# Enovis CORP (ENOV) FY 2024 MD&A

Verbatim Item 7 Management's Discussion and Analysis from Enovis CORP's 10-K for fiscal year 2024.

SEC filing source: https://www.sec.gov/Archives/edgar/data/1420800/000142080025000009/cfx-20241231.htm
Accession: 0001420800-25-000009
Filing date: 2025-02-26
Report date: 2024-12-31
Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary.
Confidence: high

Company profile: /company/ENOV/
All MD&A years: /company/ENOV/mda/
Previous year: /company/ENOV/mda/fy2023/ (FY 2023)
Next year: /company/ENOV/mda/fy2025/ (FY 2025)

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is designed to provide a reader of our financial statements with a narrative from the perspective of Company’s management. This MD&A is divided into four main sections:

•Overview

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Policies

MD&A should be read together with Part I, Item 1A. “Risk Factors” and the accompanying Consolidated Financial Statements and Notes to Consolidated Financial Statements included in Item 8. of this Form 10-K. The MD&A includes forward-looking statements. For a discussion of important factors that could cause actual results to differ materially from the results referred to in these forward-looking statements, see “Special Note Regarding Forward-Looking Statements.”

Overview

Enovis is a medical technology company focused on developing clinically differentiated solutions that generate measurably better patient outcomes and transform workflows by manufacturing and distributing high-quality medical devices with a broad range of products used for reconstructive surgery, rehabilitation, pain management and physical therapy. Our products address the continuum of patient care from injury prevention to rehabilitation after surgery or injury or from degenerative disease, enabling people to regain or maintain their natural motion. Please see Part I, Item 1. “Business” for a discussion of Enovis’s objectives and methodologies for delivering shareholder value.

Enovis conducts its operations through two operating segments: Prevention & Recovery (“P&R”) and Reconstructive (“Recon”).

•P&R - a leader in orthopedic solutions, providing devices, software and services across the patient care continuum from injury prevention to rehabilitation after surgery, injury, or from degenerative disease.

•Recon - innovation market-leader positioned in the fast-growing surgical implant business, offering a comprehensive suite of reconstructive joint products for the hip, knee, shoulder, elbow, foot, ankle, and finger and surgical productivity tools.

We have a global footprint, with production facilities in North America, Europe, Africa, and Asia. We serve a global customer base across multiple markets through a combination of direct sales and third-party distribution channels. Our customer base is highly diversified in the medical markets.

Integral to our operations is our business management system, EGX. EGX is our culture and includes our values and behaviors, a comprehensive set of tools, and repeatable, teachable processes that we use to drive continuous improvement and create superior value for our customers, shareholders and associates. We believe that our management team’s access to, and experience in, the application of the EGX methodology is one of our primary competitive strengths.

Results of Operations

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.

Items Affecting Comparability of Reported Results

Our financial performance and growth are driven by many factors, principally our ability to serve customers with market-leading delivery and innovation; the mix of products sold in any period; the impact of competitive forces, economic and market conditions; reimbursement levels for products in certain medical sales channels; availability of capital and attractive acquisition opportunities; our ability to continuously improve our cost structure; fluctuations in the relationship of foreign currencies to the U.S. dollar; and our ability to pass cost increases on to customers through pricing. These key factors have impacted our results

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of operations in the past and are likely to affect them in the future. The comparability of our operating results for the year ended December 31, 2024 to the comparable periods is affected by the following additional significant items:

Strategic Acquisitions

We complement our organic growth plans with strategic acquisitions and other investments. Acquisitions can significantly affect our reported results, and so we also report the Net sales on a Comparable Sales basis and present a Comparable Sales Growth rate to provide information on the operating performance of the business. Comparable Sales and Comparable Sales Growth rate are defined in the “Non-GAAP Measures” section below.

On January 3, 2024, we 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 included 1,942,686 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”. The Contingent Acquisition Shares were issuable in two equal tranches within six and twelve months of the acquisition date upon non-occurrence of certain future events, in each case subject to certain adjustments and conditions as provided for in the purchase agreement.. The first tranche of 971,343 Contingent Acquisition Shares was issued to the seller on July 16, 2024 and the second tranche of Contingent Acquisition Shares was issued on January 15, 2025. This acquisition expands and complements our current product offerings internationally within our Recon segment.

In 2024, we also completed one asset acquisition in our Reconstructive segment and one business acquisition in our Prevention & Recovery segment for aggregate purchase consideration of $4.0 million.

