Transcript: Enovis Q2 2026 Earnings Conference Call

Enovis (NYSE: ENOV ) reported second-quarter financial results on Thursday. The transcript from the company's second-quarter earnings call has been provided below. APIs provide real-time access to earnings call transcripts and financial data. Visit to learn more.

View the webcast at Summary Enovis reported second quarter 2026 sales of $583 million, reflecting 3% growth on a reported basis and 5% organic growth. The Recon segment grew 6% organically, driven by strong performance in hips and knees, while the P&R segment grew 3% organically. , contributing to growth in the Recon segment. They are also focusing on innovation and have a robust pipeline of new product introductions planned across key markets.

Enovis reaffirmed its 2026 guidance, expecting sales acceleration in Q4. The company anticipates a more seasonally soft Q3 due to market conditions in Western Europe and disruptions from the Middle East conflict. Gross margins improved by 120 basis points to 62%, aided by tariff refunds and operational productivity. Free cash flow was $31 million, a significant improvement from the prior year, positioning the company for positive cash flow generation.

Management emphasized ongoing efforts in commercial execution, innovation, and operational excellence, with a focus on disciplined capital allocation and debt reduction. They remain optimistic about capturing market share and driving sustainable growth. Full Transcript OPERATOR Hello and thank you for standing by. Ladies and gentlemen, welcome to Enovis' second quarter 2026 earnings call.

Please note that this call is being recorded at this time. All participants are in listen-only mode. There will be some opening remarks followed by a question-and-answer session. If you wish to ask a question, please press star one on your telephone keypad.

Thank you. I'd now like to turn the call over to Kyle Rose, Vice President, Investor Relations. Please go ahead. Kyle Rose, Vice President of Investor Relations Good morning, everyone, and thank you for joining us today for our second quarter 2026 earnings conference call.

I'm Kyle Rose, Vice President of Investor Relations. Joining me on the call this morning are Damian McDonald, Chief Executive Officer, and Ben Barry, our Chief Financial Officer. com. We also posted a slide presentation to accompany today's call on our website.

Both the audio and the slide presentation of this call will be archived on the website later this afternoon. During the call, we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language in today's earnings release and in our filings with the SEC. Actual results might differ materially from any forward-looking statements that we make today.

The forward-looking statements speak only as of today and we do not assume any obligation or intend to update them except as required by law. For further details regarding any non-GAAP financial measures referenced during the call today, the accompanying reconciliation information can be found in our earnings press release and in the appendix of today's slide presentation. With that, let me turn it over to Damian. Damian McDonald, Chief Executive Officer Hey, thanks, Kyle, and good morning everyone, and thank you for joining us today.

On today's call, I'll start with an overview of our second quarter results, discuss performance across our two operating segments, Recon and P&R, and Ben will then walk you through our financial results and outlook for Q3 and 2026. After that, I'll come back and highlight a few quick themes before we open the call for questions. Our second quarter results demonstrated the strength and stability of our diversified product portfolio, improving execution from our global teams, and the ongoing adoption of the One Enovis mindset. We delivered organic growth of 5%, driven by 6% organic growth in Recon and 3% organic growth in P&R.

S. Recon, we grew 6% organically in the second quarter, led by 8% organic growth in hips and knees. Our focus products of Nebula ARG and Arvis continue to gain traction, and we're excited about the momentum we're carrying into the second half of the year in hips and knees. We continue to execute our commercial plans across the hospital and ASC settings, and Nebula continues to be a driver of growth, with over 80% of new instrumentation sets going to competitive users in Q2.

Internationally, we grew 6% in Recon on an organic basis, including double-digit growth in shoulders. We continue to strengthen our global portfolio and remain positioned to take market share. Innovation is a core pillar of our growth strategy at Enovis. We have a robust pipeline of new product introductions planned across our key markets and geographies.

S. in the second quarter, and I'm excited about the early feedback from surgeons and the commercial teams. We're using this launch as an opportunity to strategically target new customers, and we expect to see continued adoption in shoulders as we move through the second half of 2026. Now moving to P&R, this segment grew 3% on an organic basis year over year.

S. driven by revenue cycle management and spine bracing. Recovery Sciences and Bone Stem were another source of strength for the quarter, delivering mid- to high-single-digit growth, and new products are expected to start contributing more as we get into the later part of the year. So we continue to execute across our businesses, and I'll pass it over to Ben to walk through the financial details.

