importantly, our year-over-year growth trends in U.S. Orthopedic sales improved on both a 2- and 3-year basis in the third quarter. By product, our reinforced bio inductive implant, BioBrace, was a key driver in our Orthopedic Surgery sales growth in the quarter, particularly the impressive performance delivered by our international team.

I'll now provide a brief update on BioBrace. We continue to see the traction globally as our team works to raise awareness of the product and its clinical benefits, most notably its ability to provide both mechanical strength to protect repairs and reduce stress in healing tissue and bio inductive properties to promote tissue growth, supporting the body's natural healing process.

The powerful combination of these 2 attributes allow our sales representatives to confidently recommend BioBrace for prospective customers' toughest cases. Most notably rotator cuff repairs, where roughly 1/3 to half of procedures are estimated to result in repair. As a reminder, BioBrace has clinically demonstrated a 94% healing rate when used to augment rotator cuff repair in high-risk patients.

The American Academy of Orthopedic Surgeons clinical practice guidelines also now strongly recommend the use of bio inductive implants to augment these procedures, support that provides an important tailwind for adoption given the estimated 1 million rotator cuff repair procedures performed annually in the United States alone. We continue to see that clinicians who trial BioBrace for such challenging cases and experience the strong outcomes they are able to achieve tend to adopt and utilize the product over the long term.

Beyond our existing markets, we continue to expand access to BioBrace globally. Most notably, during the third quarter, our international team secured regulatory clearance for BioBrace in Brazil, an important step in extending the reach of this platform. Taken together, we remain confident that BioBrace's differentiated clinical profile and expanding global footprint positioned it to remain a durable long-term growth driver for our Orthopedic Surgery product line.

With that, I'll turn the call over to John, who will walk you through our third quarter financial results in greater detail and review our updated guidance.

John Gallagher

Thank you, Pat.

Given Pat's detailed discussion of our sales results in the third quarter, I will begin my remarks at the gross profit line. Unless otherwise noted, my commentary will focus on our non-GAAP results during the third quarter of 2026, with all growth rates on a year-over-year basis.

Our earnings press release issued today includes reconciliations to the most comparable figures presented in accordance with GAAP. We also have included a supplemental slide deck reviewing our third quarter results and updated financial guidance on the Investor Relations section of our website.

Third quarter adjusted gross profit was consistent with the prior year period. Adjusted gross margin was 56.4%, an increase of 40 basis points, driven primarily by favorable product mix. Adjusted operating expenses were essentially flat with a 20 basis point decrease in adjusted SG&A expense and a 1% decrease in adjusted R&D expense.

Our adjusted operating margin was 15.4%, an increase of 20 basis points. Adjusted interest expense was $10.5 million in the third quarter compared to $6.3 million last year. The increase in our adjusted interest expense in the third quarter of 2026 reflects the impact of our recent debt refinancing activities.

As a reminder, during the second quarter of 2026, we drew down on our new $450 million term loan and our existing revolving credit facility to repurchase $645.2 million of our $800 million 2.25% convertible notes ahead of their June 2027 maturity.

The adjusted effective tax rate in the third quarter was 23.5% compared to 25.5% last year. Adjusted net income was $31.4 million or $1.04 per diluted share compared to $33.4 million or $1.08 per diluted share in 2025. As Pat mentioned, our third quarter adjusted EPS results exceeded the low and high-end expectations we outlined on our second quarter earnings call by $0.06 and $0.01, respectively. We generated $46.4 million of free cash flow in the third quarter of 2026, a decrease of 3.6% year-over-year.

Turning to a review of our balance sheet and financial condition. As of September 30, 2026, CONMED had cash of $48 million, total debt obligations of $815.9 million and additional available borrowing capacity of $468.5 million. This compares to cash and equivalents of $40.8 million, total debt obligations of $834.9 million and available borrowing capacity of $648.5 million as of December 31, 2025. Our leverage ratio on September 30, 2026, was 2.7x.

Lastly, with respect to share repurchases, during the first 9 months of 2026, we repurchased approximately 1.2 million shares of common stock for a total of $49.9 million. We anticipate allocating approximately $62 million to share repurchase in the full year of 2026.

