Keith Hinton

Keith Hinton from Freedom Capital Markets asked about the strategic implementation of the 'One Enovis' initiative, specifically how Enovis plans to exploit revenue and cost synergies between its Recon and PNR segments, differentiating between U.S. and OUS operations. He also inquired about the drivers behind the projected 50-basis point margin improvement for 2026 and beyond, and the ongoing process of shaping the PNR portfolio, including potential divestitures and ensuring sufficient cash generation for Recon investments.

Answer

Damien McDonald (CEO) detailed 'One Enovis' as optimizing investment, fostering commercial collaboration, and simplifying processes, citing examples like leveraging shared services and insourcing RCM. Ben Berry (CFO) explained that margin improvement is driven by gross margin enhancements (mix, productivity, Lima synergies) to fund R&D, alongside leveraging the overall cost structure. Damien McDonald (CEO) further elaborated on PNR portfolio shaping through commercial execution, geographic expansion, SKU rationalization, and strategic evaluations like the Dr. Comfort divestiture.

Keith Hinton asked about the 'One Enovis' initiative, specifically how the company plans to exploit synergies between the Recon and PNR segments on both revenue and cost sides, differentiating between U.S. and OUS. He also inquired about the drivers of the projected 50 basis points margin improvement in 2026 and beyond, asking for a breakdown across PNR margins, Recon margins, mix shift, and corporate cost leveraging.

Answer

Damien McDonald, Chief Executive Officer, explained 'One Enovis' focuses on optimizing investment across the entity, improving collaboration and information sharing between commercial organizations, and simplifying processes in finance, HR, and procurement. He cited examples like leveraging shared services in Portugal for Recon internationally and insourcing revenue cycle management. Ben Berry, Chief Financial Officer, stated that margin improvement focuses on all aspects, with near-term emphasis on driving gross margin improvements through positive mix, productivity projects, and Lima synergy capture, which will fuel R&D investments and leverage the overall cost structure.

Keith Hinton asked if the exciting ASCO GU data for Decipher Bladder would make investing additional commercial resources a near-term priority, or if more data is needed. He also inquired about the potential for more near-term data and the synergy with the existing Decipher and MRD franchises if commercial investment is increased.

Answer

Chief Commercial Officer John Leite stated that the rate-limiting step for Decipher Bladder's growth is not commercial investment, as there is significant overlap with physicians already targeted for Decipher Prostate, and the current channel has sufficient bandwidth. He emphasized that the key is the completion and publication of clinical evidence, like the ASCO GU data, to update clinical reports and generate demand. CEO Marc Stapley added that commercial investment this year will primarily focus on Prosigna LDT in the U.S., with MRD commercial investment planned for future years as indications broaden, leveraging the existing urology channel overlap.

Keith Hinton followed up on Decipher Bladder, asking if investing additional commercial resources is a near-term priority given the exciting ASCO GU data, or if more data is needed. He also inquired about the synergy with the existing Decipher and TruMRD franchises if commercial investment were to increase.

Answer

Global Chief Commercial Officer John Leite stated that commercial investment is not the rate-limiting step for Decipher Bladder growth, citing high overlap with Decipher Prostate physicians and existing channel capacity. He emphasized that completing and publishing evidence (like ASCO GU data) is the key to updating clinical reports and driving demand. CEO Marc Stapley added that current commercial investment priorities for 2026 are primarily the Prosigna LDT in the U.S., with MRD investment for future years as indications broaden.

Keith Hinton inquired if an increase in enabling technology leases or pay-per-use contracts would smooth out revenue long-term, and asked about expected changes in working capital metrics, CapEx, and plans for deploying the increasing cash balance.

Answer

Keith Pfeil, President and CEO, expects enabling tech revenue to smooth out longer term as the operating lease base grows, leading to stronger spine implant pull-through. Kyle Kline, Chief Financial Officer, stated no changes to historical CapEx guidance (5%-6% of sales), prioritizing cash for product development, inventory/sets, and manufacturing, while continuing to evaluate share repurchases and tuck-in M&A.

