Enovis(ENOV) - 2021 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted EPS growth of 16% to $0.44 per share, exceeding the guidance range of $0.35 to $0.40 per share [8][30] - Organic sales per day growth was 9% in Q1, despite a 5% headwind from fewer selling days compared to Q1 2020 [7][26] - Free cash flow for Q1 was $60 million, contributing to a strong cash position [28] Business Line Data and Key Metrics Changes - In the MedTech business, core daily sales increased over 5% year-over-year, with reported growth of 7% for the quarter [12][13] - The FabTech segment saw sales per day growth of 11% and reported sales increased by 8%, with adjusted EBITA margins reaching an all-time high of 16.1% [20][26] Market Data and Key Metrics Changes - The U.S. elective surgery environment improved significantly, contributing to better-than-expected performance in MedTech [39] - Emerging market regions for FabTech grew sharply, indicating strong sequential improvement across most regions [20] Company Strategy and Development Direction - The company announced plans to separate into two independent, publicly traded companies, targeting completion by Q1 2022 [9][10] - A disciplined acquisition strategy is in place, with recent acquisitions like MedShape expected to enhance growth in the MedTech segment [11][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the recovery of elective surgeries and overall market conditions, expecting continued strong sales growth [40][60] - The company anticipates a strong sales recovery for the year, with guidance for 14% to 16% organic growth [14][30] Other Important Information - The company completed a $700 million equity offering to strengthen its balance sheet and support future acquisitions [29][35] - The MedTech business is expected to grow rapidly, with a target of reaching $100 million in revenue within three years from recent acquisitions [19][32] Q&A Session Summary Question: Any surprises in the quarter regarding trends? - Management noted improvements in the U.S. elective surgery environment, which exceeded expectations, while Europe faced tougher conditions [39] Question: How is inflation being managed in MedTech? - Management indicated that higher gross margins in MedTech mitigate product cost inflation, and they are passing through costs effectively [42] Question: Update on FDA warning regarding STAR portfolio? - Management confirmed awareness of the situation and is implementing a plan to replace the polymer in the STAR Ankle product, maintaining confidence in its growth potential [47][48] Question: Opportunities for larger M&A deals? - Management expressed excitement about recent acquisitions but indicated a focus on small to medium-sized deals in the near term [55] Question: Will there be a catch-up in procedures due to vaccinations? - Management expects a multi-year recovery period for surgeries delayed during COVID, leading to elevated growth rates beyond 2021 [60] Question: Guidance on annual sales and seasonality? - Management confirmed that Q1 performance aligns with expectations, but typical seasonal trends suggest a potential step down in Q3 [84]