Enovis Corporation

Good morning and welcome to the Novice Fourth Quarter 2023 Earnings Call. All participants will be in 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 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 Kyle Rose, VP, Investor Relations. Please go ahead.

Good morning, everyone. Thank you for joining us today for our fourth quarter 2023 results conference call. I'm Kyle Rose, Vice President of Investor Relations. Joining me on the call this morning are Matt Taratola, Chair and 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 in novus.com. We will 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 this call will be archived on the website later today. During the 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 might differ materially from any forward-looking statements that we make. 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 relating to those measures can be found in our earnings press release and and in the appendix of today's slide presentation. With that, let me turn it over to Matt, who will begin on slide three. Matt?

Thanks, Kyle. Hello, everyone, and thanks for joining us today. 2023 was a year of significant progress toward our long-term strategic goals, and I'm excited about the future of our high-value MedTech growth company. We had a terrific year with continued share gains across geographies and business units, strong execution on new product initiatives, solid margin expansion, and truly transformative acquisitions. We completed the year with total revenue growth of 9%, which included 8% organic growth, right in line with our high single digit strategic goal. Our talented team continues to develop exciting technologies and solutions that improve patient outcomes and satisfaction around the world. In Recon, we made considerable progress expanding this high growth and high margin platform and drove full-year organic growth of 14%. We delivered double-digit organic growth across all major segments, continued to win in the ASC in the U.S., and had strong execution internationally as we continued to ramp our very successful 2021 Mathis acquisition. We also closed the year with the strategic acquisition of Lima that step changes our recon business starting in 2024. In P&R, we've been reshaping the business for sustained mid-single-digit organic growth. In 2023, we once again outgrew our markets with full-year organic growth of nearly 5%. We improved innovation vitality in this business from close to zero in 2018 to double digits as we exit 2023 and have a strong pipeline for 2024 and beyond. We also made good progress on margins in 2023, improving our EBITDA margins by 70 basis points, more than offsetting growth investments and headwinds from M&A, currency, and inflation. Our gross margin improvement is a result of our mix enriching strategy and the powerful impact of our EGX business system driving operational productivity and pricing improvements. And finally, we continue to accelerate our growth through focused M&A. Our acquisitions from the past few years grew double digits and started to scale. We expanded geographically and enhanced our innovation capabilities with Lima and Novistep. And we continue to follow our proven EGX playbook to make sure each acquisition delivers strong strategic impact, financial contributions, and long-term shareholder returns. And they bring great talent into our company. Let's go to slide four and talk about how we finished the year. We grew organically by 8% in the fourth quarter with 11% growth in recon and 6% growth in P and R. We continued our trend of double digit growth and share gain and recon as our markets had normal seasonality. We believe the elective surgery markets we serve remain healthy with higher than normal procedural demand in early 2023. and the potential for above normal demand again in 2024. In P&R, we had another strong quarter showing our reestablished leadership in these markets with global share gain in a stable market environment, plus a bit of tailwind from the light prior year come. We expanded our gross margins by 150 basis points, reflecting continued impacts from productivity, mix, and the scaling of recent acquisitions. Overall, we exited 2023 with strong momentum in line with our strategic goals and are excited for a great 2024. Digging a little deeper in recon on slide five, we had double-digit growth in the U.S., led by 11% organic growth in hip and knee, as well as extremities. Outside the U.S., we grew 11% organically in a resilient market. I know there are a lot of 11s on the page. Trust me, it's just a coincidence. We have a very strong recon innovation pipeline that will allow us to continue to gain share. We're off to a great start on the ramp of our Empower Revision knee, and we've also launched and updated Harvest 2.0 with full Empower capability. Additionally, in foot and ankle, we recently launched the Evolve 34 Lapidus Correction System for bunions, one of the fastest-growing market segments in the U.S. We've had terrific feedback from surgeons on all of these great new products. In P&R on slide six, our organic growth reflects a healthy market environment and disciplined execution, albeit against the easiest comp of the year. Overall, this business is performing in line with our strategic plan, with global bracing grew 6%, driving share gain from strong customer service, improved innovation, and motion MD performance.