Enovis Corporation (NYSE:ENOV), an innovation-driven medical technology growth company, has delivered a robust performance in the first quarter of 2024, driven by its transformative acquisition of LimaCorporate S.p.A. ("Lima") and continued momentum across its business segments.

Financials

The company reported net sales of $516.3 million in Q1 2024, up 27.1% from the prior year period. This strong top-line growth was primarily attributable to the Lima acquisition, as well as organic growth in the company's existing businesses. On a pro forma basis, which includes the sales of acquired businesses prior to Enovis' ownership, the company's revenue grew 5.1% year-over-year.

Enovis' Reconstructive ("Recon") segment was the primary driver of the revenue increase, with a 65.5% jump in sales to $257.3 million. This was largely due to the Lima acquisition, as well as the Novastep acquisition completed in 2023. The company's Prevention & Recovery ("P&R") segment also contributed to the top-line growth, with a 3.3% increase in pro forma sales to $259.0 million.

Gross profit for the quarter increased to $297.9 million, up from $235.1 million in the prior year period. Gross profit margin remained relatively stable at 57.7%, compared to 57.9% in Q1 2023. The company noted that the increase in gross profit was attributable to the higher sales volumes, particularly from the Lima acquisition, offset by a $5.0 million increase in inventory fair value step-up amortization charges.

Enovis' operating loss for the quarter was $35.0 million, compared to an operating loss of $25.0 million in the prior year period. This increase in operating loss was primarily due to higher selling, general and administrative expenses, research and development costs, amortization of acquired intangibles, and restructuring and other charges. The company's net loss from continuing operations for the quarter was $71.8 million, compared to a net loss of $22.8 million in the same period last year.

Despite the net loss, Enovis' adjusted EBITDA, a non-GAAP metric that excludes the impact of certain items, increased to $83.2 million, up from $56.4 million in the prior year quarter. The adjusted EBITDA margin expanded by 220 basis points to 16.1%, reflecting the mix impact of the Recon segment's growth, productivity improvements, and the step-change impact from the Lima acquisition.

Segment Performance

The company's Prevention & Recovery segment reported net sales of $259.0 million, up 3.3% on a pro forma basis, driven by increases in volume. Adjusted EBITDA for the P&R segment increased to $27.9 million, with the adjusted EBITDA margin improving by 50 basis points to 10.8%.

In the Reconstructive segment, net sales grew 65.6% to $257.3 million, primarily due to the Lima acquisition. On a pro forma basis, Recon segment sales increased 7.0%, despite a 2-3 percentage point negative impact from integration-related disruptions. Adjusted EBITDA for the Recon segment increased to $55.3 million, with the adjusted EBITDA margin expanding to 21.5%.

Liquidity

Enovis' balance sheet remains strong, with $74.5 million in cash, cash equivalents, and restricted cash as of March 29, 2024. The company's total debt stood at $1.34 billion, including $446.9 million in senior unsecured convertible notes and $500.2 million in revolving credit facilities and other borrowings. The company's net debt to adjusted EBITDA ratio was 3.2x at the end of the quarter.

Outlook

Looking ahead, Enovis has raised its full-year 2024 guidance. The company now expects revenue in the range of $2.06 billion to $2.16 billion, up from its previous guidance of $2.00 billion to $2.10 billion. This revised guidance translates to approximately 5-6% pro forma growth, including the impact of the Lima acquisition.

In the Reconstructive segment, the company expects pro forma high single-digit growth for the full year 2024, with an acceleration in the second half as it annualizes higher prior year comparisons and begins realizing benefits from cross-selling and new product launches. For the Prevention & Recovery segment, Enovis continues to expect stable low to mid-single digit growth.

The company has also increased its adjusted EBITDA guidance range to $368 million to $383 million, up from the previous range of $360 million to $375 million. As a result of the strong operational performance in the first quarter, Enovis has raised its adjusted earnings per share guidance to $2.52 to $2.67, up from the prior range of $2.45 to $2.60.

Conclusion

Enovis' transformative acquisition of Lima, combined with its continued focus on innovation, global expansion, and operational excellence, has positioned the company for sustained growth and value creation. The company's diversified product portfolio, robust pipeline of new technologies, and strong financial position provide a solid foundation for its long-term success.