You are on page 1of 20


Morgan 35th Annual Healthcare Conference

Curt R. Hartman
President & Chief Executive Officer
Luke A. Pomilio
Chief Financial Officer

January 11, 2017

Forward-Looking Information
This presentation contains forward-looking statements based on certain assumptions
and contingencies that involve risks and uncertainties. The forward-looking statements
are made pursuant to the safe harbor provisions of the Private Securities Litigation
Reform Act of 1995 and relate to the Company's performance on a going-forward basis.
The forward-looking statements in this presentation involve risks and uncertainties which
could cause actual results, performance or trends, to differ materially from those
expressed in the forward-looking statements herein or in previous disclosures. In
addition to general industry and economic conditions, factors that could cause actual
results to differ materially from those discussed in the forward-looking statements in this
presentation include, but are not limited to the risks relating to forward-looking
statements discussed in the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 2015.

Management has disclosed adjusted financial measurements in this presentation that

present financial information that is not in accordance with generally accepted
accounting principles (GAAP). These adjusted financial measures are helpful to
management in comparing the recurring aspects of the business performance without
the effect of unusual, non-recurring or special revenues or costs. These measurements
are not a substitute for GAAP measurements. Investors should consider adjusted
measures in addition to, and not as a substitute for, or superior to, financial performance
measures prepared in accordance with GAAP.

Company Snapshot
Company Overview Global Presence

n Founded in 1970 in Utica, NY, CONMED is a global medical technology organization with n Direct sales to 17 countries and indirect
~3,400 employees and sales across six continents sales to more than 100 countries

Key Business Categories Employees by Region

Revenue by Category Orthopedic Surgery

OUS 1,250
n Surgical devices including capital, 36%
70% disposables, and implants used in the
58% repair of soft tissue and joint injuries
60% US 2,150
42% General Surgery Total Employees: 3,400
n Low Impact Laparoscopy, enabled by
the AirSeal System Revenue by Region
n GI diagnostic and therapeutic Europe
20% products 19%

10% n ECG and other patient care devices

0% US 53% 11%
Orthopedic Surgery General Surgery

2016 YTD as of FY16Q3 All Other


2016 YTD as of FY16Q3

Q3 2016 Results and 2016 Guidance
Q3 2016

Reported Revenue: $184.8M

9.2% reported growth, 11.2% growth in constant currency
AirSeal sales of $17.3M, 46% growth over SurgiQuest FY15Q3 actual
Adjusted EPS1: $0.41

Comments on Q3 2016
Global General Surgery sales grew 29.2% as reported, 30.6% in constant currency, and
4.2% organically in constant currency.
Domestic sales growth driven by strong performance of General Surgery, partially offset by
declines in Orthopedics and Visualization. Endoscopic Technology delivered its third
consecutive quarter of mid-single-digit or greater growth.
Internationally, all three reporting businesses posted constant currency organic growth for
the second consecutive quarter.

2016 Full Year Guidance (based on FX Rates at October 21, 2016)

Reported Revenue: $757M to $767M
Adjusted EPS1: $1.83 to $1.93

1Excludes the after-tax costs of special items including acquisitions, restructuring, the gain on the sale of the Companys facility in Centennial, Colorado,
and debt refinancing, as well as amortization of intangible assets, net of tax.

Orthopedics Overview
Description Global Market/Key Competitors
Devices for repair of soft tissue injuries in $4.4 to $4.6 Billion
joints, particularly the knee and shoulder Arthrex
Sports Medicine DePuy Mitek (J&J)
Smith & Nephew

Surgical drills and saws powered by $1.4 to $1.6 Billion

battery, electricity, or pneumatic with Stryker
related single-use cutting accessories DePuy Synthes (J&J)
Powered Instruments Medtronic (Midas Rex / Xomed)

MTF allograft tissue used in sports $375 to $425 Million

medicine surgery Allosource
Allograft Tissue LifeNet

High definition surgical visualization $1.8 to $2.0 Billion

systems to enable minimally invasive Stryker
arthroscopic surgery Arthrex
Surgical Visualization Karl Storz
Richard Wolf
Smith & Nephew

Revenue Split Revenue Composition Selling Model

41% US 73% Single-Use Items US - Hybrid Sales Model
59% International Intl - Direct in 16 Countries

General Surgery Overview
Description Global Market/Key Competitors
A platform of devices and accessories to $1.4 to $1.6 Billion
create and enter the surgical working Ethicon (J&J) Medtronic (Covidien)
space in minimally invasive procedures Applied Medical
Access Stryker
Karl Storz

