ENOV - Earnings call 3 2023 | Enovis Corporation

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Operator

Good morning, and welcome to the Enovis' Third Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

And I would now like to turn the conference over to Kyle Rose, Enovis' Vice President of Investor Relations. Please go ahead.

Kyle Rose

good and Marliese, you, morning, everyone. Thank for XXXX results you joining us quarter third our for conference today Thank call. I'm Kyle Investor Relations. Rose, Enovis' Vice President of With Ben today CEO; me Officer. call Trerotola, on and Chairman are as our Berry, Matthew as Chief Financial well the

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

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

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

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

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

Matthew Trerotola

us Thanks, Kyle. Hello, today. everyone, joining for thanks and

business. had a that strategic margin Lima we productive acquisition announced, solid the Recon expansion, continued changes previously we announced gain, our step quarter we As very third with and share of

quarter, X% XX% by about P&R. organic X brings growth X% our to growth these in Let's in highlights. We and and Slide grew X%. talk go growth year-to-date That in Recon, organically with the to

with growth in volumes with We third and which with gain normal we pandemic-related summer from likely double-digit surgery demand to was We XXXX down. XXXX worked volatility in elective versus in healthy strong side than a higher gradually believe a share the remain trend serve our procedural continued are procedure expectations. saw some a normal quarter persist the QX XXXX and of seasonality as compare. line expect will on Recon backlogs patient trend through markets return our We more we vacations, overall,

In mix P&R, we of bit quarter, a our points, recent in margin these of a margins scaling with acquisitions. basis XX showing gross had stable EBITDA share and gain another We the environment. leadership reestablished reflecting strong market our strong from productivity, markets adjusted by expansion expanded in

a about reach In exposure to definitive billion LimaCorporate, which September, that we announced the expands market. agreement $X segment taking Recon, to close with to global sales, to extremities in acquire XX% faster-growing in our

with momentum great track Overall, a we strong our remain goals. on strategic XXXX for versus

little deeper tough 'XX. on in organic Digging and X. led in hip a U.S., year XX% a We against double-digit knee. by XX% QX Slide growth grew X% had Recon Extremities of the of growth comp prior in in

about the excited Outside growth good expand market with I'm products. XX% our international and our resilient AltiVate for position we the traction almost as in grew a opportunity industry-leading organically U.S., EMPOWR market. we initial

Knee The to have pipeline allow a and launched updated take we ramp will innings, of come. early with ARVIS we EMPOWR in years in capability. X.X continue Recon many believe innovation to our remains strong for also of Importantly, have full that us share Revision the we to an EMPOWR

these feedback products. all recently Lapidus the launched the great we for X on from We've one the new in EvolveXX and Correction foot of of System U.S. bunions, in fastest-growing terrific market ankle, Additionally, segments had surgeons

I acquisition have to Lima of take about Lima. and the with Turning was the activities, the in and the exciting planning big leaders we I to with remind making have our ahead. opportunity came to that our moment on and the to and We're want we a recently Mathys headway integration good and with teams. increased away Slide of X. opportunity talent Switzerland, everyone business by Italy I meeting conviction strength and the advance excitement

gets acquisitions have start We and financial contributions a shareholder to track record returns. experience sure of lot a our this great and playbook strategic make strong impact, deliver proven and doing are following well, EGX to and one off

represents sustained the for our goal Enovis of Lima we The a expansion. evolution addition clear innovator the to with as strategic execute in med operating a tech next margin against of build pathway step high-growth

close transaction, fastest-growing growth, expected the extremities. our parts and reshape higher-margin expansion scale. continuous is our progress our market Recon of against recon pillars organic global accelerates single-digit faster-growing, to mix This This our increased strategic of to exposure the long-term margin to will which sustainable in XXXX, early high and and

is a business strong P&R This with in over X% healthy strategic service, improving is disciplined environment with from year-to-date Global our growth In gains execution. market and share Slide our innovation conversions. and reflects on clinic organic bracing performing X% plan. customer line growth X, MotionMD

electrotherapy strong of growth, Sciences team. to ROAM, products for innovation a drive called pipeline brace including and the generation additional knee next OA of our have a We new clinical Recovery

