Curt Hartman - President & CEO Todd Garner - EVP & CFO Luke Pomilio - Advisor.

William English - Piper Jaffray Matthew Mishan - KeyBanc Capital Markets Kristen Stewart - Deutsche Bank Jaime Morgan - Leerink Partners Mike Matson - Needham & Company.

Good afternoon, everyone. Before we begin, let me remind you that during this call management will be making comments and statements regarding its financial outlook, which represents forward-looking statements that involve risks and uncertainties as those terms are defined under the federal securities laws.

The company's actual results may differ materially from its current expectations. Please refer to the risk factors and other cautionary factors in today's press release as well as the company's SEC filings for more details on factors that may cause actual results to differ materially.

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 will use these figures to aid and 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 reconciliation in the press release issued this afternoon.

With these required announcements completed, I will turn the call over to Curt Hartman, CONMED's President and Chief Executive Officer, for opening remarks. Mr.

Hartman?.

Thank you, Karen. Good afternoon. Thank you for joining us for CONMED's fourth quarter and fiscal year 2017 earnings call. With me on the call are Todd Garner, Executive Vice President and Chief Financial Officer and Luke Pomilio, CONMED's Advisor to the Chief Financial Officer.

Today, I'll provide a brief overview of the financial and operating highlights for the quarter and fiscal year. Luke will then provide a more detailed analysis of our financial performance and Todd will discuss our fiscal 2018 financial guidance. After that, we'll open the call to your questions.

Fiscal 2017 was a milestone year for CONMED as the impact of our investments in people and products started to materialize in our performance on a more consistent basis.

The results we posted during the fourth quarter and the full year validate our turnaround strategy and underline the ability and dedication of our team to correctly identify problems, build upon our strengths, make the right investments at the right time and position our company for profitable growth.

Our total sales in the fourth quarter were $222.6 million representing an increase of 9% as reported and 7.9% in constant currency as compared to the fourth quarter of 2016. This growth was driven by strong performances from both of our businesses on a global basis.

For fiscal year 2017, our sales totaled $796.4 million, representing an increase of 4.3% as reported as well as in constant currency when compared to the prior year period.

From an earnings perspective during the fourth quarter, our adjusted net earnings of $19.5 million increased 29.4% year-over-year and adjusted diluted net earnings per share of $0.69 increased 27.8% year-over-year.

For fiscal 2017, our adjusted net earnings of $53.3 million increased 3.7% year-over-year and adjusted diluted net earnings per share of $1.89 increased 2.7% from the prior year. Now looking more closely at our fourth quarter results.

On a worldwide constant currency basis, general surgery grew 9.1% posting its eighth straight quarter of positive gains, our orthopedics increased 6.9% year-over-year.

Our international business continued to perform well during the quarter and increased 10.4% as reported and 8% in constant currency driven by continued growth in both general surgery and orthopedics for the seventh consecutive quarter.

International general surgery recorded its eighth consecutive quarter of growth at 10.1% as reported and 8.1% on a constant currency basis. International orthopedics increased 10.5% as reported and 7.9% in constant currency. Overall, our international business delivered another year of fantastic results.

Our domestic business increased 7.8% in Q4 versus prior year and was also driven by growth in both general surgery and orthopedics. Domestic general surgery grew 9.6% and was led by solid growth from Advanced Surgical and endoscopic technologies, both of which had nice performances in the quarter and for the full year.

Our domestic orthopedics business reported 5.3% growth after six quarters of declines exiting the year on a positive trajectory as anticipated. As previously discussed, we've been working hard to reinvigorate this franchise through new product introductions, updated purchasing contracts and focused salesforce development.

The resulting improvement in orthopedics that we saw during the quarter was in line with our expectations. We're thrilled with this positive momentum and believe we have the right strategies in place to continue the growth as we enter 2018.

Due to our continued focus on innovation during fiscal 2017, we introduced 22 new products topping our previously stated goal of 20 and bringing the total number of new product introductions over the past three years to 42.

