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Item 2. Management’s Discussion and Analysis

2025-08-07 compared with 2025-05-08 · 215 added, 129 removed, 253 unchanged (58% of the section changed)

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The following discussion of the financial condition and results of operations of Enovis Corporation (“Enovis,” “the Company,” “we,” “our,” and “us”) should be read in conjunction with the Condensed Consolidated Financial Statements and related footnotes included in Part I.

“Financial Statements” of this Quarterly Report on Form 10-Q for the quarterly period ended April 4, 2025 (this “Form 10-Q”) and the Consolidated Financial Statements and related footnotes included in Part II.

“Financial Statements” of this Quarterly Report on Form 10-Q for the quarterly period ended July 4, 2025 (this “Form 10-Q”) and the Consolidated Financial Statements and related footnotes included in Part II.

“Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2024 (the “2024 Form 10-K”) filed with the Securities and Exchange Commission (the “SEC”) on February 26, 2025.

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The following discussion of Results of Operations addresses the comparison of the periods presented.

Our management evaluates the operating results of each of its reportable segments based upon Net sales, Adjusted EBITDA, Comparable Sales, and Comparable Sales Growth rate as defined in the “Non-GAAP Measures” section below.

Our management evaluates the operating results of each of its reportable segments based upon Net sales and Adjusted EBITDA as defined in the “Non-GAAP Measures” section below.

Items Affecting Comparability of Reported Results

The comparability of our operating results for the three months ended April 4, 2025 to the prior periods in 2024 is affected by additional days as compared to the three months ended March 29, 2024.

The second and third quarters will have the same number of days compared to 2024.

The fourth quarter of 2025 will have fewer days compared to 2024.

Additionally, the comparability of our operating results for the three months ended April 4, 2025 and three months ended March 29, 2024 is affected by the following additional significant items:

The comparability of our operating results for the six months ended July 4, 2025 compared to the prior periods in 2024 was affected by additional calendar days in the first quarter of 2025.

Second quarter 2025 operating results were impacted negatively by the timing of holidays.

Additionally, the comparability of our operating results for the six months ended July 4, 2025 and six months ended June 28, 2024 is affected by the following additional significant items:

Strategic Acquisitions

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Acquisitions can significantly affect our reported results.

In the three months ended April 4, 2025, the Company completed five bolt-on acquisitions for $30.0 million total purchase consideration, including deferred consideration and estimated contingent consideration.

Three acquisitions are in the Prevention & Recovery segment and two are in the Reconstructive segment.

See Note 3, “Acquisitions and Investments” in our Notes to Condensed Consolidated Financial Statements included in this Form 10-Q for additional information regarding our acquisitions.

In the six months ended July 4, 2025, the Company completed seven transactions for $35.4 million total purchase consideration, including deferred consideration and estimated contingent consideration which included the acquisition of three distributors, two businesses, and two purchases of intellectual property.

Three transactions are in the P&R segment and four are in the Recon segment.

See Note 3, “Acquisitions and Investments” in our Notes to Condensed Consolidated Financial Statements included in this Form 10-Q for additional information regarding these transactions.

On January 3, 2024, the Company acquired Lima, a privately held global orthopedic company focused on restoring motion through digital innovation and customized hardware for total fair value consideration of $865.6 million, net of acquired cash.

The fair value total consideration includes 1,942,686 contingently issuable shares of Enovis common stock, as determined based upon a €100 million value divided by the thirty-day volume weighted average price of Enovis common stock as of the close of business on September 21, 2023 (the “Contingent Acquisition Shares”), which issuance was dependent on the non-occurrence of certain future events and was settled within one year of the acquisition closing.

The Contingent Acquisition Shares were issuable in two equal tranches.

The first tranche of 971,343 Contingent Acquisition Shares was issued to the sellers

on July 16, 2024 and the second tranche was issued on January 15, 2025.

The Contingent Acquisition

Shares were issuable in two equal tranches.

The first tranche of 971,343 Contingent Acquisition Shares was issued to the sellers on July 16, 2024 and the second tranche was issued on January 15, 2025.

This acquisition expanded and complements our current product offerings internationally within our Recon segment.

Foreign Currency Fluctuations

During the three months ended April 4, 2025, approximately 43% of our sales were derived from operations outside the United States, the majority of which are in Europe, with the remaining portion primarily in the Asia-Pacific region.

During the three and six months ended July 4, 2025, approximately 43% and 43%, respectively, of our sales were derived from operations outside the United States, the majority of which are in Europe, with the remaining portion primarily in the Asia-Pacific region.

Accordingly, we can be affected by market demand, economic and political factors in countries in Europe and the Asia-Pacific region, and significant movements in foreign exchange rates.

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Changes in foreign exchange rates can impact our results of operations and are quantified when significant.

For the three months ended April 4, 2025 compared to the three months ended March 29, 2024, fluctuations in foreign currencies decreased Net sales by 1.2%, decreased Gross profit by approximately 0.6%, and decreased operating expense by approximately 0.9%.

For the three months ended July 4, 2025 compared to the three months ended June 28, 2024, fluctuations in foreign currencies increased Net sales by 2.0%, increased Gross profit by approximately 2.0%, and increased operating expense by approximately 1.5%.

For the six months ended July 4, 2025 compared to the six months ended June 28, 2024, fluctuations in foreign currencies increased Net sales by 0.4%, increased Gross profit by approximately 0.7%, and increased operating expenses by approximately 0.2%.

Sales in our P&R and Recon segments typically peak in the fourth quarter.

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Adjusted EBITDA

Comparable Sales

Adjusted EBITDA, Adjusted EBITDA margin, Comparable Sales, and Comparable Sales Growth rate, which are non-GAAP performance measures, are included in this report because they are key metrics used by our management to assess our operating performance.

Adjusted EBITDA excludes from Net income (loss) from continuing operations the effect of Income tax expense (benefit);

Adjusted EBITDA and Adjusted EBITDA margin, which are non-GAAP performance measures, are included in this report because they are key metrics used by our management to assess our operating performance.