Turning to a review of our 2026 financial guidance, which we updated in today's press release. We updated our net sales guidance range today based on updated expectations for revenue contributions from product sales and the MSA agreement related to our strategic exit from our GI product offerings in 2026 and updated assumptions regarding the impact on our revenue results from changes in foreign currency exchange rates.

Specifically, our full year 2026 net revenue guidance now assumes GI revenue of approximately $20 million compared to our prior guidance range of $20 million to $22 million. And changes in foreign currency exchange rates are now expected to represent a tailwind to GAAP results of approximately $9 million compared to our prior expectation of a tailwind from FX of between $7 million to $7.5 million.

On an organic constant currency basis, we now expect net sales growth of 5% to 5.5% compared to our prior expectation of 5% to 6%. Our updated full year 2026 revenue guidance also reflects both our performance in the third quarter and updated outlook for the balance of the year.

Specifically, we reaffirmed the low end of our organic constant currency growth range and remain confident in our team's ability to deliver at least 5% organic constant currency growth in 2026. We narrowed the high end of our organic constant currency growth range to reflect a more measured pace of sequential improvement in our growth trends compared to what was assumed in our prior guidance.

With respect to profitability guidance for 2026, we now expect non-GAAP adjusted diluted earnings per share in the range of $4.54 to $4.61 compared to our prior guidance range of $4.48 to $4.60. The increase in our non-GAAP EPS guidance range reflects our better-than-expected EPS results in the third quarter.

For modeling purposes, our updated financial guidance for 2026 now assumes adjusted gross margin of approximately 57.5% adjusted interest expense of approximately $33.7 million in 2026 compared to our prior expectation of approximately $33 million. Adjusted effective tax rate of approximately 24.5% compared to 25% previously. We expect to generate free cash flow of approximately $115 million, and we expect weighted average shares outstanding of 30.2 million.

Lastly, as it relates to the fourth quarter of 2026, our guidance implies the following, GAAP net sales of between $364 million and $370 million. This represents organic constant currency growth in the range of 5.1% to 6.8%, excluding expected GI revenue of approximately $3.7 million and an FX tailwind of approximately $650,000. Adjusted EPS in the fourth quarter of between $1.23 and $1.30.

I'll now turn the call back to Pat to share a few closing thoughts.

Patrick Beyer

Thanks, John.

In summary, Q3 was a quarter of solid execution for CONMED. We delivered 6.7% net revenue growth on an organic constant currency basis, fueled by balanced contributions from both General and Orthopedic Surgery. AirSeal, Buffalo Filter direct smoke evacuation and BioBrace served as the driving engines of our sales growth in their respective product lines. And our performance across the P&L enabled us to deliver adjusted EPS that exceeded our expectations.

More broadly, our progress to date this year leaves us well positioned going forward. Following the strategic exits of our GI products, our organization is increasingly focused on the markets where we see the greatest long-term opportunity, minimally invasive surgery, smoke evacuation and orthopedic soft tissue repair. And our 3 key growth platforms in each market continue to gain share as we expand into new regions and clinical settings.

With an enhanced focus on our key markets, differentiated growth platforms and a strong balance sheet, we look forward to driving continued execution on our growth strategy as we close out 2026.

I'd like to conclude by thanking everyone on the CONMED team for their efforts this past quarter. Thanks as well to our customers, suppliers, shareholders and those joining us on today's call for your continued support.

Operator, we will now open the call for questions.

Operator

[Operator Instructions] Our first question comes from Vik Chopra with BMO Capital Markets.

질의응답

Anton Heldmann

It's Anton Heldmann on for Vik. I guess, John, I was hoping you could talk a bit more about the full year guidance update. At the midpoint, the sales guidance is moving lower by $2.5 million more than the $800,000 third quarter sales shortfall. Can you kind of bridge us to the change in the fourth quarter outlook? What specifically changed relative to your expectations heading into the quarter?

