Hi. Good afternoon. Good afternoon, everyone. Thank you for joining us at this year's Canaccord Genuity Musculoskeletal Conference. My name is Caitlin Roberts, and I'm one of the medical device analysts here at Canaccord Genuity. I'm pleased to be joined this afternoon by Enovis, a medical device company focused on products spanning the orthopedic care continuum, including injury prevention, repair, and recovery, with the goal of improving patient outcomes and transforming procedural and clinical workflows. We'll begin with a fireside chat by the Enovis team, and I'll try to leave a couple of minutes at the end for any questions from the audience. With me today is Ben Berry, Chief Financial Officer, and Louis Vogt, Group President of Reconstruction. Before we begin, I want to remind everyone of any relevant disclosures which can be found on our conference and/or firm website. With that, we'll get started.
Let's start off with the Q4 results, which you announced last week, after softly pre-announcing in January. Maybe if you could highlight what you want investors to understand coming out of those results.
Yeah. Thanks, Caitlin. Thanks for hosting us again this year. You know, it was a good solid year for us in 2025. We grew the company 6%. We grew double digits in extremities. We grew double digits in international recon. We grew about 2x the market in our market-leading PNR segment. It was a dynamic environment in the year, as you know. We were dealing with lots of, you know, things like tariffs that we didn't expect as we came into the year. So we were able to hold our margins while we underwent all of the mitigation efforts to try to make sure that wasn't a big drag on the company, even though it impacted us about 40 basis points in the year in terms of our margins.
One of the critical things for us is we've been through multiple years of integration work because we've been acquiring a lot of businesses over the last several years. One of the key focal points for 2025 was to maintain and not only take a step forward with regards to our cash journey and deleveraging the company. We did that in 2025. We generated positive cash flow. We took leverage down to just over 3x . Overall, a good solid year for the company. Look forward to the momentum that we're building here, as we enter 2026, and look forward to it.
Just turning to guidance, you announced 2026 guidance on the call as well. How are you thinking about the guidance by segment and anything from, you know, a cadence perspective to call out other than the typical seasonality?
Yeah. Set up the year really similar to the way we guided last year with regards to low single-digit expectation for our PNR segment and high single-digit expectation for our recon segment. We expect our margins to increase by about 50 basis points. We expect our free cash flow conversion to be about 25% or more in 2026. Another year step forward for the company in 2026.
Mm-hmm. Then, you know, with the Lima acquisition a couple years in the rearview with Damien joining as Chief Executive Officer last year, what changes has Damien brought to the organization, and what are some key strategic priorities for the company in 2026? And any potential for disruption given some of, you know, these changes and operating model updates?
Well, I think you said it. You know, Damian came in at an inflection point for the company. As you think about our history as a company, we've gone through a lot of change and dynamics with regards to the acquisition of DJO that Colfax did in 2019, building the company and shaping it through acquisitions of over 20 acquisitions over the last several years, splitting off our industrial business as ESAB and then becoming Enovis. We've been through a lot of change in a very short amount of time as a company. Damian steps into an organization that has created a lot of the building blocks that we've been out trying to do as we've established ourselves.
He's really come in with a mindset of, you know, three key priorities, one being commercial execution, one being operating excellence, and one being financial discipline. As Damien steps into the organization, he sees the building blocks in place, and now it's really about focus and discipline for the organization to go and execute. He's brought that mentality. He's really eager about what we've done so far as a company. He brings a view of really wanting to drive the innovation cycle within the company. Overall, we've made some leadership changes along the way, really just, again, focused on those three factors.
Then just jumping off of that, something that really stuck with me from the call, was that you guys said you had 50% more 510(k) clearances in fiscal year 25 than your best prior year. What's really driving the shift in vitality? Was this something that happened organically as you started driving R&D engines across your acquisitions that you noted, that you made over the past few years, or was it something else?
I'd say it's two things really. It's investment. You know, we've been pumping money into R&D. We've taken our R&D as a percentage of sales up a couple points over the last several years. We increased R&D as a percentage of sales by one point last year. We've been really investing in the engine because we see a lot of opportunity in the business segments in which we participate. I would also say that we acquired a lot of capabilities as well. As you think about all of the businesses that we've acquired, we've brought in a lot of talent from an R&D standpoint and a lot of capabilities that we've been able to lean in. We see a lot of opportunities to create a really meaningful portfolio for the future.
We've been continuing to invest not only in that, you know, capability, but building out the resources as well.
