Enovis Corporation

Good morning and welcome to the ANOVA's fourth quarter and full year 2022 earnings conference call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then one on your telephone keypad. To withdraw your question, please press star, then two. Please note this event is being recorded. I would now like to turn the conference over to Derek Letko, Vice President of Investor Relations. Please go ahead.

Thank you, Danielle. Good morning, everyone, and thank you for joining us today for our fourth quarter and full year 2022 results conference call. I'm Derek Letko, and joining me today on the call are Matt Triartola, Chief Executive Officer, and Ben Barry, Chief Financial Officer. Our earnings release was issued earlier this morning and is available in the investor section of our website, eNovis.com. We'll be using a slide presentation in today's call, which can also be found on our website. Both the audio and the slide presentation of the call will be archived on the website later today. During this call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the Safe Harbor language in today's earnings release and in our filings with the SEC. Actual results may differ materially from any forward-looking statements that we make today. The forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them except as required by law. With respect to any non-GAAP financial measures referenced during the call today, the accompanying reconciliation information related to those measures can be found in our earnings press release and in the appendix of today's slide presentation. With that, let me turn the call over to Matt, who will begin on slide three. Matt?

Thanks, Derek. 2022 was a year of significant progress toward our longer-term strategic goals, and I'm excited about the future of our focused MedTech growth company. We successfully launched Inovus with a talented global team, our proven EGX business system driving continuous improvement, a healthy innovation engine, and a strong capital structure to support our growth. We completed the year with total revenue growth of 10%, which included 6% organic growth. Inovus is well on its way towards sustainable, high single-digit organic growth. We made great progress in 2022, despite the choppiness related to macro challenges and residual effects from COVID. We had double-digit organic growth in recon and over 3% organic growth in P&R, fueled by investments we've been making in our innovation engine. Our talented team continues to develop exciting new technologies and solutions that improve patient outcomes, and satisfaction around the world. In PNR, we're reshaping the business for sustained mid-single-digit organic growth. In 2022, we once again outgrew our markets. We've improved innovation vitality in this business from close to zero in 2018 to double digits as we exit 2022, and we have a strong pipeline for 2023 and beyond. In recon, we made significant progress expanding this high-growth and high-margin platform. We delivered double-digit growth, continued to win in the ASC, and expanded globally through Mathis. We made good progress on margins in 2022, improving our EBITDA margins by 70 basis points despite headwinds from FX and inflation. Our gross margin improvement shows the power of our mix enriching strategy and EGX traction driving operational and pricing improvements. We delivered $25 million in fixed cost reductions, which is more than originally expected, making room to invest in our growth and absorb wage inflation. We accelerated our growth through our M&A strategy, enhancing our innovation capabilities and expanding geographically. Our acquisitions from the past few years grew double digits and have started to scale. In 2022, we added Arvis Surgical Navigation and also deepened our presence in the attractive Australian market with 360 MedCare. We exit the year with a healthy pipeline of acquisition opportunities and a strong balance sheet. On slide four, our fourth quarter organic growth was 5% fueled by double-digit growth in recon, once again, well above market levels. We had low single-digit growth in P&R, which was impacted by some temporary market softness. We're seeing a return toward more normal P&R growth rates so far in the first quarter. We expanded adjusted EBITDA margins almost 300 basis points in the quarter and are starting to see inflation and currency stabilize. You can see the power of our model with mixed improvement and operating leverage clearly displayed in this higher volume period. We are continuing to build momentum with EGX, and we drove improvements in safety, service levels, and productivity. We made significant progress on our supply chain initiatives and invested in some extra inventory, which helped us to achieve a multi-year low past due level at P&R. As you can see on slide five, we grew our recon business 14% organically, and that growth was broad-based with U.S. hips and knees up 14% and extremities up 13%, led by our powerful shoulder franchise. Innovation momentum continues to build. There is very high interest in our ARVIS-enabling technology, and we're excited about the launch of the Empower Revision Knee, which opens up a whole new market category for us. And in foot and ankle, we started a new phase of growth for the star ankle with FDA clearance of our patient-specific instrumentation to improve surgical efficiency. We made great progress on our geographic expansion strategy with Mathis business up 16%, and I look forward to the opportunity ahead as we continue driving some of our strongest and high gross margin U.S. products into the Mathis channel. Turning to slide six, I'm excited about the progress we've made reshaping our P&R business to set it up for sustainable mid-single-digit organic growth. Organic growth in the quarter was lower than the rest of the year as we experienced some temporary market softness that carried over from elective surgery slowdowns in the third quarter. But even with this finish, we had 3.5% full-year sales-per-day growth and share gain across most markets and products. Our bracing business grew over 4% in the year and is now reestablished as a strong global leader with great customer service and a healthy pipeline of additional new products coming. We also delivered strong growth in our MotionMD clinic workflow solution, a 30% increase in active clinics. This market-leading solution drives clinic conversions and sets us up well for future growth. Before I turn it over to Ben to take you through our Q4 financial results and outlook for 2023, I want to say that I'm so proud of our talented team and want to thank our teammates around the world for their hard work and many contributions this year as we continue to build a high-value MedTech growth company. Ben?