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EC

Enovis CORP (ENOV)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 2024 delivered 23% reported revenue growth to $561.0M, with adjusted gross margin rising to 60.1% and adjusted EBITDA margin to 20.1% as Recon mix and Lima synergies expanded profitability .
  • Adjusted diluted EPS increased to $0.98, up from $0.79 in Q4 2023, while GAAP EPS was $(12.06) due to a non-cash $645M goodwill impairment tied to stock price and market cap declines; management emphasized no impact to liquidity, cash flows or covenants .
  • 2025 guidance introduced: revenue $2.19–$2.22B (6–6.5% organic), adjusted EBITDA $405–$415M (+60–70 bps), adjusted EPS $3.10–$3.25; Q1 2025 phasing revenue $555–$563M and aEBITDA $97–$100M; guidance excludes potential Mexico tariffs .
  • CEO succession announced with Matt Trerotola planning to retire upon appointment of a successor; the transition was highlighted as orderly and growth-focused, which, together with the impairment, is likely a key stock reaction catalyst .

What Went Well and What Went Wrong

What Went Well

  • Recon delivered +59% reported growth and +10% comparable growth in Q4; double-digit global growth across Hip/Knee and Extremities with cross-selling building, reflecting successful Lima integration .
  • “We expanded our adjusted EBITDA margins by 210 basis points, reflecting the mix impact of Recon, the step change impact from Lima and EGX driven productivity improvements” — CEO prepared remarks .
  • CFO: “We made great progress on our Lima cost initiatives coming in above the high end of our year 1 goals of $10 million to $15 million… adjusted EBITDA grew 38%, delivering a margin of 20.1%” .

What Went Wrong

  • GAAP results reflect a non-cash goodwill impairment of $645M, driving Q4 GAAP EPS to $(12.06) and an operating loss of $(664.7)M; impairment was triggered by sustained share price and market cap decline versus carrying value of Recon and P&R reporting units .
  • Interest expense increased to $9.1M in Q4 versus $4.3M in Q4 2023, and FX headwinds of ~20 bps affected comparable growth; management expects 1–2% FX headwinds in 2025 .
  • U.S. Recon faced lapping of integration headwinds and a slow start to Q4 before a strong finish; pricing pressure assumptions in Recon remain ~1–2% downward annually embedded in 2025 planning .

Financial Results

MetricQ4 2023Q2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$455.0 $525.2 $505.2 $561.0
Adjusted EBITDA ($USD Millions)$81.7 $90.2 $90.2 $112.9
Adjusted EBITDA Margin %18.0% 17.2% 17.9% 20.1%
Gross Profit Margin % (GAAP)58.1% 55.0% 56.7% 54.8%
Adjusted Gross Profit Margin %58.6% 59.6% 58.9% 60.1%
Adjusted Diluted EPS ($)$0.79 $0.62 $0.73 $0.98
GAAP Diluted EPS ($, Continuing Ops)$0.05 $(0.34) $(0.61) $(12.06)

Segment sales (GAAP):

Segment ($USD Millions)Q4 2023Q3 2024Q4 2024
U.S. Bracing & Support$118.4 $123.0 $124.2
U.S. Other P&R$71.5 $66.2 $70.2
International P&R$92.3 $85.0 $92.5
Total Prevention & Recovery$282.2 $274.2 $286.9
U.S. Reconstructive$117.0 $120.8 $139.0
International Reconstructive$55.7 $110.2 $135.0
Total Reconstructive$172.8 $231.0 $274.0
Total Company$455.0 $505.2 $561.0

KPIs:

KPIQ3 2024Q4 2024
Weighted-average diluted shares (GAAP)55,666 55,875
Interest expense ($M)$11.1 $9.1
Adjusted tax rate (%)19.7% 21.0%
Comparable sales growth (Total)5.7% 6.4%
Recon comparable sales growth9.2% 10.0%
P&R comparable sales growth2.9% 3.2%
Goodwill impairment ($M)—$645.0
Adjusted Gross Profit ($M)$297.6 $337.1

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue ($B)FY 2025—$2.19–$2.22 New
Organic revenue growth (%)FY 2025—6–6.5 New
Adjusted EBITDA ($M)FY 2025—$405–$415 New
Adjusted EPS ($)FY 2025—$3.10–$3.25 New
Depreciation ($M)FY 2025—$125–$130 New
Interest & other expense ($M)FY 2025—$42–$46 New
Adjusted tax rate (%)FY 2025—~23 New
Share count (mm)FY 2025—~57 New
Q1 Revenue ($M)Q1 2025—$555–$563 New
Q1 Adjusted EBITDA ($M)Q1 2025—$97–$100 New
Adjusted EPS ($)FY 2024$2.62–$2.77 $2.75–$2.80 Raised

