Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the Enovis First Quarter 2023 Earnings Conference Call [Operator Instructions]. Please note, today's event is being recorded.

I would now like to turn the conference over to Derek Leckow, Vice President of Investor Relations. Please go ahead, sir.

Derek Leckow

Thanks, Bracho. everyone. morning, Good joining results for for first our Thank call. us XXXX conference quarter you today I'm President Leckow, Derek Vice of Investor Relations.

the Ben Officer. Joining Executive on call Matt are me Trerotola, Officer; and Berry, Financial Chief today Chief

presentation available and Our earnings earlier a this enovis.com. the Investors on issued of also release slide site, website. the presentation of Web the be call, our on which be be and our can will this section We'll archived the later morning website was slide is audio using on Both call today's found on today.

call, some results to safe we may and make in forward-looking today's Those we'll forward-looking During Actual set and about our this results. statements any that regarding harbor language filings subject are those make the risks our estimates beliefs in release only and and SEC. statements earnings and to differ earnings today, uncertainties, any release them, reconciliation statements measures as by to in accompanying respect the except slide With The events update can may related forward-looking from in of with found future materially including forward-looking forth measures the law. be referenced of appendix those as to information not statements we assume non-GAAP our obligation intend today's today, the speak required or any in call do the financial press presentation. today.

Matt on me who With X. begin call to will that, let turn over the Matt? Slide

Matt Trerotola

global more associates a hard the to efforts great our was quarter. help Derek. want recognize results, before our strategies the us It fulfilling live day We active fantastic I I patients Thanks, today. had a thanks and lives. But every team strong who first Hello, our quarter. everyone, execute joining dedicated and for to and work of of discuss

were is strong traction margins by EBITDA and the the in of Recon completed of some momentum the Revision the Recon expected internationally. in products mix and grew continue XXXX as We in Let's one in areas market growth in few we building our organic U.S., go a U.S. Augmented there quarter highlights. our from the hip. to the strong about recovery of XX% on rollout Australia. led a pleased grew there signed see really knee a And years. the flourishing of another EGX, by full the P&R. organically, by XX% shoulder. we X% In Recon tailwinds led in market but and growth and presence and strong growth and and had European recap productivity X, Altivate in growth, Overall, last with Slide EMPOWR strong the have I'm organically healthy great Slide EMPOWR over we market in the talk Altivate And continued on of We reflecting we're in expanded brand high And grew to in XX% begin excited initial Glenoid. objectives. points, progress X growth some and outperformance strong X% impact back over XXX a market-leading Clearly, the our set also double-digit U.S., a pipeline and we're we Knee as the Recon price momentum cross-sell the growth by recovery over we led knees and toward adjusted start side, seeing P&R. & view Extremities in some Outside hips. we acquisition Foot innovation We about strategic seeing we're and scaling a the to out XX% basis step our in Ankle by acquisitions moderation of in April. inflation. in and of key strong the

The again once Recon growing were above well QX, and the leaders. strong other advantage, markets full took we in

to fast-growing take & in with hindfoot I MIS possible, Ankle offerings with solution built issues QX, almost some forefoot to surgery, a for a to surgeons and large, which product regardless staple address the part lines plating minimally position segment of new market. Novastep indication. the mid-foot market. the procedures. of of X. for of rapidly want terrific billion We've discuss This fastest-growing or and Lapidus what on the focused have coupled Foot a will to strengthen be the us Slide And acquisition segment, and a Whenever to with a largest severity $X offering strong adding the comprehensive and of robust Turning for [EVOLVE per XX], gives key entire we're we moment the want foundation the further a bunion solution. we bunion launch for and offering We fast-growing MIS And we're a doing our these in differentiated great the complement to and the will growing of segments, market, invasive these now technologies us foot the bunion set ankle product year announced market. and bunion space. Novastep, percutaneous gives leading at products in our

