Enovis Q2 Earnings Call Highlights

Key Points

• Second-quarter sales rose 3% to $583 million, with 5% organic growth led by 6% growth in Reconstruction, particularly U.S. hips and knees. Enovis reaffirmed its 2026 guidance and expects growth to accelerate in the fourth quarter as new products gain traction.
• Performance & Recovery grew 3% organically, while adjusted gross and EBITDA margins improved to 62% and 17.9%, respectively. However, Middle East disruptions, inflation and ongoing tariff costs are expected to create roughly a $10 million full-year headwind.
• Free cash flow improved to $31 million in the quarter, making first-half cash flow slightly positive, while leverage declined to 3.1 times. Enovis is targeting leverage below three times in 2026 and expects stronger contributions from ARVIS, Nebula, ARG and other product launches.

Enovis NYSE: ENOV reported second-quarter 2026 sales of $583 million, up 3% on a reported basis and 5% organically, as growth in its Reconstruction business offset a slower but still expanding Performance & Recovery segment. Management said the company’s results reflected improved commercial execution, new-product adoption and operational productivity, while also noting pressure from Middle East-related disruptions and higher inflation.

Chief Executive Officer Damien McDonald said the company delivered 6% organic growth in Reconstruction, or Recon, and 3% organic growth in Performance & Recovery, or P&R. Enovis reaffirmed its full-year 2026 guidance and said it expects sales growth to accelerate in the fourth quarter as product launches scale and market volumes improve.

Recon growth led by U.S. hips and knees

U.S. Recon grew 6% organically in the second quarter, with hips and knees increasing 8%. McDonald said growth was supported by commercial execution across hospitals and ambulatory surgery centers, or ASCs, as well as demand for the company’s Nebula, ARG and ARVIS offerings.

Nebula remained a key growth contributor, with McDonald saying more than 80% of new instrumentation sets in the quarter went to users converting from competing products. International Recon sales also increased 6% organically, including double-digit shoulder growth, according to the company.

ARVIS entered full commercial launch in the U.S. during the quarter. McDonald said early feedback from surgeons and commercial teams has been encouraging, citing the platform’s mobility, small footprint and versatility, particularly for shoulder procedures. The company plans to expand ARVIS in shoulders during the second half and begin its rollout in international markets.

During the question-and-answer session, McDonald said U.S. extremities growth faced a difficult comparison with the prior-year ARG launch and an elevated number of medical-education events that temporarily took high-volume surgeons out of the field. Still, he pointed to 8% first-half growth in both hips and knees and extremities as a better reflection of the business’s overall momentum.

P&R posts growth amid cost pressures

P&R organic revenue increased 3% year over year. Global bracing grew 4%, including mid-single-digit growth in the U.S. driven by revenue-cycle management and spine bracing. Recovery Sciences and Bone Stim delivered mid- to high-single-digit growth, management said.

McDonald also said the company was “meaningfully” gaining share in its regeneration business and that its foot-and-ankle operation grew above an estimated 4% to 6% market rate. New products are expected to contribute more meaningfully later in the year, including the planned launch of CT-RevitL for laser treatment in the companion market.

Chief Financial Officer Ben Berry said the company’s international operations were affected by the conflict in the Middle East, creating a 100-basis-point headwind to international growth and about a 40-basis-point headwind to total company growth. Management also cited softer market conditions in Western Europe, particularly France, Spain and Italy. McDonald characterized those conditions as largely transient, pointing to disruptions including strikes, fires and heat waves that may delay rather than eliminate procedures.

Margins improve, but inflation remains a headwind

Enovis reported adjusted gross margin of 62%, representing a 120-basis-point underlying improvement. The result included an $8 million benefit from 2025 tariff refunds and operational productivity, partly offset by $4 million of ongoing tariff costs and $2 million of unplanned inflationary pressure tied to higher raw-material, freight and distribution costs associated with the Middle East conflict.

Adjusted EBITDA margin was 17.9%, up 70 basis points on an underlying basis. Adjusted earnings per share were $0.90, which Berry said represented 14% underlying growth in the quarter. Interest expense declined to $8 million from $9 million a year earlier, while the effective tax rate was 24%.

Berry said Enovis expects the $8 million tariff-refund benefit to be offset by approximately $10 million of full-year inflationary impact. The inflationary effects began to become more material near the end of the second quarter, he said, and are expected to weigh more heavily on the third quarter than the fourth quarter. The impact is concentrated primarily in P&R.

Despite those pressures, management said it does not expect its longer-term margin and cash-flow framework to change. Berry cited product mix, continued integration benefits from the Lima acquisition, productivity efforts and lower-cost manufacturing expansion as contributors to a multiyear margin-expansion opportunity.

Cash flow turns positive in the first half

Free cash flow was $31 million in the second quarter, improving $27 million from the prior-year period and bringing the company to slightly positive free cash flow for the first half. Enovis maintained its expectation for free-cash-flow conversion of more than 25% in 2026.

Berry said P&R remains the company’s primary source of cash generation, though Recon cash flow is improving as integration work progresses and productivity initiatives take hold. Management said there were no significant one-time drivers behind the quarterly cash-flow result beyond the tariff refund and related offsets.

McDonald said Enovis reduced leverage to 3.1 times and refinanced its balance sheet to improve terms and capacity. The company is targeting leverage below three times during 2026, after which management expects to have greater flexibility to consider capital-allocation options beyond debt reduction.

Looking ahead, Enovis expects third-quarter seasonality to be more pronounced than in prior years because of Western European conditions and continued Middle East disruption. Management nevertheless expects improved contributions from ARVIS, Nebula, ARG and P&R product launches, followed by stronger sales acceleration in the fourth quarter.

About Enovis (NYSE:ENOV)

Enovis is a global medical technology company focused on advancing the field of musculoskeletal health. Formed through the separation of the MedTech business from Colfax Corporation in 2021, Enovis brings together a portfolio of specialized products and services designed to address conditions affecting the foot and ankle, hand and wrist, sports medicine, joint repair, biologics and rehabilitation.

The company’s flagship offerings include minimally invasive implants and instrumentation for foot and ankle surgery under the Treace Medical Concepts brand, focal joint resurfacing implants through Arthrosurface, and synthetic bone graft substitutes marketed as NovaBone.

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