Innovation and products and procedures remain a core theme of the CONMED story and remaining committed to investing in research and development initiatives. Finally, and not surprisingly the CFO transition is going extremely well and we're excited to have Todd on Board. We were lucky to find such a great talent.

I was pleased that he selected CONMED for the next step in his career. In the meantime, I'd like to express my personal thanks to Luke whose deep knowledge of the company and dedication to our success are making this transition easy and efficient.

Overall, we're very pleased with our financial and operating accomplishments during the fourth quarter and fiscal year. We believe the investments we've made in our people and product portfolio position us well to achieve further market expansion and profitable growth in 2018 and beyond.

While Todd will provide the detailed 2018 guidance a little later, I'm happy to tell you that we now believe that the organization is positioned to drive mid-single-digit revenue growth and double-digit earnings growth organically on a sustainable basis.

We believe the continued diligent execution that drove the improvement to this point will drive sustainable above-market growth rates in the future and I'd like to take this opportunity to thank the entire CONMED team for their continued passion and dedication, which makes this possible. I'll now turn the call to Luck..

Thank you, Curt. This was a solid quarter from a sales perspective with constant currency growth of 7.9% versus the fourth quarter of 2016, despite one less selling day in this year's fourth quarter. Sales this quarter grew across all reporting categories in both the U.S. and international markets.

Today's press release provides a relevant sales growth detail. With my pending retirement, I thought that it would be appropriate to reflect on the CONMED journey over the last three years. All references to growth there will be on constant currency basis unless otherwise noted.

Investors who have followed the company for an extended period will recall that 2014 was a difficult year for CONMED from a sales perspective. Overall sales fell 2.4% in 2014 due to declines across all reporting businesses in both U.S. and international markets.

I can track those results with today where our International business grew 5.8% for the year with growth in both the orthopedic and general surgery categories in every quarter of 2017. In addition, the growth rate increased in each quarter of the year with the fourth quarter finishing at 8%.

Domestic general surgery has been a consistent performer all year with full-year sales growth of 6.8% versus 2016. Fourth quarter growth of 9.6% carries good momentum into 2018. Despite the challenges we've had with our domestic orthopedics category, our goal for this business has been to exit 2017 much stronger than we started the year.

While this business declined 2.1% for the year, we feel good about finishing 2017 with 5.3% growth in the fourth quarter. Much has been accomplished at CONMED over the last three years we are a different company today they were three years ago. It is fulfilling to see this reflect in our sales results.

Now turning to other components of the income statement. Adjusted gross margin for the fourth quarter including restructuring cost expanded by 240 basis points to 55.8% compared to 53.4% in the fourth quarter of 2016.

The year-over-year improvement is attributable to favorable foreign exchange rate of approximately 40 basis points, a favorable impact from product mix of approximate 40 basis points and a favorable production impact of approximately 160 basis points. For fiscal year 2017, adjusted gross margin was 54.5% in line with the prior year period.

As discussed during the year, less payable gross margins in the first half of the year offset the increase in gross margins realized in the back half of the year.

On an adjusted basis, which excludes the impact of amortization, selling and administrative expenses for the fourth quarter were $86.5 million or 38.8% of total sales compared to $77.2 million or 37.8% of total sales in the fourth quarter of 2016.

As previously -- as discussed previously, our business is seasonal with fourth quarter sales representing the highest quarter of the year. As a result, and as we expected, adjusted SG&A as a percentage of total sales for the fourth quarter of 2017 was at the lowest quarterly level of the year.

For the full fiscal year, adjusted selling and administrative expenses were $315.3 million or 39.6% of total sales compared to $298.8 million or 39.1% of total sales in 2016. As we discussed on last quarter's call, topline strength in 2017 has allowed us to make sales and marketing investments to accelerate our growth in 2018 and beyond.

Research and development expenses for the fourth quarter were $8.4 million which is slightly higher than the $8.3 million recorded in the third quarter of 2017 and an increase over the $7.6 million reported in the prior year period.

