Enovis Corporation

and welcome to the Inovus first quarter 2024 earnings conference 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 a touch-tone phone. To withdraw your question, please press star then two. Please note this event is being recorded. And now I would like to turn the conference over to Kyle Rose, Vice President of Investor Relations. Please go ahead.

Thank you, Marylise. Good morning, everyone, and thank you for joining us today on our first quarter 2024 results conference call. I'm Kyle Rose, Vice President of Investor Relations. Joining me on the call today are Matt Caratola, 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 Relations section of our website, Inovus.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. For further details regarding 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 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 this morning. We had a strong first quarter, but before I begin to discuss the results, I want to welcome the MEMA organization to ANOVUS and recognize the efforts of our strong global teams who work hard every day to execute our strategies and help our patients live more active and fulfilling lives. Please note that as we fully integrate into one company with a global focus, we're managing the organization on a combined global basis, and we use pro forma growth for comparative purposes. For year-over-year comparisons, our prior year financials have been updated to include the acquisitions at Lima and Novistep. Let's start on slide three and talk about some of the quarter's highlights. We had a transformational start to the year. We completed our planned acquisition of Lima, made significant progress on our integration plans, and carried forward momentum from 2023 across our geographies and business units. We delivered reported growth of 27% year over year and 5% on a pro forma combined basis versus very strong comps. We expanded our adjusted EBITDA margins by 220 basis points, reflecting the mixed impact of recon growth, productivity improvements, stable inflation and pricing trends, and the step change impact from Lima. We closed the Lima acquisition in early January and are seeing strong momentum and healthy scaling of the broader set of acquisitions we've completed in the past few years. Overall, a strong start to the year. In recon, on slide four, we delivered 66% reported global revenue growth. Pro forma recon grew 7% year-on-year in the first quarter, which includes a 2% to 3% negative impact from integration dis-synergies in line with our plan. U.S. recon grew 4%, including 8% growth in U.S. extremities and flat performance in hips and knees against a very strong prior year comparable of 22% growth in our core Novus business. Outside of the U.S., we grew 10% in a resilient market. We've achieved significant progress integrating the LEEM acquisition and are encouraged by the early execution of our combined teams. To date, we have seen some short-term growth impacts across anatomies and geographies as we've worked through the integration of our commercial channels. These fall well within our projected estimates, and our expectations for the full year remain intact. We look forward to ramping cross-selling opportunities as we move into the second half of 2024. I'm excited about the initial traction we're seeing with our market-leading Power and Ultimate products globally. We continue to expand market access with the clearance of our Ultimate small shell in Q1 in Europe. We also have a strong pipeline of innovation as we continue the U.S. rollout of the Empower Revision Me, controlled ramp of Argus 2.0, and selling Lima's 3D printed trabecular titanium cones for use with our Empower Revision System, one of our first key cross-selling opportunities. I'm also very excited to announce that just earlier this week, Argus received 510K clearance for use in shoulders. This timing aligns well with our planned launch of the augmented glenoid component of our flagship Altivate reverse shoulder system in the second half of the year. Our foot and ankle team continue to launch great new differentiated technologies like the Arsenal Reload that are keeping the vitality high and helping drive very strong double-digit growth. These great new technologies, alongside the cross-selling potential of the combined portfolios, offer a significant opportunity to accelerate growth in the second half of 2024 and set us up with great momentum as a billion-dollar-plus, fast-growing recon business entering 2025. In PR, on slide 5, our 3% organic growth reflects a stable market environment and disciplined execution. Overall, this business is performing in line with our strategic plans. Recovery Sciences led growth, boosted by continued double-digit laser growth, and global bracing continued to grow above market rates. Our new product pipeline is robust and includes the new OA knee brace called Roam, additional spine bracing products, and the next generation of clinical electrotherapy products for our Recovery Sciences teams. Adjusted EBITDA margins in P&R improved 50 basis points year over year as we continue to use EGX tools to drive consistent productivity improvements and sustained traction on price versus cost. Now, I'll let Ben take you through the P&L details. Ben? Thanks, Matt. Hello, everyone. I'll begin on slide six. We are pleased to report first quarter sales of $516 million, up 27% versus the prior year. and 5% on a pro forma basis. This compares to strong prior year organic core growth of 9%. Our teams have been working really hard to integrate our global Lima acquisition that closed January 3rd.

We've been extremely pleased so far with the collaboration in our teams and the high quality integration plans that we've begun executing against. Our underlying growth in P&R and recon continues to be solid, and while still early, our integration efforts are slightly ahead of our original plans.