EGX driving this as versus in and sustain traction on we segment cost tools, XXX productivity system price notable expanded additional out roll points which improvements. margins continue business basis by Gross to are

Slide X. to Moving

to confidence over year-to-date. it in to team's want the I hand reiterate execution Ben, our I Before

our day-to-day the world global we lot diverse been a execution has deliver takes have. a And thankfully from XXXX bit while recent consistently the than way around to have We members normal a more it team business. of years,

high-single-digit comes commitment capability to value growth low- compounding The to our double and to create mid-single-digit along shareholder with grow high-single-digit in shows organic execution stable continuous consistently growth. Our expansion. through from and ability margin demonstrated XXXX our P&R our digits, Recon growth

investments grow headwinds. as Recon margin faster, offset scale, supplemented margin EGX the expansion by comes in-year we structural from by and productivity The expansion and growth gross partially

provide continue compounding this for update up a recent guidance will growth are formula impact our quarter in fourth XXXX margin call, drive ramp more we our but to the on formal and ability acquisitions. of also confident in We to

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

Phillip Berry

Thanks, Slide to remarks X. begin We're Matt, my sales and hello, third on versus $XXX and year, pleased everyone. X% prior quarter report organic. I'll up of million, X%

demand of in Our growth for products segments. strong execution our by was fueled solid and commercial both our business

a include third XXX quarter acquisitions. from results currency contribution basis our and Additionally, sales foreign positive point recent combined

driven The cost higher Third margin gross up was quarter by growth sales, from XXX basis points mix year-over-year. and leverage was discipline. XX.X%, strong

leverage system to drive through the in margin. and and EGX continue business stabilize supply the productivity gross results in to We our continue chain, read to

up in XX dilution points Adjusted recent adjusted driven EBITDA acquisitions. This growth R&D versus by margin from was EBITDA XX%, by growth year. grew margin expansion gross and offset basis was investments XX.X%, prior and and partially

QX resulting year. strong first results build basis on in a versus EBITDA the adjusted year-to-date prior half, XXX margins points up

million $X was effective which is the $X quarter compared items XX%. quarter was included lowered million Interest year, tax benefits This Third last X% rate. in to the expense rate onetime XXXX. versus that for from significantly

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

strong Enovis far We're XXXX. in built team congratulate extremely with delivering results the another in I these the all want worldwide quarter. pleased and momentum thus to we've

X. raising to QX sales year previous Slide X.X% for to organic move versus guidance the to X% our growth performance, Let's our the X.X%. Considering we to outlook X.X%, are of

and and business consistent excited are the segments business both are in performance execution as our momentum the commercial seeing of We efforts. on creating build our we are we shape about

full from acquisitions. year sales point expect be roughly with $X.X X We approximately additional to of growth recent billion,

year, to we currency be expect rates, impact flat. latest the based relatively sales the foreign on For on

solid to We adjusted are reflecting end raising QX to million, million $XXX bottom of performance. range the $XXX EBITDA our our

interest are the the $XX adjusted adjustments, Based million, and expect approximately previously X performance and rate range guided $X.XX. months EPS first in now outlook of updating to range lowering our $X.XX estimated tax to to XX.X%. our to our our in we be our strong We $X.XX to XX% these $X.XX versus on to

to next we sheet solidified markets we've financing balance to spend have for recent our like I'd discussing taken a On the backdrop. XX, our capital secured the Slide few challenging and steps in minutes LimaCorporate optimize acquisition.

term We our will new maintain interest a credit rates. loan our and facility at add existing revolving current

Additionally, completed convertible a a fixed rate. we've debt X.XXX% offering at

challenging from this capital market and a we Given ourselves acquisition. the we strong value put to have position in create conditions, drive believe