U.S., products and our Novastep ankle. outside progress also approved foot accelerating global brings channel and in the

making markets and Foot volume product leading In We our also we're Page our P&R of announced reflects & Fixation X, a platform. growth pleased position. on progress very leading External the existing offerings line, acquisition rebound our channel complements recovered. organic to I'm strengthens build X% as which Ankle in with Seal's the Overall, a

even right back the the improve areas. X% on to expectations. principles and tools to supply line we in in strengthen see our We've applied EGX had X% inventory resiliency levels begin we're can to and some And more and bring stay seeing as and chain, levels results down range better service the tuned. with we've in with that average quarters, growth our X past over the You

help growth. that P&R support us pipeline coming bracing have a additional launches We nice in to of later XXXX will

Ben details let the through P&L guidance positive take update. I'll you Ben? and our Now

Ben Berry

Slide prepared thanks, margin We solid Thanks, Matt, had X. our a to improvement. everyone, and on start call delivering today. and for growth very XXXX, I'll joining strong remarks start my

growth the grew or X% for For quarter, -- organically. X% we the

Foreign Recon proven another We basis Gross Recon as percentage points innovation some strong up on segment by XXX to quarter, increased primarily in a This points investments pipeline. of expenses is Recon saw prior XX quarter as of performance point XXX had recent from as and our operating versus versus We segment largely our mid-single-digit cost. and our price sales. healthy well reflecting were research currency benefits strong margins business. on and realizing delivered taking in ground our and operations, In double-digit impact P&R basis sales. and integrate leverage the continue achieved a in growth faster-growing mix, as negative fuel acquisitions business higher-margin growth our business basis system the year, development, we scale from our driven a and our in growth.

XX% Our year, and reflecting of prior margin QX grew in resulting profitable quarter. expansion a in our XXX the growth versus EBITDA strong basis points

$X.XX posted at interest quarter was earnings rate $X.X share or versus Our of adjusted XX% Overall, expense in came and year. strong the growth prior for effective million. per we XX% tax

with and the pleased strategic clear our results executing our progress quarter our goals. against in We are

markets year expected are organic Moving QX our off grew with business to to strong sales line Slide X%. the Recon to to X. outlook in start, raising our for P&R we X% got our Considering growth momentum, our and a levels.

will X QX within we has expect range. results the updated growth expect quarters, confident roughly headwind coming a selling slightly more but and comparison of prior are be that guidance the point the year We growth overall due difficult lift QX less our to days, growth performance to for in the the we QX year.

We raising to ranges performance. adjusted EPS year QX the full are our reflect and EBITDA

to with EBITDA Our of million new $X.XX. to EPS million, $XXX outlook for $XXX adjusted adjusted $X.XX is

inflation While our still currency on headwinds QX performance for we through experiencing are the from year. expect our some to we full read operations, and

Foot acquisitions, margins annualized our $XX We bring gross Those sales, recently a Ankle approximately announced acquisitions $XX will of platform. complementing million profile. about and growth our to strong existing & excited double-digit million are initially

our We beginning QX our accretive should have momentum. full forward step to in raise summarize, had for confident growth single-digit full they deals To of we scale. impact strategy a expect earnings but are path year to continue and slightly earnings another and as leading guide. X, turn this strong negative a to us demonstrated a above-market strong growth our building high these We margins XXXX a they Slide on have clear in took on sustainable, to We the in company. year expanding

of are execute. our prospective continue on as sheet X an the this with rich of across execute and our funnel capacity business deals They to example strong strategy our by a We ample M&A evidenced that balance highlighted deals we to call.

now open will Bracho, Q&A. the for move we And to please questions. call

Operator

comes Vik first from Chopra Today's Wells [Operator Instructions] with question Fargo.

Vik Chopra

questions I'm Two business ask question regards with about guidance. them And to going volumes guess both my how love first of P&R, you would now for what the of on is just I market kind I seeing me. going think XXXX? on second to hear upfront. rest in you're to and forward that the

end? of you the You end raised the you guidance how there beat. after help top you nice frame the us low just kind gets guidance, a Could what out [Indiscernible] versus

Matt Trerotola

saw do of normal been it's into place through kind a actually volumes 'XX, especially business 'XX our showed in year. of little from back and So expect of actually we the bit in And then that if growth that terms bit year P&R, for a The in the we the shown and easier in comps kind balance at kind yes, -- QX. that a as performing. growth we as up in of back pressure range recovery to in or last range half to range we the little X back the P&R QX. be P&R a get expect next in look a where similar growth quarter as as in similar we've been we've go normal quarter, tougher saying business first after has the to stay we through P&R of in QX, the in we what And expected quarter to of recover there of the you

Ben Berry

and guidance Vik, the take Yes, I'll question.

a general. about We're not little We're we what with have cautious market being start. in we a may balance to bit of as to excited in happen year think the terms the year. think of or the still good regards the about the I may start

of bit balance So this see could momentum we're some more that continue a and a anticipate in we to road trying be being there keep to the think approach year. through about But the to bumps cautious then play to have of QX as upside. little just the of little the we'll on hopefully, bit continue

Operator

Instructions] next [Operator Vijay ISI. with comes from Our Evercore question Kumar

Unidentified Analyst

on is question. Vijay. This Two-part Sophia for

First you're lot update your And is give how greater-than-expected staffing backlog peers cited any Can on and much this growth on provide a organic of seeing? and can contributed what color you any supply have improvements. to you quarter? recovery procedure

Matt Trerotola

saw as you a is the saw It's well. we then healthy in good no no So of pressure. what plenty QX really normal, demand, levels. in And of a staffing strong QX kind COVID pressure, U.S.

the pressure healthy maybe So because on normal a little then the comp in last levels of I think year. you and better than saw a normal soft even U.S.,

had addition in continue bit much little than the And there the in in are industry QX, we growth to some that strong so on comp, and well off backlogs obviously very higher we of QX. everybody on significant running U.S., easier stronger normal they're in leaders with Germany significant Outside countries of growth the -- rest the a the of well actually have levels to surgery, U.S. countries working over they're than as overdrive, and like and XX% saw outside growth surgeries where working we and backlog and

and expect in play countries as going as healthy of about cautious to a get coming comps the so, the hot I elective lower strong balance start surgery to will could in in be with of But Recon, once but the happens it's we little out tailwinds QX, place back a we another the quarter in in which a the area expect overdrive. some year's period growth in of year U.S. through seasonality quarters. you remain but for or so we move then the And performance. the that Outside we the become still think good, very on of the year, way, play overall, lead normal some of the things the to what a through normal to U.S., in of see half in bit again, the still more healthy out this need of extra not but year very terms strong

Unidentified Analyst

follow-up. one just then quick And

margin you about in of we gross what quarter-over-quarter. And And what was line the up that drove XXX think above bps impact XQ? about the the kind it with quarter, quarter? in level? was inflation was overall, what being of that performance performance? Can So pricing in and talk just kind should Or XQ

Ben Berry

Yes, with mentioned driven expansion margin our my company. gross which lot average in performance, I quarter. by remarks, happy our of like the mix, that in our strong margins compared to A overall business brings above Recon

parts freight certain still and We've have to of of We ground, regards wage chain. take came us the in our of some certain say the with that on in years. our about price and that overcome in I inbound areas But seeing inflation surcharges, over couple to we challenges getting make to continue around we're plastics. good some that taken some outbound operations We business. the on last would overall, some some inflation side of after claw that X% the price freight, ground see supply confident challenges cost I of some we're some P&R the moderate that metal back to X% productivity inflation equation. inflation seen feel

would year. maybe saw kind in good little lower the a be think a margins of as start line, to So I in than bit But we quarters. strong overall, we coming in what the expect here about QX gross

Operator

Rose And our of Genuity. comes today from Kyle next Canaccord question

Kyle Rose

incremental maybe how you me new about existing are to platform the they we for as move we the revision through the really in or that bringing think that Is customers? on new have the is should were U.S. questions revision capturing year. a waiting of adopted you're primary, two impact Just -- on you for set more customers share before

Matt Trerotola

the the converted both, market. overall already part gives the which combination some their opportunity it of of lines a to just complement an existing kind us XX% Yes, be surgeons it past like XX% that we've key our to customers, should we of in now is of out products revision of that other that and brought into offering, serve sell years,

into So now until existing we then wouldn't get a to chance that had Revision also and more we And sell do. convert EMPOWR customers. surgeons some we some have we an

this way combination on a our knee make That as products strong So already work right really and ramping year. have just this next to we year. we just year And it that will now, that growth extremely be both. of and our as continue way into through through will fuel put we

Kyle Rose

products And then a OUS some have U.S. got U.S. OUS integrating DJO you about growth high moving EMPOWR mean, still we base, Mathys like in I portfolio. portfolio versus coming. think But a smaller coming obviously, historic opportunities should level, Revision just forward? -- you've but cross-selling the how on the with from then Recon EMPOWR side,

moving should they should OUS say fair to So the the future foreseeable or be market? I higher U.S. forward grow EMPOWR that until growing the than sustainably maybe is annualizes it for mean, market about equal

Matt Trerotola

on then expect we bit double term double higher kind on think U.S. little strong And combination business kind U.S. with of U.S. a we've fuel combination done of in think for as in that probably grow the keep grow further have engine that should growth time. and into about with continues Ankle growing U.S. longer-term we've the scale. least over at got OUS, the I the us well digits that there the into double-digit high and double of & commercial talked the getting combination innovation. always a being digits business the than in growth a to and now basis, that and pushing outside double-digit a to the medium it as single based fuel that well continuing innovation our decade we've to And We over digits the the digits. Foot

Now we year as for there the sales, even the year we the possibility move this some has that comments is the outside certainly think the potential earlier some business next line term, to from than the the in more faster for I as in tailwind, coming the ramp of synergy think in my grow and U.S. of I business up into U.S. quarters outside U.S. short with and

Kyle Rose

been question, then and Ben expectations I'll And historically. a tuck-in bit on strategy mean just about I there. last balance a in more M&A the the hop strength sheet it's back Obviously, is moving forward. talked of little

Just wanted how adjacent should transformational to longer deals term? see of think type about we versus tuck-ins

Matt Trerotola

call. about Kyle, we're talking So here we're about really two the the on super deals They solidified. first, excited

full, said all And Ankle could & of Foot we platform, & after the build talked Novastep to in. powerful and we've here, think to round about strategic really powerful some and the with with go or we've organically deals other of it can technologies Ankle, very channel. I rest is also the particularly a strong think which got out surgeons continue all offering I aspects the Foot that bring along we out powerful

we side. at kind see And good space. certainly, on lot but We and I so we've we'll more about other within very that adjacencies a think there, space, P&R are of that. in focused other Recon about possibilities there do to the done execution strategic that feel organic little on and within And be think look bit to a

with And strong healthy on bringing we of our got margins. gross so focus funnel growth, a a that things do, all we've could accelerating

that versus we've big kind attractive open on we've indications continue medium-sized of technologies and or balance And got things. small- the execute deals healthy focused sheet transformational to and expect -- accelerate certainly either So funnel, geographies. our to that things got adjacent a growth, great up using

Operator

Johnson at from our next Jeff question And Baird. today comes

Jeff Johnson

U.S., pretty you one to the of kind faster here European get about wanted backlog. years I recover up some of take comment made we've operating and couple of on even under us I the think assumption a maybe that follow a but little to probably outside of you none cited ORs burning all know, that being would there In U.S. even in already patients capacity the can't you think the dynamics, catch-up U.S.? dynamics it right Are utilization away. backlog backlog that specifically, of different maybe be through backlog really I get as German market, market through maybe just kind back and to Matt, been could operate are in just different there where the the U.S., at those the about utilizations you how Europe? different the thinking catch-up but are capacity And high faster

Matt Trerotola

average in U.S., And I yes, look but that if quarter, that's first the the locked what view -- XXXX agreed a in XX%-or-so versus at walk said, the kind Certainly, you kind growth it. of growth period. of I in XXXX, And right? think four with is would our year I through versus I'll the be best you

of of to XX% period. industry growth four So XX%. maybe little or was growth that's two year that almost two the our years but in through now for XX% years about more grew growth the industry a than And probably a period,

not as that still think through would industry the out terms extra I surgery in in the surgeries. U.S., come patients But couple And of of in years growth demand seeing there's a I the that in any were given is and that point the that we're needing of time. there so in lost say

in picture. to the there surgery flat were such growth kind to And down nobody different the saying time for have very they're comp people I is overdrive healthy levels all they're some running the U.S. time, just than the situation. with outside in good at Outside of normal a And think running course, is -- same picture doing way There it the countries work U.S. the first levels ways backlog little an U.S., versus certain of waiting some a that that was here. that are there the think, less pretty over easy significant was the versus oversized there 'XX now list that U.S. out. I through staffing of where period But think and U.S. then, quarter. have markets. some on created, they And found outside is they run that's at I

to U.S., there's and seem to on more make up And the up. that make some there be ground so countries are to outside some running overdrive

was at to But some how what careful more those that about a to about levels the outside even coming elevated to tailwind for a levels. portion U.S. healthy, work the years potential to of the start demand think step year a normal down U.S. I the plays think outside be think I we need be last we remaining of pretty this few still the overdrive of that that in whether off demand and I means kind out that there'll year, over stay little years. or the more with to very be think they'll has missed a

Jeff Johnson

And question. maybe one then my follow-up

on out clicking a that's Stryker, modular business, with of maybe how cylinders your XX% come well. that you are and shoulder. new market you're terms, I above if Zimmer, It's on system all of even Just obviously, doing shoulder. going leader outlook competitive. getting kind guys very little I and well what much They're -- U.S. here? very for also qualitative what's a mean, shoulder the shoulder? We've think, that in growth, their in there, Extremities just your And was more

that of trying how market stronger as So thing doing are here think you well? and about of and both to just as do within competitive kind market your positioning kind others dynamics their get

Matt Trerotola

that Well, above was we share as was continue it we nice shoulder. enough that comfortable I'll we're say in it to take said, above,

doing in is new leadership anatomic has the our Altivate lot been out we glenoid brought augmented market well, feel there terms things phenomenal our so we to tremendously different our have of and continue comfortable And of we ramping. good that [Indiscernible]

Xx versus We've and leader that shoulder as Xx in you that's with the we're talked the market, so shoulder. significant as share, and got and a the to we're We're comfortable. you commercially, innovation market some and can share now we we've in grow growing Xx a not enabling tech consistent in with of whereas player the innovate there. in hip more the phenomenal do if in fact EMPOWR we're and but of leader Xx knee than still knee X% and market, drive the more leading And to with amount aggressively bringing about shoulder hip, product a X.Xx, in Xx

We continue market. multiple at to grow times

Now more potential certainly outside take the got ramp at Altivate grow levels, can U.S., time we the to up of as market multiples we've to a the but little here. that's going

Operator

question And Li with from Jefferies. Xuyang comes our next today

Xuyang Li

Congrats some talk the Maybe to you & I was good & a about the the year grow we for business. updates STAR with as wondering Ankle start get can well? outlook digits Foot year. & Ankle? the progress Ankle. the if to on Foot Foot growth on double latest for And Ankle can Did

Matt Trerotola

a kind stages into & Foot we're The to decline and exited very final in digits bit & quarter, modernization under working product, that's little we STAR Foot and double double quarter comfortably the Ankle Ankle. our just continuing some as with the the growth in other the of of products, the business strong in of that was digits through on

the business build on the top up in that this of double standpoint, We're we're Even And critical into Foot will thrilled & the kind growth the that will And that expect get a year piece a of of the later just is Ankle kind resolved that. we're guide, of we STAR with And interest. with we've which swap positive the our that through should will ramping how cutting footing. be here digits on guide, so well. a that and additions digits back we're from polymer business we're FDA plenty well the have new grow in comfortable very double work as cutting QX. made that with year to continuing getting of we out and

strong of the be to Foot coming to able the expect QX. And growth we'll that here -- in growth in with turn everything digits Ankle. & back else, well here we'd very & we're into quarters so grow back And in to Foot to the Ankle double comfortable

Xuyang Li

maybe growth the as well And Can as about expand to you bit the the a little U.S? and as growth then plans as it business well on the Novastep. for into talk rate globally outlook

Matt Trerotola

business position bunion balanced have Novastep and well in between phenomenal in into the the the digits. that U.S. pretty approvals the U.S. growing that outside that lines outside U.S. is has the the and multiple is So position been MIS double the product

the And our approvals presence Novastep so channel in the path and terms bring in expect has. more here the opportunity the to it to more an presence doctors strengthen on that also have we grow and it move we position with channel the our to and have -- that and our accelerate into digits, to that based to be our have continue double areas able make presence we And to to into powerful. and some also well key outside U.S. but really the product in of U.S. ability continue

range, talked So been and high million annualized margins. it's $XX growing it of digits about, $XX Ben million comfortably the to kind of that the very larger portion of gross revenue has double and that into it's

Operator

from with our And today Mishan comes question Matt next KeyBanc.

Brett Fishbin

today. This is in Thanks for us Fishbin. Brett squeezing

looking & Just M&A to few follow little market. last wanted Ankle looks a strategy. Foot bit a focus up the possible just that the a to like given you're like activity forefront some wondering maybe forward. other -- areas have in area when actually the I'm pretty the at years it now portfolio over has deal you on It been going lot if comprehensive come like that in seems of

that thinking respect. priorities Just about curious how in you're

Matt Trerotola

has capital technology expansion some the key of with largest well. amount the of amount key largest the right deployment you're then & -- acquisitions by mean Foot capital that the as being Ankle and Recon far, in global there I been we've Mathys the things and or deployment done

a laser in terrific nicely side that technology is P&R invested very also growing in We the well. very, as

geographies Looking space the possibilities in also further into up get segments indications technologies of certainly that could an space, be that or investments sort other key area could in also in have that area make forward, Recon or we that high-growth key orthopedics terms terms attractive as adjacent we Recon and some of well rehab look within in other the kind is we as of attractive at modalities in opportunities within can well. opening of

Brett Fishbin

And me. for then follow-up just one

backlog few deal. cross-selling Mathys also Understanding of calling talked following the quarter. some like -- seems some about really opportunities was it seems expanding a from you're the in strong drivers But Europe of out and this it also traction that performance international presence You it DJO related. brand

So just contributing forward. how you outlook and the that curious how going the are can benefit to performance those growth initiatives then think

Matt Trerotola

grew double business extra we tailwind. year digits in market an without that So last

So do think certainly business we the comfortable we'd Mathys plus in XX% tailwind, probably sustainable the but for is growth that U.S. extra range market double-digit even a be feel without I the outside rate, not the

lot U.S. in then the think, a I channel in a offerings in -- our new and there's fruit coming right the COVID had these also in have some positive over that feet Mathys contribution street. years terms as the from -- that made there's our think just are themselves. that also, and of on a think of lot investments business even business. lot confidence I going the in are I just small There Mathys a market. of the into confidence paying past the they of from there's now, few But have And historically strength synergies in of they the momentum bearing marketplace

about yet a most will So come. going products, that. getting the into to initially and it's benefit we're that is flow careful lot all the products docs world. being I everywhere At how using growth ready see products given and of to market, point, use the fast say docs we of the the this to great the in synergy on

And the so and of are think, from a doing what channel now just the revenues, and us. surgeons extent to benefit, of terms confidence of to excited brand for additional benefit over actual I in our little an the our bit right it's in switch synergy that

we'll how synergy nicely, in subside, grow year think the the really to continued have to that not And from the tailwinds and to ramp, have I so years come. market that's contribution business we but as the the just this opportunity

Operator

like question to management our for session. any concludes remarks. this conference the closing to gentlemen, team and over back answer turn and Ladies I'd the

Derek Leckow

for everyone, today. joining you, Thank us

any you follow-ups, a Investor Have great day. Relations. please If have further contact

Operator

This call. all concludes We conference today's for sir. you attending you, presentation. Thank thank today's

You now disconnect wonderful your a and have lines, day. may

Enovis (ENOV) 4 May 232023 Q1 Earnings call transcript