CONMED Corporation (CNMD) Earnings Call Transcript & Summary

Good afternoon, everyone. I'm Robbie Marcus at the JPMorgan Medtech team. I'm very happy to have CONMED presenting next. And introducing President and CEO, Curt Hartman. Curt?

Thank you, Robbie. Thank you, Robbie, and thank you, everybody, for being here with CONMED today towards the end of the day. I appreciate you holding out all day for this presentation. We hopefully saved the best for last. That's my attempt to the joke very late in the day. I'm joined today by the CFO of CONMED, Todd Garner. He's up here in the front row. Another member of my management team, Pete Shagory, who runs up -- runs our strategy, corporate development. A member of his team, Cheri Matyk, who handles -- works with Pete on strategy corporate development. And then we have 1 member of our Board of Directors, Chuck Farkas, up here with us today as well. So let me dive right into the presentation. Slide is forward-looking information. As we look at the way to start this year, we thought we would introduce you to CONMED's vision. We have not shown this in the past, and there was a lot of work to do at CONMED when we got here 5 years ago. The last thing we needed to do was lead with vision. We had a lot more fundamental infrastructure things to focus on, but we thought this would be an appropriate meeting to share our vision with you. It's pretty -- if you know me at all, I'm pretty focused, pretty straightforward. I think the vision reflects that: empower health care providers worldwide to deliver exceptional outcomes for patients, and that's what we do with our tools across all the categories of our business. At the bottom of the slide, you see some very fundamental operating principles. I'm not going to walk you through all those. 1 that's very important to this management team is the one in the middle, we do things the right way. We operate in over 100 countries. It's very important that we operate with the highest ethics. As you look at health care on all those different markets that we serve, doing things the right way is extremely important. The 1 in the middle, if you follow the story, you should be familiar with those. I stood here in 2015 and said that 2 things CONMED needs to do to change this company, to get the right people on board from the boardroom all the way down to reps on the street. We need to innovate, get the right products. We did not have any innovation in the company at that point in time. And then in 2017, at this meeting, I introduced the third one, which was profitability. We need to start driving profitability now that we fixed the first 2. So wanted to start today's session with that lead off slide. Now I'm going to get to the slide that's probably most important for all of you. What are our objectives for shareholders? We think it's pretty straightforward. Its aggregate growth and profitability over the long term, increase our market share. You'll see our market position in future slides. And then finally, we do that by delivering above-market revenue and profitability growth. And I just thought I'd point out in 2015, January 1, 2015 through December 31, 2019, the average total annual shareholder return for CONMED is 22.6%. So I think we've done that last one fairly well here over the last 5-year period. We hope to look to continue that as we go forward. Can I reintroduce the most recent quarterly results for CONMED? It's still October 30. We have not preannounced. We haven't talked about the fourth quarter. If you look at the top of the slide, the third quarter was a very good quarter for us, both on a revenue and a profitability standpoint. The guidance down in your lower right-hand side shows pretty good performance on the top and the bottom. We did adjust the earnings estimate up to $2.62 to $2.65, 20% to 22% growth on the bottom. Important to remind folks that also in that third quarter earnings call, we said we were going to pull forward sales force expansion. The reason to do sales force expansion is when your portfolio is very robust. When you look across CONMED, we've had a lot of new product introductions. We have sales professionals who can wake up and make a decision about what they sell. In my world, that is not ideal. I want them to sell everything. One way to combat that is to put more feet on the street. We typically would do that in January to start a new year, but because of the performance year-to-date of the company, we pulled that forward. That can be a messy process. And we're doing it in a large-scale in select businesses, and this is also a global event, where we're changing channels outside of the U.S. And when we use the word channel change, that really is a statement about international. They go to market, sometimes through distributors, sometimes through direct reps, sometimes a combination of both. So because of our performance through 9 quarters, we elected to pull forward that effort and start that in the fourth quarter. So just important that you remember that as you look at the story here. So where do those results put us today? You can see the trend on the revenue growth on the right-hand side -- the upper right-hand side of the screen. Today, I think the people side, pretty strong seasoned leadership team. Product side, we're in very good shape. We've got great organic development. We also have a very steady process around M&A. And we have said many times over from day 1 that M&A is our first use of cash. In the absence of M&A, debt pay down. And then finally, on profitability, we think we significantly enhanced it, but