X, of year rates. will This effective us X.XX% in X on the to accretive earnings accretion will beyond. company current with based to X.XX% rate meaningful interest around deliver be allow in and year Our

more for scales. the M&A have position our also integration as progress will quickly the the We and ourselves plans to future flexibility business in

grew quarter, XX, in To we've us company. and a sales raise growth full sustainable, leading to guidance. months in strong summarize, again on capability We X high-single-digit our confident per our we the strategy X% year, first of the Slide our and remain to day build another had year

our step continue margin we clear on and took growth. another We expanding forward margins, our execute plan in continued to for

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

Enovis We are to team very and the excited family look welcome early in into the together. creating to Lima better XXXX, forward

open for move Marliese, questions. Q&A. I'll Now please to the call

Operator

from Wells comes question from first our And Instructions] [Operator Vik Chopra Fargo.

Vikramjeet Chopra

print. nice a on Congrats

GLP-Xs me. remains it Just didn't and questions you Matt, X first this. front about remiss center will you, ask for me one be and for with to if I investors, maybe

updated impact And thinking procedures? So on I just want to get GLP-Xs you're I had of question, on about on how a thoughts ortho -- ortho then follow-up the please. your

Matthew Trerotola

thanks a kind words. the thanks Vik, lot, Okay. for

the and Let question, let me first your second. ask you address

Certainly, that the taken of able the terms would the portion to obesity. potentially some obesity impacts. when and reduce headwinds the discussion between the portfolio less positive close can and from And as from on that portfolio impact look a the have we far, our have really have the might versus obesity we from demonstrated some path look potential obesity, GLP-X We've impact about at of be might we're and being the look GLP-X in GLP-X tailwinds is somewhere attention and all at a neutral obesity it kind we of it so small obesity. and to portion on at paying that less of see --

at our it that impacts business, based of Recon this most business, kind out continue to not view itself. that's of from situation. we share But on in how market from going monitor are the demonstrated the there. we growth to the growth get point We're our gain, our So in

very drive if growth knee and hip terms diversification, would growth. of impact market as even so in there was strong in well a position little be of on to the as Recon, thing in share our our enabling us And a still bit small good

Vikramjeet Chopra

question We're Great. And next orthopedic sort second coming how backlog XXXX. you I'm some a up of curious to about you to that towards XXXX? procedures. to in backlog on then tailwind for of be my do the was the that think heading Do expect backlog as into just Or you end just time? year? expect for work the

Matthew Trerotola

Yes.

look or the X missing, think topic that you I since this industry overall if still the growth is right, backlog we in the way year XXXX, at math. there's at look a

And so growth. of

to so And that years to that of the the people backlog, an and in little if see the of off year able a some some came create staffing tailwind opportunity, even the gives the really bit of of backlog. opportunity be capacity coming we some that for each this tailwind work still with from

there's And to had little And in in couple a year of this possibility it, the bit for we half of real year Recon of years. the tailwind particularly have we're terms a pleased procedures. in the that expect continue tailwind of so has would that first next

that to we basis. when obviously, a And give our situational assumptions share we're But guidance. the it's kind going on of be we'll making year-to-year

Operator

Okay. next with from Jeff Johnson question, which Jeff? our We'll proceed from Baird. is

Jeffrey Johnson

guess, again know the up Nice that comp. quarter. appreciate tough Extremities I I it came business all very I X%. Ben, or the Matt XX% commentary. up just on

standpoint. competitive products what here of Just have new seeing a shoulder to recently. your hear like couple launched some maybe know a would I you're from competitors

foreseeable little So bit are seeing we you you that in that this single-digit stayed the range in what of few Or the Do your the number? number, pretty back a confidence gets in to maybe [indiscernible] next a think quarters, upper field kind double-digit I although are high. out over and getting think for it future?