Adjusted EBITDA excludes from Net income the effect of Loss from discontinued operations, net of taxes;

Income tax expense (benefit);

Other (income) expense, net;

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Interest expense, net;

Restructuring and other charges;

Restructuring charges;

Medical Device Regulation (“MDR”) fees and other costs;

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Adjusted EBITDA assists our management in comparing operating performance over time because certain items may obscure underlying business trends and make comparisons of long-term performance difficult, as they are of a nature and/or size that occur with inconsistent frequency or relate to discrete restructuring plans and other initiatives that are fundamentally different from our ongoing productivity improvements.

Comparable Sales adjusts nets sales for prior periods to include the sales of acquired businesses prior to our ownership from acquisitions that closed in the periods presented and to exclude the sales of certain non-core product lines that were divested or discontinued, as applicable, during the periods presented.

There were no acquired business adjustments in the periods presented.

The non-core product lines excluded were both in 2024 and are comprised of the divested compression hosiery product line in the P&R segment and certain discontinued third-party OEM relationships in the Recon segment.

Comparable Sales Growth rate represents the change in Comparable Sales for the current period from Comparable Sales for the prior year period.

Comparable Sales and Comparable Sales Growth rate assist our management in evaluating operating performance over time because the impact of significant acquisitions and divestitures or discontinuance of certain non-core product lines subsequent to prior periods may obscure underlying business trends and make the evaluation of period-over-period performance difficult.

Comparable Sales and Comparable Sales Growth rate are presented for illustrative purposes only and do not and are not intended to comply with Article 11 of Regulation S-X promulgated by the SEC in respect of proforma financial information, and may differ, including materially, from proforma financial statements presented in accordance therewith.

Our management also believes that presenting these measures allows investors to view our performance using the same measures that we use in evaluating our financial and business performance and trends.

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Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures.

The following table sets forth a reconciliation of net income (loss) from continuing operations, the most directly comparable financial statement measure, to Adjusted EBITDA, for the three months ended April 4, 2025 and March 29, 2024, respectively.

The following table sets forth a reconciliation of net loss, the most directly comparable financial statement measure, to Adjusted EBITDA, for the three and six months ended July 4, 2025 and June 28, 2024, respectively.

Three Months Ended

April 4, 2025 March 29, 2024

July 4, 2025 June 28, 2024

P&R Recon Total P&R Recon Total

(Dollars in millions)

Net income (loss) from continuing operations (GAAP) (1)

Net Loss (GAAP) (1)

$ (36.5) $ (18.4)

Net Loss margin (GAAP) (6.5) % (3.5) %

Loss from discontinued operations, net of taxes 0.1 0.1

Income tax expense (benefit) 10.8 (8.9)

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Operating income (loss) (GAAP) $ 9.3 $ (26.1) (16.8) $ 2.5 $ (46.8) (44.3)

Operating income (loss) margin (2.5) % (13.9) % (8.4) % (5.4) % (8.2) % (6.8) %

Operating income (loss) margin (GAAP) 3.2 % (9.5) % (3.0) % 0.9 % (18.9) % (8.4) %

Adjusted to add (deduct):

Restructuring and other charges (2)(3)

Restructuring charges (2)(3)

0.7 0.3 0.9 1.8 2.8 4.6

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Adjusted EBITDA margin (non-GAAP) 16.1 % 18.4 % 17.2 % 14.8 % 19.8 % 17.2 %

(1) Non-operating components of Net income (loss) from continuing operations are not allocated to the segments.

(2) Restructuring and other charges includes an immaterial expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three months ended April 4, 2025, and there were no similar charges for the three months ended March 29, 2024.

(1) Non-operating components of Net income (loss) are not allocated to the segments.

(2) Restructuring charges include $0.2 million expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three months ended July 4, 2025, and there were no similar charges for the three months ended June 28, 2024.

(3) Certain amounts are allocated to the segments as a percentage of revenue as the costs are not discrete to either segment.

(4) MDR and other costs includes (i) $2.8 million for the three months ended July 4, 2025 and $4.4 million for the three months ended June 28, 2024, respectively, in non-recurring costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with the medical device reporting regulations and other requirements of the new medical device regulations in the European Union for devices which were introduced to the market prior to the regulation and (ii) $0.4 million for the three months ended July 4, 2025 and $0.1 million for the three months ended June 28, 2024, respectively, of expenses to resolve certain infrequent, non-recurring regulatory or other legal matters.

These costs are classified as Selling, general and administrative expense on our Condensed Consolidated Statements of Operations.

(5) Strategic transaction costs includes:

(i) $7.8 million for the three months ended July 4, 2025 and $19.5 million for the three months ended June 28, 2024 related to non-recurring integration costs associated with the Lima Acquisition, which includes payroll and retention costs for roles to be eliminated or that are dedicated to integration activities, professional and consulting fees specifically incurred to consummate the acquisition and advise and facilitate on post-acquisition integration matters including legal entity consolidation, costs associated with rebranding and marketing acquired business under Enovis name, such as marketing materials, trade show redesign costs and product labeling, and integration related costs associated with sales agent and distributor network rationalization, including contract termination and retention expenses, supply chain and portfolio integration, and quality management system consolidation, (ii) $5.4 million for the three months ended July 4, 2025 and $2.0 million three months ended June 28, 2024 of non-recurring (non-Lima) acquisition integration costs and other costs associated with non-recurring projects, including global ERP rationalization and establishment of a new shared service center, and (iii) $0.3 million for the three months ended July 4, 2025 and $1.2 million for the three months ended June 28, 2024, respectively, related to the Separation of our former fabrication technology business.

These costs are classified as Selling, general and administrative expense on our Condensed Consolidated Statements of Operations.