Just maybe moving to enabling technologies and ARVIS, your augmented reality solution. You were working on ARVIS 2.0 last year and debuted the updates at a couple of conferences in the fall. Maybe just give us a quick overview of what are the benefits of the next gen ARVIS versus the gen one?
Sure, yeah. I'll take that one, Evan. Thanks. I was getting a little lonely over here. I was about to give you the double blink. ARVIS 2.0, we're not really using 2.0 anymore much externally. 2.0 was the generation of headset that we were talking about, and of course, the software evolves and updates all the time as well. 2.0 was the new lighter headset with new visualization and new battery, new computer capabilities, things like that. We're about to launch here at this meeting our, you know, our latest version of knee software, which includes full soft tissue balancing and all the latest and greatest features and speed functionalities that we've been working on for quite some time now.
Looking forward to seeing that get unleashed in the knee space. Shortly thereafter, we have our, you know, what's called our 2.0 version of shoulder, but our more advanced version of shoulder arthroplasty with augmented reality. It's a pretty comprehensive solution. You know, our planning capabilities that we're going to launch with our portal is pretty comprehensive. Our, you know, the actual AR itself and what ARVIS and AR will do for a surgeon in the procedure is probably the most feature-rich tech solution on the market right now in shoulder arthroplasty.
It'll only be available in the U.S. for a little while, and then, you know, shortly after that, we're going to introduce it to the international markets, and then in the back half of the year, we're gonna have a more full commercial launch in the, in the international market. It's a really exciting time, somewhat of a transition point in the life cycle of the ARVIS brand. We're looking forward to getting that thing going and getting into a lot more people's hands outside of the limited crew we've been working with so far.
On the earnings call, you noted planning to deploy ARVIS through more of a flexible business model versus your prior capital sales model. Maybe just describe the change in strategy and the rationale for that change as well.
Yeah, I think it's all about meeting the customer where they are, right? you know, Who we were targeting in the earlier generations was a better financial situation for them to look at, you know, either capital or in some cases a fee per use type of model. As we go to a full market launch and we start tailoring our solutions to the, all the segments of the market, you kinda open the aperture to meeting them where they are and what's best for them. there's three or four approaches that we think are going to be you know, not equally distributed, but we think are going to be attractive.
The beauty of ARVIS and augmented reality, wearable navigation if you will, is the cost itself. I mean, it's the lowest cost, least capital intensive navigation technology that you can find in our space. The portability of it and the ability to use it in the hospital in multiple rooms or bring it to the ASC, and the cost that we bring to the table is really unique. We expect adoption, you know, to be significantly higher in 2026, in the back half of 2026. I think from a feature standpoint, it'll compete with anything in the shoulder that exists and it'll get us on the right footing to where we wanna go long term with tech in the shoulder.
As you get further on into that launch, how are you thinking about the pull through from an implant perspective and, you know, leading on from that, the revenue contribution?
Yeah. The game right now is a razor-razorblade model, right? I mean, everybody's doing that with robotics and digital tech. You know, I don't necessarily see that changing. I think the, you know, we're not, you know. Our approach thus far has been to take an approach where we don't have a loss leader in one category, so it can drive the razorblade sales in another category. You know, but again, it's all about meeting the customer where they are. If, you know, every situation is very different, and we're trying to be responsive and flexible to what they need.
At the end of the day, I mean, yes, the larger play is the joint volume, and that's what everybody's, you know, intensely focused on, as are we, and I don't really see that changing here in the near term.
Mm-hmm. maybe turning more broadly to recon-
Mm-hmm.
Maybe starting with knees. You guys have talked about how your EMPOWR Knee is kinematic and the higher rate of dissatisfaction with knee replacements from patients versus actual revisions is a problem. I mean, how much are surgeons actually paying attention to, you know, this rate of dissatisfaction with knee replacement? Are patients also attuned to how much, you know, better certain knees are than other knees? Or do you think the awareness really isn't there yet?
If you look at the knee market, the two biggest shifts in the knee market in the last 15 years outside of robotics is cementless, which is a, you know, you can speak to the clinical advantages or the biological advantages. Some are theoretical. You can speak to the younger patient population and the workflow advantage of saving five minutes intraoperatively with that. The second biggest shift has been to constrained articular surfaces. Medial congruent dual pivot was our concept. You know, that's just had a massive shift. If you know, if you know the knee space, you know, Even 10 years ago, posterior stabilized knees were by far the largest category.