both Todd and I look at the company and say, there's still a long way to go. The revenue mix, you can see that 5 years ago, it was more heavily weighted towards orthopedics. We've done some big M&A to fix and more balance that portfolio. So now it's a 51-49 split between orthopedics and general surgery. And you can see our international presence is a little bit different than the typical medtech industry, where 46% of our revenue comes from outside the U.S. If you take those results and you take our guidance, this is what it should look like when we put full year '19 up there on the slide for revenue and EPS. And underpinning all of that, we think we've built an organization and an infrastructure that's well positioned for future growth in revenue as well as profitability. I'm going to step into a couple of slides that kind of talk about how we got here. The first one, if you go back to 2015, that was the portfolio. You see a really big slice of the pie with Orthopedics. You go through September of 2019, you see Orthopedics is now little bit less than 50% of the pie. We've added 2 new slices to the pie. One was AirSeal. We completed that acquisition January 1, 2016. The second was the Buffalo Filter acquisition that we closed on February 11, 2019. So we've changed the complexion of the revenue mix. Obviously, the pie on your right is much bigger than the pie on the left, but the revenue complexion has changed because of the addition of those important portfolio items being AirSeal and Buffalo Filter. Another important slide that tells you the mix. In 2015, we walked in, we had 79% of portfolio with declining sales, with 21% that was growing single digits. We had no double-digit growers on the portfolio. You look at third quarter results through 2019, 17% declining. We would love that number to be 0. I don't know if that's a realistic expectation, but we continue to pound on that. 48% growing single digits and 35% growing double digits, so portfolio shift in the previous slide, growth shift in this slide. And you put it all together, and I failed to mention this at the beginning, but if you were paying really attention to the cover slide, as we hit 2020, CONMED will hit its 50-year anniversary in February. The company was founded in 1970, and February is the 50-year anniversary. So as we look at this, in the first 45 years, and these are rough estimates, these are not absolute numbers here. The company did about $750 million. $25 million in R&D spend and about $130 million EBITDA. If you think about those previous 2 slides, over the last 5 years, we've added about $0.25 billion in revenue. We've almost, dollar-wise, doubled the R&D investment, and we've added $70 million in EBITDA approximately as we look out into 2020. And if you do a quick calculation on the ratio of that EBITDA to the revenue, it's much higher than the corporate average. That's the trajectory the company is moving on. And we're not here giving guidance for 2020. We'll do that at the end of the month. So these are kind of rough approximations of where the company is going. But I think it's instructive for all of you to understand the transformation the company has gone through over the last 5 years. I'm going to take a pause for a moment and give you a little deeper look at the markets. We have shown these slides in the past. Going to start with Orthopedics. One column we did add is the column on the far right, the dollar value of 1 market share point. You could have calculated that on your own with the previous slide. We thought it was instructive to call that out. If you look at what it would mean if CONMED took 1 market share point from each category we participate in, it's $83 million in Orthopedics. That's approximately 8% growth for the company. So people constantly ask Todd and I, you guys are small, you're a small market share player, how are you going to compete? How are you going to win? I don't have to become #1 to meaningfully change the trajectory of the company. I have to focus on taking market share. And that's what our portfolio and our sales team to wake up every day thinking about. That's what our R&D teams think about in terms of innovation. So in Orthopedics, $83 million equates to about 8% growth on the company. The other thing I'd point out on this slide, 70% of the revenue is recurring. The contrast, 30% is capital. Capital inherently introduces a little bit of lumpiness into this business. And I call that out because you're going to see on the next slide that General Surgery is a little bit different mix, not nearly capital component. And then I would also note and draw your attention to the revenue mix. Orthopedics is 61% outside the U.S., 39% in the U.S. That's a bit of a legacy. When CONMED bought the whole Linvatec assets out of Bristol-Myers Squibb in 1997, that infrastructure was left in place. The struggles in this business were in the U.S., and that's why it's been a longer climb for us in the U.S. market to recover that business. Jumping over into the General Surgery side. Again, large markets, big competitors, but look at the dollar value of 1 market share point, $98 million or approximately 10 percentage growth points. So if we could have a home run year and get 1 market share point out of every category, everybody sitting on that side of the dais would be really excited. We'd be really excited as a management team. But it just kind of gives you a view of what it means for us to go out and try to get -- grab half a market share point. It's really meaningful to the company. This one is a little bit different, almost 90% of