Six Months Ended

July 4, 2025 June 28, 2024

P&R Recon Total P&R Recon Total

(Dollars in millions)

Net Loss (GAAP) (1)

$ (92.3) $ (90.4)

Net Loss margin (GAAP) (8.2) % (8.7) %

Loss from discontinued operations, net of taxes 0.2 0.1

Income tax expense (benefit) 9.0 (16.3)

Other (income) expense, net 1.0 (9.6)

Interest expense, net 18.5 37.0

Operating income (loss) (GAAP) $ 2.4 $ (65.9) (63.6) $ (11.4) $ (67.8) (79.2)

Operating income (loss) margin (GAAP) 0.4 % (11.8) % (5.7) % (2.1) % (13.4) % (7.6) %

Adjusted to add (deduct):

Restructuring charges (2)(3)

3.5 1.3 4.8 9.5 8.0 17.5

MDR and other costs (3)(4)

2.8 3.6 6.5 5.2 4.3 9.5

Strategic transaction costs (3)(5)

4.1 21.4 25.5 2.0 41.5 43.5

Stock-based compensation (3)

9.8 6.3 16.1 8.6 5.5 14.0

Depreciation and other amortization 8.9 49.4 58.3 9.1 48.2 57.3

Amortization of acquired intangibles 46.1 38.7 84.8 46.1 35.7 81.9

Purchase of royalty interest — 45.8 45.8 — — —

Inventory step-up — 18.1 18.1 — 29.0 29.0

Adjusted EBITDA (non-GAAP) $ 77.6 $ 118.7 $ 196.3 $ 69.1 $ 104.4 $ 173.4

Adjusted EBITDA margin (non-GAAP) 13.8 % 21.2 % 17.5 % 12.9 % 20.7 % 16.7 %

(1) Non-operating components of Net loss are not allocated to the segments.

(2) Restructuring charges include $0.3 million expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the six months ended July 4, 2025, and there were no similar charges for the six months ended June 28, 2024.

(3) Certain amounts are allocated to the segments as a percentage of revenue as the costs are not discrete to either segment.

(4) MDR and other costs includes (i) $5.4 million for the six months ended July 4, 2025 and $8.8 million for the six months ended June 28, 2024, respectively, in non-recurring costs specific to updating our quality system, product labeling, asset write-offs and product remanufacturing to comply with the medical device reporting regulations and other requirements of the new medical device regulations in the European Union for devices which were introduced to the market prior to the regulation and (ii) $1.1 million for the six months ended July 4, 2025 and $0.6 million for the six months ended June 28, 2024, respectively, of expenses to resolve certain infrequent, non-recurring regulatory or other legal matters.

These costs are classified as Selling, general and administrative expense on our Condensed Consolidated Statements of Operations.

(5) Strategic transaction costs includes:

(i) $16.5 million for the six months ended July 4, 2025 and $37.7 million for the six months ended June 28, 2024, respectively, related to non-recurring integration costs associated with the Lima Acquisition, which includes payroll and retention costs for roles to be eliminated or that are dedicated to integration activities, professional and consulting fees specifically incurred to consummate the acquisition and advise and facilitate on post-acquisition integration matters including legal entity consolidation, costs associated with rebranding and marketing acquired business under Enovis name, such as marketing materials, trade show redesign costs and product labeling, and integration related costs associated with sales agent and distributor network rationalization, including contract termination and retention expenses, supply chain and portfolio integration, and quality management system consolidation, (ii) $8.2 million for the six months ended July 4, 2025 and $3.0 million for the six months ended June 28, 2024, respectively, of non-recurring (non-Lima) acquisition integration costs and other costs associated with non-recurring projects, including global ERP rationalization and establishment of a new shared service center, and (iii) $0.8 million for the six months ended July 4, 2025 and $2.8 million for the six months ended June 28, 2024, respectively, related to the Separation of our former fabrication technology business.

These costs are classified as Selling, general and administrative expense on our Condensed Consolidated Statements of Operations.

Total Company

The following table summarizes our sales for the three months ended April 4, 2025 and March 29, 2024, respectively.

As noted in the Items Affecting Comparability of Reported Results section above, the three months ended April 4, 2025 include the impact of additional days as compared to the three months ended March 29, 2024.

Three Months Ended

April 4, 2025 March 29, 2024 Growth Rate

(In millions)

Prevention & Recovery:

Bracing & Support $ 115.1 $ 104.6 10.1 %

Other P&R 66.6 66.4 0.4 %

International P&R 90.9 88.1 3.2 %

Total Prevention & Recovery 272.6 259.0 5.2 %

Reconstructive:

Reconstructive 137.9 123.7 11.4 %

International Reconstructive 148.4 133.5 11.1 %

Total Reconstructive 286.3 257.3 11.3 %

Total $ 558.8 $ 516.3 8.2 %

The following table summarizes sales on a Comparable Sales and Comparable Sales Growth rate basis for the periods presented.

Three Months Ended

April 4, 2025 March 29, 2024 Growth Rate

Comparable Sales (1)

The following table summarizes our Net sales for the three and six months ended July 4, 2025 and June 28, 2024, respectively.

As noted in the Items Affecting Comparability of Reported Results section above, the six months ended July 4, 2025 include the impact of additional days as compared to the six months ended June 28, 2024.

Three Months Ended Six Months Ended

Net Sales Change % Net Sales Change %

(In millions)

Prevention & Recovery:

Bracing & Support $ 115.1 $ 104.6 10.1 %

Other P&R 66.6 63.6 4.7 %

International P&R 90.9 86.5 5.1 %

Total Prevention & Recovery 272.6 254.7 7.0 %

Reconstructive:

Reconstructive 137.9 123.7 11.4 %

International Reconstructive 148.4 133.0 11.5 %

Total Reconstructive 286.3 256.8 11.5 %

Total $ 558.8 $ 511.4 9.3 %

(1) Comparable Sales adjusts net sales for prior periods to include the sales of acquired businesses prior to our ownership from acquisitions that closed in the periods presented and to exclude the sales of divested businesses and certain discontinued Recon products lines in conjunction with the Lima Acquisition.

There were no acquired business adjustments in the periods presented.

The excluded non-core product lines were both in 2024 and are comprised of a divested compression hosiery product line in the P&R segment and certain discontinued third-party OEM relationships in the Recon segment.

Net sales for the three months ended April 4, 2025 increased from the prior year by $42.6 million, or 8.2%, driven by strong sales growth in Recon and additional selling days, partially offset by impact of unfavorable foreign currency and the 2024 divestiture and discontinuance of certain non-core product lines.

