CONMED Corporation (CNMD) Q3 2021 Earnings Report, Transcript and Summary

Good day and thank you for standing by. Welcome to the Q3 Fiscal Year ‘21 CONMED Earnings Conference Call. At this time, all participants are in listen-only mode. [Operator Instructions] I now like to hand the conference over to CONMED for a brief announcement. Please go ahead.

Good afternoon, everyone. Before the conference call begins, let me remind you that during this call, management will be making comments and statements regarding its financial outlook and its plans and objectives, which represent forward-looking statements that involve risks and uncertainties as those terms are defined under the Federal Securities Laws. Investors are cautioned that any such forward-looking statements are not guarantees of future events, performance or results, and the company's actual results may differ materially from its current expectations. Please refer to the risks and other uncertainties disclosed under 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 certain non-GAAP adjusted measurements during this discussion. While these figures are not a substitute for GAAP measurements, management uses these figures to aid in monitoring the company's ongoing financial performance from quarter-to-quarter and year-to-year on a regular basis and for benchmarking against other medical technology companies. Adjusted net income and adjusted earnings per share measure the income of the company, excluding credits or charges that are considered by the company to be special or outside of its normal ongoing operations. These adjusting items are specified in the reconciliations supporting the Company's earnings releases posted to the company's website. With these required announcements completed, I will turn the call over to Curt Hartman, CONMED’s Chair of the Board, President and Chief Executive Officer, for opening remarks, Mr. Hartman?

Thank you, Michelle and Julie. Good afternoon and thank you for joining us for CONMED’s third quarter 2021 earnings call. I'm joined by Todd Garner, Executive Vice President and Chief Financial Officer. Today we will walk you through our third quarter results and provide an update to our full year outlook. We will then open the call to your questions. Turning to our results, total sales for the third quarter were $248.8 million representing a year-over-year increase of 4.6% as reported and an increase of 4.3% in constant currency versus the same quarter in 2020. From an earnings perspective during the third quarter, our GAAP net income totaled $14.9 million. And this compares to net income of $6.9 million in the third quarter of 2020. Excluding special items that affected comparability, our adjusted net income was $24.7 million a decline of 4.9% versus the prior year, third quarter. Our adjusted diluted net earnings per share came in at $0.80, a decline of 9.1% versus the prior year, third quarter. Looking at the quarter and more detail, the international markets delivered solid results with 7.7% constant currency growth, while the domestic businesses felt the increased presence of the Delta variant, which held their growth to 1.6%. Both the Global Orthopedics business and the global General Surgery business delivered positive growth in the quarter. Overall, we delivered a decent quarter that was clearly slowed by an even more aggressive impact from the Delta variant than we had communicated when we talked to you on our Q2 call. Finally, as a follow-up from our Q2 call, we made great progress in the quarter on our announced salesforce expansion. In the U.S. market we're 100% complete across our General Surgery business and the Orthopedics expansion is on track to be complete by year end. Our international market expansion has a handful of positions to finalize and will be completed soon. In closing, I'm proud of the CONMED team and the progress we made during the quarter that had a lot of variability. The CONMED global leadership team and our organization around the world, continue to perform exceptionally well in an unpredictable environment. We remain excited by both the near- and longer-term opportunities and strengths of the business. Our focus remains on meaningful innovation, service and delivery and enhanced and growing digital strategy. I'll now turn the call over to Todd who will provide a more detailed analysis of our financial performance and walk you through out. Todd?