During the year ended December 31, 2023, we completed one business combination and two asset acquisitions in Recon. On June 28, 2023, we acquired Novastep, a leading player in Minimally Invasive Surgery (MIS) foot and ankle solutions for total consideration of $96.9 million. The Novastep best-in-class MIS bunion system serves a rapidly growing portion of the global bunion segment. On July 20, 2023, we completed the asset acquisition of SEAL, developers of a broad line of external fixation products for total consideration of $28.2 million. These two acquisitions are valuable additions serving to enhance the offerings under our foot & ankle product lines. On October 5, 2023, we acquired 100% interest in Precision AI, a developer of surgical planning software. This asset acquisition complements our current product offerings with advanced surgical planning software. The software has capabilities to be used for shoulder reconstruction and there is opportunity to expand this to additional anatomies.

During the year ended December 31, 2022, the Company completed two business acquisitions for aggregate net cash consideration of $50.5 million. In the second quarter of 2022, the Company acquired KICo Knee Innovation Company Pty Limited and subsidiaries, an Australian private company doing business as 360 Med Care, which is a medical device distributor that bundles certain computer-assisted surgery and patient experience enhancement programs to add value to the device supply arrangements with surgeons, hospitals, and insurers. In the third quarter of 2022, the Company acquired a controlling interest in Insight Medical Systems, the flagship product of which is the ARVIS surgical navigation system.

Global Operations

During 2024, approximately 41% of our sales are derived from operations outside the U.S., the majority of which is in Europe with the remaining portion mostly 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. Our ability to grow and our financial performance will be affected by our ability to address challenges and opportunities that are a consequence of expanding our global operations through our recent acquisitions, including efficiently utilizing our international sales channels, manufacturing and distribution capabilities, participating in the expansion of market opportunities, successfully completing global acquisitions and engineering innovative new product applications to create better patient outcomes. 

The majority of our Net sales derived from operations outside the U.S. are denominated in currencies other than the U.S. dollar. Similar portions of our manufacturing and employee costs are also outside the U.S. and denominated in currencies other than the U.S. dollar. Changes in foreign exchange rates can impact our results of operations and are quantified when significant. For the year ended December 31, 2024 compared to 2023, fluctuations in foreign currencies increased Net sales by 0.1%, had an immaterial impact on Gross profit, and increased operating expenses by approximately 0.1%.

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The Separation

On April 4, 2022, we completed the Separation through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to our stockholders. We initially retained 10% of the shares of ESAB common stock immediately following the Separation. On November 18, 2022, we completed an exchange with our lenders of 6,003,431 shares of common stock of ESAB, representing all of our retained shares, for $230.5 million in term loan outstanding under our previous credit agreement. We recorded a gain of $102.7 million on the exchange of the shares representing the excess of fair value, less cost to sell, over our cost basis in the investment.

Once the Separation was completed in the second quarter of 2022, we began classifying the results from the fabrication technology business for the comparable periods presented as a discontinued operation in our financial statements. Accordingly, the results of our fabrication technology businesses in our financial statements prior to its spin-off as a separate public company are excluded from continuing operations in the accompanying financials for the year ended December 31, 2022.

Please see Part I. Item 1A. “Risk Factors” in this Form 10-K for further discussion of the Company’s risks relating to the Separation.

Seasonality

Sales in P&R and Recon typically peak in the fourth quarter. General economic conditions may, however, impact future seasonal variations.

Material Costs

Our principal raw materials and components are foam ethylene vinyl acetate, copolymer for our bracing and vascular products in P&R and cobalt chromium alloy, stainless steel alloys, titanium alloy and ultra high molecular weight polyethylene in Recon. Prices for raw materials, energy and commodities are subject to volatility and are influenced by worldwide economic conditions. Input cost inflation historically has not been a material factor to our gross margin; however, inflation effects have increased since 2021 and are expected to continue to remain elevated for at least the near term. In response, we have been enacting tactical price increases to certain products, mainly in P&R. Although we seek to proactively manage inflation risk, future changes in component and raw material costs may adversely impact earnings or our margins. Prices for raw materials, energy and commodities are also influenced by import duties and tariffs, world supply and demand balances, inventory levels, availability of substitute materials, currency exchange rates, anticipated or perceived shortages, geopolitical tensions, government trade practices and regulations and other factors. Specifically, tariffs, such as the tariffs announced by the U.S. government in February 2025, may increase the cost of and impair sourcing flexibility for raw materials, component parts and supplies, and further trade restrictions, retaliatory trade measures, or additional tariffs implemented could result in higher input costs to our products.