the revenue is single use. And you can see a really heavy concentration of this portfolio in the U.S., 70%. Remember, I said Orthopedics, legacy outside the U.S., one of the big changes we made in the last 5 years was channel. We took General Surgery outside the U.S. from a largely distributed, not controlled by local market leadership, and we gave that to our international team and said, "Hey, you're the Country Manager of Spain. You've been doing a great job with Orthopedics. Guess what, you're now the Country Manager of Spain just like you were yesterday, but you're responsible for General Surgery as well as Orthopedics. Leverage the infrastructure, build the sales team, get after it." And that is a big part of the international strategy. Do more where we're already well positioned in Orthopedics, but grow a channel that's been underinvested in. So 2 very healthy attractive markets, we're excited by the opportunities in both of them. We've talked ad nauseum about profits. Nothing's really changed on this slide. It starts with better revenue on the top line, on a fixed infrastructure. It talks what -- it talks about the innovation and the M&A focus and greatly accretive products to the current gross margin of the company. It talks about production efficiencies. Those things are all very consistent with what we've said in the past. The item at the bottom of the slide that we did add, that we've talked about on our earnings calls and our guidance, is that you should expect not less than 50 to 100 basis points of gross margin improvement year-over-year-over-year. And we remain very resolute in our attention to that across the company whether it's in the R&D and new products coming out or it's in the operational efficiencies the teams are going after. Going to jump into a new category as well presentation-wise. We've never talked about our efforts around environmental, social and governance, and I'm not going to spend a lot of time talking about these. I think it's important at this stage of CONMED's evolution that we do bring these up. The environmental aspects, we're as much in tune with the environmental aspects as anybody out there. Our plant in Chihuahua, Mexico, has received the Clean Industry Certification. Our plant in Chihuahua, Mexico, went fully solar panels, all those projects were based on financial justification. We're not doing these things just because we have to get on board with environmental, social and governance. We're doing them because they're the right things to do, not only for the environmental, social and governance aspects, but they're also the right thing to do for the business. On the social side, these are more inside the 4 walls of the company. CONMED will create a foundation. We'll give our charitable giving through that foundation in 2020. We'll establish CONMED communities, which really address the aspects of our employee base, which our principal locations, our Largo, Florida, Upstate New York outside of Boston and then in Denver, Colorado, very different employee bases, all have community engagement that they want to drive, and we're happy to support that. And then outside the U.S., as I said, we're present in over 100 countries. So very different community aspects there. Last part of the ES&G is the governance aspects, and the governance aspects in any company start at the top of the boardroom. We have 9 of 10 board members are new since 2013. And in 2019, we added 2 new board members. Both of these individuals fantastically accomplished. Barb comes to us from Caterpillar. LaVerne has a different career trajectory. She worked at Dell when it went from $20 billion to $50 billion. She was the first CIO at J&J, and she worked in the Obama administration. Both highly accomplished individuals joining an already very accomplished Board. And what we're excited about is the level of accomplishment and experiences that they bring to our Board. Candidly, it's secondary that they bring both ethnic diversity as well as gender diversity to the Board, but they are great hires. So we're excited to have them as part of our Board. And as a company, we continue to focus on diversity inclusion in our workplace. That is a key metric, mantra of our HR team on a global basis. So in summary, when we look at CONMED, intense customer focus. Our sales teams, our marketing teams wake up every day thinking about the customer and solving their unmet need. And when you show up and you bring solutions to your customers, they're happy to see you. And when you think about what we've added to the portfolio, whether it's game-changing technology like AirSeal or the more recent Buffalo Filter acquisition or dive into Orthopedics and look at our MicroFree power tool platform, the industry's first battery-powered small bone solution or our TruShot all-in-one anchor for the extremities platform uniquely designed, customers get really excited when you do that. I noted the markets we're in. They're large, they're attractive, they're growing and we have a lot of runway to go. We think aggregating growth over the long term can be very meaningful for you as shareholders. And I sum it all up by that operating principle I had on the first slide, we believe in doing things in the right way, and that underpins everything we undertake at the executive level from the boardroom to my management team all the way through the company. So that's the CONMED story. Again, thank you for joining us. And is Robbie still in the room? Robbie's right there. I'm sorry. We -- oh, I'm sorry. Q&A is across the hall in the Essex Room. But thank you.

