Enovis CORP Q3 FY2024 earnings call

• Integration Progress: Made significant progress on integrating Lima, with integration plans progressing nicely and expected to be within the initial negative revenue impact range of $20 million to $30 million.
• Recon Performance: Delivered 57% reported global revenue growth in the third quarter, with 9% comparable growth (adjusted for integration dis-synergies). The U.S. Recon business rebounded, and the international market grew 8%.
• P&R Performance: Underlying growth was stable at 3%, with efforts to improve the portfolio and leverage EGX tools for productivity gains.
• Financial Results: Third quarter reported growth of 21% year-over-year and 6% on a comparable basis with a FX tailwind. Adjusted EBITDA margins expanded by 220 basis points. Third quarter adjusted gross margin was 58.9%, up 70 basis points year-over-year. Adjusted EBITDA grew 38% to 17.9% margin. Adjusted earnings per share was $0.73, an increase of 30% versus prior year.

Recon: In the third quarter, reported global revenue growth of 57% year-over-year. Comparable basis growth was 9% (approximately 10% when adjusted for integration dis-synergies). U.S. Recon grew 9%, with 11% growth in U.S. Extremities and 8% in Hips and Knees. International market grew 8%. For 9 months of 2024, Recon delivered 57% reported global revenue growth with a comparable growth of 9% (adjusted for integration dis-synergies). P&R: Underlying growth remained stable, growing at 3% in the third quarter.

• Revenue: Expect revenues of approximately $2.1 billion, with comparable revenue growth of 5% to 5.5% (considering impacts from recent hurricanes and IV shortages in Q4).
• Adjusted EBITDA: Narrowed the expected adjusted EBITDA range to $373 million to $378 million, expecting 200 basis points or more of margin expansion versus prior year.
• EPS: Raised the adjusted earnings per share range to $2.75 to $2.80, resulting in strong double-digit earnings growth versus last year.

• Integration Risks: Continued integration efforts, with some hybrid markets still being worked through, though most channel integration is complete.
• Market Risks: Near-term market conditions such as hurricane impacts and IV shortages affecting Q4 results.

Q: On synergies, Ben responded about dissynergies stepping down in Q4 and clearing in 2025.

A: Ben said dissynergies are stepping down in Q4, with further reduction expected in 2025 and clearing by the start of 2025.

Q: On Q4 guidance granularity, Matt and Ben discussed market disruptions from storms and IV shortages.

A: Matt and Ben mentioned Q4 had disruptions from storms and IV shortages, which were factored into the guidance.

Q: On Extremities growth, Matt talked about Foot and Ankle strong performance and Shoulder growth improving.

A: Matt said Foot and Ankle performance is extremely strong with above-market growth, and Shoulder growth is improving towards market growth with the ARG reverse product ramping.

Q: On Foot and Ankle portfolio, Matt discussed product lineup and innovation.

A: Matt discussed the strong product line in Foot and Ankle, including flagship products and innovation, and the aligned channel and KOL partners.

Q: On model clarification and free cash flow, Ben discussed free cash flow conversion outlook.

A: Ben said they are focused on investments for integration and growth, with a pathway to 70% to 80% plus free cash flow conversion over time, and free cash flow expected to be positive in 2025.