Financial Data and Key Metrics Changes - Revenue for the second quarter was $474 million, exceeding the high end of the outlook of $450 million, driven by stronger performance in both active and workgroups [31] - Ongoing revenue increased by 11.6% compared to the prior year, with a constant currency growth of 10.4% [32] - Adjusted diluted earnings per share rose to $0.35 from $0.15 in the prior year, reflecting strong revenue growth and gross margin expansion [38] Business Line Data and Key Metrics Changes - Saucony achieved a revenue increase of 42% in the quarter, with broad-based growth across regions and channels [34] - Merrell grew by 11%, marking its fourth consecutive quarter of growth, supported by strong wholesale performance [36] - Sweaty Betty's revenue declined by 6%, but this was an improvement compared to the first quarter, indicating progress in reestablishing the brand's premium positioning [36] Market Data and Key Metrics Changes - Global wholesale revenue was the primary driver of performance, with international growth slightly outpacing the U.S. [32] - The active group revenue increased by 16% compared to the prior year, led by Saucony and Merrell [33] - The workgroup revenue grew by 2% compared to the prior year, indicating a sequential improvement [36] Company Strategy and Development Direction - The company is focused on becoming a consumer-obsessed brand builder, emphasizing innovative and trend-right products [47] - A new brand building playbook has been effective, leading to improved revenue trends for five consecutive quarters [7] - The company is navigating a volatile macro environment and has taken actions to mitigate the impact of tariffs [7][40] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's positioning to navigate ongoing changes in the global marketplace [7] - The outlook for the second half of the year anticipates moderated year-over-year growth compared to the first half due to timing shifts normalizing [43] - The company expects to continue seeing benefits from pricing discipline and cost initiatives, with gross margin anticipated to remain strong [58] Other Important Information - The company has made significant progress in reducing net debt, which was $568 million at the end of the second quarter, down 15% compared to the previous year [39] - The company is implementing strategic price increases on select products to offset tariff-related headwinds while maintaining investment in brand building [41] Q&A Session Summary Question: Follow-up on Saucony's growth in the second half - Management highlighted broad-based growth in both performance and lifestyle segments, driven by a reinvigorated product pipeline and effective storytelling [52][54] Question: Sustainability of current gross margin levels - Management expressed confidence in sustaining gross margins at current levels due to improved pricing discipline and cost initiatives [58][59] Question: Go-to-market strategy for DTC growth - Management acknowledged the need for improvement in the DTC channel and emphasized a focus on consistent messaging and innovative product flow [63][66] Question: Saucony's performance in newly expanded doors - Management indicated a strong focus on sell-through rates and responsible growth as they lap new door expansions [67][70] Question: Merrill's growth momentum and future outlook - Management noted that Merrill has gained market share and is well-positioned for future growth due to new product introductions and thoughtful distribution strategies [81] Question: Operating cash flow and leverage expectations - Management confirmed a focus on sustainable long-term profitable growth, with a bank-defined leverage of 2.9 times at the end of the second quarter, down from 3.9 times a year ago [88]

Financial Data and Key Metrics Changes - Q1 performance was in line with expectations regarding revenue and profitability, consistent with a heavily back-end weighted year [4] - A small order of approximately $2 million was shipped but not recognized as revenue in Q1, impacting revenue and gross margin [12] Business Line Data and Key Metrics Changes - The desalination business remains strong and on track for the year, with a robust pipeline and active contracted projects [5][11] - The CO2 business is progressing towards full commercialization, with three OEMs working to integrate the PX into their designs [5][6] Market Data and Key Metrics Changes - The company remains bullish on the desalination market, particularly in the Middle East and North Africa, despite a tougher macro backdrop [11][25] - There is a small presence in India, with plans to double resources, and North America is seen as a significant market opportunity, especially in water reuse [27][28] Company Strategy and Development Direction - The company prefers to establish a 100% owned and operated energy recovery facility, but is open to partnerships for short-term solutions [13] - The focus is on mitigating tariff impacts and rightsizing the cost structure while aiming for margin expansion in 2025 [37] Management Comments on Operating Environment and Future Outlook - Management is confident in desalination and CO2 revenue guidance, with visibility into more than 80% of expected 2025 revenue from contracted projects and high-probability pipeline [37] - The company is actively working on additional options to mitigate tariff impacts [37] Other Important Information - The collaboration with Hill Phoenix is seen as a positive development, with potential for multifaceted customer relationships in both retail and industrial spaces [32] Q&A Session Summary Question: Insights on the desalination