Recon sales increased by $29.0 million, or 11.3%, due to strong sales volumes and additional selling days.

P&R sales increased by $13.6 million, or 5.2%, from solid core volume growth and additional selling days and was negatively impacted by a $4.3 million decrease in sales from divesting a minor product line.

For the three months ended March 29, 2024, U.S.

GAAP basis net sales were $516.3 million.

The Comparable Sales were $511.4 million for the same period, reflecting the total effect of the divestiture and discontinuance of certain non-core product lines of $4.8 million.

Comparable Sales Growth for Recon was 11.5%, driven by increases in volume and additional selling days, partially offset by unfavorable foreign currency translation of 1.5%.

Comparable Sales Growth for P&R was 7.0%, driven by organic growth in volumes and additional selling days, partially offset by unfavorable foreign currency translation of 0.8%.

The strengthening of the U.S.

Dollar relative to other currencies resulted in $6.0 million, or 1.2%, of unfavorable foreign currency translation impacts on total net sales for the three months ended April 4, 2025 from the prior year period.

For the three and six months ended June 28, 2024 $ 525.2 $ 1,041.4

Components of Change:

Existing Businesses (1)

27.1 5.2 % 80.1 7.7 %

Acquisitions (2)

1.7 0.3 % 1.7 0.2 %

Divestitures (3)

— — % (4.3) (0.4) %

Foreign Currency Translation (4)

10.5 2.0 % 4.5 0.4 %

39.3 7.5 % 82.0 7.9 %

For the three and six months ended July 4, 2025 $ 564.5 $ 1,123.4

(1) Excludes the impact of foreign exchange rate fluctuations and acquisitions, thus providing a measure of change due to factors such as price, product mix and volume.

(2) Represents the incremental sales as a result of acquisitions of businesses for twelve months from the acquisition date.

Excludes (i) acquisitions of former distribution partners as such transactions primarily represent a shift from a third-party distribution model to a direct sales model, and (ii) acquisitions of intellectual property as such transactions involve the purchase of technologies that have not been commercialized.

(3) Represents the decrease in sales as a result of divestitures of businesses for twelve months from the divestiture date.

(4) Represents the difference between prior year sales valued at the actual prior year foreign exchange rates and prior year sales valued at current year foreign exchange rates.

The increase in Net sales during the three months ended July 4, 2025 compared to the prior year period was primarily attributable to an increase in sales from existing businesses across both of our segments and favorable foreign currency translation, partially offset by a decrease due to the timing of holidays.

The increase in Net sales during the six months ended July 4, 2025 compared to the prior year period was primarily attributable to an increase in sales from existing businesses across both of our segments, an increase in calendar days in the first quarter, net of the aforementioned effect of holidays in the second quarter, and favorable foreign currency translation, partially offset by a $4.3 million decrease in sales from the 2024 divestiture of our hosiery business in P&R.

Existing business sales in Recon increased $20.0 million and $52.8 million during the three and six months ended July 4, 2025, respectively, due to higher sales volumes compared to the prior year period, driven by broad market strength.

Existing business sales in Recon for the three and six months ended July 4, 2025 was also impacted by the aforementioned impact of calendar days and holidays.

Existing business sales in P&R increased $7.2 million and $27.2 million during the three and six months ended July 4, 2025, respectively, due to higher sales volumes compared to the prior year period.

Existing business sales in P&R for the three and six months ended July 4, 2025 was also impacted by the aforementioned impact of calendar days and holidays.

The weakening of the U.S.

dollar relative to other currencies resulted in $10.5 million and $4.5 million favorable foreign currency translation impacts during the three and six months ended July 4, 2025, respectively.

Operating Results

The following table summarizes our results of continuing operations for the current year and prior year periods.

Three Months Ended

April 4, 2025 March 29, 2024

Three Months Ended Six Months Ended

July 4, 2025 June 28, 2024 July 4, 2025 June 28, 2024

(Dollars in millions)

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Operating loss margin (3.0) % (8.4) % (5.7) % (7.6) %

Net loss from continuing operations $ (55.6) $ (71.8)

Net loss from continuing operations (GAAP) $ (36.5) $ (18.4) $ (92.0) $ (90.3)

Net loss from continuing operations margin (GAAP) (6.5) % (3.5) % (8.2) % (8.7) %

Net loss (GAAP) $ (36.5) $ (18.5) $ (92.3) $ (90.4)

Net loss margin (GAAP) (6.5) % (3.5) % (8.2) % (8.7) %

Adjusted EBITDA (non-GAAP) $ 97.2 $ 90.2 $ 196.3 $ 173.4

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Items excluded from Adjusted EBITDA:

Restructuring and other charges (1)

Restructuring charges (1)

$ 0.9 $ 4.6 $ 4.8 $ 17.5

MDR and other costs $ 3.3 $ 4.5 $ 6.5 $ 9.5

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Other expense (income), net $ (0.4) $ (33.8) $ 1.0 $ (9.6)

Income tax benefit $ (1.8) $ (7.4)

(1) Restructuring and other charges includes an immaterial expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three months ended April 4, 2025, and there were no similar charges for the three months ended March 29, 2024.

Three Months Ended April 4, 2025 Compared to Prior Year

Gross profit increased $34.3 million, or 11.5%, in the three months ended April 4, 2025 compared with the prior year period due to a $21.8 million increase in our Recon segment and a $12.5 million increase in our P&R segment.

The Gross profit increase was attributable to growth in sales volume, improved mix of higher margin products sales, and the additional selling days, partially offset by an increase of $7.0 million in inventory fair value step-up amortization charges.

Selling, general and administrative expense increased $13.3 million in the three months ended April 4, 2025 compared to the prior year period, primarily due to a $21.1 million increase in commissions on increased sales and increased investment in the business in selling, general and administrative costs, offset by a $8.7 million decrease in strategic transactions costs driven by the higher acquisition deals costs in 2024 and a reduction in acquisition integration costs.

Research and development costs increased compared to prior year period from increased spending within recently acquired businesses in our Recon segment, which is investing in surgical productivity solutions and computer-assisted surgery technologies.

Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to the finalization of the Lima Acquisition in the later part of 2024, the additional bolt-on acquisitions in 2025, and higher levels of capital expenditures associated with recent acquisitions.

Purchase of royalty interest increased in the first quarter of 2025 as we completed strategic purchases of economic interest on future royalty payments in our intellectual property (“royalty interest”) for a fixed price of $43.8 million, which will be paid over seven years.

Income tax expense (benefit) $ 10.8 $ (8.9) $ 9.0 $ (16.3)

(1) Restructuring charges include $0.2 million and $0.3 million expense classified as Cost of sales on the Company’s Condensed Consolidated Statements of Operations for the three and six months ended July 4, 2025, respectively, and there were no similar charges for the three and six months ended June 28, 2024 .

Three Months Ended July 4, 2025 Compared to Prior Year

Gross profit increased $45.8 million, or 15.9%, in the three months ended July 4, 2025 compared with the prior year period due to a $32.8 million increase in our Recon segment and a $13.0 million increase in our P&R segment.

The Gross profit increase was attributable to growth in sales volume, improved mix of higher margin products sales, and the decrease of $17.9 million in inventory fair value step-up amortization charges.

Gross profit margin increased by 4.3% due to the decrease in inventory fair value step-up amortization charges and supply chain productivity.

Selling, general and administrative expense increased $3.0 million in the three months ended July 4, 2025 compared to the prior year period, primarily due to a $5.5 million increase in commissions on increased sales and increased investment in the business in selling, general and administrative costs of $7.0 million, offset by a $9.2 million decrease in strategic transactions costs driven by the higher transaction costs in 2024 and a reduction in acquisition integration costs.

Research and development costs increased compared to the prior year period from increased spending within recently acquired businesses in our Recon segment, which is investing in surgical productivity solutions and computer-assisted surgery technologies.

Amortization of acquired intangibles increased slightly compared to the prior year period due to the finalization of the Lima Acquisition in the later part of 2024 and the additional bolt-on business, distributor, and intellectual property acquisitions in 2025.

Depreciation and other amortization decreased slightly due to phasing of older assets partially offset by the higher levels of capital expenditures associated with recent acquisitions.

Purchase of royalty interest increased in the second quarter of 2025 as we completed additional strategic purchases of economic interest on future royalty payments in our intellectual property (“royalty interest”) for a fixed price of $12.7 million, which will be paid over nine years.

We accrued a liability and recognized a $10.0 million charge for the net present value of the purchases.

Interest expense, net decreased in the three months ended April 4, 2025 compared to the prior year period due to a $9.6 million increase in interest income on the cross-currency swap derivatives.

Interest expense, net decreased in the three months ended July 4, 2025 compared to the prior year period due to a $6.3 million increase in interest income on the cross-currency swap derivatives.

This was driven by the increase in the hedging position entered into during the third quarter of 2024.

Other expense, net decreased in the three months ended April 4, 2025 compared to the prior year period due to an $11.7 million decrease in the fair value loss on the Contingent Acquisition Shares and an $11.1 million decrease from the loss in the prior year on the non-designated forward currency contracts for the purpose of managing its exposure to currency exchange rate risk related to the Euro-denominated purchase price of the Lima Acquisition which closed in January 3, 2024.

The effective tax rate for Net loss from continuing operations during the three months ended April 4, 2025 and March 29, 2024 was 3.1% and 9.3%, respectively, which was lower than the U.S.

federal statutory tax rate of 21%, primarily due to an increase in valuation allowance on interest limitation carryforwards, non-deductible expenses, and U.S.

Other income, net decreased in the three months ended July 4, 2025 compared to the prior year period due to the $33.5 million fair value mark-to-market gain on the Contingent Acquisition Shares in 2024.

The final settlement of the Contingent Acquisition Shares was completed on January 15, 2025 so there was no gain or loss in the second quarter of 2025.

The effective tax rate for Net loss from continuing operations during the three months ended July 4, 2025 was (42.1)%, which differs from the U.S.

federal statutory tax rate of 21%, primarily due to an increase in valuation allowance on U.S.

deferred tax assets, non-deductible expenses, and U.S.

taxation on international operations.

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income taxed at lower rates.

Net loss from continuing operations decreased in the three months ended April 4, 2025 compared with the prior year period, primarily due to the aforementioned increase in Gross Profit, decreases in Other expense, net and interest expense, net, partially offset by increases in Purchase of royalty interest and Selling, general and administrative expense.

The effective tax rate for the three months ended June 28, 2024 was 32.6% which was higher than the 2024 U.S.

federal statutory rate of 21%, primarily due to tax credits for research and development, non-U.S.

income taxed at lower rates and non-taxable fair value gain on contingent acquisition shares.

This was partially offset by an increase in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S.

taxation on international operations.

Net loss and Net loss from continuing operations increased in the three months ended July 4, 2025 compared with the prior year period, primarily due to the aforementioned decreases in Other income, net and the increase in Purchase of royalty interest, partially offset by the increase in Gross Profit and lower interest expense, net.

Adjusted EBITDA and Adjusted EBITDA margin increased due to improved scale of aforementioned gross profit growth over a more stable fixed base of selling, general, and administrative expenses.

Six Months Ended July 4, 2025 Compared to Prior Year

Gross profit increased in the six months ended July 4, 2025 compared with the prior year period due to a $54.6 million increase in our Recon segment and a $25.5 million increase in our P&R segment.

The Gross profit increase was attributable growth in sales volume, improved mix of higher margin products sales, and the decrease of $10.9 million in inventory fair value step-up amortization charges.

Gross profit margin increased by 3.1% due to improved product mix, supply chain productivity, and the decrease in inventory fair value step-up amortization charges.

Selling, general and administrative expense increased $16.3 million in the six months ended July 4, 2025 compared to the prior year period, primarily due to a $17.6 million increase in commissions on increased sales and increased investment in selling, general and administrative costs of $18.9 million, offset by a $18.0 million decrease in strategic transaction costs driven by higher transaction costs in 2024 and a reduction in acquisition integration costs.

Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to the finalization of the Lima Acquisition in the later part of 2024, the additional business, distributor, and intellectual property acquisitions in 2025, and higher levels of capital expenditures associated with recent acquisitions.

Purchase of royalty interest increased in the first half of 2025 as we completed strategic purchases of economic interest on future royalty payments in our intellectual property (“royalty interest”) for a fixed price of $56.5 million, which will be paid over nine years.

We accrued a liability and recognized a $45.8 million charge for the net present value of the purchases.

Interest expense, net decreased in the six months ended July 4, 2025 compared to the prior year period due to a $16.0 million increase in interest income on the cross-currency swap derivatives.

This was driven by the increase in the hedging position entered into during the third quarter of 2024.

Other expense, net decreased in the six months ended July 4, 2025 compared to the prior year period due to the $21.8 million decrease in the fair value gain on the Contingent Acquisition Shares, partially offset by an $11.1 million decrease in the prior year loss on the non-designated forward currency contracts for the purpose of managing its exposure to currency exchange rate risk related to the Euro-denominated purchase price of the Lima Acquisition which closed in January 3, 2024.

The effective tax rate for Net loss from continuing operations during the six months ended July 4, 2025 was (10.9)%, which differs from the 2025 U.S.

federal statutory tax rate of 21%, primarily due to an increase in valuation allowance on U.S.

deferred tax assets, non-deductible expenses, and U.S.

taxation on international operations.

This was partially offset by tax credits for research and development and non-U.S.

income taxed at lower rates.

The effective tax rate for Net income from continuing operations during the six months ended June 28, 2024 was 15.3%, which was lower than the 2024 U.S.

federal statutory tax rate of 21%, primarily due to an increase in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S.

taxation on international operations.

This was partially offset by tax credits for research and development, non-U.S.

income taxed at lower rates and non-taxable fair value gain on contingent acquisition shares.

Net loss and Net loss from continuing operations increased in the six months ended July 4, 2025 compared with the prior year period, primarily due to the aforementioned decreases in Other income, net and the increase in Purchase of royalty interest, partially offset by the increase in Gross Profit and lower interest expense, net.

Adjusted EBITDA and Adjusted EBITDA margin increased due to improved scale of aforementioned gross profit growth over a more stable fixed base of selling, general, and administrative expenses.

Business Segments

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Prevention & Recovery

We develop, manufacture, and distribute rigid bracing products, orthopedic soft goods, vascular systems, and compression garments, and hot and cold therapy products and offer robust recovery sciences products in the clinical rehabilitation and sports medicine markets such as bone growth stimulators and electrical stimulators used for pain management.

Our Prevention & Recovery products are marketed under several brand names, most notably DJO, to orthopedic specialists, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers, and other healthcare professionals who treat patients with a variety of treatment needs including musculoskeletal conditions resulting from degenerative diseases, deformities, traumatic events and sports-related injuries.

Enovis Prevention & Recovery develops, manufactures, and distributes rigid bracing products, orthopedic soft goods, vascular systems, and compression garments, and hot and cold therapy products and offers robust recovery sciences products in the clinical rehabilitation and sports medicine markets such as bone growth stimulators and electrical stimulators used for pain management.

Our Prevention & Recovery products are marketed under several brand names, most notably Donjoy, Aircast, and Chattanooga, to orthopedic specialists, primary care physicians, pain management specialists, physical therapists, podiatrists, chiropractors, athletic trainers, and other healthcare professionals who treat patients with a variety of treatment needs including musculoskeletal conditions resulting from degenerative diseases, deformities, traumatic events and sports-related injuries.

Many of our medical devices and related accessories are used by athletes and other patients for injury prevention and at-home physical therapy treatments.

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The following table summarizes selected financial results for our Prevention & Recovery segment:

Three Months Ended

April 4, 2025 March 29, 2024

Three Months Ended Six Months Ended

July 4, 2025 June 28, 2024 July 4, 2025 June 28, 2024

(Dollars in millions)

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Amortization of acquired intangibles $ 23.3 $ 22.9 $ 46.1 $ 46.1

Restructuring and other charges $ 2.9 $ 7.8

Restructuring charges $ 0.7 $ 1.8 $ 3.5 $ 9.5

Operating income (loss) (GAAP) $ 9.3 $ 2.5 $ 2.4 $ (11.4)

Operating loss margin (GAAP) (2.5) % (5.4) %

Operating income (loss) margin (GAAP) 3.2 % 0.9 % 0.4 % (2.1) %

Adjusted EBITDA (non-GAAP) $ 46.7 $ 41.1 $ 77.6 $ 69.1

Adjusted EBITDA margin (non-GAAP) 16.1 % 14.8 % 13.8 % 12.9 %

Three Months Ended April 4, 2025 Compared to Prior Year

Net sales increased $13.6 million, or 5.2%, in the three months ended April 4, 2025 compared with the prior year period, driven by solid core volume growth and additional selling days and was negatively impacted by a $4.3 million decrease from divesting a minor product line.

Comparable Sales Growth for P&R was 7.0%, which was driven by organic growth in volumes and additional selling days, partially offset by unfavorable foreign currency translation of 0.8%.

Gross profit increased $12.5 million and Gross profit margin increased by 210 basis points, primarily due to an improved mix of higher margin product sales.

Selling, general and administrative expense increased slightly as a percentage of net sales.

Operating loss decreased by $7.0 million due to the reduction of restructuring costs and MDR spending, as well as slightly lower depreciation and amortization.

Operating loss and Operating loss margin decreased and Adjusted EBITDA and Adjusted EBITDA margin increased due to the aforementioned gross profit increase.

Three Months Ended July 4, 2025 Compared to Prior Year

Net sales increased $12.8 million, or 4.6%, in the three months ended July 4, 2025 compared with the prior year period, driven by solid existing business volume growth and favorable foreign currency translation of 1.4%, partially offset by a decrease due to the timing of holidays.

Gross profit increased $13.0 million and Gross profit margin increased by 220 basis points, primarily due to an improved mix of higher margin product sales and supply chain productivity.

