Enovis(US:ENOV)2024-05-02 10:24Enovis First Quarter 2024 Performance Overview Enovis reported strong Q1 2024 results, driven by strategic acquisitions and segment growth, leading to increased financial guidance for the full year First Quarter 2024 Financial and Business Highlights Enovis reported strong Q1 2024 financial performance with significant net sales growth driven by strategic acquisitions and segment expansion, alongside improved adjusted EBITDA Key Financial Highlights | Financial Metric (in millions) | Q1 2024 | Q1 2023 | Change | Proforma Change | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $516 | $406 | +27% | +5% | | Net Loss from Continuing Ops | ($72) | ($22.8) | - | - | | Adjusted EBITDA | $83 | $56.4 | +47.5% | - | | Adjusted EBITDA Margin | 16.1% | 13.9% | +220 bps | - | | Net Loss per Share (GAAP) | ($1.32) | ($0.42) | - | - | | Adjusted EPS (diluted) | $0.50 | $0.44 | +13.6% | - | - Segment performance was led by the Reconstructive (Recon) division, which grew 66% on a reported basis and 7% on a proforma basis, while the Prevention & Recovery (P&R) segment grew 3% on both a reported and organic basis3 - Key strategic achievements in the quarter include closing the transformative acquisition of LimaCorporate S.p.A. and launching Arvis 2.0, Lima Trabecular Titanium Cones, and ROAM OA at the AAOS Annual Meeting58 2024 Financial Outlook Enovis has raised its full-year 2024 financial guidance, anticipating higher revenue, increased adjusted EBITDA, and improved adjusted earnings per share Updated 2024 Financial Guidance | Metric | Previous 2024 Guidance | Updated 2024 Guidance | | :--- | :--- | :--- | | Revenue (in billions) | $2.05 - $2.15 | $2.06 - $2.16 | | Adjusted EBITDA (in millions) | $365 - $380 | $368 - $383 | | Adjusted EPS (diluted) | $2.50 - $2.65 | $2.52 - $2.67 | Corporate Information and Disclosures This section outlines corporate disclosures, including forward-looking statements subject to various risks and the company's use of non-GAAP financial measures for clearer performance insights - Forward-looking statements are subject to risks including, but not limited to, the integration of the Lima acquisition, macroeconomic pressures, supply chain disruptions, and geopolitical tensions12 - The company utilizes non-GAAP financial measures such as adjusted net income, adjusted EBITDA, and organic sales growth to help management and investors compare operating performance over time by excluding items that may obscure underlying business trends1317 Consolidated Financial Statements (Unaudited) This section presents the unaudited consolidated financial statements, including statements of operations, balance sheets, and cash flows, for the reported period Condensed Consolidated Statements of Operations Enovis reported Q1 2024 net sales of $516.3 million, an increase from the prior year, alongside a widened operating loss and increased net loss from continuing operations Condensed Consolidated Statements of Operations (Unaudited) | (In thousands, except per share data) | Three Months Ended Mar 29, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net sales | $516,266 | $406,151 | | Gross profit | $297,896 | $235,065 | | Operating loss | $(35,014) | $(24,968) | | Net loss from continuing operations | $(71,841) | $(22,846) | | Net loss per share - continuing ops | $(1.32) | $(0.42) | Condensed Consolidated Balance Sheets As of March 29, 2024, Enovis's total assets increased to $5.48 billion, primarily due to acquisitions, while total liabilities also rose significantly to $2.17 billion, largely from increased long-term debt Condensed Consolidated Balance Sheets (Unaudited) | (In thousands) | March 29, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Total current assets | $1,150,719 | $896,519 | | Goodwill | $2,414,611 | $2,060,893 | | Intangible assets, net | $1,408,310 | $1,127,363 | | Total assets | $5,478,681 | $4,509,334 | | Total current liabilities | $549,132 | $369,607 | | Long-term debt, less current portion | $1,318,463 | $466,164 | | Total liabilities | $2,167,839 | $1,088,633 | | Total equity | $3,310,842 | $3,420,701 | - The balance sheet reflects the impact of recent acquisitions, with Goodwill increasing by approximately $354 million and Intangible assets increasing by $281 million since year-end 2023, with Long-term debt increasing by over $850 million to finance these activities30 Condensed Consolidated Statements of Cash Flows In Q1 2024, Enovis reported a net cash outflow from operating activities and significant cash usage in investing activities, primarily for acquisitions, largely offset by cash provided from financing activities Condensed Consolidated Statements of Cash Flows (Unaudited) | (In thousands) | Three Months Ended Mar 29, 2024 | Three Months Ended Mar 31, 2023 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $(36,156) | $7,457 | | Net cash used in investing activities | $(797,842) | $(34,385) | | Net cash provided by financing activities | $864,540 | $24,498 | | Increase (decrease) in Cash | $29,714 | $(2,395) | - The significant cash outflow for investing activities was driven by $760.9 million in payments for acquisitions, funded by a substantial inflow from financing activities, including $400 million from a term credit facility and $480 million from revolving credit facilities32 Non-GAAP Reconciliations and Supplemental Data This section provides reconciliations of GAAP to non-GAAP financial measures and supplemental sales data, offering additional insights into the company's performance Reconciliation of Net Income and EPS Enovis reconciled its Q1 2024 GAAP net loss from continuing operations of $72.0 million to a non-GAAP adjusted net income of $27.7 million, resulting in an adjusted diluted EPS of $0.50 Reconciliation of Net Income and EPS (Non-GAAP) | (In millions, except per share) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Net loss from continuing operations (GAAP) | $(72.0) | $(23.0) | | Amortization of acquired intangibles | $40.9 | $32.0 | | Strategic transaction costs | $20.8 | $11.6 | | Other (income) expense, net | $24.2 | $(0.7) | | Adjusted net income (non-GAAP) | $27.7 | $24.1 | | Net loss per share (GAAP) | $(1.32) | $(0.42) | | Adjusted net income per share (non-GAAP) | $0.50 | $0.44 | Reconciliation of Adjusted EBITDA Enovis reconciled its Q1 2024 GAAP operating loss of $35.0 million to a non-GAAP adjusted EBITDA of $83.2 million, achieving a 16.1% adjusted EBITDA margin Reconciliation of Adjusted EBITDA (Non-GAAP) | (In millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Operating loss (GAAP) | $(35.0) | $(25.0) | | Amortization of acquired intangibles | $40.9 | $32.0 | | Depreciation and other amortization | $27.2 | $20.0 | | Strategic transaction costs | $20.8 | $11.6 | | Adjusted EBITDA (non-GAAP) | $83.2 | $56.4 | | Adjusted EBITDA margin (non-GAAP) | 16.1% | 13.9% | Reconciliation of Gross Margin The company's Q1 2024 GAAP gross margin was 57.7%, while the non-GAAP adjusted gross margin improved to 58.7% after accounting for inventory step-up Reconciliation of Gross Margin (Non-GAAP) | (In millions) | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Gross profit (GAAP) | $297.9 | $235.1 | | Gross profit margin (GAAP) | 57.7% | 57.9% | | Inventory step-up | $5.1 | $0.1 | | Adjusted gross profit (Non-GAAP) | $303.0 | $235.5 | | Adjusted gross profit margin (Non-GAAP) | 58.7% | 58.0% | Net Sales by Segment Total net sales grew 27.1% reported and 5.1% proforma, primarily driven by the Reconstructive segment's 65.5% reported growth, while Prevention & Recovery saw 3.3% growth Net Sales by Segment (Unaudited) | (In thousands) | Q1 2024 Sales | GAAP Growth | Proforma Growth | | :--- | :--- | :--- | :--- | | Prevention & Recovery | $259,013 | 3.3% | 3.3% | | U.S. Bracing & Support | $104,574 | 0.2% | 0.2% | | U.S. Other P&R | $66,350 | 6.4% | 6.4% | | International P&R | $88,089 | 4.8% | 4.8% | | Reconstructive | $257,253 | 65.5% | 7.0% | | U.S. Reconstructive | $123,735 | 19.6% | 4.1% | | International Reconstructive | $133,518 | 157.2% | 10.0% | | Total | $516,266 | 27.1% | 5.1% |