Matthew Trerotola

Yes, Jeff, the question. appreciate

innovation AltiVate that in continue to shoulder very and all long different and be leadership our great We we've able the market based we've the that We've to shown shoulder. for confident time the been through. leadership outgrow in been on a bringing

stack certainly, But market above-market X last is top of growth. then in X% growth. the above It the year, of normal. the rate comfortably see of on growth in if versus you And you'd then is like neighborhood kind quarter, XX% more the of market it years

quarters be there, and continue we a even Yes, couple competitive our we've a confident have in We still So little field. more advantaged to got pipeline. in product a tremendous And we innovations leadership really work we've year. innovation bit exciting an at this through quarter. of through strong got starting same some as of comps our of the first half next time, coming way the

that to shoulder above-market consistent show going over So to we're term we here. growth continue comfortable medium in feel the

Jeffrey Johnson

mentioned And summer then helpful. That's right. you All seasonality.

and thoughts to any give we've on as heard from that's trends, from But I that sure October others kind Are maybe trend want seasonality recovery in you now has -- trended. line. but I'm a some think how seeing normalization pretty with recent summer your update that you just volumes, just don't month-by-month seasonality, I'm well. into of of sorry, consistent, everything and September on kind of

Matthew Trerotola

Jeff. July the year, new little seasonality bit last setting Yes, year this it's with a again, and that in a as this than I of of new a last Yes. heavier than year. year little vacations normal, kind sort normal repeated mean, sort -- summer bit of more itself even probably sure,

step were So forward. good the good summer, couple a the of September forward. of step October first was is months another definitely healthy And healthy slower.

pretty QX for normal that And months roll into next well through things to the expecting will a versus and coming in up acceleration we're things we for sequential head finish run QX, as Recon the so set year. over how

Operator

Jefferies. Li And we'll take from from Yang a question

Young Li

about customers about how excited start, All your right. do I from I hear Enovis Anything European wanted What deal. they to on just Lima little customers, that are team, deal? maybe the early of? they to they're it? like a the In feedback bit guess cautious about general, the

Matthew Trerotola

of spent we've the very of and getting Certainly, Recon and lot and feedback. time positive customers a really combination a out important that lot terms feedback in of Yes. from our getting in business, channel

at the some had. example, limitations had. Lima U.S., they've but how great if how of in had channel, customers had mean I look of of product products, you line on and They've they've here they've some much much on for limitations some product the they've breadth kind had breadth line

And real positive a so opportunity. great, that's

some in Lima had some Same strengths will of tremendous areas goes line, U.S., quickly. that certain but for fill areas outside product in the the weaker also very has we had

the And U.S. the channel so the outside U.S. and again, the opportunity. customers excited are about outside the

side, Lima quite some about Enovis are our technologies come with on will excited And customers that that as well. there's

team. leaders the spend excited by very about other time So the able Lima we've that from spent the have pleased been marketplace. gotten the team, I'm able I've the spend the I'm really with been to to with being team feedback -- and Lima

of of and lot talent lot there a excitement joining about our energy great company. Just a and

Young Li

strong growth the just the mean, quarter. comps. are guess on of you rate sustainability drivers to great. also third but comment things margin before. quarter pretty get about and little the P&L gross pretty a XXX about sometimes, key That's a elevated curve? of lot that, It the follow don't talked driven year-to-date some drove enough in growth market Any key third a Where gross I in a and hear the of lot expansion up of of you I of going And growth P&R, the other growth to but pretty off if sounds products against margins, maybe expansion to wanted attention just maybe you strong bps, bit Okay. like on on can comps? have call the got out especially it? on mid-single-digit by forward, tough

Matthew Trerotola

Yes.

the certainly talk Ben me about growth. little a there. and let gross a I'll X% growth, pleased bit bit We're the Let with about talk margin little the consistent

there, market outgrow leader lot. to we've the need we by a a said, don't As consistently

low- is growth us mid-single-digit outgrow for Our kind gets the into to P&R. of little range by a to that that strategic market plan bit