For the full year, our research and development expenses were $32.3 million or 4.1% of total sales, compared to the $32.3 million or 4.2% of total sales a year ago. Adjusted EBITDA margin in the fourth quarter of 2017 was 19.1% compared to 17.8% a year ago. Adjusted EBITDA margin for the full-year was 17.2% compared to 17.4% for the prior year period.

We often discuss the power of sales leverage on our profitability and this quarter is 19.1% adjusted EBITDA margin on strong sales reflects this potential. Turning now to a discussion of our income tax rate. During the fourth quarter we recorded the impact of the recently passed tax reform legislation.

This resulted in a fourth quarter tax benefit of $32.1 million, related primarily to revaluation of our deferred tax liabilities, which has been excluded from our adjusted results.

Excluding the impact of tax reform, our non-GAAP effective quarterly tax rate decreased to 24.5% from 30.7% in the prior year quarter, as a result of several discrete tax benefits amounting to $1.2 million, which are recognized in this fourth quarter in connection with finalizing our 2017 tax position.

For the full year, our adjusted effective tax rate decreased to 28% compared to 31.9% in 2016. Fourth quarter GAAP net income totaled $46.7 million or $1.65 per diluted share compared to a reported net income of $6.7 million or $0.24 per diluted share a year ago. 2017 fourth quarter GAAP net income includes $1.13 of benefit related tax reform.

For the full year, our diluted net earnings per share on a GAAP basis were $1.97, which includes the benefit associated with tax reform compared to diluted net earnings per share of $0.52 a year ago.

As previously discussed and as outlined in today's press release, we exclude the cost of special items including acquisitions, restructurings, legal matters, gains on sales of assets, debt refinancings, amortization of intangible assets net of tax, as well as the impact of tax reform from our calculation of adjusted diluted net earnings per share.

Excluding the impact of these items, our fourth quarter adjusted diluted net earnings per share were $0.69 versus $0.54 in the prior year period. For fiscal year 2017, our adjusted diluted net earnings per share were $1.89 versus a $1.84 in the prior year period.

Looking at the balance sheet, our cash balance as of the end of the fourth quarter of 2017 was $32.6 million compared to $27.4 million as of December 31, 2016. Accounts renewable days as of December 31, 2017 were 69 days compared to 66 days in the same quarter a year ago.

The inventory balance at quarter end was $141.4 million compared to $149.5 million at September 30, 2017 and $135.9 million at December 31, 2016. Inventory days at quarter end were 142. Long term debt at the end of the quarter was $471.7 million versus $488.3 million at the end of December 2016. Our leverage ratio at December 31, 2017 was 3.48.

Cash flow from operations was $65.6 million in 2017 compared to $39.9 million in 2016 and free cash flow for fiscal year 2017 was $52.7 million compared to $25.1 million in the prior year period. Before I turn the call over to Todd who will review our fiscal 2018 financial guidance, I would like to officially welcome him to CONMED.

We've spent a better part of this month together and I've got great insight into his experiencing capabilities. I feel confident that Todd is the ideal person to help CONMED in the next phase of the company's growth. And with that, I'll turn the call over to Todd..

Thank you, Luck. I know I speak for all those on the call as we wish you all the best in retirement. I sincerely appreciate all your help in getting me up to speed quickly and I'm very glad you'll be available as an Advisor as we continue our smooth transition.

Before I get to our financial guidance for 2018, I would like to provide my perspective on the status of the turnaround and the help of CONMED's business engine.

Over the past three years, Kurt and the CONMED team have transformed what had been a declining business into a 4% topline grower in 2017, which approximates the average revenue growth in med tech. That kind of a change in three years is highly impressive and it has taken significant investment and strategic execution to accomplish that.

That being said, I can already tell you that no one on the leadership team here is happy with average performance. Given our size and our position in the market, the objective is to grow revenue faster than the market segments we are in. I'll point out that one point of revenue growth for us is only $8 million.