Thank you, Curt. All sales growth numbers I reference today will be given in constant currency. The reconciliation to GAAP numbers is included in our press release. As usual, we have included an investor deck on our website that summarizes the results of the quarter, our updated guidance and also provide sales results compared to 2019 for those of you interested in that view. For the third quarter of 2021, our total sales increased 4.3% compared to the third quarter of 2020. Our U.S. sales increased 1.6% versus the prior year quarter. Our international sales increased 7.7% for the quarter compared to the prior year. Worldwide orthopedics revenue grew 2.9% in the third quarter. In the U.S. orthopedics sales decreased 2.5% and internationally orthopedics increased 6.3%. Total worldwide general surgery revenue in the third quarter of 2021 grew 5.3% over the third quarter of 2020, which was a strong growth quarter for us growing 9.8% a year ago. U.S. general surgery revenue increased 3.3% over 2020 and internationally general surgery revenue increased 10.0%. Now let's move to the expense side of the income statement. We will discuss expenses and profitability, excluding special items, which include debt refinancing costs, charges related to acquisitions and integrations, restructurings, manufacturing, consolidations, amortization of intangible assets and amortization of deferred financing fees and debt discount net of tax. Reconciliation to GAAP numbers is included in our press release. Adjusted gross margin for the third quarter was 57.2%, an increase of 40 basis points from the prior year quarter. Research and development expense for the third quarter was 4.4% of total sales, 20 basis points higher than the prior year quarter. Third quarter SG&A expenses on an adjusted basis were 39.4% of sales, which was 310 basis points higher than Q3 of 2020. As we talked about last quarter, and as Curt discussed a few minutes ago, based on the significant revenue opportunities ahead of us, we have invested in adding sales resources to both general surgery and orthopedics. Interest expense in Q3 was $4.7 million on an adjusted basis. The adjusted effective tax rate was 18.4% in Q3. This was lower than we expected principally due to the excess tax benefit from stock plan. This is difficult to predict, but we don't expect the same benefit in future quarters. We continue to expect our adjusted effective tax rate to be around 25% in the coming quarters. Third quarter GAAP net income totaled $14.9 million or $0.47 per diluted share compared to net income of $6.9 million or $0.23 per diluted share a year ago. Excluding the impact of special items discussed earlier, we reported an adjusted net income of $24.7 million this quarter, compared to adjusted net income of $26.0 million in the third quarter of 2020. Our adjusted diluted net earnings per share were $0.80 this quarter versus $0.88 in the prior year period. Turning to the balance sheet, our cash balance at the end of the quarter was $31.5 million compared to $46.4 million as of June 30, 2021. Accounts receivable days as of September 30th, were 60 days compared to the same number 60 days, three months ago. Inventory days at quarter end were 193 days compared to 167 days three months ago. We are purposely building inventory of our faster moving items to mitigate the pressures on the supply chain and in anticipation of increasing revenue. Long-term debt at the end of the quarter was $703 million versus $708 million as of June 30th. Our leverage ratio has September 30, 2021 was 3.9 times and we continue to believe we should be below 3.5 times by the end of this year. Cash flow provided from operations for the third quarter was $21.4 million compared to $35.1 million a year ago. Capital expenditures in the third quarter were $5.6 million compared to $3.3 million in the prior year quarter. Now let's move to financial guidance. The Delta variance negative impact on revenue increased sequentially each month of the third quarter and peak in September. While trends are certainly improving in October the improvement has been gradual so far. Despite the slower than expected start to Q4 and assuming continued acceleration and procedure growth with no new setbacks in hospital staffing or supply we believe the lower end of our existing full year revenue guidance at $1.015 billion is still achievable. That would require approximately $278 million in fourth quarter revenue, which represents constant currency growth of approximately 11% over Q4 of 2020 with about 100 basis points of currency headwind. We expect adjusted cash EPS in Q4 to be in the range of $1.04 to $1.09, which represents growth over Q4 2020, between 24% and 30%. For the full year that would put our adjusted cash EPS range at $3.18 to $3.23 just narrowing of our prior guidance of $3.15 to $3.25. With that we'd like to open the call to your questions and I'll hand it back to Michelle.

[Operator Instructions] Our first question comes from Travis Steed with Barclays. Your line is open.

Hi. Thanks for taking the question. Just a clarification; first, it looks like for – if you look at growth rates versus 2019 Q1 Q2, Q3 were all in that 6% range, if you could just clarify what the guidance assumes for Q4 versus 2019?

Let me get there really quick, Travis, that would be so 278 over 2019 was 264.9. So I don't have the percent here...