Ben Barry, Chief Financial Officer Thanks, Damian. Hello, everyone. We reported second quarter sales of $583 million, up 3% versus prior year on a reported basis and up 5% on an organic basis. Reported growth included a 100 basis point tailwind from foreign currency, a 90 basis point tailwind from selling days, and a 260 basis point headwind related to the divestiture of Dr.

Comfort. For the quarter, days-adjusted organic growth was 4% at the enterprise level, 5% in Recon and 3% in P&R, which was in line with our guidance. Second quarter results for our international businesses were negatively impacted by the ongoing conflict in the Middle East, resulting in a 100 basis point growth headwind. This represents about a 40 basis point headwind to total Enovis growth in the quarter.

For the first half, Enovis grew 4% organically, 5% days-adjusted, with Recon at 7% and P&R at 3%. S. Recon, with both extremities and hip and knee growing at 8%, driven by strong commercial execution and new products. We delivered adjusted gross margins of 62%, an underlying improvement of 120 basis points driven by an $8 million benefit from two 2025 tariff refunds and operational productivity.

This was partially offset by $4 million of ongoing tariff impact and $2 million of unplanned inflationary pressure as a result of higher raw material and freight and distribution costs stemming from the Middle East conflict. 9%, an improvement of 70 basis points on an underlying basis and up 20 basis points through the first half. Our second quarter effective tax rate was 24%. Interest expense was $8 million for the quarter versus $9 million in the prior year.

90, representing 14% underlying growth in the quarter and 12% earnings growth through the first half. We remain focused on disciplined capital allocation. Free cash flow in the quarter was $31 million, an improvement of $27 million versus prior year, which gets us to slightly positive free cash flow generation in the first half, a significant improvement. We expect to continue our positive momentum in cash flow and we'll continue pursuing opportunities to make investments to support growth.

Turning to guidance, we are reaffirming our 2026 guidance. Commercial execution remains critical to delivering our 2026 commitments. We continue to focus the organization's attention on increasing commercial agility and targeted share gain opportunities. On the profit side, we expect the $8 million benefit from the partial tariff refund to be offset by $10 million of full-year impact from the increased inflationary environment we are currently facing.

Additionally, we expect free cash flow conversion of greater than 25% in 2026 as laid out in our prior calls. In terms of quarterly phasing for the second half, we expect the third quarter to have a heavier impact by seasonality than in prior years due to market conditions in Western Europe and the continued disruption from the conflicts in the Middle East. We expect sales acceleration across both segments in the fourth quarter as we continue to scale and launch new products against the backdrop of improving market volumes as we close out the year. To summarize, second quarter was in line with our expectations.

Given the dynamic market environment, we remain confident in the strength of our company, the diversified portfolio we built, and the continued execution leading to consistent market share gains. Now I'll turn it back over to Damian for closing comments. Damian McDonald, Chief Executive Officer Before we get into Q&A, I just want to take a few minutes to reflect on my first year. A year ago this week I led my first earnings call at Enovis.

I'd been here about 90 days and found a company that had assembled a compelling portfolio, yet was early in its journey of value creation. When I spoke to you then, I outlined three priorities: commercial execution, innovation, operational excellence and financial discipline. These priorities are driving meaningful change in how we operate and remain the foundation for how we will deliver sustainable, profitable, capital-efficient growth. Most of what we did in the first year was foundational.

We changed the operating cadence and attracted new talent to the senior leadership team. We put real rigor around daily management and revised our incentive plans to align with our strategic priorities. We pushed EGX deeper into the business and we shaped the portfolio, most visibly with the divestiture of Dr. Comfort.

We also put a focus around fostering a One Enovis mindset, working together across teams to drive growth and execution. With regard to commercial execution and innovation, it was clear that our teams had been stretched by complex integrations and rapid product launches, and we needed to create space for our teams to bring their A game to every customer-facing activity. We continue to grow above market in both of our business segments and still see potential for further acceleration. Innovation is a key area for our future growth, and we continue to invest in people, process, and product to remain a nimble innovator.

It's clear that innovation and enabling tech will be foundational to our long-term growth strategy. This means investing in the technologies, the teams, and the capabilities that will improve clinical outcomes, optimize surgical efficiency, respond to customer preferences, and ultimately define the next generation of orthopaedic surgery. On operational excellence, I said last August that high-teens EBITDA margins were not sufficient for this company's ambition, and I still believe that. We held our margins through tariffs and unexpected inflationary headwinds while stepping up our investment in R&D.