Sales and Cost Mix

Gross profit margins within our operating segments vary primarily based on the type of product and distribution channel. Reconstructive products tend to have higher gross margins than the Prevention & Recovery products.

The mix of sales was as follows for the periods presented:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["P&R","52","%","","63","%","","66","%"],["Recon(1)","48","%","","37","%","","34","%"]]
[[/GREPCENT_TABLE]]

(1) The change in mix for the year ended December 31, 2024 from 2023 reflects the impact of the Lima acquisition in Recon, which was completed on January 3, 2024.

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Non-GAAP Measures

Adjusted EBITDA; Comparable Sales

Adjusted EBITDA and 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); Other income, net; non-operating (gain) loss on investments; debt extinguishment charges; interest expense, net; restructuring and other charges; Medical Device Regulation (“MDR”) fees and other costs; strategic transaction costs; stock-based compensation; depreciation and other amortization; acquisition-related intangible asset amortization; insurance settlement (gain) loss; goodwill impairment charges; and fair value charges on acquired inventory. We also present Adjusted EBITDA and Adjusted EBITDA margin by operating segment, which are subject to the same adjustments. Operating income (loss), adjusted EBITDA and adjusted EBITDA margins at the operating segment level also include allocations of certain central function expenses not directly attributable to either operating segment. 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 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 certain non-core product lines that were divested or discontinued, as applicable, during the periods presented. The acquired businesses include Lima, Novastep, and KICo, which are reflected in the Recon segment, and the excluded non-core product lines 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.

Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information calculated in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures. The following tables set forth a reconciliation of net loss from continuing operations, the most directly comparable financial statement measure, to Adjusted EBITDA for the years ended December 31, 2024, 2023 and 2022.

41

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2024"],["","P&R","","Recon","","Total"],["","(Dollars in millions)"],["Net loss from continuing operations (GAAP) (1)","","","","","$","(827.4)"],["Income tax expense","","","","","4.5"],["Other income, net","","","","","(9.9)"],["Interest expense, net","","","","","57.1"],["Operating loss (GAAP)","$","(321.8)","","","$","(454.0)","","","(775.7)"],["Operating loss margin","(29.3)","%","","(45.0)","%","","(36.8)","%"],["Adjusted to add:"],["Restructuring and other charges (2)(3)","20.9","","","24.3","","","45.2"],["MDR and other costs (3)","10.1","","","9.4","","","19.5"],["Strategic transaction costs (3)","4.3","","","74.0","","","78.3"],["Stock-based compensation (3)","18.1","","","11.6","","","29.7"],["Depreciation and other amortization","20.6","","","96.7","","","117.3"],["Amortization of acquired intangibles","92.3","","","73.2","","","165.5"],["Goodwill impairment charge","315.0","","","330.0","","","645.0"],["Inventory step-up","\u2014","","","51.7","","","51.7"],["Adjusted EBITDA (non-GAAP)","$","159.6","","","$","216.9","","","$","376.5"],["Adjusted EBITDA margin (non-GAAP)","14.5","%","","21.5","%","","17.9","%"]]
[[/GREPCENT_TABLE]]

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

(2) Restructuring and other charges includes $17.9 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations related to the discontinuation of certain product lines in the P&R and Recon segments.

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

[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2023"],["","P&R","","Recon","","Total"],["","(Dollars in millions)"],["Net loss from continuing operations (GAAP) (1)","","","","","$","(53.8)"],["Income tax benefit","","","","","(13.3)"],["Other income, net","","","","","(25.7)"],["Debt extinguishment charges","","","","","7.3"],["Interest expense, net","","","","","19.8"],["Operating loss (GAAP)","$","(24.7)","","","$","(41.0)","","","(65.7)"],["Operating loss margin","(2.3)","%","","(6.5)","%","","(3.8)","%"],["Adjusted to add:"],["Restructuring and other charges (2)(3)","13.5","","","6.4","","","20.0"],["MDR and other costs (3)","14.5","","","12.9","","","27.4"],["Strategic transaction costs (3)","13.2","","","25.1","","","38.3"],["Stock-based compensation (3)","20.2","","","11.8","","","32.1"],["Depreciation and other amortization","22.2","","","61.4","","","83.6"],["Amortization of acquired intangibles","93.6","","","40.0","","","133.5"],["Inventory step-up","\u2014","","","0.1","","","0.1"],["Adjusted EBITDA (non-GAAP)","152.5","","","116.7","","","269.2"],["Adjusted EBITDA margin (non-GAAP)","14.2","%","","18.5","%","","15.8","%"]]
[[/GREPCENT_TABLE]]

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

(2) Restructuring and other charges includes $2.6 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations.