market and geographical enthusiasm - Management remains optimistic about the desalination market, particularly in the Middle East and North Africa, with a strong pipeline and active projects [11] Question: Revenue impact from a mega project order not recognized in Q1 - The order was approximately $2 million, which provides context for Q1 revenue and gross margin [12] Question: International footprint strategy regarding manufacturing - The preference is to establish a fully owned facility, but partnerships may be considered to navigate tariffs [13] Question: Opportunities to offset lost revenue from China - Management believes there are opportunities to offset some of the $9 million lost revenue from China through sales in other geographies [14] Question: Progress with Hill Phoenix and future milestones - Key milestones include finalizing a commercial agreement and establishing a test site for the PXG integrated into Hill Phoenix systems [16][17] Question: Long-term advantages of developing an international production presence - Closer proximity to customers in key regions like the Middle East and North Africa could enhance service and support [25][26] Question: Alternative markets for ERI Solutions beyond China - India and North America are identified as markets with significant upside potential, with plans to increase resources in both regions [27][28] Question: Gross margin guidance amidst various factors - Management is comfortable with the gross margin guidance and remains focused on both gross and EBITDA margins [30] Question: Potential upside from collaborations with Hill Phoenix - Hill Phoenix is viewed as a diverse customer with opportunities in both retail and industrial applications, potentially leading to increased activity by the end of 2025 [32]

Financial Data and Key Metrics Changes - The company reported robust organic sales growth of 10.1% in Q1 2025, with adjusted EPS of $2.84, reflecting a 13.6% increase compared to Q1 2024 [5][6][16] - The adjusted gross margin improved to 65.5%, up 190 basis points year-over-year, while the adjusted operating margin was 22.9%, an increase of 100 basis points [23][27] - The company anticipates full-year organic sales growth of 8.5% to 9.5% and adjusted EPS in the range of $13.2 to $13.45 [7][26][27] Business Line Data and Key Metrics Changes - MedSurg and Neurotechnology achieved organic sales growth of 10.7%, with U.S. growth at 11.4% and international growth at 8.2% [16][19] - The Instruments segment saw U.S. organic sales growth of 10.4%, while Endoscopy reported 11.1% growth driven by core portfolios [17][18] - Orthopedics had organic sales growth of 9.3%, with U.S. knee business growing 8.3% and trauma and extremities growing 15.2% [19][20][21] Market Data and Key Metrics Changes - U.S. organic sales growth was 10.7%, while international organic sales growth was 8.5%, with notable strength in Australia, New Zealand, Japan, and Europe [15][19] - The company noted a favorable pricing impact of 0.7%, while foreign currency had a 0.9% unfavorable impact on sales [14][15] Company Strategy and Development Direction - The company completed the acquisition of Inari Medical, with integration going well and expected to contribute positively to the vascular division [7][12][50] - The company continues to focus on innovation and product launches, including the Mako robotic system and the Pangaea plating system, which are expected to drive future growth [10][11][12][58] - The company is addressing tariff impacts through pricing strategies, operational efficiencies, and leveraging its manufacturing footprint [27][33][68] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the sustainability of growth, citing strong demand and no significant red flags in the operating environment [35][40] - Supply chain disruptions were acknowledged, particularly in the medical segment, but these were factored into the guidance [40] - The company remains optimistic about maintaining strong sales momentum and achieving its margin improvement targets despite tariff challenges [27][44][68] Other Important Information - The company has been recognized for the fifteenth consecutive year on Great Place to Work's list of 100 Best Companies to Work For, highlighting its strong corporate culture [8] - The company expects a tariff impact of approximately $200 million in 2025, with ongoing efforts to mitigate this through various strategies [27][33] Q&A Session Summary Question: How is the company planning to absorb the estimated $200 million tariff impact? - Management indicated that the absorption will come from strong sales momentum, pricing strategies, and optimizing operational expenditures [30][32] Question: What is the outlook for the orthopedics market and the company's positioning? - Management noted that the orthopedics market remains healthy, with expectations for growth above the market average due to strong demand and successful product launches [34][35] Question: Can you provide insights on the gross margin expectations for the rest of the year? - Management expects a balanced contribution to margin improvement from both gross margin and operational expenditures, despite potential tariff impacts in the latter half of the year [42][44] Question: How is the integration of Inari progressing? - The integration is going well, with positive early performance and alignment with the company's culture [50] Question: What are the expectations for capital expenditures in 2026? - Management indicated that it is too early to provide a detailed outlook for 2026, but they remain optimistic about capital needs tied to strong procedural volumes [102]