Devices using Radio Frequency (RF) $2.6 to $2.8 Billion

energy to affect tissue by cutting, sealing, Medtronic (Covidien) Olympus
Energy or causing hemostasis in open or Ethicon (J&J) Megadyne
minimally invasive procedures ERBE

Instruments and accessories for $1.5 to $1.7 Billion

minimally invasive laparoscopic, open, Karl Storz CR Bard
Instruments and robotic approaches Aesculap Cooper Surgical
Ethicon (J&J)

Therapeutic and diagnostic endoscopic $3.0 to $3.2 Billion

Endoscopic products used by Gastroenterologists Boston Scientific Olympus
Cook Medical Merit Endotek

Single-use devices for monitoring cardiac $0.8 to $1.0 Billion

activity and other patient care devices 3M Company
Critical Care Medtronic (Covidien)

Revenue Split Revenue Composition Selling Model

67% US 88% Single-Use Items US - Direct Sales Model
33% International Intl - Direct in 4 Countries

Growth Through People and Products

2015 2016

Phase One Phase Two

People Products
Eight of ten directors appointed post-2013 New marketing teams developed product roadmap
strategies for each business
New CEO effective November 2014
Existing projects evaluated and either refocused or
Leadership team reconstituted with new commercial terminated
leaders in every business; six of ten leaders new to
company since November 2014 SurgiQuest acquisition provided innovation jumpstart to
Advanced Surgical business
Sales and marketing leadership restructured across all
businesses; teams substantially rebuilt R&D function restructured under Kurt Azarbarzin,
CONMEDs newly appointed Corporate VP of R&D
Restored Business Development function to drive
acquisition strategy Continued to aggressively pursue business
development opportunities to secure innovative
International Direct and Export management structure technologies and fill product portfolio gaps
revised; numerous leadership transitions across key
geographies Aligned manufacturing, advanced engineering, RA and
QA to support new product launch agenda

Leadership Team
Years at Years in Years at Years in
Executive Title CONMED Industry Executive Title CONMED Industry
Curt President & 2 26 Luke EVP & CFO 21 21
Hartman CEO Pomilio

Pat President 2 26 Heather EVP, 15 15

Beyer International Cohen Human
Bill VP/GM, 2 14 Dan EVP & 18 18
Peters Advanced Jonas General
Surgical Counsel
Jed VP/GM, 4 31 Wilfredo EVP, 1 24
Kennedy Endoscopic Ruiz-Caban RA/QA and
Technologies Operations
Nate VP/GM, 1 16
Folkert Orthopedics
Peter EVP, 2 21
Shagory Corporate
and Strategy

CONMEDs Innovation Journey

2014 and Prior 2015/2016

Existing projects evaluated and either refocused

Product development strategy not focused or or abandoned; refocused projects released in
market driven 2016 include EDGE and Helix

Limited innovation in core businesses; Business development approach established to

substantial investments in non-core accelerate innovation offering and pursue
opportunities strategic additions

Project budgets and timetables lacked Strategic planning process completed; new
accountability commercial, marketing, and R&D leaders own
product roadmap strategy and execution
Market acceptance of released products was
limited R&D departments restructured under new leader

Manufacturing, RA/QA, and support teams

focused on ensuring support and alignment from
development through product lifecycle

Marketing-driven product development becoming a meaningful

component of the Companys commercial strategy
New Product Progress
Contribution to 2016 Revenue
Q3 2016

New Product Sales

Q2 2016
11.6% of total sales
Building innovation to
New Product Sales be a strength
Q1 2016
10.9% of total sales New product revenue
New Product Sales measured and
evolving as a
7.5% of total sales meaningful contributor

2016 was dependent

on inorganic growth
given project timelines
Introduction Cadence
The 2016 trend for
developed products
Inorganic Organic Total was positive and
should continue into
2015 0 5 5 2017
2016 3 12 15
2017(e) 1 19 20

Inorganic Growth Complements Organic Pipeline


Patented, Revolutionary Replaces standard insufflation and Industrys Only
Valve-Free Design smoke evacuation machines in the Tri-Lumen Tubing
OR Patented, tri-lumen
Creates invisible pressure
Offers AirSeal, Smoke Evac, and design
barrier with no valves,
standard insufflation modes Pumps in CO2
gaskets, or seals
Real-time pressure sensing Evacuates smoke out
Enables real-time pressure Measures pressure in
sensing dynamically responds to changes in
abdominal environment real time
Vents abdominal
Enables intact specimen
removal & integrated smoke

AirSeal is the most technologically advanced and only integrated access management system
for robotic and laparoscopic surgery, enabling numerous clinical benefits with the low impact
laparoscopy approach

