CONMED (CNMD) 2026 年第三季法說會：有機成長達 6.7%，財測指引收窄

重點摘要

• 2026 財年第三季淨營收為 3.356 億美元，按報告數據年減 0.7%，按固定匯率計算年減 0.8%。若扣除已退出的腸胃科產品，有機固定匯率營收成長 6.7%。
• 調整後稀釋每股盈餘 (EPS) 為 1.04 美元，前一年同期為 1.08 美元。調整後營業利益率擴增 20 個基點至 15.4%。
• 一般外科有機固定匯率銷售額成長 6.4%，主要由 AirSeal 與 Buffalo Filter 直銷業務帶動。骨科外科成長 7.2%，其中 BioBrace 為主要貢獻者。
• 國際市場表現持續強勁：按固定匯率計算，美國以外地區的一般外科成長 15.5%，骨科外科成長 12.7%。美國本土一般外科成長 1.9%，而美國骨科外科銷售額則下降 1.7%。
• CONMED 將 2026 財年有機固定匯率銷售成長展望從 5.0%–6.0% 窄幅調降至 5.0%–5.5%，反映出季增改善步調較為穩健溫和。調整後 EPS 展望則從 4.48–4.60 美元上調至 4.54–4.61 美元。
• 管理層預計 2026 財年自由現金流約為 1.15 億美元，全年股票回購約為 6,200 萬美元。

關鍵財務數據

CONMED 在 2026 財年前九個月以 4,990 萬美元回購了約 120 萬股股票。截至季末，可用借貸額度為 4.685 億美元。

業務與營運表現

一般外科

一般外科有機固定匯率銷售額成長 6.4%。國際市場 15.5% 的成長彌補了美國本土 1.9% 的較溫和成長。

AirSeal 為最大貢獻者。在耗材銷售穩定及資本設備強勁成長（尤其是在美國以外地區）的支持下，銷售成長加速至高個位數到低雙位數區間。

CONMED 獲得了美國擴大的臨床適應症，允許其 AirSeal 機械手臂解決方案搭配 Intuitive 的 8 mm 六角套管使用。管理層表示，這有助於向採用達文西 5 (da Vinci 5) 平台的醫院和外科醫生進行推廣。

該公司還強調了 AirSeal 在美國腹腔鏡手術中的低滲透率。管理層估計，在每年超過 300 萬例的腹腔鏡手術中，其使用率僅為 6%–7%。商業推廣正聚焦於複雜、高急性期的手術，管理層認為 AirSeal 在這些領域能提供最強的臨床與經濟價值。

Buffalo Filter 排煙設備的直銷業務成長符合管理層的高個位數至低雙位數長期目標區間。這部分被 OEM 客戶銷售額下降所抵消。CONMED 仍專注於直銷業務，因為直銷擁有更高的毛利率以及與終端使用者更緊密的聯繫。

管理層提到了密西根州和賓夕法尼亞州新通過的手術室無煙法案。目前共有 23 個州頒布了此類法律，覆蓋約 60% 的美國人口，另有 10 多個州正在考慮類似立法。

骨科外科

骨科外科有機固定匯率銷售額成長 7.2%。國際銷售額成長 12.7%，而隨著 CONMED 繼續重組其美國商業組織，本土銷售額下降 1.7%。

BioBrace 為主要成長動力，尤其是在國際市場。管理層特別強調了其機械強度與生物誘導特性的結合，以及在用於高風險患者旋轉肌腱修復強化時，臨床證實達 94% 的癒合率。

BioBrace 在本季獲得了巴西的監管批准。該產品亦已在加拿大以及東歐、中東、韓國、中國和印度的部分市場獲批，國際監管批准因適應症而異。

管理層財務展望

針對 2026 財年第四季，管理層預期 GAAP 淨銷售額為 3.64 億至 3.70 億美元。在扣除約 370 萬美元的腸胃科營收以及估計 65 萬美元的匯率有利因素後，這意味著有機固定匯率成長率為 5.1%–6.8%。調整後 EPS 預期為 1.23–1.30 美元。

風險與關注焦點

• 全年有機成長展望的高標被下調，原因是管理層目前預期季增改善步調將比先前假設的更加穩健溫和。
• 國際經銷商的訂單時程落點提振了第三季業績，但管理層未假設該有利因素會在第四季重複出現。該公司第三季有機固定匯率營收超出其展望低標 150 萬美元，但未將該金額納入第四季展望中。
• 隨著 CONMED 在商業組織變更後導入並營運經銷商，美國骨科銷售額仍維持負成長。
• OEM Buffalo Filter 的需求可能保持波動，因為下單情況取決於 OEM 合作夥伴的業務與供應鏈決策。
• 第三季毛利率受到毛利率較低的國際經銷商銷售組合，以及特定營運與庫存項目的影響。
• 管理層維持關稅對 EPS 影響約 0.35 美元的估算（不含關稅退稅），同時承認關稅環境可能發生變化。
• 再融資增加了利息費用。管理層指出，若利率保持不變，2026 財年下半年的運作年化率 (run rate) 是合理的模型參考基準。

分析師問答亮點

管理層解釋稱，下調年度有機成長展望的高標主要反映出第四季展望與第三季表現更加一致。先前的展望隱含第四季有機固定匯率成長率為 8.1%，而更新後的高標則隱含 6.8%。

關於美國骨科業務，管理層表示商業組織調整在前三個季度持續推進。目前的重點是導入並營運經銷商，公司的目標是在年底前或 2027 年上半年推動該業務恢復成長。

針對 AirSeal，管理層正優先推廣複雜的腹腔鏡與機械手臂手術，包括大腸直腸、泌尿科、婦科及減重手術應用，而非一次追求所有的腹腔鏡手術機會。

在資本配置方面，財務長 John Gallagher 指出可透過優化庫存、利息費用、營運資金及減少非經常性現金支出來改善現金產生能力。他還表示，CONMED 對有助於營收成長的併購 (M&A) 保持興趣，而更具體的 2027 年資本配置計劃預計將在第四季電話會議上公布。

管理層拒絕就市場關於潛在策略行動的謠言發表評論。管理層重申，CONMED 專注於微創手術、煙霧排除及骨科軟組織修復，並以 AirSeal、Buffalo Filter 與 BioBrace 為核心。

法說會逐字稿全文

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完整財報電話會議逐字稿

管理層陳述

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.

分析師問答

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.