John Gallagher

Anton, happy to do that. Yes, for avoidance of any doubt, there's 2 things that changed as it relates to the revenue guidance that we put out there. The first of which is FX. So we made an update to FX. It's now a tailwind of $9 million. It was $7 million to $7.5 million.

And then the second is GI. GI, we now have at $20 million, and it was $20 million to $22 million. So when you exclude those items, then we're very confident in at the low end of the range being at least 5% organic constant currency revenue growth for the year.

Up at the high end, which I think is where your question was going and how do you move lower then up at the high end of the range, we previously had an implied Q4 revenue growth on a constant currency organic basis of 8.1%. And that was too high based on the performance that we saw in Q3.

So in Q3, we did 6.7 organic constant currency revenue growth. And when we look at that and the visibility we have for the rest of the year, then we felt more comfortable and the implied -- by the way, at the high end of the range, the implied Q4 is at 6.8%.

So it's more in line with where we -- the performance that we saw in Q3. And here we are with a couple of months left in the year, we felt more comfortable tightening the range, but I have very high confidence in achieving at least 5% organic constant currency revenue growth.

Anton Heldmann

Great. And then Pat, maybe one for you. The U.S. General Surgery business is a bit softer than what we were kind of thinking. It sounds like perhaps the OEM kind of smoke evacuation business was the driver here. Can you talk a little bit more about your visibility into the OEM kind of smoke evacuation like ordering dynamics and like whether we've kind of reached trough levels? Like what kind of gets that kind of improving from here?

Patrick Beyer

Anton, you're right in your assumption that global General Surgery business was up 6.4%, and we were really pleased with it. U.S. General Surgery business was up 2%. Smoke evacuation was up strong. AirSeal was up strong in the U.S. It was OEM Buffalo Filter.

And to remind you, we acquired the OEM Buffalo Filter business when we purchased the Buffalo Filter franchise. Our strategy is to focus on our direct business. It's higher margin. It's closer to the customer, and we can control and enjoy that dynamic with the direct business better by going direct.

We continue to have an OEM business. We're working with our OEM partners to understand more of that supply chain. But quite honestly, it will be more variable for us as OEM suppliers decide what they're doing with their business, which is one of the reasons why we specifically call it out Anton.

Operator

Our next question comes from Lawrence Biegelsen with Wells Fargo.

Ross Osborn

This is Ross Osborn on for Larry. So starting with Ortho domestic, what inning do you think you guys are in with getting sales productivity back to a normal rate? And how should we think about your domestic ortho growth rate exiting this year and next?

Patrick Beyer

Ross, good question. Again, kind of similar to the previous answer, I would just go, listen, our global Orthopedic business had a really good Q3. We were up 7.2%. We also called out in our second quarter call our U.S. orthopedic performance will reflect the actions we're undertaking to improve our commercial organization.

I can tell you that's the reason why our U.S. Orthopedic business kind of took a sideway movement and declined a little bit in the third quarter. But we believe our U.S. Orthopedic product line is better positioned for stable long-term growth as a result of it.

What inning we're in? I'd probably go half versus innings. We know last night's game went to the 12th inning. And so I don't want to draw this out. We've made a lot of progress in the first and second quarter of this year, making the changes. Third quarter, we made even more.

Right now, our focus is onboarding and operationalizing our distributors so that we can be back to driving growth. We believe we'll exit this year in a position or first half next year for driving growth in the United States back in the guideline of what we should be doing.

John Gallagher

And as far as the growth rate, Ross, you were asking about the growth rate. So we highlighted in the prepared remarks that the growth trends are improving. So despite what we saw in the quarter-on-quarter performance in U.S. ortho, we're seeing improvement in the growth trends. So that's giving us some confidence as we approach the end of the year.

Ross Osborn

Makes sense. And then in your prepared remarks, you cited AirSeal is underpenetrated 6% to 7% of lab procedures. What's the process for prioritizing which procedure types or specialties to target next? And what procedure categories the current focus for expanding beyond that 6% to 7% base?

Patrick Beyer

Ross, it's a really good question. And in previous calls, I've tried to lay that out a little bit. we know where in our robotic procedures, we're getting the highest uptake and it's complex, high acuity, longer procedures, those procedures like colorectal, urology, gynecology, bariatrics.