Sorry. It's okay. I can follow up offline. I can ask a kind of a bigger picture question here and thinking through kind of the Q3 impacts COVID U.S. versus O-U.S. we are going to get some more color on how that's shaping up in early October versus what you saw in late Q3?

Yes. I think as you look Travis, Q3 the Delta variant had the most impact on our business in the U.S. market and as Todd noted, it grew as the quarter unfolded. That's not to say we didn't experience impact from it outside the U.S. Canada had areas, geographies, Australia, Asia, Asia export, Korea market all felt impact from the Delta variant. And as Todd said, we feel that that peaked as we got towards the middle to the end of September and certainly better off as we got into October, but I don't think anybody's completely out of the woods yet. I think there's a lot of things factoring into surgery schedules, whether it's Delta variant or staffing, and all of those things are still out there to some level or another, but subsiding as we get further into the quarter.

Alright, that's helpful. I guess, where I was going with the Q4 guidance question is just trying to assume what, see what you're assuming on some of the staffing issues and the Delta impact in Q4 versus what you saw in Q3 and how to think about – are some of these issues going to subside as we move into next year? Or do you think we're still going to be dealing with us in early 2022?

Yes. I mean, the assumption in the guidance is that it does subside, right. But like I said, it has started more gradually than we would have like. We would have liked to see a sharper bounce back. So it's getting better, but it's getting better gradually and so as we extrapolate that through the quarter, we do expect things to get better from here, but probably more gradually and then we'll wait to talk about 22 in January.

All right. Great. Thanks a lot.

Our next question comes from Robbie Marcus with J.P. Morgan. Your line is open.

Great. Thanks for taking the question. Two for me. First one, the capital business put up to me what looked like a really good quarter. So maybe you could just spend a minute on what's driving that? Any color on how the Buffalo Filter and air filtration business did in the quarter and any other drivers there to think about?

Yes. Robbie, we had a respectable Capitol quarter. Just remind everybody that earlier in the year we had noted that we had a new power tool platform, a new video platform, and obviously there's momentum behind AirSeal in Buffalo Filter from the capital side of those businesses. But just keep in mind, the Buffalo Filter capital is on the smaller dollar value. Whereas AirSeal is going to be higher value along with power tools and video, and again, it was not the largest comp a year ago. So the market really was driven kind of the way our results tell us, well and then outside the U.S. we had 8% capital growth, where in the U.S. it was kind of consistent with the overall growth in the 2% range.

Got it. Second question for me for Todd, you beat by $0.05 in the quarter and reiterated or narrowed guidance, implying a bit softer fourth quarter than we'd been thinking. So maybe you could just walk through some of the puts and takes there, and your thinking of guidance. Were there any delay of expenses or any step up in expenses in fourth quarter that might've been pushed out from third quarter? Just trying to get it, the thought process there? Thanks a lot.

Sure, Robbie. Great question. It's actually fairly simple; $0.07 of the beat in Q3 was related to tax. The tax rate being lower than we expected and so – and we don't expect that to continue. And then really, if you look back to where we were a quarter ago, as we looked at the back half of 2021 we knew that Delta was going to slow down Q3, but we did not expect it to be as impactful as it was, and we didn't expect it to still be impacting Q4 the way it is. So like I said, it's getting better. We do definitely expect Q4 to be better than Q3, but we don't expect Q4 to be as strong as we did back in July. So things still trending well. We're still – the long-term prospects and our growth opportunities are all still the same, nothing has changed, but this temporary storm has been a little stronger and a little longer duration than we envisioned three months ago. So that's really the only change.

Got it. Understood. Appreciate the questions.

Our next question comes from Young Li with UBS. Your line is open.

Okay, great. Thanks so much for taking the questions I guess to start off, you guys have been more conservative in your COVID impact assumptions, and also have been more accurate as a result compared to some of the other companies. What do you see as some of the – some of the bigger risks in the coming months outside of another major COVID surge? I mean, there's a, there's a whole list of other macro issues that investors have questions about from staffing, supply chain, components, inflation, et cetera. I guess what are you paying more attention to and what do you think is potentially overblown?