Selling, general and administrative expenses were flat as a percentage of net sales.

Operating income and Operating income margin increased due to the aforementioned gross profit growth and stable selling, general and administrative expenses and a reduction of restructuring costs and MDR spending.

Adjusted EBITDA and Adjusted EBITDA margin increased due to the aforementioned gross profit increase partially offset by an increase in the selling, general, and administrative expenses.

Six Months Ended July 4, 2025 Compared to Prior Year

Net sales increased $26.4 million, or 4.9%, compared with the prior year period, driven by solid existing business volume growth and additional calendar days, net of the aforementioned effect of holidays in the second quarter, partially offset by a $4.3 million decrease from divesting the compression hosiery business in April 2024.

Gross profit increased $25.4 million and Gross profit margin increased by 210 basis points primarily due to mix of higher margin products sales and supply chain productivity.

Selling, general and administrative expenses increased slightly as a percentage of net sales.

Operating income, net increased $13.8 million due to the aforementioned higher gross profit, partially offset by charges from divesting a minor product line.

Adjusted EBITDA and Adjusted EBITDA margin increased slightly compared with the prior year period.

Reconstructive

We develop, manufacture, and market a wide variety of knee, hip, shoulder, elbow, foot, ankle, and finger implant products and surgical productivity solutions that serve the orthopedic reconstructive joint implant market.

Our products are primarily used by surgeons for surgical procedures.

Enovis Reconstructive is a global medical technology business focused on developing, manufacturing, marketing, and distributing innovative surgical solutions that restore mobility and improve patient outcomes.

Our portfolio includes a broad range of differentiated implants, instrumentation, and enabling technologies used in elective and non-elective joint replacement, limb reconstruction, and foot & ankle procedures.

We serve orthopedic surgeons and healthcare systems worldwide with products for shoulder, hip, knee, and extremity reconstruction and fixation, including both primary and revision procedures.

Our offerings are supported by proprietary surgical techniques, surgeon education, and digital tools that enhance preoperative planning, intraoperative precision, and postoperative recovery.

Our strategy is focused on accelerating growth through innovation, expanding market presence in both established and emerging markets, and delivering exceptional clinical and economic value to our customers.

Backed by a strong commitment to research and development, surgeon collaboration, and commercial execution, Enovis Reconstructive is positioned as a leading partner in advancing the future of reconstructive surgery.

The following table summarizes the selected financial results for our Reconstructive segment:

Three Months Ended

April 4, 2025 March 29, 2024

Three Months Ended Six Months Ended

July 4, 2025 June 28, 2024 July 4, 2025 June 28, 2024

(Dollars in millions)

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Purchase of royalty interest $ 10.0 $ — $ 45.8 $ —

Restructuring and other charges $ 1.0 $ 5.1

Restructuring charges $ 0.3 $ 2.8 $ 1.3 $ 8.0

Operating loss (GAAP) $ (26.1) $ (46.8) $ (65.9) $ (67.8)

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Adjusted EBITDA margin (non-GAAP) 18.4 % 19.8 % 21.2 % 20.7 %

Three Months Ended April 4, 2025 Compared to Prior Year

Net sales increased by $29.0 million, or 11.3%, in the three months ended April 4, 2025, due to strong sales volumes and additional selling days, partially offset by unfavorable foreign currency translation of 1.5%.

Gross profit increased over the same period, primarily due to higher net sales, offset by an increase of $7.0 million in inventory fair value step-up amortization charges.

Selling, general and administrative expense increased by $3.0 million over the same period, primarily due to increased commissions driven by higher sales and increases in existing business investments to support growth.

Three Months Ended July 4, 2025 Compared to Prior Year

Net sales increased by $26.6 million, or 10.7%, in the three months ended July 4, 2025, due to strong sales volumes and favorable foreign currency translation of 2.7%, partially offset by a decrease due to the timing of holidays.

Gross profit increased over the same period, primarily due to higher net sales and a decrease of $17.9 million in inventory fair value step-up amortization charges.

Selling, general and administrative expenses decreased by $3.7 million over the same period, primarily due to a decrease in Lima Acquisition integration costs, partially offset by an increase in commissions driven by higher sales and increases in existing business investments to support growth.

Research and development expense increased compared to the prior year period due to an increase in new product development projects and activities and spending within our recently acquired businesses, which are investing in surgical productivity solutions and computer-assisted surgery technologies.

Purchase of royalty interest increased in the second quarter of 2025 as we completed additional strategic purchases to buyout the economic interest in future royalty payments in connection with the termination of certain legacy product development agreements for a fixed price of $12.6 million, which will be paid over nine seven years.

We accrued a liability and recognized a $10.0 million charge for the net present value of the purchases.

Operating loss increased, primarily due to the $35.8 million Purchase of royalty interest, partially offset by a $10.8 million decrease in strategic transaction costs including the deal costs for the Lima Acquisition and integration costs.

Operating loss decreased, primarily due to the aforementioned gross profit increases and a $9.4 million decrease in strategic transaction costs including the integration and transaction costs for the Lima Acquisition, partially offset by the $10.0 million purchase of royalty interest and the increase in research and development expense.

Adjusted EBITDA increased primarily due to the aforementioned sales growth and gross profit increase.

Six Months Ended July 4, 2025 Compared to Prior Year

Net sales increased by $55.5 million, or 11.0%, due to strong sales volumes, additional calendar days, and favorable foreign currency translation of 0.5%, net of the aforementioned effect of holidays in the second quarter.

Gross profit increased $54.6 million in the six months ended July 4, 2025 compared to the prior year period, primarily due to higher net sales, improved operating leverage and a decrease of $10.9 million in inventory fair value step-up amortization charges.

Selling, general and administrative expenses decreased by $0.6 million over the same period, primarily due to a decrease in Lima Acquisition integration costs, partially offset by an increase in commissions driven by higher sales and increases in existing business investments to support growth.

Purchase of royalty interest increased over the same period as we completed strategic purchases to buyout the economic interest in future royalty payments in connection with the termination of certain legacy product development agreements for a fixed price of $ 56.5 million, which will be paid over nine years.