Note: 2025 guidance explicitly excludes any impact from potential Mexico tariffs .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q3 2024)Current Period (Q4 2024)Trend
Enabling technology (Argus/Arvis)FDA 510(k) clearance for Arvis 2.0 Shoulder and AltiVate Reverse Glenoid; launches expected Q3 2024 Next-gen Argus in knees and initial rollout of Arves in shoulder planned; broader portfolio leverage Building pipeline; commercialization ramp in 2025
Supply chain & tariffsStable execution; manufacturing expansions in Italy; digitization center in Lisbon Guidance includes China tariffs; Mexico Maquiladora largely exempt historically; potential 25% tariff would be $3–$4M per month exposure; mitigation playbook (multi-sourcing, pricing/reimbursement) Monitoring; contingency planning; potential headwind not in FY25 guidance
Macro/FXReported and comparable growth with FX impacts; narrowing FY24 ranges ~20 bps FX headwind in Q4; planning 1–2% FX headwind in FY25; natural hedges with euro/CHF operations Manageable FX; limited EBITDA % impact
Product performance (Shoulder, Foot & Ankle)Strong innovation cadence; set up to accelerate in 2H24 Shoulder back to healthy double-digit growth in Q4; Foot & Ankle comfortably above-market double-digit growth; continued momentum Strengthening across extremities
Regional trends (U.S. vs OUS)Strong OUS Recon growth; Lima addition OUS remained strong with cross-selling; U.S. Recon lapped integration headwinds, exited Q4 strong; pricing down 1–2% assumed for Recon OUS normalizing but still strong; U.S. re-accelerating
Regulatory & MDR costsMDR costs noted (non-GAAP adjustments) MDR and other costs continue as non-GAAP adjustments; expected to subside post-2025 Declining beyond 2025
R&D/Capex & FCFInvestments in enabling tech, facilities; FY24 guidance refined Positive FCF expected in 2025; pathway to 70–80% conversion over time; leverage to low-3x by year-end Improving FCF trajectory and deleveraging

Management Commentary

  • “2024 was a transformational year… In the fourth quarter, we reported growth of 23% and 7% on a constant currency comparable basis… We expanded our adjusted EBITDA margins by 210 basis points, reflecting the mix impact of Recon, the step change impact from Lima and EGX driven productivity improvements” — Matt Trerotola, CEO .
  • “We made great progress on our Lima cost initiatives coming in above the high end of our year 1 goals… adjusted EBITDA grew 38%, delivering a margin of 20.1%” — Ben Berry, CFO .
  • “While we have consistently delivered against our financial commitments… a goodwill impairment of $645 million was triggered… This impairment does not have any impact to Enovis' liquidity, cash flows, debt covenants nor… future operations” — CFO .
  • “We expect 2025 to be another year of strong execution… revenues $2.19–$2.22B… adjusted EBITDA $405–$415M… adjusted EPS $3.10 to $3.25” — CFO .

Q&A Highlights

  • M&A strategy: focus on small bolt-ons in 2025 while completing Lima integration and deleveraging; larger opportunities over medium term remain part of playbook .
  • Recon growth: path to double-digit possible; guidance set at high single-digit to balance quarterly variability; U.S. exited Q4 strongly .
  • Phasing: Q1 has 2–3 extra selling days, offset by fewer days in Q4; revenues and margins expected more evenly weighted across halves in 2025 .
  • Margins: target 60–70 bps aEBITDA expansion in FY25 driven by ~50 bps core and 10–20 bps Lima synergies (year 2) .
  • Pricing: Recon planning assumption of ~1–2% annual downward price; P&R roughly flat, with levers to offset inflationary environments .
  • Product cadence: Hip collar stem and other Hip products launching 1H25 to re-accelerate Hip in U.S.; cross-selling ramp OUS and U.S. .
  • FCF and leverage: positive FCF in 2025 with conversion ramping to 70–80% over time; leverage ~3.5x now, targeting low-3s by YE25 and <3.0x in 2026 .
  • Tariffs: China impacts contemplated; Mexico exposure $3–$4M/month under hypothetical 25% tariff (not in guidance); playbook to offset within 18–24 months .

Estimates Context

  • S&P Global consensus estimates (EPS, Revenue, EBITDA) for Q4 2024 and FY 2025 were unavailable at the time of this analysis due to data access limits. As a result, we cannot definitively assess beat/miss versus Street for Q4 or FY25 guidance at this time. Values would normally be retrieved from S&P Global; consensus data was unavailable.
  • Implication: Focus comparisons on sequential and year-over-year performance and company guidance until consensus becomes available.

Key Takeaways for Investors

  • Q4 quality: Adjusted profitability inflected meaningfully (aEBITDA margin 20.1%, adj GM 60.1%), supported by Recon mix and Lima synergy capture, with sequential EPS acceleration from $0.62 (Q2) to $0.73 (Q3) to $0.98 (Q4) .
  • Balance the GAAP headline: The $645M non-cash goodwill impairment dominated GAAP optics, but management emphasized no impact to liquidity/covenants and reiterated confidence in long-range plans — a setup where investors should weight non-GAAP trajectory more heavily .
  • 2025 setup: High-single-digit Recon and low-single-digit P&R growth, 60–70 bps aEBITDA margin expansion, and positive FCF point to continued operating leverage; Q1 has extra selling days and guidance excludes Mexico tariffs .
  • Product and cross-selling catalysts: Next-gen Argus, Arves shoulder, Hip launches in 1H25, and OUS/U.S. channel consolidation should support share gains; monitor U.S. Hip ramp and OUS normalization trajectory .
  • Tariff risk management: Mexico tariff exposure (if implemented) is not in guidance but management’s mitigation timeline suggests transitory effects; this remains a macro sensitivity to watch .
  • Capital allocation: Near-term bolt-on M&A while deleveraging; medium-term optionality for larger moves remains, supporting a compounder thesis .
  • Leadership transition: CEO succession is underway; Board seeks a seasoned medtech operator to sustain EGX-driven execution and innovation — watch the appointment timing and initial strategic framing .