And our gross margins have expanded on the back of mix and productivity. Over the next year, the emphasis moves from embedding our foundational business system to optimizing our operating model. On financial discipline, for the past year, our response to every capital allocation question has been debt reduction — and it needed to be. 1 times, and refinanced our balance sheet to improve terms and capacity.

And this is also the last year of heavy investment in the Lima integration. As the balance sheet strengthens, we're beginning to evaluate how we can advance our portfolio for durable long-term growth without losing our focus on cash generation and debt reduction. I'm more optimistic now than I was 12 months ago, and it isn't because of any single product or quarter. It's because this organization has embraced change faster than I anticipated, and I've seen what we can do when everyone is pointed in the same direction.

This is the One Enovis mindset, and it's driving engagement across the organization. So before we go to Q&A, I want to thank the Enovis team for their dedication and execution over this past year. The efforts have been instrumental in delivering meaningful changes that we've discussed and positioning Enovis for long-term success. So, Kyle, why don't we open it up for Q&A?

Kyle Rose, Vice President of Investor Relations Thanks, Damian. In an effort to accommodate everyone in the Q&A session, we ask that analysts limit questions to one question and one follow-up. You are welcome to rejoin the queue, and we will fit you in if we have more time. With that, we'd like to now open it up to take questions.

Operator. OPERATOR Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star one on your telephone keypad.

If you would like to withdraw your question, simply press star one again. At this time, I would like everyone to know that in order to ask a question, please press star one, then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A roster. Your first question comes from the line of Ryan Zimmerman with BTIG.

Please go ahead. Ryan Zimmerman, Analyst at BTIG Thanks for taking our questions. I appreciate your thoughts, Damian. S.

Recon for a moment here. You saw really nice growth, particularly in the hips and knee business. Extremities was a little softer than maybe I would have expected given where the shoulder market's going. S.

extremities as you think about the balance of the year. Damian McDonald, Chief Executive Officer Sure. Hey, good morning, Ryan. Thanks for the question and joining us.

Yeah, look, I'm really proud with how that team have executed in both spaces, hips and knees and shoulder. If you look through the first half, hips and knees are up 8%. Extremities are up 8%. In Q2, yeah, we had some challenges there with a few things.

One is we're lapping the ARVIS launch from last year, so it's a pretty tough comp. But I think, importantly, we had a lot of med ed events in Q2 that took a lot of our high, high-volume KOLs and surgeons out of the space for a few weeks. The first-half performance, I think, is the thing to look at. I mean, look at our scale — we move a couple of people here one week or another and it materially affects us.

So I think the first half is the way to look at it. And so, as we think about the back half of the year, we've got more work coming with ARVIS, we've got the Arcos rollout expanding, and so that's why we're confident about the back half of the year. Ryan Zimmerman, Analyst at BTIG Understood. And maybe turning to Ben, gross margins, if you look over the last six quarters have been trending favorably.

So, Ben, can you talk about your gross margin progression, where you think that can go and what levers you have, particularly against the backdrop of some of these inflationary pressures that you're experiencing? Ben Barry, Chief Financial Officer Yeah, thanks, Ryan, for the question. I mean, it's one of the things that we're proud of in terms of how we built the portfolio with regards to how the product mix flows through the P&L, with the way that we've established the segments, and what's growing the fastest is generally coming with higher standard margins.

You layer that on top with, you know, continuing to get added benefits as we get further, you know, downstream with regards to all the integration work that we've been doing within the Recon business, being able to start to capitalize now on some of the synergies from the Lima deal as we're, you know, consolidating and expanding production facilities in lower-cost locations. And then also you've got just deeper embedded continuous improvement that we've been able to drive into both segments on P&R and Recon with regards to productivity and making sure that we're working through, you know, how do we get the most out of our manufacturing and operations supply chain.

So overall I would say it's a multi-levered effort and we’ve got a few tailwinds that help organically. But then it's about, you know, making sure that we're offsetting some of the surprises that come our way, like the inflationary pressure that we've been continuing to face. And then we did in the quarter get the benefit of a partial tariff refund as well. That helped in the quarter, but overall I think as we look at it, we see a multi-year cadence of margin expansion and a lot of that driven by gross margins.

Ryan Zimmerman, Analyst at BTIG Thank you. OPERATOR Thank you. Your next question comes from the line of Yongle of Jefferies. Please go ahead.

Yongle, Analyst at Jefferies Great, thanks for taking the questions. I guess maybe starting with cash flows — good to see the progress in 2Q, and it seems like you're on track for the 25+% conversion for the year.