And years, there so we've had price some growth. environment and we've nice driven And of performance also it's the certainly it than there. pleased that market above growth. is very execution then above-market is And But recent really, a healthier terms consistent with market growth. that, in nice the helping in of

supply there well. as delivery work chain the our market consistency helping to a lot strong. Second, the been us And very has A is so our EGX that's strong. supply chain, demanding customers of in and great of very in

businesses, team innovation to Third, continue share that year. them and MotionMD on we've we in the that's fourth, of of in P&R growth a new is up some And bit conversions, some products giving a curve sell. through clinic our any good to little come our terms piece then the in demonstrate helping gain given

is the And innovation formula that go a getting same as more we us as so of we business. forward, we're roll little And that this bit coming that kind range we growth the confident from working that need will of off. consistently at price into and time to start through, have

should And P&R in mid-single-digit be to us low- to for able on forward a growth path. range so keep the sustainable that

Phillip Berry

gross Matt of impacts through as manage try we've now ground some indicated, our price to our taking inflationary kind I Yes. of mean, terms margins, we of to are to versus that on Yang, ability And cost some continue on capabilities and had. the in

I we that's freight kind a those through chain, off little us work as pressures little bit. improved roll a some the of seeing helped supply mean, of bit. rates We're we're getting

within happening the some is The positive business we've P&R that's other itself. mix thing got

higher parts of actually business of are our gross fastest-growing carrying that margins. Some

cost of to some benefit a that we've top on done of to drive continue that So of the of price we're improvement. efforts getting kind

with you that's of good the the P&R. overall, put work So about really progress there constantly kind those feel and of in We've margin view. strong kind seen really together EGX and gross our all performance on

Operator

we from And take will Plovanic Bill question Canaccord. a from now

William Plovanic

strategy. focus I'm going to on

lot of So in with rates going of up there's interest on M&A, terms valuations moving a down. and parts

earlier a done? you. I next those got could about in M&A assets you one, buy us think the you will do then Lima go you given You what assets? how of understand, and Two, shift have, buy the do anything? you until Does big you do that closing into Lima valuations later-stage actually of help And of deal going gets or lastly, what if powder the you into dynamics? stage whether in you're do marketplace? that year, was kind wondering much Three, think front recent with post dry anything you have actually to deal financings

Matthew Trerotola

Very thoughtful, Bill.

it's I think the excited we we've environment the this deals. shared year. really about well that definitely foot And Lima some we've of technology very as and being to on able we're deals those been kind for deal of as the acquisitions as certainly seen, a and you've that multiples better as important paid get of ankle in terms better done valuations

we've some advantage the had market, of strategic So the of period we taken moves more this great feel made like a we and where we've buyer's of and little a for firepower time it's company.

of And next versus expect would tremendous and the be very and to foot ramp that going that the we are XX the integration a any year, for success. acquisitions is But strategic our do Lima clearly, we've smaller size. strategy. to and going we're integration of made, to in ankle likely to acquisitions months anything is scale the part on a be any acquisition I next continuing focused continue acquisitions X that primarily the of M&A that making sure

the for that At or things into strengthen in to would where acquisitions, be the be to core that constantly things interested whether that our would whether would work logical things markets, that whether -- attractive into else us us. further it's it's prioritize strategy move strategies move and accelerate or time, attractive same attractive make other doing ortho us we're we'd adjacencies it's markets,

certainly as larger so than our in around we'll firepower of and that moves And next leverage, have up the but year start little less at in back or time. down a attractive we to And back probably $X.X we and the point can then bit kind years, of consider over coming bring build billion-ish. that strategic

Operator

comes next Company. Our Mike question from from Needham & Matson

Michael Matson

Yes.

first, up the years deal, in the recent guess, close implant and quite I lines. acquisitions you've the of So done given picked of I upcoming imagine number product Lima a you've few

sort product ask Just wanted difficult tend products, of that? those that doing these rationalize about and types to the of to cycles, -- it's about have to customer some and how I long if of things over know to plan really because you there's aspect any sometimes but. lines to go of certain time products try life loyalty

Matthew Trerotola

look we're that. taking a Yes. Yes, for sure, at

to acquisition, Recon all overlap, acquisitions Now our a that stuff of core complementary overlap. has not and honest, additions. products The majority much be Lima we've product ankle complementary, of but have in had and almost largely the complementary, done been of little Mathys until kind bit and new the acquisition our foot product was largely