Robbie took the TVs out so we couldn't have the game on. Sorry about that.

You guys are more interesting.

We like to think so.

All right. We can get started here. Happy to have Curt Hartman, CEO of CONMED; and Todd Garner, CFO. Curt, I wanted to follow-up in 2 slides you had up in your presentation, where 1% market share equals X dollars. It seems like an easy thing. You can just get 1 percentage point of market share, 8% growth, 10% growth in these different divisions. Maybe just run through, like, we look at the 2 businesses from a very high level. But what are the ways you're driving market share gains in each of those segments? If there are any key products or new launches you can point us to?

So the 2 very distinct segments. General Surgery, let me start there. In General Surgery, it goes back to that comment I made in 2015, we get the right people and get the right products. So there's been candidly a wholesale refresh of the portfolios. Our General Surgery business is made up of 3 unique businesses. Each of those businesses has a level of R&D commensurate with the investment profile that we have created for those businesses. Obviously, where Advanced Surgical is our largest business there, that's where AirSeal and Buffalo Filter sit. They have the biggest portfolio. They have the biggest R&D spend and the most refreshed portfolio. Taking new refreshed products, putting platforms like AirSeal and Buffalo Filter in there, that's what allows our sales force to be on offense and go after that market share point. Obviously, the comment I didn't make on those slides was the competitors. Those are very large, big strategic competitors. They outnumber us in terms of personnel. They outnumber us in terms of size of the balance sheet. So it's a big battle every day. Our sales forces have to work very hard to convert that customer, to win that new account, to get through that committee evaluation, that trial, whatever the case may be. But when they sign up to work at CONMED, that's part of what they signed up for. It's a little bit of the same story in Orthopedics. Orthopedics has not, on a global basis, benefited as much from big platform acquisitions as the General Surgery side of the business has. They've had to do it the good old-fashioned way with organic internal development. That takes a little bit longer. But we've had a really nice steady stream of products coming out. And when you look at Orthopedics in 2019, we introduced new platforms around the soft tissue management of the shoulder, the hip, the knee and some products selectively in the extremities category. So getting in front of customers with new products is very important. Things like MicroFree that we introduced in 2018, a big attention getter for customers. When customers see you're investing in their space and bringing something new to make them more efficient to help them deliver better patient outcomes, they get pretty excited about what you're doing. So that's largely the offense.

Yes. And Robbie, if I could just add, we've had those slide out there for a number of years, showing the large attractive markets that we play in. We added that last column to show the dollar impact of 1 share point. Really because at the end of almost every investor meeting, investors will ask, what do investors not get? What are people missing about the story? And I think a lot of investors, especially in medtech, we've all conditioned ourselves that you've got to be #1 or #2 to be successful. And so a lot of people look at CONMED, and they look at who we're up against and to Curt's point, and says, "How is CONMED ever going to be #1 or #2?" And the point is, from that slide, hopefully, what you take away is, you're right. It -- Curt and I probably won't be working anymore, well, by the time CONMED becomes #1, and we're a lot of years away from that. But we don't have to be #1 or #2 to be dramatically successful in these spaces. To take 1 market share point, 2 market share points over a few years, provides a company our size significant growth. So our objective is to grow faster than the market. You have to take share to do that. And the point of that slide was to show the magnitude of what a little bit of share take does to our revenue growth. So that was kind of the point to put in down there.

Yes. Maybe we could dive into that a little bit because it's -- I imagine, part of it is a high-quality sales force. Part of it is innovative product lines. On the flip side, if you don't, it's very easy for CONMED if you lose a point of market share to have sales go down by an equal amount. So what are the keys to making sure that it's in an upward trajectory? Is it constant innovation? Maybe run through how you view the pathway this -- to market share gains.

