Enovis Corporation

Good day and welcome to the Innovis second quarter 2023 earnings call. All participants will be in the 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 a touch-tone phone. 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 Lecao, Vice President of Investor Relations. Please go ahead.

Thank you, Darwin. Good morning, everyone. Thank you for joining us today for our second quarter 2023 results conference call. I'm Derek Lecao, Vice President, Investor Relations. Joining me on the call today are Matt Truertola, 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, eNovus.com. We will be using a slide presentation in today's call, which can also be found on our website. Both the audio and slide presentation of this 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 the 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. Hello, everyone, and thanks for joining us today. We had a strong second quarter with high single-digit organic growth, margin expansion, and good progress against our strategic goals. Before I get into the results, I'm going to congratulate our team for being recognized by Newsweek as one of the best places to work in America. We have positive energy and momentum in our company and a talent and cohesive global team that gets stronger every day. Let's go to slide three and talk about some of the Q2 highlights. We grew organically by 8% with 17% growth in recon and 4% growth in P&R. That gives us 9% daily sales growth for the first half of the year. We continue to see some market tailwinds. on the recon side, and we continued to outperform the market by quite a bit. We had another strong P&R quarter, as well, in a healthy market environment. We expanded our adjusted EBITDA margins by 110 basis points, reflecting the mixed impact of strong recon growth, gross margin expansion from our price and productivity progress, and continued moderation of inflation. We recently closed two acquisitions at foot and ankle, And we're also delivering strong growth while scaling the full set of acquisitions we completed in the last few years. Overall, we remain on track for a great 2023 with strong momentum toward our strategic objectives. In recon, on slide four, we had high double-digit growth in the U.S., led by over 22% organic growth in knees and hips. Extremities grew 15% with well above market growth in both shoulder and foot and ankle. Outside the U.S., we grew over 16% organically in a resilient market. It's still early days, but I'm excited about the international growth opportunity as we leverage our market position and begin to cross-sell our market leading in power and alternate products in some large markets. And we have a strong pipeline of innovation. as we continue the U.S. rollout of the Empower Revision knee and have some key new products launching in shoulder, hip, and our foot and ankle franchise. Turning to slide five, I want to take a moment to discuss the impact from the key recon acquisitions we completed in the past few years. We closed Mathis to globalize our surgical business in July of 2021, and two years in, things are going very well. We're exceeding our plan and seeing very strong double-digit growth, meaningful EBITDA margin expansion, and good traction on synergies. We see great opportunities ahead as growth synergies ramp, and we continue to scale the business. There are also a number of other attractive global bolt-on opportunities. In extremities, we built a leading position in foot and ankle that is now growing organically well into double-digits, and has scaled from no profit to double digits EBITDA margin. With the recent acquisitions, we expect to exit the year at $100 million global run rate with a clear path for double digit revenue growth and strong margin improvement as we continue to scale. In P&R on page six, our 4% organic growth reflects a healthy market environment and solid execution. The business is performing in line with our strategic plan, with the average growth for the past six quarters a bit under 4%. We have a strong pipeline of innovation for the balance of the year and next year that should support continued growth in this range. We also expect P&R to generate solid cash flow in the second half of the year as we right-size inventory and continue to get the benefits of the productivity muscle we've built with our EGX business system. Now I'll let Ben take you through the P&L details and our positive guidance update.