Keith Hinton from Freedom Capital Markets asked about the long-term impact of increased operating leases or pay-per-use contracts on enabling technology revenue, specifically if it would smooth out lumpiness or maintain it. He also inquired about any expected changes in working capital metrics, CapEx, or plans for deploying the increasing cash balance.

Answer

Keith Pfeil, President and CEO, stated that while the initial year of pushing operating leases for enabling tech will be lumpy, it should smooth out over time as a base is established. He anticipates a 'flywheel effect' where increased robot placements drive stronger spine implant pull-through. Kyle Kline, Chief Financial Officer, confirmed no significant changes to historical working capital or CapEx expectations (5%-6% of sales). He reiterated priorities for cash deployment: internal investment in product development, inventory/sets, manufacturing CapEx, with share repurchases and tuck-in M&A as secondary considerations.

Keith Hinton from Freedom Capital Markets asked if the anticipated acceleration in foundational market growth for 2026 is driven by new indications or a natural reacceleration. He also questioned the relatively low 30% patient penetration among geneticists, despite high clinician penetration, and whether a significant portion of the 300,000 annual patients might be better served by initial single or multi-gene panels rather than next-generation sequencing.

Answer

Kevin Feeley, CFO, explained that foundational market growth is supported by a multi-year roadmap for expanding target indications, focusing on areas with secure guidelines and reimbursement, rather than just natural reacceleration. Regarding patient penetration, Feeley asserted that GeneDx believes whole genome will eventually be the single test for all hereditary diseases. He attributed the 30% patient penetration to a disciplined approach of not previously pursuing all volume types, emphasizing that new guidelines and economic support are driving a shift towards exome/genome replacing multi-gene panels. Katherine Stueland, CEO, added that continued use of single/multi-gene panels prolongs the diagnostic odyssey, and the robustness of exome/genome testing makes them largely obsolete.

Keith Hinton sought clarification on whether the anticipated acceleration in foundational market growth for 2026 is driven by major new indications or a natural reacceleration. He also presented a 'bearish' perspective on the 30% geneticist penetration rate, questioning if a significant portion of these patients might be better suited for initial single or multi-gene panels rather than next-generation sequencing.

Answer

Kevin Feeley (CFO) confirmed a multiyear roadmap for expanding indication targets within foundational markets, driven by underlying guidelines and secure reimbursement policy, indicating a larger set of diagnosis types will be targeted. Addressing the geneticist penetration, Mr. Feeley reiterated GeneDx's belief that whole genome will ultimately be the single test for all hereditary diseases. He explained that the 30% penetration reflects a disciplined approach to only pursue volumes with secure reimbursement, and that a 'tidal wave of support' is emerging to replace multi-gene panels with exome/genome. Katherine Stueland (CEO) added that continued use of single/multi-gene panels contributes to diagnostic odyssey and should largely be retired.

Keith Hinton asked about the XGen volumes, noting they seemed to slightly exceed internal expectations based on the H2 2025 volume split discussed in the Q2 call. He inquired where GeneDx outperformed internal expectations and why the full-year guide remained unchanged despite the beat. Hinton also asked about the general pediatrician launch, specifically regarding the back-end build-up (e.g., additional billing/revenue cycle staff, DTC spend) and any concerns about potential bottlenecks in genetic counseling for patients with variants.

Answer

Kevin Feeley, CFO, stated that the outperformance in XGen volumes was primarily driven by the outpatient side of the business, particularly from farming the pediatric neurologist call point, and noted strong momentum throughout Q3. He explained that the full-year guide was maintained to reflect a balanced view. Regarding the general pediatrician launch, Feeley confirmed that investments in back-end support, including genetic counseling resources and other support for non-experts, are core to the experience design changes. He reiterated that these investments are covered by ample gross margin, ensuring the business remains profitable on an adjusted basis.