Well, first of all I appreciate the comment I – Todd and I both appreciate the comment on our positioning throughout COVID. And we are able to do that because our executive team is highly engaged in the local markets and have not taken their eye off of this. And that's in part because of the habits we have around how we're managing this. And so I want to take your comment and turn it into a congratulatory note for my executive team, because I do appreciate you recognizing that. Now to your question, I think there's some topics that are very well known. There's how long the surgery remain deferred because of variants? And that seems to be slowing a little bit and seems to be moving more into local geographies versus broad locations; obviously hospital staffing shortages have kind of moved up the rankings in terms of their priority. And then the ongoing supply base disruption and logistics challenges are right up there as well. I think we've said on calls in the past that we've been very proud of our global logistics and supply team. They dove into this in March of 2020 and have been meeting literally every single day on these topics to reach out, not only to our Tier 1, but Tier 2, Tier 3 suppliers. And as Todd noted, we've been building inventory in anticipation of these things, perhaps getting more challenging instead of easier as the virus moved on. And so we feel like we're at a pretty respectable position for CONMED relative to supply and logistics. Not saying there's not new challenges all the time because of there are, but feel like our team is in really good position to manage these things and minimize any disruption. The biggest wildcard to me is hospital staffing, healthcare workers, fatigue, which is very evident and what that may mean for surgery schedules and overall hospital operations. And we're all reading the same things, hearing the same things, and it remains to be seen. If COVID cases drop and people can return to their normal kind of healthcare venue and alignment of work, maybe that pressure will lessen, but we all need to see that. So I think that's how I would frame the challenges we were looking at as we look out into the future here, whether it's this quarter or even stepping into 2022. I don't know, Todd, if you have any other comments or areas of focus.

No. I agree. I think all those that you mentioned are the top concerns, and I would just point out on the supply side, we've been – we've had a very focused kind of all hands on deck approach to our supply since very early in February of 2020. So at the time we thought we'd have to maintain that intense focus for a couple of months or maybe three months. And we've been at that same level of intensity since that date. So the team is very close to our suppliers and managing it as best we can. So far so good and hopefully we continue to be able to manage that as we have so far.

Okay, great. That's a really helpful color. Appreciate that. I guess as a follow-up; was wondering if you can talk a little bit about the ortho performance and the higher back native regions in the U.S. such as the Northeast as well as some of the higher vaccinated O-U.S. countries. I heard the October comment of slower rebounds than what you would like to see, but I guess what insights can you get from some of the regional performance differences about the pace of recovery in the coming months as we expect vaccination rates to increase?

Yes. It's a really interesting question. I'm going to start with a macro level. I think if you look at our press release, we're very pleased with our orthopedics performance in the international markets. They put up a very good number while facing some headwinds in markets like Australia, Canada, the Asian markets and I think they'll continue to do so. They've been a sound performer across orthopedics for a number of years and have a lot of history in those markets with very tenured leadership. Our challenge in orthopedics has been the U.S. market. Broadly speaking now we've had ups and downs. We haven't moved into that consistency mode and that is clearly where our efforts are focused. To specific U.S. geographies in our orthopedics performance, I don't see a correlation. I'd just be brutally honest with you in vaccination rates and our performance. I was at dinner with an orthopedic surgeon who commented that he has been operating at about 120% of normal since May, June of last year. Facility down the road is operating at about 60%. Our orthopedics business is more track to how the healthcare systems are operating in this environment? And there is no one answer to that question. So again I don't see a correlation to orthopedic performance with geographies with higher vaccination rates. You would logically assume that, but I think the health system behavior and practices and protocols seemed to weight heavier, at least through my eyes on this, then the vaccination rates at this point in time.

All right. Great. Thank you so much.

Our next question comes from Mike Matson with Needham & Company. Your line is open.