AirSeal 2016 Execution (as of Q3)
Original Target Results

On Track to
Sales $55M to $60M

Financial Gross On Track to

58% to 62%
Goals Profit Exceed

Cost $15M
On Track to
Synergies Realize

Successfully executed integration

Other 2016 Q1-Q3 Pro-Forma growth exceeded 35%

Accomplishments 75% of revenue from single-use items

Early days in International - momentum building

AirSeal Domestic and Global Market
Domestic Procedure Market
Robotic Surgery (2014) ~450,000

Laparoscopic Surgery (2015) ~2,890,000

~ $568 Million in Annual Disposables ~6,700 Capital Units Required*

Global Procedure Market

Robotic Surgery (2014) ~ 600,000

Laparoscopic Surgery (2015) ~11,000,000

~ $2 Billion in Annual Disposables

~23,000 Capital Units Required*

AirSeal penetration is approximately 20% in global robotic procedures

Clinical data continues to strengthen adoption

* 2 Procedures per day per Capital Unit

International Commercial Progress
Direct Sales Growth (constant currency)

Driving One CONMED approach

Leadership restructuring complete
Concentrated effort in key direct markets to increase
existing product registration investments and
Organic growth trend supported by limited impact from
SurgiQuest acquisition

Export Sales Growth

Newly hired in-market support teams impacting results

Business stabilized in key export markets (Brazil, Japan)
Despite continued challenges with currency and macro
economic issues, export trend in 2016 positive
AirSeal still in early stages in International markets - 2nd
year in most markets

International Sales represent 47% of consolidated sales. International business split: Direct 2/3, Export 1/3
Domestic Commercial Progress
Domestic Orthopedics Sales Growth
Mixed performance
Procedure specific consistently positive
Arthroscopy Enabling Devices (resection, fluid)
challenged; EDGE system should help stabilize
Capital results mixed
Focus on the MTF opportunity
Focus on sales execution and sales channel
Account access and contract strategy in progress
New products critical to success
Domestic Orthopedics represents 23% of consolidated sales

Domestic General Surgery Sales Growth

Continuity in leadership and business plans

Fully integrated SurgiQuest acquisition within

Advanced Surgical

New products and expanded sales force showing

immediate impact in Endoscopic Technologies

AirSeal is a truly differentiated platform technology

Domestic General Surgery represents 30% of consolidated sales

CONMED vs Market Growth Rates

Market CONMED 2016

Growth Revenue Trend
Rate % (as of Q3)

Positive organic constant currency growth

International 2 4% 47% Accelerating Advanced Surgical organic growth
Strengthened presence in key markets direct and export

AirSeal platform in early innings

Domestic CET category enabling further expansion
2 - 4% 30% New products and sales force expansion continues across
General Surgery
Weakness in Arthroscopy Enabling Devices a long-term
issue; EDGE will begin to slow erosion
Domestic Innovation focus critical to reverse declines
4 - 6% 23% Account access and sales execution are high priority areas
of focus

Return to market growth and accelerate

Financial Goal - EBITDA

EBITDA Margin Trend

Despite limited sales growth since 2013,
EBITDA margin has expanded (exclusive of
the impact of FX); driving sales growth
remains the top priority
YTD EBITDA margin through September 2016
would be approximately 350 bps higher than
presented using 2013 average FX rates

EBITDA Margin Strategy

Drive incremental sales through existing SG&A
structure over consolidated footprint
Adjusted EBITDA - Using 2016 Average FX Rates
Reallocate investments to areas with highest
returns; pipeline priorities now reflect enhanced
margin profile expectations
Implement manufacturing and procurement cost
savings programs

Continue to pursue margin expansion; move

margins in line with industry peer group

2017 Priorities

Focus on reinvigorating product portfolio organic and inorganic

Orthopedics Drive EDGE adoption and stabilize Arthro Power Portfolio
Salesforce execution and contract access

Capitalize on organization stability pursue synergy sales

Expand AirSeal into laparoscopic market
General Surgery Continue to reinvigorate product portfolio
Continue CET growth progress

Build on growing sales momentum and investments in talent; further

advance One CONMED approach
International Continue to leverage sales channel optimization opportunities
Continue to build export market support

Implement manufacturing and procurement cost savings programs

Other Execute on product development plans
Continue to pursue inorganic growth opportunities

Closing Thoughts

P We remain focused on improving our overall operating

P Our General Surgery and InternationalBusinesses are
on track; Domestic Orthopedic performance has more
work ahead
P New product innovation is critical to our growth plan
P 2017 will bring continued enhancements to the business
and our outcomes
P We have made important strides in our turnaround, and
I am proud of the work of this leadership team

Destination of Choice

Talented employees, customers, and investors!