What we've done is we've looked at the penetration rate we have in laparoscopy versus robotic, and we're underpenetrated in laparoscopy. So we know from a 6% to 7% current penetration, if we could have the same penetration rate that we have in robotic, it would be a significant move for us. And so we are very targeted on the surgeon groups we're bringing our clinical insufflation to in the laparoscopic market, and we're very targeted how we train our sales force on don't go after 100% initially opportunities in laparoscopic. It's our targeted opportunities we're going at.

Operator

Our next question comes from Matthew O'Brien with Piper Sandler.

Matthew O'Brien

I was just hoping to follow up on Anton's question on the high end of the range coming down by 50 basis points. Is that -- how much of that is related to the OEM Buffalo Filter business versus the, I guess, a little slowness in terms of getting the ortho franchise back to kind of where you want it from a growth perspective? And then I do have a follow-up.

John Gallagher

Well, so actually, the way to think about it is it was -- we're bringing -- we're tightening from the high end of the range from 6% down to 5.5%. So we're taking it down 50 basis points.

The thing to focus on there is the performance that we saw in Q3 was aided by a very strong international. So you saw that in the report and in the prepared remarks. Some of that was benefit -- and we know that our international business is largely a distribution-oriented business. We saw some timing of distributor orders that benefited Q3, and as we look at the second half of the year, we remain on track for international performance, but we basically are not underwriting that to repeat again in Q4. So it's one of the key items related to why is the high end of the guide coming down from 6% to 5.5%.

Matthew O'Brien

Okay. Maybe I'll follow up offline. The other piece is the domestic franchise. I know you're saying Buffalo did pretty well. Direct Buffalo did well. AirSeal did well. I'm just thinking about competing in these markets and like what kind of evidence you're starting to see that some of your adjustments are working between those franchises between the orthopedic franchises, I think about some of your competition there, which is really, really strong.

Are you -- is there anything you can point us to from an evidentiary perspective that it's starting to work? Because, again, it's just -- it feels like a little bit of the guide -- the modest guide down on the top line is related to maybe some competitive challenges as you're going up against some pretty big players.

Patrick Beyer

Matt, as we think -- as I think and we think about the United States market, it's a big market. Certainly, it's competitive, but it's a market we can and should win in. When I look at General Surgery specific, we had strong growth in Buffalo Filter. We met our guidance range and AirSeal continues to do well there. And our direct smoke, as I said, did well.

When we look at Buffalo Filter OEM, it does not hit international. So we get all of the headwind in the U.S. On the Orthopedic side, our BioBrace is strong and doing well. And our portfolio, the same portfolio that continues to do well internationally should be doing better in the United States, which is one of the reasons we're doubling down on the commercial organization and the sales force. We know that our trends are improving. So when we look at the year-to-year growth over 2 and 3 years to normalize for quarter comp dynamics, our trends are getting better.

So while we certainly agree with you, we never want to decline in the business, we're getting better, and we believe the trends prove that we should be a growth business in the United States, not just in the General Surgery side, but also in our Orthopedic business. We're certainly holding ourselves accountable to that and our teams accountable to that.

Operator

Our next question comes from Mike Matson with Needham & Company.

Michael Matson

So I just wanted to ask one on BioBrace. You mentioned the OUS sales. So curious of the countries where you're selling your Orthopedic products, how many of them are you selling BioBrace in currently? And how does the labeling and kind of the way that you're able to market it compare to the U.S. market? And I guess, pricing for that matter as well, is it a lower price outside the U.S.?

Patrick Beyer

Good question, Mike. Again, so BioBrace internationally -- first of all, and you are right to call that difference out. In the United States, we're approved for anywhere soft tissue weakness exists. Internationally, it's by indication. So we have studies going on to get our BioBrace solution approved in the rotator cuff, in the knee and in the Achilles area.

Today, it's approved in Canada, in some of our Eastern European and our Middle East markets, in Korea, in China, in India and in Brazil, but for the rotator cuff. And where it is approved, we're getting really strong uptake. So the clinical differentiation of strength and healing is resonating. And on the price side, the price is different in every market around the world. And so as you would expect it to be in many orthopedic businesses.