So, success on the revenue line is defined as growing faster than our markets. Because of the level of investment required to execute the turnaround and generate the improved topline growth, our earnings growth profile has been below average for our sector and we believe 2018 is the year when we begin to close the gap.

We believe the engine is now in a position to sustainably deliver mid-single-digit revenue growth and double digit adjusted earnings growth on an organic basis. Now specifically for fiscal year 2018, we expect constant currency sales growth in the 4% to 5% range.

Based on recent exchange rates, 2018 FX is expected to be favorable to the revenue line between 100 and 150 basis points. We expect our fiscal year 2018 adjusted gross margin to improve by 50 to 100 basis points, driven principally by cost savings initiatives.

We expect our full year 2018 SG&A as a percentage of sales to improve between 20 and 50 basis points. Given the seasonal nature of our business, we anticipate SG&A may be higher than prior year periods early in the year, but will be down as a percentage of sales for the full year.

As we continue to focus on reinvigorating organic growth through our pipeline, we expect full year 2018 R&D expense in the range of 4.5% to 5% as a percentage of sales and are working to bring our R&D toward the high end of that range.

Based on the latest projections from economists, which call for multiple rate increases during the year, we expect interest expense in the range of $20 million to $21 million in 2018. We expect our effective tax rate on an adjusted basis to be in the range of 25% to 27%.

That range is slightly wider than what we we've historically provided as the recently passed U.S. tax reform is still very new, but we expect to have more clarity as the year progresses. That will result in adjusted diluted net earnings per share in the range of $2.11 to $2.17, which represents 12% to 15% growth over 2017.

This guidance includes between $0.05 and $0.08 of positive currency impact.

The adjusted diluted net earnings per share estimates for 2018 exclude the cost of special items including acquisition costs and restructuring costs, which are estimated in the range of $3 million to $5 million net of tax and amortization of intangible assets, which are estimated in the range of $16 million to $18 million net of tax.

As we look at the contribution by quarter, the cadence of 2018 looks a lot like 2017, with slightly more than 40% of adjusted cash EPS in the first half of the year and about 20% in Q1. We estimate operating cash flow in the $70 million range for 2018 with capital expenditure around $15 million. That would result in free cash flow around $55 million.

Before we move to Q&A, just a couple of housekeeping items. As many others in our sector do and as Luke just did, we will provide key balance sheet and cash flow metrics on our earnings calls, but the full balance sheet and cash flow will no longer be part of the press release.

The full financial statements are in our SEC filings, which are typically filed shortly after earnings. And one final reminder for your models, which Luke touched on last quarter. There's an accounting standards change relating to revenue recognition, which has taken effect here in 2018.

The impact of this change is a roughly $8 million in fees that we pay to GPOs and distributors will transition from SG&A expense to a reduction of sales on the income statement. This will have a negative impact on the topline of your models this year relative to 2017, which will be offset by lower SG&A expense, meaning EBIT will remain unchanged.

We've provided a supplemental reconciliation on the Investor section of our website, which should allow you to make a more direct comparison between 2017 and 2018. Thank you for your time and attention. I would now like to turn the call back to Karen for Q&A..

Thank you. [Operator instructions] Our first question for today comes from the line of William English from Piper Jaffray..

Hi, this is Will English from Piper Jaffray on for Matt. Congrats on the great quarter. Just a couple questions and a quick follow-up.

I guess what's been the hardest part of turning the ortho business around and what do you attribute to the success to in the fourth quarter?.

I think Will, if you look at the U.S. orthopedics as we went through the businesses when we first started this journey, there were different challenges in all them and principally as a company statement, there was a lack of new product innovation and the U.S. orthopedic business is a very competitive business as you're well aware.

There is a lot of great competitors in that space and when you don't innovate in that space, you take a position at the back of the line relative to what your customers are willing to accept from you. So, we had a long wait in line and getting that innovation engine turn back on really took as I've said people and products.

We had to bring in the right group of people that started with a new leader for the business who came in, in September of 2015, brought a new marketing team, new R&D team, we've got to connect with the market, we got to listen to what customers want, we've got to go through the R&D iteration, get the products out in the market.

You're never going to be perfect and we've started that work back in 2015, late 2015, supplemented it with some tuck-in M&A and find ourself in a better spot this year with the way we closed out the year.

The combination of getting the right people in the right products and as we move forward now from a company statement it's adding the profitability component as those investments that we've been making the last couple years are now firmly in place and we start leveraging some of the hard work that's been done over the last couple years..

Excellent, excellent.

And then regards to SurgiQuest we've heard that there's a possible competitor entering that space and given the line extension that occurred in the third quarter, do you think that that's going to help CONMED defend against this competitor and how might you respond?.

So, the AirSeal platform has been a great platform since we closed on that on January 04, 2016. We had a great first year. We had a great second year on a global basis. There were actually two competitors that came into the market in 2017 and I think our results would suggest we fared very well against competitive entrance.

And as you noted, we continue to innovate on that platform and that innovation will not stop. There is a lot we can continue to do there. There's the great president of being first in the market. We've got a great reputation for a technology innovation standpoint and we continue to leverage that.

So, I think anyone of us we welcome competition and we think we just have a great technology platform and a great team that's focused on innovating there day in and day out. So, we like our chances..

Excellent, excellent. And then this probably more for Todd, but looking out to 2018 guidance, why aren’t we seeing more leverage on the bottom line with revenue upside and tax benefits. You could provide any more color on just guidance for operating margins etcetera that would be much appreciated..

Sure will, I think 12% to 15% on the bottom line is pretty good. Our view of that is that it does represent about 10% growth on an organic basis.

We've got currency helping a little bit and tax helping a little bit, but on an underlying basis and I think if you take the midpoint of the ranges that we provided, you will see operating income growing at or close to that double-digit mark. So, we feel pretty good about the engine going into 2018..

Got it. Great. Thank you very much and congrats..

Thank you..

Thank you. Our next question comes from the line of Matthew Mishan with KeyBanc..

Hey good afternoon and thank you for taking the questions. Hey, just a couple of quick clarifications to start.

How should we be thinking about the accounting change impact on guidance? Is that excluding the accounting change or including it?.

So, it would be including it, I guess the way to think about it is….

On revenue gross margin type, sorry..

Right, yes. So, we're going to restate, as we talked about '18 versus '17, '17 will be restated with the accounting change in there. So that's why we provided the reconciliation on the website, so that you can rebase your models..

Okay. That makes a ton of sense and then on the revenue growth side, was there anything inorganic in some of the numbers? I know you've done a couple of smaller bolt-on.

Did some of those come on a little bit stronger?.

Well as we said, we did three tuck-in acquisitions in 2017, all of which contributed in some way, shape or form over the course of the year depending on when they came on, depending on when the training happened in full ramp up. One of those was that we referenced last quarter was the anchor tissue retriable bag.

We're excited about that platform, but part of that is offset by the fact we were already carrying it in some of the international markets. So, it wasn't completely new outside the U.S. It was new to our U.S. team. That would probably have the biggest contribution, but I wouldn't point to any of those things as drivers for the quarter.

It was just good fundamental results based on the work we've done over the last couple years and across 42 new products and across revamping the organization..

Thank you. And our next question comes from the line of Kristen Stewart from Deutsche Bank..

Hi everybody. Congratulations on a really great quarter. Just wondering on the confidence just now stating after what has been a really good couple of years of really turning around the company, Curt what gives you confidence after just one quarter of seeing U.S.

orthopedic come back, so the conviction level seeing now were at this mid-single-digit run rate today kind of just one quarter typically doesn't make a trend, not to be in this year or anything like that. But what gives you the confidence today to say CONMED were here now at a mid-single-digit growth rate.