Yes. Thanks for taking my questions. Just stepping back you're going through this comp early Salesforce expansion this year. You're building a lot of inventory. I understand there's supply chain issues, but I mean, just kind of reading between the lines that it seems like you're kind of setting yourselves up for a pretty big 2022, I mean, am I missing something here?

I think we'll tag team this question, Mike, but our focus has been on innovation and connecting with customers and we have both organic and inorganic developments that we're very excited about. And everybody on your side of the table is very familiar with AirSeal and Buffalo Filter appropriately so, but we've also been working on the organic side and delivering a lot of products. And I think early in the year we talked about the second half of this year. We would see more of those in the market and into the first quarter of next year. And we remained very focused on our innovation pipeline and the delivery of that pipeline and all those things with the market opportunities in front of us really motivated us to look at the Salesforce expansion earlier in the year than when we would normally do that. And we felt like we could – we could digest that, but clearly those things can be very disruptive. And I'd be less than honest if I didn't say there was some disruption from that for us. But as I said on the last call, when we announced that our team has been through this are pretty sophisticated in how they handle it, but clearly any you do that, mid-year, there's going to be disruption, but I think we absorbed it in the majority. And all we're doing is trying to reinvest in the business to keep it going forward in the direction that Todd, myself and the entire management team want it to go, which is grow faster than the markets that we serve. And that's what we're trying to do.

Okay. I understand. Yes.

Sorry, Mike.

Todd were you going to say something?

Yes, I was just going to add a little bit. And I think it's an insightful question. The normal seasonality of Q3 is usually our high point in inventory because in Q4 there is a lot of holidays and we actually have some plant closures for routine maintenance and things at the end of the year. And so, it usually is the high point anyway. The other point I would say is that obviously we had higher expectations for Q3 than what happened on the sales side. And so, we were building it. And so, inventory is higher because sales are lower, right. Those things go together. But the crux of your question, I think, is accurate. Yes, I mean, we've added sales resources as we've talked about because we are bullish about the opportunities in front of us. And we definitely expect to have strong revenue once this storm passes, which we would all love it if it would – if 2022 could be a clean kind of post-pandemic year that would be terrific. We would sign up for that. And we're bullish about where revenue will be once procedures are back to normal.

Okay. Thanks. And then I wanted to ask one on the gross margin. My model goes back to 2008. I look back; this is the highest quarterly gross margin you've had. I mean, I know it was only up 40 basis points from the year ago quarter. But maybe you could just talk a little bit about what's driving it, is it primarily mixed from the high growth products, Buffalo Filter and AirSeal or other things?

Yes, it is. And it's really good. You consider everything that's going on in the world with the freight charges, and increased inflation and supply costs. And yes, we've got margin. I said it was going to be in the 57% range in the back half. And we're a little above that for Q3. We still expect that same level in Q4. We continue to watch those increasing costs, and we'll talk about 2022 in January. But yes, it's thanks to the mix improvement in the business that has been able to kind of overcome those headwinds that are real and meaningful and still allow us to be where we are. So, if it weren't for COVID, we would definitely be better. And we look forward to days when you do your historical lookalike, and you see this as one of the low marks. I look forward to those days.

Yes, I'm waiting for it to have a six in front of it. Thanks Todd.

Our next question comes from Rick Wise with Stifel. Your line is open.

Good afternoon to you both. Maybe starting off with the smoke evacuation business AirSeal and Buffalo Filter, obviously it's been growing in recent quarters, 20% or better. Curt maybe just update us is this another similar growth rate, just any recent dynamics you want to point out and the highlight? And I assume that that's – or should we assume that's been relatively impervious to some of the COVID short-term pressures here?

Yes, thanks, great question. So, the good news is that year-to-date we are definitely above that mark of the 20% growth, and we continue to expect to be above that mark going forward. Q3 was a dip below. So Q3, because of the procedure shortfall, we did dip below that mark. And we saw the actual declines in our OEM sales on the smoke side. So that's not a majority of our business that's a minority of that business. But the OEM actually declined in Q3. But we remain bullish on those growth drivers and think now they will be really important to us. And like I said, year-to-date we continue to be above the number where we said.

