Investor Presentation

Curt R. Hartman
President & Chief Executive Officer
August 2016

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.
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Company Snapshot
Company Overview
n

Global Presence

Founded in 1970 in Utica, NY, CONMED is a global medical technology

organization with ~3,400 employees and sales across six continents

Direct sales to 17 countries and indirect

sales to more than 100 countries

Employees by Region

Key Business Categories

Revenue by Category

Orthopedic Surgery

70%
60%

Surgical instruments including

capital, disposables, and implants
used in the repair of soft tissue and
joint injuries

58%

50%

US 2,150, 64%

Advanced Surgical
Devices used in endoscopic surgical
procedures, including single- and
multi-use tools as well as 3-D high
definition camera systems

40%
28%

30%
20%

14%

10%
0%

OUS 1,250,
36%

Ortho

Advanced Surgical
2015 Pro Forma with SurgiQuest

Endoscopic
Technologies and
Critical Care

Endoscopic Technologies
and Critical Care
GI diagnostic and therapeutic
products, ECG, and other patient care
devices

Total Employees: 3,400

Revenue by Region

US 52%

OUS 48%

2015 Pro Forma with SurgiQuest

Product Portfolio Orthopedics

Description

Sports Medicine

Powered
Instruments

Devices for repair of soft tissue

injuries in joints, particularly the
knee and shoulder

Surgical
Visualization

Surgical drills and saws and related

blades powered by battery,
electricity, or pneumatic, used by
orthopedic surgeons or other
specialists

Global Market/Key Competitors

Shoulder anchors
Bioabsorable, PEEK, and metal
screws
Meniscal repair devices
Resection shavers
Fluid management systems

$4.2 to $4.4 Billion

Large bone, small bone, and

specialty hand pieces
Related single-use disposables

$1.3 to $1.5 Billion

MTF allograft tissue

Allograft Tissue

Key Products

Revenue from promoting allograft

tissue use

2-D high definition surgical

visualization systems to enable
minimally invasive arthroscopic
surgery

Arthrex
DePuy Mitek (J&J)
Smith & Nephew
Stryker

DePuy Synthes (J&J)

Medtronic (Midas Rex and Xomed
divisions)
MicroAire
Stryker
Zimmer

Tendon ligament
Meniscus grafts
Dermis for tendon and ligament
reinforcement

$375 to $425 Million

Cameras and controllers

Scopes
Light sources
Image capture systems

$1.8 to $2.0 Billion

Allosource
LifeNet
RTI

Arthrex
Karl Storz
Olympus
Richard Wolf
Smith & Nephew
Stryker

Product Portfolio Advanced Surgical

Description

Energy

Endomechanical

Surgical
Visualization

Key Products

Devices using Radio Frequency (RF)

energy to affect tissue by cutting,
sealing, or causing hemostasis in
open or minimally invasive
procedures

Instruments for minimally invasive

laparoscopic or gynecological
abdominal surgery

2-D and 3-D high definition surgical

visualization systems to enable
minimally invasive laparoscopic
surgery

Global Market/Key Competitors

Electrosurgical pencils, ground pads,

generators, and smoke evacuation
Argon Beam coagulation

$2.8 to $3.0 Billion

$3.8 to $4.0 Billion

Trocars
Suction irrigation
Scissors and other handheld
instruments
Probes
V-Care

Cameras and controllers

Scopes
Light sources
Insufflation devices and accessories
Image capture systems

$1.8 to $2.0 Billion

ERBE
Ethicon Endo-Surgery (J&J)
Medtronic (Covidien)
Megadyne

Applied Medical
Ethicon Endo-Surgery (J&J)
Medtronic (Covidien)

Arthrex
Karl Storz
Olympus
Richard Wolf
Smith & Nephew
Stryker

Product Portfolio
Endoscopic Technologies and Critical Care
Description

Global Market/Key Competitors

Minimally invasive diagnostic and therapeutic

products used by Gastroenterologists

Forceps, snares, and retrieval nets

Scope management
Biliary stents
Hemostasis devices
Bronchoscopy devices

$3.0 to $3.2 Billion

Single-use devices for monitoring cardiac

activity and other patient care devices

EKG electrodes
Defibrillation pads
Surgical suction devices
IV fluid management devices

$0.8 to $1.0 Billion

Endoscopic
Technologies

Critical Care

Key Products

Boston Scientific
Cook Medical
EndoChoice
Olympus
Merit Endotek
STERIS

3M Company
Medtronic (Covidien)

CONMED Transformation Progress

Board of Director Changes
Investor dissatisfaction
Seven of nine directors appointed post-2013 Annual Meeting
2014