Is it just the number of new products that you see going forward that you have in the pipeline? Is it just that you just feel really good about the business? Maybe just help get us a little bit more comfortable that now is the right time to be putting out the longer-term stake in the ground saying you're at this level of mid-single digit topline and double-digit EPS growth? Thanks..

Sure, it's a fair question and so number one, we start with 4% to 5% guidance, which captures the year we just finished at 4.3%. Number two, 78% of the revenue has been doing very well now for many quarters, that being 48% in international and 30% in general surgery in the last 22 to get over the line, the U.S.

orthopedics had a good strong fourth quarter, probably a little bit delayed in getting there because of some of the things that happen in the third quarter with hurricane impact, but nonetheless got there. And as I said, when you look at domestic orthopedics it's a very competitive market.

We worked hard over the last couple years investing in that business, weather its new products or new people and those things take time to get hold in the marketplace. Your surgeon customers don't just say, hey welcome back. Let's give your stuff a try. You still very much have to wait in line.

Our reps are out there working every single day, trying to get that opportunity and we're starting to get more opportunities as we bring more innovation to the marketplace and I think you're starting to see that as you look at 2017's fourth quarter.

AND we see it in the underlying trends whether it's things like the Edge platform that's now been out for six quarters in the quarter-over-quarter growth that continues to demonstrate or the slowdown in erosion in the shaver blade market membrane.

It was academy last year when we first introduced a refresh line of shaver blades and continue to add through that through the course of the year. All of those small things start to add up and build the confidence and consistency in the underlying business.

So, as we look at 2018, we think there will be first and foremost domestic orthopedics keeps its head above water. Obviously, nobody is happy with that. They want to get to market growth rate and then continue forward and we're building new product platforms to work towards that.

And at the same time, the rest of our businesses are just getting stronger and stronger every day. And as you highlighted and as Todd mentioned in his guidance statement, we're looking beyond the high end of the R&D range, 4.5% to 5%. We've got more efficient in our R&D efforts.

We've become confident in our ability to get products out based on what we've done the last couple years and that's grown the last couple years. So, all those things Kristen coming together say, right now is the right time to make those statements. Again, it's starting with 4% to 5%.

We still got more work to do, to get on the higher side of mid-single digits to go from there, but hopefully all that makes sense..

Yeah, that's perfect. And I guess just in terms of the guidance going forward, I just want to make sure I understood Todd, the cadence here, you said that for the first quarter about 20% of the year should fall in the first quarter, is that about right form an EPS….

That's right, for EPS yes..

Okay. Perfect and welcome aboard. Nice having on the call..

Thanks Kirsten..

And Luke I don't know if this is your last one, but it's been great having you on all the calls as well. So, thanks..

Thanks Kirsten..

Our next question comes from the line of Richard Newitter with Leerink Partners..

Hi guys. This is Jaime Morgan on for Richard Newitter. Thanks for taking my question. I guess to start the first question that I have, it's for you Todd.

Since you've only been in new CFO role for a couple of weeks now, kind of looking ahead into 2018, what do you see as the biggest opportunities and challenges for CONMED over the next 12 months?.

Well yeah Jaime, thanks. We're really fortunate to join right now at this time, we're at an inflection point I think where there has been a lot of work done to get the business back to mid-single-digit revenue growth.

Profitability has been delayed a little bit and so to join when the top line is a lot more stable and frankly we feel poised to grow share and improve our position in the marketplace. And then be able to have an engine that we feel going into 2018 is providing an organic double-digit earnings growth level gives us choices of what to do right.

So, I think the work that's been done to get us here puts us in a stable position and now it's about winning and taking share in the marketplace and hopefully, I can be helpful in helping us make the right decisions to put us in a position to do that..

Great. And then just one quick follow-up on the guidance and kind of thinking longer term on the margin, how should we be thinking about reinvestment in 2018? I know 2017 shaped up to be a year of investment.

Are you still expecting that same sort of investment in 2018 and then kind of as we head into some out years in 2019 and just as I said longer term, looking to get a little bit more color on what you guys think of the gross margin and operating margin profile and just from like a leverage perspective as well? Thanks so much..