Michael Matson

Okay. That's helpful. And then for AirSeal, so I apologize if you did mention this and I missed it, but you've talked about targeting or expecting it to grow high single digits to low double digits. And I heard your commentary on Buffalo Filter kind of being in that range if you exclude the OEM business. Was AirSeal also in that range in the quarter?

Patrick Beyer

So I'll say 3 quick things on AirSeal. We were really pleased with the AirSeal sales performance in quarter 3. We said in quarter 2, we would accelerate the growth, and we did as we expected. It grew both disposables and capital and accelerated. And yes, we said it would be a high single-digit, low double-digit business. It grew in that range.

Operator

Our next question comes from Robbie Marcus with JPMorgan.

Robert Marcus

Two for me. First, I wanted -- I didn't hear anything about the progress on the strategic update. You had mentioned in some releases that you were evaluating strategic action for the company. Would love to just get the latest on interest and thoughts on that. And then I have a follow-up.

Patrick Beyer

Robbie, what I have said and what we have said publicly is, number one, there was a rumor, and we don't comment on rumors. But what I would say is I can see why somebody would be attracted to CONMED. We just grew organic constant currency growth, 6.7%.

And in 2025, CONMED heightened our focus. We exited the GI business. We aligned our execution around 3 focus markets, minimally invasive surgery, smoke evacuation, orthopedic soft tissue repair. So we're focused on 3 markets, and we are executing strongly around 3 growth drivers, AirSeal, Buffalo Filter and BioBrace. That's kind of step one. Where are we going to play and how are we going to win?

Step 2 is this refining our multiyear plan of what are our execution, what are our actions around M&A opportunities and how are we going to win and maximize our growth opportunity and optimize our profitability. And so that's consistent with what I've tried to say in the past, and we don't comment on rumors.

Robert Marcus

Got it. As you think about the exit rate here, somewhere in that upper mid-single-digit organic sales growth range. Is that the right place to be as we think about moving into 2027? We obviously have half a year higher of the new interest rate. But any other puts and takes you would highlight into 2027? And is that the right run rate to use on top line?

John Gallagher

Robbie, so we were -- as Patrick said, we were pleased with 6.7% organic constant currency revenue growth. in the quarter. You saw the tightening on the guide basically gets the high end of the implied Q4 to approximately in that range. It's at 6.8% at the high end.

As I mentioned, some timing of distributor orders internationally would have us pointed more towards the lower end of that. But overall, our growth rate expectations as we look at international remain intact for the second half.

So we're not going to comment on 2027 today. We look forward to updating you on the next call related to that. But we have very high confidence at the low end of this range here. We tightened a bit based on some timing related to Q3 international. And you saw us do 6.7% in Q3.

Robert Marcus

Any puts and takes on the P&L to think about into next year with that specific guidance?

John Gallagher

I mean you mentioned interest expense. I think that's an area that's higher now. So when you look at second half interest expense, then that's the right way to think about it given that we didn't have a refi in place for Q1 and for most of Q2. So second half interest expense, assuming flat interest rates to where we are right now would be a good modeling point.

The other one to call out, too, Robbie, is we -- during 2026, we have we have had the impact of GI in our EPS. So like when we're thinking about down the P&L and EPS growth, it's important to note that full year EPS this year is flat, and we're jumping over $0.45 of a headwind related to GI. So that's a bit of a tailwind as we look at next year. We don't expect that to repeat. We expect it to happen on a partial year, but not on a full year basis like we've seen.

Operator

Our next question comes from Travis Steed with Bank of America.

Travis Steed

Gross margin, a little light versus Street and guide also ticked down a little lower to the low end of the 57.5% to 58%. So just wanted to make sure I understood the puts and takes on gross margin for this year.

John Gallagher

Yes. Thanks for the question. Two things on gross margin as it relates to the Q3 results. One is international mix. So you saw the strong performance that we've been referencing on international, distributor-oriented business, slightly lower gross margin. So the strong mix that we had in Q3 is a partial driver.