Strategic Process
Completion of a strategic process July 23, 2014
Interim CEO appointed
New CEO November 10, 2014
Curt Hartman appointed permanent CEO

2015

Leadership Team
New leadership team hiring completed during 2015
Focus on Commercial Improvement
Domestic and international commercial changes to position for growth
Aligned functional areas to support growth focus
New Product Innovation
Aligned marketing product strategy road map with R&D resource allocation
Restored Business Development function to drive acquisition strategy
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Leadership Team
COMMERCIAL

FUNCTIONAL
Years at
CONMED

Years in
Industry

Executive

Title

Curt
Hartman

President &
CEO

Pat
Beyer

President
International

Bill
Peters

Years at
CONMED

Years in
Industry

Executive

Title

25

Luke
Pomilio

EVP & CFO

20

20

25

Heather
Cohen

EVP,
Human
Resources

14

14

VP/GM,
Advanced
Surgical

13

Dan
Jonas

EVP &
General
Counsel

17

17

Jed
Kennedy

VP/GM,
Endoscopic
Technologies

30

Wilfredo
Ruiz-Caban

EVP,
RA/QA and
Operations

<1

23

Nate
Folkert

VP/GM,
Orthopedics

15

Peter
Shagory

EVP,
Corporate
Development
and Strategy

20

Focus on Commercial Improvement

2015 Domestic Progress

Sales Growth

Combined Energy and Endomechanical into

Advanced Surgical
Expanded/enhanced sales management and
integrated sports tissue
Restructured marketing leadership across all
businesses
Simplified and focused commission structure

Constant Currency
Sales Growth

2015 International Progress

Refocused teams on One CONMED approach

Key export markets hired in-country leadership
Key direct markets increased product
registrations
Underperforming direct markets restructured
leadership with renewed focus on accountability
International business split: Direct 2/3, Export 1/3

New Products Building a Future

Organic

Inorganic

Small Lithium Power Battery

UltraBlades Dual Purpose Shaver Blades
Spectrum AutoPass Suture Passer
Graftmax Button/Reamers
Micro Power Plus Power Instruments
Urology Camera Heads
TenoLok Tenodesis Anchor
HelixAR Energy Platform
Edge RF System

SurgiQuest AirSeal System

ARC Adjustable Retractor Cannula
AssistARM Surgical Limb Positioners
AppianFX Bicep Tenodesis Anchors

2015 - 2016
Marketing-driven product development becoming a meaningful
component of the Companys commercial strategy
10

SurgiQuest - Transformative Acquisition

On November 16, 2015, announced definitive agreement to acquire for
$265 million on a cash-free, debt-free basis
SurgiQuests AirSeal System is the first integrated access management
technology for use in laparoscopic and robotic procedures
AirSeal Rapidly becoming the standard of care in robotic procedures
Significantly bolsters CONMEDs Advanced Surgical portfolio
AirSeal is a proprietary and differentiated access system that will
become a centerpiece in Advanced Surgical product portfolio
Complementary to current Advanced Surgical offering and
significantly enhances provider relationships
Added R&D expertise to accelerate current innovation capability
Uniquely bolsters progress made in revitalizing Advanced Surgical
business
Acquisition closed on January 4, 2016
Contributed sales of $31.2M through FY16Q2
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AirSeal System
iFS

ACCESS PORT
Patented, Revolutionary
Valve-Free Design

Replaces standard insufflation and

Creates invisible pressure

barrier with no valves,

gaskets, or seals
Enables continuous pressure
sensing
Vents abdominal
overpressures
Enables intact specimen
removal & integrated smoke
evacuation

smoke evacuation machines in the

OR

Offers AirSeal, Smoke Evac, and

standard insufflation modes
Continuous pressure sensing
dynamically responds to changes in
abdominal environment

TRI-LUMEN TUBING
Industrys Only
Tri-Lumen Tubing

Patented, tri-lumen
design
Pumps in CO2
Evacuates smoke out
Continuously
measures pressure

AirSeal is the most technologically advanced and only integrated access management system
for robotic and laparoscopic surgery, enabling numerous clinical benefits including low impact
surgery; poised to become the Standard of Care in Laparoscopy
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Low Impact:
Clinical Benefits & Value Proposition
Surgical Arena Benefits

Operating Room Economics

P Superior, stable pneumoperitoneum

P Lowers procedure time by approximately 12-15%5

P Eliminates smoke evacuation hardware costs
P Decreases staff liability from surgical smoke
P Increases procedure volumes

P Integrated, continuous smoke evacuation

P Improved (valve-free) access to abdomen
P Ideal for robotic-assisted surgeries

PACU1 & Recovery Economics

Clinical Benefits

P Lower anesthesia time & CO2 absorption

P Reduces PACU1 Time (~49%5) & LOS4 (~74%5)