We try to keep it pretty focused. It is continuous innovation. There's no let off in the innovation cadence. And we've built R&D 5 years ago, 3.3% of sales. Now we've guided to 4.5% to 5%. We think that's the right level right now. There are no, what I would call, unfunded projects that our commercial leaders are asking us to pursue. If they did, we would probably, through the course of the P&L, find ways to get more innovation going. But all the teams and all the businesses are fully staffed and working on projects that we think will add to the outlook of the company. It's keeping your sales force on offense. You do that with new products. It's what we talked about on the third quarter call, expanding the sales presence, feet on the street in this industry matters. If you're not there, if you're not present, you have no opportunity to get the business. So as the income statement and our performance allow us to continue to expand our sales force and get the right presence in the marketplace for all the categories we serve, those are kind of the 3 fundamentals of keeping a med device company on offense. Obviously, when you look at some of the categories of products, clinical studies are important. Things like AirSeal bring a great volume for clinical studies. And that really changes the perspective in the eyes of the customer when they can look at our products, see a book of clinical studies and say, "This makes a very dramatic clinical difference." When you talk about AirSeal, its length of surgery, length of stay, postoperative pain management, insufflation, typically 15 pounds of mercury. With AirSeal, you can lower that number because of the constant pneumo. So there's just all kinds of things that you want to arm your sales force with. Expanding indications, we did that with AirSeal. We have indication approval in the thoracic cavity. Think about that cavity and what kind of clinical work we had to do to get that approval. And now when you go in and talk to that clinical customer about insufflation, we have laparoscopic insufflation, we have thoracic indication. And this past year, we had a pediatric indications. We cover the waterfront. We make it safe in the environment that we're using the devices.

So what do you think your weighted average market growth rates are now? Given you added robotic surgery and [ air filtration ]. I don't think those are 20%-plus growth market. So when you [ blend them ], what are you -- what's the [indiscernible] growth?

Yes. So the question was, what is the weighted average markets -- growth rate at the markets we serve. I still believe we're somewhere in the 3% to 5%, 4% to 6%. Yes, we've got AirSeal, which participates in the robotic market. Yes, we have Buffalo Filter, which has demonstrated very high growth rates. But remember, those are smaller percentage of the overall portfolio. So I still think it's 3% to 5% kind of a -- in general. Really hard to get data on all that, but best estimates right now, 3% to 5%.

And if we could spend a minute on Buffalo Filter. A really attractive acquisition you did in February last year, outperformed expectations so far throughout the fiscal year of calendar 2019. Now where do you think we are in terms of adoption here? Are we still in the first inning? Or are we further through? What are the keys for CONMED to really drive a V-curve here in adoption?

Yes. It's -- we're in the very early innings. We estimate that the market -- the global market today is in the low $100 million -- 100 -- it's over $100 million, but not a lot, over $100 million. And if you just look at the addressable market on the disposable side, there's 395 million surgical procedures a year, 95% of those create smoke. If protection from surgical smoke got to the point where LED is from radiation, right, which is 100% everywhere in the world, which it should be, right, because this is dangerous toxic smoke. If you get to that point, you're talking about north of the $7 billion total addressable market. So we're at $100 million-ish, $7 billion but that's -- so we're in the very early, early days. The second part of your question, Robbie?

What are some of the milestones we can expect in terms of pushing this more from a legislative setting?

Yes. So well -- so where we are today is a land grab, right? There's a land rush because the -- it's actually not the legislation that's driving the demand. The legislation is following the demand. Nurses have been pretty adamant about having a safe workplace for a decade. And now the data has caught up so you can no longer argue that it's theoretical. We now know that this is dangerous smoke. Buffalo, with its focus here in the last couple of decades, has solved the key complaints from the surgeons about the tools. So the tools have been -- we've made the tools more flexible, less intrusive to the surgical procedure, more like what the surgeons are used to. So that combination of the data and solving the product problem has now got to -- we're sitting here today, it's just very hard to argue making nurses breathe in the smoke all day long every day. And so because of that, the demand is strong, and this is growing much faster than any of us expected. And so it really is a land grab in a rush to serve all of the -- as a hospital starts talking about what -- how do we do this? How do we solve this? We want to make sure we're there to be on the front end of those conversations. And so that led to moving that sales force expansion up earlier, as Curt talked about, to make sure we have more resources, to get early on in those discussions with the customers.