There's just been a massive shift away from posterior stabilized to more congruent bearings that are intended to replicate the natural kinematic pattern of the knee and the biomechanics of the knee. You know, we're very proud of that, of course. That was our go-to. In fact, you know, I think a lot of our efforts and of course the growth we experienced, the share we took, I think drove a lot of this. That's kind of the hottest topic in knees, is how do you get the most, you know, the most stable and kinematically appropriate knee for the patient. There's multiple brands and multiple approaches to doing that.
You know, it's not, it's not, you know, just one company that's pursuing it and another company that's pursuing it. Implant differentiation and implant, the impact of implant design on clinical outcomes is very real, and it still remains very real. We shouldn't sleep on it as an industry. It will continue to evolve, and that's a case in point of it evolving right there. Of course it will evolve, you know, at the same time as technology's evolving with it. I think the more precise you get with an implant that you're trying to drive a certain kinematic or biomechanical pattern to replicate for the knee, the more accurate you have to put it in.
It actually feeds well into this tech world where we're going that eliminates errors, it eliminates outliers, and allows surgeons to achieve surgical objectives that are closer to what they're trying to accomplish than ever before.
Maybe touching on hip as well, you launched some new hip products in 2025, your OrthoDrive Impactor and Nebula Stem, to really address the direct anterior approach. How have those launches been going, and what growth did you see in fiscal year 2025 versus 2024? Have you begun to really see that growth really pull through from those new products?
Yeah. You're getting at the direct anterior approach, right? I mean, it's another case in point where not tech necessarily, but procedural advancement and implant advancement has really shifted in a massive way. That's been the biggest shift in hip arthroplasty in the last 25 years, for good reason. You know, we can't build them fast enough, essentially.
You know, if you look at that space for us, you know, 60% of the implants that we're building are going in competitive surgeons' hands, which is a really remarkable statistic. You know, automation with impactors and saving surgeons' elbows and shoulders as they pound these hips in is a real thing, and it's definitely here to stay, and it's not gonna do anything except get more popular. I think it's a great example, Caitlin, you know, as to how, you know, technology advances on whatever curve it may be. Implants advance on whatever curve they may be, so do techniques. When you combine them, when they all kind of come together like that, you know, it's very synergistic. That's what's happened in hips.
You know, I think hips has always been a very successful procedure. Very successful. Maybe the most successful procedure in all of orthopedics. What we've been able to do with eliminating dislocation and instability in hips with, you know, direct anterior approaches is really remarkable, and it's really around the world. A great example of the industry sort of going after real patient issues and real clinical issues and finding a better problem.
Mm-hmm.
The better solution, excuse me.
On the earnings call, you also noted expectations to bring your OUS hip products, Optimys and RM, to the US. How do you see that dovetailing with the recent, you know, NPLs that we just talked about?
Mm-hmm
in terms of helping you gain share?
People probably don't know that we're a, you know, Depending on which market, we're a number two or three hip player outside the United States. We, you know, we have anywhere from 10%-20% share, depending on the country, which is much bigger than we have in the U.S. It's driven by those, you know, the, some of the brands that we have that are unique in Europe right now, the Optimys stem and the RM Cup. You know, we intend to bring those to the United States in due time. The stem itself, we anticipate, you know, sort of later this year, and we're really excited about that.
After 18 years, it has the lowest risk of revision of any hip stem in the world in four of the largest joint registries in the world. We're very confident in its clinical performance, and, you know, it was designed specifically for that DA technique that you talk about. In combination with that cup, it was designed for low-cost markets, outside the United States. I think it has a really good spot in the United States. It's, it's a little different than what you, what we are seeing in the United States right now. Some of the, some of the differences in philosophy and the cultural approaches to how do we do total hips have to be overcome.
We think that, you know, the clinical results itself are so compelling that it's gonna be hard to slow it down once we get it going.
Great. Turning to extremities, on the call, you pointed to double-digit shoulder growth in 2025. How sustainable do you see that growth, and could further NPL and ARVIS also help maintain momentum there?
Shoulders is a great market right now. You know, I think everybody in the space here, Rob was just talking, he was on the podium, you know. I mean, the market grew, you know, almost double digit, maybe double digit last year. That's good. You know, he said a high tides rise all boats, all boats rise. You know, we're riding that. I mean, we grew quite a bit beyond that as well with some new product launches that are very important. You know, outside the U.S., we're number one or number two in every market we compete in in shoulders.
Inside the U.S., we're, you know, a strong player that's approaching number two. You know, I think, you know, you talked about MP new product launches and technology and how it's gonna shape it. The shoulder market is where the knee market was probably 25 years ago, something like that, where technology and implant and procedural innovation are still really changing and adapting and growing and we're learning a lot about it. You know, I expect to see the growth to remain high in that space. I expect to see differentiation among all the elements, tech and implant and procedure remain really high.
I think that, you know, the companies who are really dedicated to it and putting all their energy towards it are gonna see share gains.
Mm-hmm. Just overall, how are you thinking about your competitive positioning now in the recon segment? Any areas you would like to add, maybe organically through R&D or inorganically? I think you noted sports medicine as an organic R&D area, potential on the call. Any more color on that or the potential for inorganic opportunities in that segment as well?
You know, you always wanna look at the full picture of what your customers are doing, right? If you're not, you know, if you have a great relationship with a particular customer and you're not serving the other procedures that they do, it's very attractive. Sports medicine is one of those for us with our big shoulder business. You know, that's definitely attractive. I know a lot about that space. There's multiple other categories that are also very intriguing. You know, I'm not gonna give away our hand in terms of how we're thinking about entrance into that space.
If you look at our value prop as a company of being the full continuum player that, you know, that deals with, you know, prevention and even rehabilitation of sports medicine injuries, and we have close intimate relationships with the sports medicine space with our bracing business, you know, and then we do miss out on the sports medicine soft tissue repair in the middle, and then we, of course, have joint arthroplasty. I think it's a natural fit for the company. You know, I think right now what. You know, Ben mentioned we've had over 20 acquisitions in the last five or six years. I've got my hands full with that. I think in a future venture, yeah, you'd probably see us look in there.
All right. Maybe just touching on the ASC. It's become an increasingly important site of care for you and just the market more broadly. You know, where did you end 2025 from an ASC mix in hips, knees, and shoulders? How are you continuing to see the competitive environment there versus the inpatient setting?
Yeah. The ASC is just massive. I mean, anybody that doesn't know what's happening right now, it's as powerful of a trend as anything that exists. The. We all talk about penetration as if penetration is the. I don't really like to think that that's the goal line. I think penetration is somewhat of a lagging indicator of are you relevant there. You know, I think we're on the front end of that, so I don't question whether or not we're relevant. I like to look at, you know, as we move to the ASC and the buying dynamics are different, the incumbent advantages are lower, are we taking advantage of that as a company?
You know, the best predictor of success for me is, you know, are we getting new customers and market share as we go to the ASC? The answer for us is yes. You know, about 15%-20% of the business that we have in ASCs is from new customers, which is really exciting. We're taking more market share as the market goes to the ASC than we are just in the remaining hospital accounts for multiple reasons. That transition to that space gives us a lot of confidence that we'll be able to continue to, you know, attack the market in that way. Yeah, I guess the answer to your question, Caitlin, is yes. We see it, we feel it, we like it. I think we're kind of on the front end.
You know, there's different pricing pressure in the ASC. Just to bring a regular customer who's at a hospital and just to bring them to the ASC isn't all that attractive. It's more about as the market goes that way, can we take more than our fair share? Right now we're doing that.
Then, you know, just in the last minute or two, how should we be thinking about the OUS opportunity for you guys? Are there any areas internationally? You, you touched on hip and the strength there, but any other areas internationally where you're very competitive and the OUS mix becoming maybe a larger percentage of your business over time?
I think it's, my turn to get lonely over here, right?
Yeah. Yeah. Sorry.
I think it's a great opportunity for us. It's been, you know, one of the strong points for integrating Lima, Mathys, and then looking at what we already had there established from a PNR business is we can selectively grow internationally. We can pick and choose which markets we see more attractive, maybe have higher price points, or benefit from the mix of portfolio that we have to really lean in in a meaningful way. We're not trying to penetrate markets just to penetrate them. We're trying to be very selective in terms of how do we expand. We've got, as Louis was mentioning, some really strong share positions in certain markets that we can continue to pour gas on the fire to drive growth.
Since we've acquired Mathys back in 2021, we've grown the international business on the recon side double digits every year while we've been going through integrations, while we've been setting up the cross-selling opportunities with regards to broader portfolio, and CapEx investment to drive that portfolio. We're really excited about what we can do internationally. We would expect that to continue to be a growth driver for us.
Mm-hmm.
Wonderful. I think we'll end it there. Thank you both.
Thanks.
Thanks, Caitlin. Thank you.