Thanks. So, we definitely want to see the margin profile improve right, but we need to do that in a controlled fashion. So, we feel like we're in a position to do both, provide the street with double-digit earnings on an organic sustainable basis and make the right investments to the business to improve the growth on the top line.

And then as the growth on the topline improves, we should get more leverage through the P&L and profitability improved. So that's that the model.

We are committed to the guidance we provided today to the extent any of our assumptions prove to be conservative and there's overachievement or the business performs better, then we would be looking to invest back into the business and we do have a list of investments that we could pull the trigger on to do that.

But we do want to operate in a balanced fashion where we are providing healthy profitability to the street and also investing in the future of the business so that the topline is stronger and more secure and then the bottom line will take of itself..

Thank you. [Operator instructions] Our next question comes from the line of Mike Matson with Needham & Company..

Hi. Thanks for taking my questions.

A few product-related questions I guess, just with regard to the orthopedics business I know you launched a number of new products last year, I was wondering if there were any of that you wanted to call out as being specific contributors to the growth acceleration?.

Mike, it's a combination of a lot of different products, it truly is. We had seven new ones that we showed at Academy and then we added a few more as the year went on and all of them contributed in some way, shape or form. And as you very well know there's very few grand slams if you will on products.

There's a lot of singles and doubles and we think we've done a great job enhancing the portfolio, filling gaps, whether that was through internal innovation or external acquisition tuck ins. I think maybe the better way to answer your question is so far, I think there's one that we've introduced that hasn't met our expectations.

Everything else is doing what we thought it would do. Some getting there a little faster than others and honestly that's a great position to be because it gives us confidence in our marketing and R&D teams that they know what they're doing. They're connected with the right people in the marketplace.

So, nothing that I would point to and say this is the AirSeal equivalent if you will for orthopedics. It's just been a lot of fundamental blocking and tackling and that approach continues as we head into 2018 and we're excited about the pipeline for the company as we go into 2018 both for orthopedics and broadly speaking..

Okay. Thanks. And then just a follow-up for Todd, just regarding free cash flow guidance for '18, I guess I would have expected it to be up a little more over '17. So, I was just wondering if you could maybe talk about why given the earnings growth that you're expecting, why it's not more over '17, thanks..

So, there's a lot of moving pieces in there right. You got working capital changes that aren’t completely predictable right. It's not exactly how all of those pieces are going to go. We got tax reform that's also kind of a swing in there. So, you got some wide ranges. I think the point is that it is going north.

We do see free cash flow improving over what it's been and we'll be working to keep that trend of improvement going..

Thank you. And we have a follow-up question from the line of Kristen Stewart with Deutsche Bank..

Hi. Thanks for taking the follow-up.

I was just wondering in terms of new products and all the different shows that are going to be coming up in terms of the Academy and then office hedges, are there any major presentations or anything like that we should be keeping an eye on whether it's new product launches or anything on AirSeal at stages?.

Yeah so as I mentioned earlier, we have again another robust R&D pipeline. The nuance in this year's R&D pipeline is that it will probably be more focused and geared towards the middle of the year versus the early part of the year. Though we do have some nice plans for Academy, which is coming up the first week in March.

So, I would probably in general draw people's attention on the orthopedic side to Academy and some things we have planned for Academy. Less so at sages this year because the general surgery businesses are moving towards more of a midyear focused on some of the products they have in the pipeline. So that's kind of how I look at the year..

Okay. Perfect. Thank you..

Thank you. And that concludes our question-and-answer session for today. I'd like to turn the floor back over to Curt Hartman for any closing comments..

Thank you, Karen and thank you, everybody for your time today. We look forward to speaking with you on our next earnings call, which will be held on April 25 of 2018. Thank you very much..

Thank you. Ladies and gentlemen, thank you for your participation in today's conference. This does conclude the program and you may now disconnect. Everyone have a great day..