With positions. will line where and the We certainly geographic product a we've still and of acquisition, complementarity overlap. like product the lines area we little technologies an of the into got get more bit Lima

and line line over there's product will of geography time. opportunities And a be certainly overlap, the there to but not lot product so simplify

as to and The be we from of we're the possible how We're the and to focus office where of and and going the the can -- first, focus and that businesses channels. retain we on outset really as efforts businesses around really growth a we'll much and processes. -- how take on sort more going at customers and the back cost will combinations cross-sell

making and make how time. we us make foremost. growth the us some do growth, very -- to scale going over our that deliver eye efficient will be with doing strong simplification thoughtful cash that lines be we're and might sure product we'll first that of about And more we towards then over But time, an when and

Michael Matson

some sort acquisition particularly, the coming then with that accretion interest as when deal. a Lima And accretion, the announced beyond -- with bit of far you double-digit expected we we've lower rate done as up And having convertible reasonable? it. debt kind the 'XX goes, seem Does in and than originally sorry. modeling. EPS of Got Okay. We're

Phillip Berry

our And much today. we even put, Very accretion I then Yes. in year I some accretion expect materials in year in X, we so, mean, think, Mike. that meaningful of starting X. double-digit and

Operator

next Our Jason from comes Instructions] [Operator question from Wittes MKM. ROTH

Jason Wittes

mentioned You pricing.

larger your terms see margin, seeing sessions talking of environment. Some some are improvements. you as of better gross inflationary that peers is in Are inflation How an getting pricing of did about in that or well? And related of much also inflation? to you subsiding

Phillip Berry

One, Yes. the continued increases of on can I'd price business, we I'd of benefits where the the put both market to do that last years, we're say, favorable Jason, momentum. seen in over product selective we've we're some, the side, sides pricing and leader, say, there. some We've P&R lines. seeing on and couple

follow seeing a of we're stabilization smaller the generally there we're we of what some kind Recon On pricing. given doing. market player, is side, the terms is What in

we're in seeing that probably like much in in normalized continue, then of maybe overall, that to more inflationary kind we environment, not erosion the to views lot of a times. seen but either. we've would as an normal revert of expect past, back the more So not and increase But and whole

we've that well. Recon out, of of the component of of is, the getting as of the key on terms volume we mix to growth. business versus kind kind the becoming of gross our driving really gross of programs the improvements one, continue can of lines goals it as really our productivity the from which that up company. the expansion the margins laid And our read-through a the getting our that then getting It's In drive, price kind a kind part bigger we're scale in cost, acquisitions margins, That's with of increases leverage well.

are contributing quarter. the to of saw of in we XXX expansion So all basis those points that the

Jason Wittes

products the distribution of could about I of the on important. is just -- and kind the key of how on? review of Okay. important, Great. be you you if kind of curious just And that be maybe Lima, sort very shoulders Lima, we kind but how should should we and are rank thinking on But it? mean, from contributors sort focused obviously,

Matthew Trerotola

Yes, sure. Yes.

extendable. a to is and shoulder, all, of and position their very be First that that's -- going going to shoulder strong with something SMR that's valuable

would second revision in been and knee, of be, the they And in very attractive -- And a very we've position revision revision position. and good that's really hip in revisions And hip a earlier terms had part strong knee. very but our of are days The strong market. product position.

and so complementary. And that's attractive

is having get bring to And then third, for in of they in from printing, them to great interested manufacturing done have cases, able the have a XD the implants custom XD and spear with really, just tip been a designing to that technologies be which are pioneer, great around product surgeons to printing. everything and They've metal XD printed very line. complicated

the XD proprietary that like And revision same great their products, design used take those time, also some technologies titanium, printing. that advantage they've of knees trabecular at metal to for cones

the -- in that's some hierarchy the kind the So products great that technologies of would are they've got share. of those of I

Operator

done we very with today's our question-and-answer attending you and finish well. the At then are session, for conference this presentation. much we time, We will as thank

disconnect. You may now

Enovis (ENOV) 7 Nov 232023 Q3 Earnings call transcript