So that was where I was going to go next, but maybe we could melt the 2 together. Is the bottleneck simply feet on the street to driving that adoption? Is capacity any issue? Do you get any pushback when you go into hospitals and present them with the data?

We're not having capacity constraints right now even though it's growing about double what we expected. Thankfully, our manufacturing teams have been able to catch up. We're actually integrating right now. We're integrating the Buffalo manufacturing into our existing manufacturing footprint. So we don't see capacity issues. And it really is just making sure that we're properly resourced to be responsive to the demand that's out there in the marketplace.

And so as we think about the sales force pull forward, when we hear other companies say, we're making changes in the sales force, it usually ends up being a negative sales result down the road. They expand too quickly or they break up territories and there's some disruption. So when we hear that, how should we think about sales force changes that come in. What exactly are you changing? And will there be any negative disruption in future results?

I would probably take the word change versus expansion. What we're doing, we typically, because of the way the product portfolio has been unfolding, every year annually, we've expanded our sales force. This is a more aggressive expansion year because of the condition of the portfolio. And when you look at the portfolio that owns both AirSeal, great platform technology, early innings. And Buffalo Filter, we need a lot more feet on the street. That's going to be a fairly aggressive sales force expansion. If you were at AOS this year, you saw on Orthopedics, we put a lot of new products out. Sales force there is going to expand, not as aggressively because those products are newer in their introduction to the marketplace. If you look at our international business, they sell everything. So our international teams are looking at those channels, and saying, do we have the right infrastructure, right number of direct reps, right distributor? Can the distributor keep pace with the new product portfolio we're introducing? Is it a blend? Do we need to put more direct reps in an existing direct rep geography? Do we need to enhance our partnership with the distributor? It's a little bit of a blend of all the things. So it's expansion versus change going from a distributor sales force through a direct sales force, direct sales force to distributor sales force. Those are very disruptive. This is an expansion, and it's important that people understand that. That said, we're pulling it forward early. That is very atypical for this industry. Typically, in this industry, you go to your January sales meeting, you celebrate, recognize all your reps, and then you tell them the bad news, I'm cutting your territory. And they understand that. They come in with that mindset. We pulled that new messaging forward into the fourth quarter. And those conversations have happened and that's -- that can be disruptive to a sales rep. It can also be disruptive to the customer. Customers get very comfortable with their sales reps. And when the manager has to walk in and tell that customer, your favorite sales rep is no longer your sales rep. Customers can react adversely until they get comfortable with the new sales rep. What I like about my management team, this is not something new for any of them. They've all been through this before in prior lives at prior organizations. So I like our chances of success. We're talking about it because it does have the potential to be disruptive.

So when you gave fourth quarter guidance, was there any disruption built into that assumption?

Yes, absolutely. And so to the point of your question, this can be messy, and it can be disruptive. And our calculus was twofold. One, the demand is hotter than we expected on the Buffalo side. On the international side, we -- distributors that we were happy with a year ago, we now have decided they're just not moving at the speed we think we should, especially with the new product cadence. And so rather than wait until January to pull that trigger when you normally would, 2019 has been a really good year. We've overachieved on the top and the bottom. And we need the resources as soon as we can get them. And 2019, frankly, can afford a little bit of disruption in the fourth quarter. So we did guide that fourth quarter will be a little messy. It will be below trend on the sales line. We provided guidance that incorporated that. And to your point, Robbie, we're hope -- the logic was let's start that disruption earlier so that we can finish it earlier. Now whether that's -- that's probably not going to be December 31. That probably does stretch into Q1 a little bit, but it will be done sooner in 2020 than it otherwise would have been. And we believe by moving that forward, it makes 2020 better than it otherwise would have been. But it does take time for those sales reps to be productive. And especially on those distributor changes, that's a little less defined. And so we will have some disruption from Q1, maybe -- I mean, from Q4, maybe into Q1. But we'll talk about the full year 2020 in a couple of weeks. But we think it's the right thing to do for our customers, it's the right thing to do for the business overall, and we think it's the right thing to do for shareholders.

Got it. So Todd, I know you haven't given fourth quarter or 2020 guidance yet, but we have a strong exit rate from 2019. We have Buffalo Filter coming into organic sales in 2020. You have made some general longer-term commentary. How shouldn't people -- based on what you've said before, how do people be thinking about 2020, just from a high level?