We accrued a liability and recognized a $45.8 million charge for the net present value of the purchases.

Operating loss decreased, primarily due to a $20.1 million decrease in strategic transaction costs including the integration and transaction costs for the Lima Acquisition, offset by the $45.8 million purchase of royalty interest.

Adjusted EBITDA increased primarily due to increased gross profit from the Lima Acquisition and improved operating cost leverage.

Liquidity and Capital Resources

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No stock repurchases have been made under this plan since the third quarter of 2018.

As of April 4, 2025, the remaining stock repurchase authorization provided by our Board of Directors was $100 million.

As of July 4, 2025, the remaining stock repurchase authorization provided by our Board of Directors was $100 million.

The timing, amount, and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors.

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All facilities under the Enovis Credit Agreement (including the 2024 Term Loan Facility) are secured by certain personal property of the Company and certain of its subsidiaries, subject to limitations and exclusions.

As of April 4, 2025, there was $335 million available on the Re volver.

As of July 4, 2025, there was $325 million available on the Re volver.

The Enovis Credit Agreement contains customary covenants limiting the ability of the Company and its subsidiaries to, among other things, incur debt or liens, merge or consolidate with others, dispose of assets, make investments, or pay dividends.

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In addition, we are party to overdraft facilities with a borrowing capacity of $30.0 million.

Total letters of credit and surety bonds of $40.1 million were outstanding as of April 4, 2025.

As of April 4, 2025, we had $38.5 million of Cash and cash equivalents, a decrease of $9.7 million from the balance as of December 31, 2024 of $48.2 million.

Total letters of credit and surety bonds of $50.1 million were outstanding as of July 4, 2025.

As of July 4, 2025, we had $44.1 million of Cash and cash equivalents, a decrease of $4.1 million from the balance as of December 31, 2024 of $48.2 million.

The following table summarizes the change in cash and cash equivalents during the periods indicated:

Three Months Ended

April 4, 2025 March 29, 2024

Six Months Ended

July 4, 2025 June 28, 2024

(Dollars in millions)

Net cash used in operating activities $ (1.6) $ (36.2)

Net cash provided by (used in) operating activities $ 46.2 $ (28.4)

Purchases of property, plant and equipment and intangibles (87.6) (76.3)

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Effect of foreign exchange rates on Cash and cash equivalents 2.6 (0.9)

Increase (decrease) in Cash and cash equivalents $ (9.7) $ 29.7

Decrease in Cash and cash equivalents $ (4.1) $ (1.4)

Cash flows from operating activities can fluctuate significantly from period-to-period due to changes in working capital and the timing of payments for items such as restructuring and strategic transaction costs.

Strategic transaction costs primarily relates to integration costs of acquired businesses such as the Lima Acquisition.

Cash flows used in operating activities decreased $34.6 million year-over-year.

This improvement was primarily due to higher adjusted EBITDA of $15.9 million, lower strategic transaction costs of $8.7 million, a lower overall investment in working capital of $7.9 million, and a decrease in net cash paid for interest of $6.0 million.

Cash flows used in investing activities during the three months ended April 4, 2025 were $60.5 million compared to $797.8 million in the prior year period due to four small bolt-on acquisitions in the first quarter of 2025 compared to the Lima Acquisition purchase price of $757.7 million, net of cash received, in the prior year and overall higher capital investments in the current year driven by recent acquisitions.

Cash flows provided by financing activities during the three months ended April 4, 2025 include $56.6 million of net debt borrowings primarily used for the recent bolt-on acquisitions, capital expenditures and operations.

Cash flows provided by financing activities for the three months ended March 29, 2024 include net debt borrowings of $873.0 million primarily used for the Lima Acquisition and to a lesser extent capital expenditures and operations.

Cash flows provided by operating activities increased $74.6 million year-over-year.

This improvement was primarily due to the increase in gross profit, lower strategic transaction costs of $18.0 million, lower interest paid of $18.1 million, and lower restructuring costs of $5.3 million, offset by a higher investment in working capital of $14.4 million and increases in Selling, general and administrative and Research and development expense.

Cash flows used in investing activities during the six months ended July 4, 2025 were $110.3 million compared to $839.2 million in the prior year period due to six small acquisition transactions during 2025 compared to the Lima Acquisition purchase price of $757.7 million, net of cash received, in the prior year and overall higher capital investments in the current year driven by recent acquisitions, including surgical implant instruments that support sales growth in Recon.

Cash flows provided by financing activities during the six months ended July 4, 2025 include $62.0 million of net debt borrowings primarily used for the recent acquisition transactions and capital expenditures.

Cash flows provided by financing activities for the six months ended June 28, 2024 include net debt borrowings of $878.5 million primarily used for the Lima Acquisition and to a lesser extent capital expenditures and operations.

Critical Accounting Policies and Estimates

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Actual results may vary from what our management anticipates, and different assumptions or estimates about the future could have a material impact on our results of operations and financial position.

There have been no significant additions or changes to the methods, estimates and judgments included in “Item 7A.

Except as noted below, there have been no significant additions or changes to the methods, estimates and judgments included in “Item 7A.

Management’s Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies” in our 2024 Form 10-K.

Goodwill and Intangible Assets

We evaluate the recoverability of Goodwill at the reporting unit level annually or more frequently if an event occurs or circumstances change in the interim that would more likely than not reduce the fair value of the asset below its carrying amount.

Our last quantitative impairment test performed on the first day of the fourth quarter of 2024 resulted in impairment.

Based on our qualitative assessment as of July 4, 2025, there were no events that would indicate an impairment should be incurred in the second quarter of 2025.

Due to the decrease in the share price of our common stock, the sum of the fair value of our two reporting units as calculated by management in the last quantitative impairment test implies a premium of approximately 45% above our current market capitalization.

As of July 4, 2025, the Goodwill of the Reconstructive and Prevention & Recovery reporting units was $800.2 million and $981.1 million, respectively.

If the decline in our market capitalization is sustained or actual results of the business differ from our estimates and projections, there is an increased risk of potential impairment, which could materially affect our financial statements.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis