Earnings call transcript Q2 2023

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Operator

Good day, and welcome to the Enovis Second Quarter 2023 Earnings Call. [Operator Instructions]

Please note, this event is being recorded.

I would now like to turn the conference over to Derek Leckow, Vice President of Investor

Relations. ahead. go Please

Derek Leckow

Good today Darwin. call. Thank for Relations. you Derek Thank our morning, second us Investor of for Vice conference quarter joining Leckow, you, President everyone. XXXX I’m results

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

Our was this issued morning in is available earnings Investors enovis.com. section release the of earlier and our website,

presentation be the slide We on today’s later slide also using audio can Both website. a website presentation this be found be will our will which on the call archived of and call, on today.

making assume During with of safe filings this that forward-looking statements call, speak make forward-looking harbor our differ earnings may release SEC. and as language to results required today, uncertainties, including our any we’ll future law. and results. risks be we obligation beliefs only regarding the and in These materially forward-looking today’s events by those forward-looking to and from in some estimates and not set update them, today. the any about in statements as or subject except The are statements statements intend we Actual do forth

the information found press call during measures financial the accompanying in the can today, and release slide reconciliation to referenced in today’s respect related With presentation. measures non-GAAP those earnings to the be our of appendix

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

Matt Trerotola

joining everyone, our and us against with a for good We expansion and single-digit goals. second Hello, margin high thanks strategic Thanks, growth, Derek. quarter today. strong organic had progress

X in being team want I places to into recognized work Before to America. the results, best I by as Newsweek the our for of congratulate get

and cohesive momentum gets energy in team our and that positive have a talented company stronger everyday. global We

the We of first sales us and in QX the P&R. go Slide organically of for growth X% with about the growth half X% growth gives X% X and grew daily Recon XX% by highlights. to in some Let’s talk That year.

by see bit. continue to had Recon healthy well strong on and another continue quite a a market some tailwinds as the side, market We in quarter environment. market we We the outperform to P&R

our our expansion growth, price expanded progress of adjusted our impact Overall, scaling ankle, margin and XXX acquisitions with margin set while for we XXXX and and few and also Recon closed in gross on great toward track past growth the the years. of foot mix inflation. basis objectives. we’re of strong points, we strong delivering a from continued two completed strategic We – productivity last full reflecting recently remain EBITDA momentum We acquisitions at by moderation strong the few

shoulder in ankle. In our grew market we some I’m XX% international to early AltiVate begin both we a had markets. the U.S., foot Slide in cross-sell over growth and our double-digit well growth over X, It’s leverage and above position knees and with in Outside growth but days, large market Recon, XX% excited the as organically we resilient opportunity growth market-leading hips. the U.S., Extremities by high in still organic products market. XX% grew on power led and in and about

products Ankle And franchise. EM-POWR and the we have Revision of Knee have pipeline we innovation hit the key some Foot and U.S. continue strong our a as of new and in rollout launching shoulder,

Recon and moment of years Turning to discuss business globalize XXXX, completed to closed the to impact we years. We want in July the Slide I a our acquisitions in things are X past very key in, the X. from going Mathys surgical few well. to take

other We are good and see EBITDA synergies ahead attractive meaningful to There we number the opportunities. traction synergies. our global strong We’re very seeing margin bolt-on ramp, scale on continue of as and business. exceeding and plan opportunities growth, great double-digit expansion also growth a

In a now profit double-digit and position organically scaled well and double digits EBITDA in to from foot is has Extremities, we that built growing into no margin. leading ankle

a With growth global scale. strong we the for recent with million acquisitions, double-digit path we expect to as clear and exit a margin at improvement the revenue continue rate run year to $XXX

P&R In past business for average our growth performing plan quarters, healthy X%. reflects bit with X, X Page line in on solid market and with execution. X% the environment a strategic The organic under a growth is our the

year continued strong innovation in pipeline for this of growth range. year that have balance next a support the the of We and should

We the get in EGX rightsize to inventory generate also muscle second business we benefits the expect built as cash our solid flow to we’ve system. year of productivity the P&R continue and the half with of

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

Ben Berry

Hello, Matt. everyone. Slide on I’ll X. Thanks, remarks my start

We are second million, report quarter pleased sales up X% $XXX prior year. versus to of

growth solid business of and our fuelled execution strong Our by was for segments our market demand products, both in commercial conditions. stable

headwind day point our XX foreign and Additionally, sales basis acquisitions. include quarter from XX combined contribution and basis recent a second positive point currency a selling results

and Second The margin quarter from mix. was by up XXX higher gross leverage Recon points. was strong sales driven basis XX%, growth

leverage and in this take system supply did price on We EGX the business continue ground chain quarter. versus we cost, again to our to efficiencies which capture

by points growth a offset by builds and other basis and margin expansion was investments EBITDA prior quarter, was up XXX partially a on margins half year. resulting R&D versus basis Adjusted first gross XX.X%, the driven strong XXX growth up adjusted in EBITDA in This first This really expenses. points. margin

cross-currency we last tax lowering fourth in $X Second onetime compared quarter. executed in This X% rate benefit million rate rates. swap, our primarily discrete due XX% quarter expense effective effectively of interest In resulted lowering the a to to interest a was year, XXXX. April,

growth the per after adjusted of $X.XX or and impacts earnings normalizing underlying posted XX% we share Overall, year. strong from tax interest prior

we’ve to well the very done the of like Enovis everyone another these built We’re I’d for and quarter of results, outstanding momentum through team at first with and team. the the pleased year. results thank half all members

outlook to X% X. year we QX Slide to to our sales performance, growth the X.X%. organic Considering Moving our for raising are

As expected Recon business and line to said, continue the Matt be in with P&R levels. grown our markets stable, has our

coming difficult QX slightly year for comparison in prior will more are a but We we quarters, that the QX, performance results growth in year. the overall expect lift our the confident especially

year announced acquisitions include foot updated and sales to foreign Full has the recently rates. ankle outlook current and been currency

balance We X% the as on to X% expect we acquisitions the to contribute well. benefit expect half. roughly FX second about in growth year, is Based which rates, year X% for the X% in the of sales current

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

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

gains half will half while first strong pressure and second some from QX temporary and hold foot the to the acquisitions from comps expect margin ankle the strong have We recent

had capability remain quarter, leading our in margins year another confident again we guidance. To summarize our another first margin high and on full us strategy half, We grew in single-digit X% and clear for place growth. Slide a the raise have in strong We to day company. we sales X, a and our build took in expanding plan growth to sustainable continued our step forward per

deals. and through the execution accelerate have recent of company strong to demonstrated M&A continue We

organization to We in have opportunities look for the and funnel a shape further continue we’ll strategic line goals. robust with our to

call open Q&A. Darwin, on please Now we’ll to questions. for the move

Operator

first question Vik Instructions] from Wells go Chopra [Operator The ahead. comes Please from Fargo.

Vik Chopra

a for two a quarter my good quarter. on your questions. thank and morning taking had I questions. good on Hey, Congrats

increases I week competitors one price what put said on that business. the customer one, through just seeing the you your put to an follow-up. battle seeing increases in have And on provide price bracing then First they’re an through that you’re that help more of last inflation? impact their they Can one update you

Matt Trerotola

thanks including that’s had waves us of there’s that the in we’ve been good bracing and and well. the and got, the directly I Vik, gross the And part pricing provided what’s into previously, of clinics helping of some increases some shared side, some margin channel Yes. relief multiple then increases have mean have price traction that’s been on P&R for to reimbursement as we’ve also question. some as that the we’ve

inflationary start some So been to back pull working hard of we’ve to that

further ahead of stay and pressure inflation.

Vik Chopra

quarter the another the and if talk you Thank can very from year? about I’m had of much. got rest you for just expectations Recon. your then And about talk in quarter benefit Great. you this perhaps backlog in strong capture how much you wondering we

Matt Trerotola

Yes, gain within we’re share with very our industry. been the Thanks, very the certainly Vik. pleased and Yes. performance first strong be will half confident Recon. healthy whole it year Definitely, has that in the of

year. some a some more there are that’s seems first of the year even healthier comps softer enabling to So for here from with the market think, in show, this year. healthy There through growth the work second quarter the comps, and oversized little backlog But were also the I very was in be to – nice tailwind quarter. there bit this surgeons capacity surgery

It That’s the about coming kind there’s I the second year, amount opportunity in in of for there. of hearing we’re surgery years. tailwind third plenty the last a continue certainly quarter something vacations the year, – But seems here, in think like like this or seeing we’re pretty more publicly heavy that to backlog-related certainly elective area. out

backlog clear as for through some a the then I then and year. we so think pause bit little back probably summer through of opportunity months of And you’ll see the go the accelerate the

Operator

next go comes The question ahead. Matthew with from you. Mishan Thank KeyBanc. Please

Brett Fishbin

see a today Recon to over over could the the past Brett really few several I taking for quarters, benefit been if lag next to for segment there. on wanted is just the strong ask pretty how market, just much bit upside current so question given might on Thanks on little some just the range? P&R, and guys. that curious quarters if and Hey, a start questions. trends of good to This trend guidance has the But to present Matt. incremental you the the a Fishbin

Matt Trerotola

for environment. in certainly that’s the and the a we’re pleased question. Yes. healthy P&R Thanks very with results, Yes,

of If segment other injuries a drivers. And also you and is while what number sports by before remember different the surgery elective portion has the of driven trauma we’ve it’s a and business, elements. shared drives P&R

the sure, for extra P&R volume we’re in elective part the that in so year surgery a of And some the first business. year, – of getting benefit

As year, a whether is a far inventory as this think I tighter. that there’s lag, little

quarter, were the as the the we within likely closer grow that business But a – second been X%. lag why markets. in range for side and realized about, kind with comfortable strong for few X% is and P&R range quarters markets we we’ve that here feel is quarter the in that P&R in probably X-plus talked on than of the tailwind past can X% X% the that’s P&R to our the versus year, the to we’ve said for I so the to continue And extra there healthy being

Brett Fishbin

organic XX% performance a the trends Recon international appreciate then quick remained color. in The And XQ. really in here. with I question as positive just second well

if curious much expansion efforts that how underlying in bifurcate of Just a Europe? Thanks cross-selling is so some dynamics you attributable for the Enovis’ performance like efforts of to market much brand could internationally, questions. versus the taking around and

Matt Trerotola

digits, into on business to work And Yes. there say – teens. without plan it digits. in Mathys think the out Yes, substantial the seen double top certainly a quite the we really low that shared tailwind No, at countries with taken market that that’s bit single into well international Mathys digits market tailwind, the bet. and I accelerate some the tailwinds was And mid-single-digit industry Germany single are we’re the that there’s really a pleased and a push it’s about of historically, some our think very where into then high tailwind. business high high to and double of results, digits. that certainly but there of acceleration like we’ve knowledge there’s was would maybe I business common least you that I to

the that And the ramp us is of chance And certainly, in we more reception high we promising can very grow kind that capabilities around the so and and of and double the years getting see we’re tailwinds the of single confident the potential to as the the a still getting coming market synergy more the business remain energy have to subside, for digits. that digits opportunity we’re in as becoming to is grow in team. world

Operator

go Please you. Thank Canaccord question next comes Kyle Genuity. The from Rose with ahead.

Kyle Rose

Thank the and you on taking a for quarter. congrats questions Great. strong

here. we of Just moving should lot the the M&A, us seeing understand to about Obviously, then the how M&A and rate of also versus put a Help a focus forward. just And for P&R? for little then a smaller historical Recon wanted higher environment Mathys bit persistent Recon both size you given on side. the we’re just overall the versus particularly tuck-in about org transformative appetite opportunity deals focus talk larger deals think just

help Just great. be would there any

in is year? where the overall just number of we’re there first you. then you’ve us the Thank contribution you Can half remind two and through at the rollout Revision. just EMPOWR seen And the

Matt Trerotola –

Thanks of the really pleased Yes. lot, call. M&A, certainly, able highlights some on of Kyle. to we’ve shared the as we a do we’re been kind here

Over the but have great expanding of done into past and shaping M&A our done constructive technologies the majority into deals. have we Recon vast been the markets in space, side smaller on things the bringing handful years, P&R very of business, attractive adjacent some that the been very, has

certainly are opportunities deals the are Mathys the that that been opportunities to acquisition that P&R very the of help more small what on some profile laser that sprinkled And we but made side our in and and Recon constructive similar of small some way as the to bolt-ons as larger small segment. driving good in larger possibilities we some past bolt-ons than attractive funnel been bolt-ons nice in a us certainly The kind that good well. the certainly within The portfolio more P&R strategic a P&R with but years, our can is side in – we’ve on growth side, doing see bolt-on. shape the have mostly

more constructive than M&A. several a is years it ago certainly, it And was environment for

of encouraging in of terms that about the better the today challenging I So kind sellers. talked it’s we environment. environment on for really strength very mean, that And a in us call deals were of M&A now the done M&A a here

excited to deploy what definitely for we the we’re the and can do so capital And about it. that have possibilities we with

half extremely to gets we’re To EMPOWR well in and your historically. we’ve of into here year year. the to the of XX% limited market really XX% Revision substantial that It’s a EMPOWR, into the next that in a is the of in had market second It’s about been that excited participation great me, and have ramp back going question accelerating received be product. to portion us this

So step-by-step instrument at back little we’ve been it a the will is more the market, a very sets out be that into limited to and contribution and to from half getting point the strong this contributor growth year. add as growth bit will in next

Kyle Rose

questions. the you Thank for taking

Operator

ahead. Kumar ISI. next with Please you. The from question comes Vijay Thank Evercore go

Vijay Kumar

here. guidance, XAnd on Matt. Hey, guys; congrats Thanks for taking first my my question question. the here execution a on good Maybe

First was pretty half solid organic X%. up

and I EPS, quarter, think back on raised to the by for just macro conservatism? EPS a but street it annual the $X.XX. a the $X.XX, change the Or is maybe Similarly, versus guide update I moderation assumptions? assumptions for half. implies beat just the maybe talk X%, Maybe Any about you think, - half? X by second

Matt Trerotola

the than first hit start second talk a the Thanks has it Yes. the I’ll question. let the growth Ben from for then half implied year, seen, Look, others as stronger first of guide our the extra had market kind of part and you’ve rest. significant have the about an on some the comps. in Recon half, based half world. the like of we’ve a And tailwind in well around as growth then

And guide so update first half. strong our that reflects to the

accelerate the year in final will year. strong on and Ben? shape I through and kind think in a tough summer And the little objective that and to we’re our perspective for put overall to the be the front. more quarter versus be going have of a very kind then strategic will certainly, range growth vacations able growth and of preserves the probe great of things QX very comp, a the in there us

Ben Berry

for the question. Vijay, Yes. thanks

the we’ve the flowed back through of really, As we the year. EPS, what beat into half we’ve done about is operating think

had at the levels rate remarks back for we of in deals interest look ankle prepared foot we I in, swaps you the from kind mentioned the that QX, If came where of we debt our benefit and increase my and completed acquisition executed half some the and to year. also in

that that the an from So in quarter. offset that the of second we’re we rate benefit to be getting bit a saw the interest will

half the then what the into So back of year, you gets that’s bit the EPS factor normalized. a that

Matt Trerotola

augmented first you on soft Any launch Matt, Fab? think should launch? Understood. reality on that we on updates a – the half, And the one I guys in are where product how about maybe we think

Matt Trerotola

as launch Yes. we’ve very but getting we’ve about about, about use a to better. on get – be a talked the limited that the it even We’ve things also been product, limited in been a bit you product. launch, feedback great feedback feedback Certainly, to of positive make a some little tweaked could lot

feedback. collect We’ve to the product, we implementing of to as working the launch of into And those a through go expecting great a we the been broader year and so balance lot here. through work

it. it’s be very growth. something today certainly, knee without and And provide it’s certainly, applied our to – to fuel going it think knee, will hip really got we’ve knee growth strong a can we help but And that to

it. And a growth that’s but and strong from strong well. start build time a bring And as a growth we very to support so knee nice got also as small revenue going over very stream very high-margin recurring without product we’ve knee in, that recurring continued revenue that stream start, create become to will

Matt Trerotola

Thanks. Understood.

Operator

next from The Conway Joseph Needham. with comes question you. Thank

Unidentified Analyst

one, could This on guys. you any updates Mike. you the for Hi, Joseph is give Maybe first that us

FDA may the have on bone reclassification? growth from stimulator the

Matt Trerotola

gets – view of terms innovate that be bone also lot get it ability the might price opportunity in no might information to indications market product. of as be but and in some get there There’s a up there would it unlikely new would there while and open pressure, it the – – that be some to on reclass, should there’s that growth while stimulator Yes. new we continue reclassed,

there’s possibility, in status prepared change constantly at this but no we’re the for So point. the

Unidentified Analyst

Okay.

thanks.. more. your Okay, Recon I on guess update business? us then Could with strategy in that And ASC you presence give X the maybe the and an

Matt Trerotola

ASC growth continues to our story. be sure. Yes, a part great Recon of

I which two done market a based in of on that think and setting. of are as shared U.S. our the that’s setting info – in we’ve previously, the done the high-growth in that’s of is our knees environment, around XX% sort times percent been an ASC about best we’re probably

active great attractive as We in offering to be our very power also for fit have the continued shape there. ASC a environment that’s that to between being our to need selected patient

ARVIS simplified a space kind for that time efficient, fit technology being set of environment efficient Our ASC instrument a well. enabling the cost-efficient, and is great as

And able so be to strong success to we continue good that expect have setting. to in

Unidentified Analyst

Okay. Great. That’s our us. taking Thanks for all from questions

Matt Trerotola

Thank you.

Operator

The question Baird. Dane you. Instructions] with comes Please ahead. next Thank [Operator Reinhardt from go

Dane Reinhardt

guys. Hey, good morning,

Just wanted on to ask little one front. margin here the bit a

about supply chain talked You kind of stabilizing. the

helping You’ve But year, think of about I much a got as as little price benefactor. you bit. won’t pricing a we be next assume

the tailwinds especially of at So of margin, elevated? next what a mix year this Is R&D about we really if you’re story as it probably kind just are kind gross point? operating keeping and bit think a

Ben Berry

benefit That’s scaling, we’ve mix. in prepared done we’ve on gets one next remarks driver. the as progress the that year some scale the year, made on definitely the to that well. as will Well, get into continues of shaping another that we of shared the as continued acquisition the And that recent be Matt around it

to price to where to And with cost about the more execute I business P&R regards built increases. in be we’ve if capability we of kind think able consistently now our price then a aspect, are

to couple reclaim evaluate still system to over we’ll our the So that the of into of came the years. pressure last continue options some there

kind So productivity to leveraging our and as in capabilities and supply out of business our and our working freight raw materials chain the EGX the definitely well. freight hard, system drive both it’s in

Recon, which terms of say and scale overall, greater is to So scaling have expansion we’ve leverage levers continue of basis regards the with the XX the margin that of operating mix are very shared lot business to and would intact the of of our our points pull we to in acquisitions I building drive still then year-over-year, and productivity than system. And what blocks our a we expansion. much

are very much those still building the remain So and blocks they really intact.

Dane Reinhardt

Got helpful. you. Very

of as given first chance tougher Okay. half, is Vijay’s And comps kind there could I half regarding X then slow mean day any that to into the Thanks. the year? maybe in half selling opposed digits? on single back impacts a Recon of could follow-up the question you phasing, think second remind you digits the then the double us, there And also upper are

Matt Trerotola

to we in grow into Yes. comp Yes. tougher a comp No, business I range. that our of getting digits a – double feel think a confident little can continue Recon bit even range, we

Ben Berry

and Yes. And brought day we’ve the to little businesses half. impact the back the be we’ve that a the integrate pressure No in the and acquisitions as selling will another add just comment in foot into bringing second work of to half we in just those announced, or [ph] is be there’ll synergies Enovis. of bit year drive as in those for Ankle

that So half as the pressure on back bit little a well. margins adds of

that As we’ll stronger in well said, QX comp as comp got with well. as Matt – dealing the be we’ve a

Operator

session. Thank question-and-answer turn would over Derek for concludes back to our to the any like you. Leckow This conference remarks. closing I

Derek Leckow

Investor the everyone, contact Relations. day.+ you please in you, on interest. any thank Have And further me if and appreciate today great us a Thank call. We for joining your questions, have you,

Operator

The conference Thank presentation. today’s has now for you. concluded. Thanks attending

now You disconnect. may

Enovis (ENOV) 3 Aug 232023 Q2 Earnings call transcript