The other one is on -- in Q3, we were impacted by some discrete operations and inventory items. And when taken together, those -- that's what positioned us below the outlook that we have of 50 to 100 basis points. Keep in mind, though, that the guidance, the full year guidance that we have, although ticked down a bit for the reasons I stated, is still on a full year basis, we'll achieve 50 to 100 basis points of gross margin expansion with and without the refund.

Travis Steed

Okay. That's helpful. And I don't know if there's a way to quantify -- you talked about the order timing benefit in Q3, not repeating in Q4. Any way to quantify that? And then anything on tariffs with Section 232 likely coming at some point in the near term?

John Gallagher

Yes. I'll take the first one first -- or the last one first. On the tariffs, no change. We had said before and throughout the year that about a $0.35 impact ignoring the tariff refunds. We continue to see that. To your point, we may see some changes coming. But for the moment, no change to the $0.35. And the other -- if you don't mind, say the other one more time.

Travis Steed

The order timing, just curious the quantification on the order timing, called the benefit of Q3 didn't -- is not going to repeat in Q4. Just know how much that helped this quarter on Q3.

John Gallagher

Yes. To be specific because I think that's where some of the other questions were going. To be specific, we beat the low end of our Q3 organic constant currency revenue guidance by $1.5 million. We did not roll that through into the Q4 guide.

Operator

Our next question comes from Young Li with Jefferies.

Young Li

I guess just a quick follow-up on the prior question. In terms of OUS contributions, the positive timing contributions, can you maybe break out the impact for ortho versus General Surgery?

John Gallagher

We haven't made that breakout. I mean you can see that both businesses on a global basis grew well into the mid-single ordering high single-digit growth rates. That was in both Ortho and in Gen Surg. That was -- a lot of that was driven internationally as you saw. So you can kind of take it from there, but we haven't broken it out.

Young Li

Okay. Got it. And then I guess one more, just wanted to hear your updated thoughts on capital allocation and M&A priorities. It definitely seems like the focus near term is more on deleveraging and buybacks. But what are your thoughts on the M&A environment, valuations? And when would you be ready or interested in doing another deal, either tuck-in or bigger ones?

John Gallagher

Yes. Yes. So I'm going to lay out the specifics on the Q4 call about capital allocation. But maybe a few thoughts like to your point, a few thoughts as I've gotten started here. I mean one is around the free cash flow profile. CONMED's historically been a strong free cash flow generator. In fact, has achieved greater than 90% free cash flow conversion in 7 of the last 10 years.

Even with that in mind, though, the free cash flow conversion has touched down a bit in the last 12 to 18 months. So I think there's opportunity there. I think there's opportunity in inventory. I think there's opportunity on interest expense. I think there's opportunity as it relates to other working capital and some nonrecurring cash spend that we have.

So that strong cash generator profile is important, and I think it's a key strength to the company. And it also represents an opportunity for some enhancement in the near term. So that's one observation, one point.

Another you mentioned this, leverage. Leverage has been coming down. We're below 3x. Our net leverage is 2.7x now. That's good. It's going to free up some capacity. But the interest expense, as we talked about, is high. So as you look at the capital structure and you contemplate how much debt or what kind of debt, then there's -- and we also have a draw on our revolving credit facility. There is an opportunity to think about the debt stack and what that capital structure will look like going forward.

And then maybe the other observation would be around share repurchase. We've done, as we mentioned in the prepared remarks, we bought back about $50 million of shares year-to-date. We anticipate doing $62 million as we had committed earlier in the year. That is meaningful return of cash to shareholders that's greater than 2x what the dividend was.

So taking all of these together, these are the inputs, if you will, that I'm thinking about some observations that I've made. And on the Q4 call, we'll roll out some specifics as it relates to 2027. But you can see that a lot of the comments and observations that I've talked about here are related to freeing up cash, and we do have an appetite for looking at revenue growth accretive M&A opportunities.

Operator

I'm not showing any further questions at this time. And that concludes our conference call today. Thank you for your participation. You may now disconnect.