And your fourth quarter guidance, Todd, assumes that sort of sequential improvement, is that a reasonable assumption?

Yes, I mean the fourth quarter guidance assumes that those product lines should be above the 20% mark in aggregate.

Got you. Turning back to the innovation pipeline, which is always fascinating to me, your slides highlight the 68 new skews in 2019, 118 in 2020. I don't know whether we should expect 2021 to be even more than 2020 Curt. So, I'd like to hear about that. But I'd be curious to hear whether given the [indiscernible] and the challenges of hospital access and physician access, are you having a tougher time carrying that new product innovation message and getting adoption? How is that aspect of the story going at sort of the street level, so to speak?

It's a great question. The COVID variant, whichever one it may have been at any given time and the restrictions of that places on healthcare facilities and access clearly slows down any organization's ability to demonstrate new technology, new product, and do trials and evaluations. There is no deny in that. If you go back to last year, we narrowed our innovation focus list and said, we're going to ensure that the things that we're focused on for the marketplace are high priority, they solve very apparent needs, and they advance in the hands of the surgeon, the care of the patient that they're treating. And that's really what we've been doing. And we believe those give us a better opportunity to get in front of our customers. But if you use the third quarter as an example, there is no denying that evaluations of new product technology slowed because of the Delta variant. And so, it's up to our team to find unique or new ways to access those clinicians. And I think the industry has learned that webinars and digital resource are very good vehicles to do that with. There is no substitute for in-person, don't get me wrong. But you can get attention through digital webinars, et cetera. And we've been working very hard to up upgrade and enhance our game there. And I feel very good about the progress we're making there. And that's all part of our innovation in digital strategy, which I referenced in my opening comments.

Yes. If I could sneak in one last one more briefly, to what extent do you think that procedures are delayed and that there really, genuinely is a backlog of patients waiting to be treated as we contemplate. Okay, maybe it's starting slowly here in the fourth quarter, slower than you would like, but there is a large backlog as we go through the quarter and head into 2022. Is that the way we should be thinking about or how are you thinking about it? Thank you.

Yes, I think there is definitely a backlog of procedures. I don't want that to come off as a blanket statement. I want that to come off as different areas have a different amount of backlog. There are some areas that have been harder hit, shut down longer, shut down more broadly. Other areas seem to move in and out of their deferrals and shutdowns are a little bit quicker. But in general, there is a deferral of patients out there waiting either for surgical suite availability, or waiting for staff availability, or dealing with other related issues brought on by COVID, whether it's having to defer procedures because of other family-related issues. So, I do believe there is a backlog of patients out there. When they present and how quickly that happens, I cannot give you that answer.

Got you. Thank you.

Our next question comes from Matthew Mishan with KeyBanc. Your line is open.

Good afternoon. Curt, Todd how are you doing?

Good.

Good,

Good. I think we all get impact of Delta on procedures, but is there any way you can give us a sense of the pace of capital placements of like AirSeal and Buffalo Filter versus procedures?

So, the pace of capital placement versus the procedures. So, the way I would answer that question, Matt and I would break it into two different scenarios in the case of AirSeal, outside the U.S. it's more geared towards general laparoscopic surgery, inside the U.S. it's been more pointed towards robotic surgery. And as we've said, many times, if they are investing in a robot, investing in AirSeal is a pretty easy tag along. And we think that still resonates today. So, if procedures are lagging or slowing down, but they're well down the path of investing in a robot, there is a high likelihood that the AirSeal is going to come along with it. And we continue to do things to work on that relationship, that partnership, if you will to the benefit of both organizations. And so I think there's a good momentum behind the AirSeal platform, both in the U.S. and outside the U.S. On smoke, I would just remind everybody it is still very much an early stage. You have to develop the market. The industry has not been using smoke evacuation in broad brush strokes for very long, and they are still adoption, they are still surgical resistance because of the extra equipment that's in the room and the impact on the surgeon. So as procedures kind of ebb and flow, we're still working every day with customers to develop them into smoke evacuation, filtration users. And it's a developmental opportunity. So, I can't tie that one quite as much to procedures as I can AirSeal, because there's more of a developmental aspect to the marketplace on surgical smoke. And I think Todd actually had some statistics we were looking at relative to states that have legislation, those that don't. And I'll defer to him to answer that question, because I don't have that right in front of me. But it was interesting data. So Todd?

Sure. Yes, we did just get the update on looking at growth by state, trying to understand the impact of legislation. And again, from the start we've known that the nurses were going to drive this growth, right. And legislation was going to follow the demand and that certainly what is happening. But it is true that in those states, in those handful of states that have enacted some sort of legislation, even when it's not yet on its effective date, we do see a higher growth than average in those states. And so, legislation is beneficial, but again, not the driver of the opportunity.

All right. This was the first quarter we've seen that where those states had put something in place where they had moved ahead of the overall growth rate.

Okay, excellent. Thank you very much.

Next question comes from Matthew OBrien with Piper Sandler. Your line is open.

Good afternoon. Thanks for taking the questions. For starters and they're both on salesforce, but the first one is the slowdown that we saw in Q3 from a revenue perspective because the Delta and some of the other softness related to staffing shortages, et cetera, did you slow down any investments as a result of that? Or did you continue to invest according to the plan that you had talked about coming out of Q2? And what I'm really trying to get to is if you are making those investments, you're thinking, I'm guessing that there is going to be a fairly quick snap back in terms of the business over the next several quarters or the next couple of quarters?

No Matt, in my opening comments, I said we 100% completed the general surgery expansion in the quarter. We had made great progress on the orthopedic side and we'll be done with that by the end of the year. And that internationally, we had less than a handful to finish up. So, we would be down with that very quickly. So, we continued as announced with our salesforce expansion. And I think I agree with what you said relative to being prepared for the marketplace. But I would also caution that statement by saying, we didn't do it to have a great fourth quarter or a great first quarter. This is us taking a long-term view of the business and saying where our portfolio is, where our market share is, these are the right investments for the long-term to make for the company. And for the marketplace candidly, we have great technology. We want to get it in front of more customers.

Got it. And then the follow-up question, and thanks for that, Curt. Can you give us a sense for the impact of the salesforce disruption in Q3? It seems like it might linger a little bit into Q4. Should it be behind you coming out of Q4? And then more importantly, what did these investments in the salesforce, and you've talked about it before, what does it do to the long-term growth trajectory of the company, does it bump it up by a 100, 200, 300 basis points? Thanks.

Yes. Great, questions. I'll attempt to answer the first one probably not going to touch the second one. We'll save over those things for overall guidance. But I don't know if I can quantify very accurately the impact of a salesforce expansion on a given quarter sales results. I think we've all been around long enough to know that there is some impact. But to tell you it was 50 basis points or 300 basis points I'd be totally guessing. I just know that when you go into territories and introduce customers to new sales professionals, when you take time out of the field for training, when you have existing sales rep shifting their priorities, so those things are just disruptive by nature. And that's why you got to have a long-term view when you do these things. Now, I think Todd and I would both say our experiences in general these things start to have a payback, six-month mark, nine-month mark. And therefore they should be additive to the overall outcomes of the company because we're just going to be present in more trials, more evaluations, and more opportunities will be presented because we're there. And that that's the goal. So I'll leave it at that.

Okay. And just to be a little bit more clear, disruptions though, you think that will largely be behind you by the end of this year, or could spill into next year a bit?

I think majority of it will be behind us Matt, majority of it should be behind us.

Okay. Thank you.

Thank you. I'm showing no further questions at this time. I will now like to turn the call back over to Mr. Hartman for closing remarks. Mr. Hartman?

All right. Thank you, Michelle. And thank you everybody for your time today. And appreciate you spending a little bit of time to look over our third quarter call with us. We look forward to speaking with you on our next earnings call. Thank you.

This concludes the program. You may now disconnect. Everyone have a great.