Q2 2024 Earnings Summary
- New product launches and innovations are expected to accelerate growth in the second half of the year, particularly in the shoulder, knee, and hip segments. The company is launching the Altivate Reverse Augmented Glenoid system in Q3, which addresses the growing desire from surgeons for augments in complex cases and significantly increases revenue per procedure. Additionally, the Arvis shoulder system is in controlled launch and is expected to enhance procedural workflow without the cost or time limitations of large robotic solutions. These innovations are anticipated to reestablish above-market growth in the shoulder segment.
- Significant cross-selling opportunities from the integration of Lima are expected to drive growth and offset dis-synergies, especially in the U.S. in the short term and internationally over the long term. The company expects cross-selling in the U.S. to start offsetting headwinds this year and to help the Lima business become a strong grower alongside the legacy Enovis business in the following years. Over a number of years, the cross-selling opportunity outside the U.S. is considered extraordinary.
- Positioning as a $2 billion-plus innovation-driven growth company with over $1 billion combined Recon portfolio, the company aims to execute its long-term strategic goals of high single-digit organic growth and expanding margins to 20% and beyond. The strategic efforts this year are intended to create a step change in margin profile and continue the growth journey into next year.
- Integration-related disruptions are causing negative growth impacts of 3% to 4%, which may continue to affect performance in the back half of the year.
- Limited pricing power in the P&R segment, with prices running "about flattish," may constrain revenue growth and margin expansion.
- The company adjusted guidance to reflect the divestiture of a $15 million revenue business in P&R, which could negatively impact revenue growth.
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Guidance and Outlook
Q: Is guidance effectively raised excluding divestiture impact?
A: Yes, the prior guidance did not include the divestiture of about $15 million business. The updated guidance now absorbs three quarters of that business in our range. Therefore, without the divestiture impact, guidance is effectively raised on revenues. , -
Dis-synergy Impact and Timeline
Q: When will dis-synergy impacts taper off?
A: Dis-synergy impacts peaked in Q2 and will decelerate in Q3 and Q4. We expect a progressive decline as we finalize channel integrations, with a modest improvement in Q3 and a return to more normal growth levels in Q4. , , -
Share Gains and Market Position
Q: Are you confident about share gains in core Recon?
A: Yes, especially in knee, where we continue to have healthy share gains. Shoulder was impacted by integration and product gaps but will improve as we launch new products and cross-sell. Hip growth has been lower, but solutions are coming by year-end. , -
Cross-Selling Opportunities
Q: Where are you seeing early cross-selling wins?
A: Early wins include Lima cones in revision knee and ProMat custom implants. Outside the U.S., combined portfolios are creating opportunities, energizing teams. Cross-selling will offset headwinds in the U.S. this year and drive growth globally over time. , , -
Foot and Ankle Growth
Q: How is the foot and ankle business performing?
A: Our foot and ankle business is passing through $100 million this year, growing strongly above market levels due to channel alignment and innovation. We're also growing double digits outside the U.S., pleased with this engine despite a less favorable market this year. , -
Shoulder Business Recovery
Q: When will the U.S. shoulder business return to strong growth?
A: We expect improvement in Q3 and more in Q4 with the launch of the augmented glenoid. We plan to exit the year with shoulder on a strong growth path, supported by technologies like Arvis for shoulder surgery. , -
P&R Economic Sensitivity
Q: Is the P&R business more economically sensitive?
A: Our industry has limited economic sensitivity, and we don't see a meaningful difference between Recon and P&R. Both may have slight impacts, but overall, they are positive with limited sensitivity. , -
P&R Growth Outlook
Q: When can P&R ramp to mid-single-digit growth?
A: P&R is a 3% to 4% grower we're working to shape into a 4%+ grower over time. Running at 3% this year aligns with our plan. We're focusing on innovation to ramp growth in upcoming years. , -
Arvis 2.0 Progress
Q: How is the Arvis 2.0 launch progressing?
A: Couple dozen surgeons are using Arvis in hip and knee, with usage ramping. We expect it to be an important part of our knee strategy this year, ensuring we have the technologies needed as the market evolves. , -
International Integration
Q: Is there potential for dis-synergies internationally?
A: Having completed 70% of integration internationally, mostly in large direct markets with limited impact, remaining integration poses limited risks. There may be a little dis-synergy in the back half, but nothing significant. ,
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