P Reduced shoulder pain & medication use

P Smaller trocars reduce wound size (and scarring) by 76%

P Reduces Medication Costs

P Reduces Patient Management Costs

P Faster recovery time

P Higher OR2 and PACU1 Throughput

P Higher patient satisfaction

P Improves HCAHPS3 Scores

Low Impact access drives lower patient management costs; higher PACU1,
OR2 and bed availability, and revenue from improved patient HCAHPS3 scoring
1

Post-Anesthesia Care Unit ; 2 Operating Room; 3 Hospital Consumer Assessment of Healthcare Providers and Systems; 4 Length of Stay; 5
Based on outcomes for laparoscopic ventral/incisional hernia repair on 106 patients

13

AirSeal Domestic and Global Market

Domestic Procedure Market
Robotic Surgery (2014)
Laparoscopic Surgery (2015)

~450,000
~2,890,000

~ $568 Million in Annual Disposables

~6,700 Capital Units Required*

Global Procedure Market

Robotic Surgery (2014)
Laparoscopic Surgery (2015)

~ 600,000
~11,000,000

~ $2 Billion in Annual Disposables

* 2 Procedures per day per Capital Unit

~23,000 Capital Units Required*

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Building Momentum in 2016

Accelerated Revenue Growth

General Surgery
Integrate SurgiQuest

International
Strengthen
presence in key
markets

Capitalize on expanded
bag and pull-through
opportunities
Orthopedic and
Visualization
Continue sales
acceleration

15

R&D
Execute on product
roadmap
Shorten development
times

Inorganic
Growth
Continue to pursue
in all businesses

Financial Guideposts
EBITDA

Revenue
Achieve Market Growth Rates

Steady EBITDA Margin Expansion

Orthopedics

4-6%

Utilize consolidated footprint to drive

higher margins

Advanced Surgical

3-5%

Endoscopic Technologies

2-4%

International

Drive incremental sales through

existing SG&A structure
Reallocate investments to areas with
highest returns

2-4%

Revenue: Return to market growth and accelerate

EBITDA: Expand margins in line with industry peer group
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2016 Second Quarter Results

Q2 Revenue
Y/Y % Change
AirSeal Sales

$193.4M
+6.9% as reported, +9.2% in constant currency
$18.5M, representing 36% growth over SurgiQuest FY15Q2 actual

Comments
Domestic sales growth was driven by strong performance of General Surgery due to AirSeal,
partially offset by a decline in capital sales within Orthopedics and Visualization. Endoscopic
technology delivered its second consecutive quarter of mid-single-digit growth, and two new
products were launched.
Internationally, all three reporting business segments posted year-over-year constant currency
organic growth and improved capital sales.
Direct markets: Another quarter of solid constant currency growth marked by improved performance
in Canada and Australia.
Export markets: Sales improved on an organic basis, driven by a return to growth in Japan and
strong performance across Asia, while EMEA and China remained soft.

Unfavorable foreign exchange rates reduced revenue by $4.3 million compared to FY15Q2.
Adjusted gross margin expanded 290 bps due to a positive impact from production variances
(+270 bps), as well as mix and pricing (+120 bps), partially offset by a negative impact from
foreign exchange (-100 bps).
Adjusted EPS of $0.47 excludes the cost of special items, net of tax, including acquisitions,
restructuring, and debt refinancing, as well as amortization of intangible assets.
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Updated 2016 Guidance

Reported Revenue

$757M - $767M

SurgiQuest Acquisition

$62M - $67M

Organic Constant Currency Growth

(1.0%) to 1.0%

FX Impact

($17M) - ($19M)

Adjusted Gross Margins

54.5% to 55.5%

Adjusted SG&A

38.5% to 39.5%

R&D Expense

$34M - $36M

Adjusted Tax Rate

~32.0%

Adjusted EPS1

$1.83 - $1.93

FX impact to Adjusted EPS

1

($0.36) - ($0.38)

Excludes the cost of special items, net of tax, including acquisitions, restructuring, and debt refinancing, as well as amortization of intangible assets

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Reconciliation to 2016 Sales Forecast

(in millions)

$ 800

$719

($17) to ($19)

(1%) to 1%

2015 Actual

FX

Organic Growth

$62 to $67

$757 to $767

SurgiQuest

2016 Forecast

$ 700

$ 600

Based on July 22, 2016 currency rates

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Conclusion

P We have made important strides in our turnaround, and I am

proud of the work of this leadership team.

P We remain focused on improving our overall operating

performance.

P 2016 will bring continued enhancements to the business and

our outcomes.

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Destination of Choice
Talented employees, customers, and investors!

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