Yes. So the marker -- a couple of year -- actually, at your conference 2 years ago, Curt and I put a stake in the ground that the days of low single-digit growth on the revenue line are behind comment. So we're going to be mid-single digits or better, and that's been the stake in the ground. That's still -- on our Q3 call, that's what we said. As we look into 2020, we see another year of healthy revenue growth. All we're seeing right now is that's at least mid-single-digit revenue growth on a constant currency organic basis or better. And on the bottom line, what we said 2 years ago is you should expect double-digit EPS growth. And on Q3, we said despite all these moves in this disruption, and we actually do have 2 headwinds that we talked about, which is FX and taxes, we expect both of those to get worse as we move into 2020. Despite those headwinds, we still are comfortable that the engine is strong enough that we'll be able to deliver on those commitments, top and bottom. And so we'll get into more details in a couple of weeks when we provide guidance, but we see 2020 as a continuation of the strong execution that we've delivered. You should see increased profitability, another year of healthy revenue growth, above market, top and bottom and double-digit EPS growth despite those headwinds.

Great. Just want to make sure -- any questions?

Are there any top line headwinds we should think about? So Buffalo rolls into organic. You have sales force expansion, you have a lot of product launches in General Surgery that are coming out. So I would think organic growth would trend better next year than this year. Is there any headwinds to that number?

Yes. So if -- for those who maybe couldn't hear the question, Charlie asked about any top line headwinds. Charlie, nothing I think that to call out, nothing major. Like I said, FX, if you're talking about constant currency, no, FX will be tougher. So reported might be a little different. But we'll talk about that in more detail in a couple of weeks. Again, the main point, mid-single digits or better on the top, and we're comfortable with that.

If we turn to the balance sheet. Right now, you're in the high 4 leverage ratio as of the last quarter. What should investors be expecting with use of cash? Is it M&A? Is it debt repurchase? What should we expect in 2020?

Yes. So our priorities for cash have not changed. They remain, first, M&A, which is defined as adding growth platforms to the portfolio that make revenue growth and margins accretive. So that remains our top priority. Obviously, with our leverage at 4.7x at Q3, we have to be a little more selective. So the bar has been raised on what we would find attractive. And frankly, we have a pretty good plan A, right? I mean what we're dealing with is a pretty attractive plan. And so -- but we have 2 of our business development team people here in the room. We didn't give them a day off after they did Buffalo. It takes a lot of time for these things to marinate and to find opportunities. And I can tell you, if we found another Buffalo Filter or another SurgiQuest, we'd figure out a way to get it done. In the absence of getting to the [ altar ] with somebody that was compelling, you see the debt come down. And actually, it's coming down faster than we had originally laid out because Buffalo has overachieved, and our cash generation has been good and EBITDA has gone up. And so the debt is coming down faster than we had originally planned, but our priorities for how to grow this business over the long term have not changed.

Great. So you've been fleshing out more on the General Surgery side, as you said, doing Orthopedics a little more organically. As you look over the portfolio, are there any standout pockets where you think inorganic growth could really help flesh out the portfolio?

It's a great question, Robbie. I look at M&A, and it is about finding the right targets. And part of why we've done more in General Surgery, there've been better targets there. The Orthopedics landscape is pretty well picked over. That's not to say there is an innovation to be found out there, but some of the multiples being paid are just not things that we can go after that. That would be step 1. Step 2, a lot of the things in Orthopedics are still more, call it, early stage, a little bit more of a science experiment. They're not quite through the regulatory approval. They're not quite in the market. That's not where CONMED needs to be today. If we found something equivalent to what we've done in General Surgery and Orthopedics, we'd be happy to go after it. Doesn't mean we're not looking. Our M&A team, our businesses through marketing on a global basis, continue to look for opportunities. Is there any business right now that needs M&A to survive? No, I think I'm right in line with Todd. Our cadence with new product development, we built 3-year strat plans. They don't include gaps for -- we have to do an M&A deal in year 2. That's just not part of how we operate the company. M&A is really additive to the overall effort, and we know it's going to be additive. We want it to be additive, it's just part of the growth strategy.

Great. Check for questions? And I think maybe we could end it there. Thanks a lot.

Thank you.

Thank you, everybody. Thank you, Rob.