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

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[[GREPCENT_TABLE]]
[["","Year Ended December 31, 2022"],["","P&R","","Recon","","Total"],["","(Dollars in millions)"],["Net loss from continuing operations (GAAP) (1)","","","","","$","(38.2)"],["Income tax expense","","","","","36.1"],["Other income, net","","","","","(2.1)"],["Gain on cost basis investment","","","","","(8.8)"],["Gain on investment in ESAB Corporation","","","","","(102.7)"],["Debt extinguishment charges","","","","","20.4"],["Interest expense, net","","","","","24.1"],["Operating loss (GAAP)","$","(18.2)","","","$","(52.9)","","","(71.2)"],["Operating loss margin","(1.8)","%","","(9.9)","%","","(4.6)","%"],["Adjusted to add (deduct):"],["Restructuring and other charges (2)(3)","9.6","","","9.4","","","19.0"],["MDR and other costs (3)","9.8","","","6.9","","","16.7"],["Strategic transaction costs (3)","39.9","","","21.2","","","61.0"],["Stock-based compensation (3)","20.2","","","11.3","","","31.5"],["Depreciation and other amortization","24.4","","","52.3","","","76.7"],["Amortization of acquired intangibles","80.1","","","46.2","","","126.3"],["Insurance settlement gain(3)","(24.4)","","","(12.3)","","","(36.7)"],["Inventory step-up","\u2014","","","12.8","","","12.8"],["Adjusted EBITDA (non-GAAP)","$","141.4","","","$","94.7","","","$","236.1"],["Adjusted EBITDA margin (non-GAAP)","13.8","%","","17.7","%","","15.1","%"]]
[[/GREPCENT_TABLE]]

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

(2) Restructuring and other charges includes $1.7 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations.

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

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Total Company

Sales

Net sales increased by $400.4 million or 23.5% to $2,107.6 million for the year ended December 31, 2024 compared with the prior year period. The following table presents the components of changes in our consolidated Net sales for the years ended December 31, 2024 and 2023.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Year Ended December 31,"],["","2024","","2023","","Growth Rate","","2024","","2023","","Growth Rate"],["","GAAP","","Comparable Sales (1)"],["","(In millions)"],["Prevention & Recovery:"],["U.S. Bracing & Support","$","469.3","","","$","456.1","","","2.9","%","","$","469.3","","","$","456.1","","","2.9","%"],["U.S. Other P&R","270.7","","","269.8","","","0.3","%","","268.0","","","260.2","","","3.0","%"],["International P&R","357.9","","","350.8","","","2.0","%","","356.3","","","345.0","","","3.3","%"],["Total Prevention & Recovery","1,098.0","","","1,076.8","","","2.0","%","","1,093.6","","","1,061.3","","","3.0","%"],["Reconstructive:"],["U.S. Reconstructive","$","505.6","","","$","426.4","","","18.6","%","","$","505.6","","","$","479.9","","","5.4","%"],["International Reconstructive","504.0","","","204.0","","","147.1","%","","503.6","","","450.0","","","11.9","%"],["Total Reconstructive","1,009.7","","","630.4","","","60.2","%","","1,009.2","","","930.0","","","8.5","%"],["Total","$","2,107.6","","","$","1,707.2","","","23.5","%","","$","2,102.8","","","$","1,991.3","","","5.6","%"]]
[[/GREPCENT_TABLE]]

(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. The acquired businesses include Lima and Novastep, which are reflected in the Recon segment, and the excluded non-core product lines 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.

2024 Compared to 2023

Net sales increased during 2024 as compared to 2023 by $400.4 million, or 23.5%, primarily attributable to an increase in sales from the Lima Acquisition and to a lesser extent the Novastep acquisition and growth in existing businesses. Recon sales increased by $379.3 million, or 60.2%, of which $338.1 million was attributable to the Lima and Novastep acquisitions. Recon sales were negatively impacted by a $4.3 million decrease from the discontinuance of certain non-core product lines. P&R sales increased by $21.2 million, or 2.0%, which was negatively impacted by a $11.1 million decrease from divesting a minor product line. For the year ended December 31, 2024, U.S. GAAP basis net sales were $2,107.6 million. The Comparable Sales were $2,102.8 million for the same period. The sales attributable to the non-core product lines, which were divested or discontinued, were $4.8 million. For the year ended December 31, 2023, U.S. GAAP basis net sales were $1,707.2 million. The Comparable Sales were $1,991.3 million for the same period. In 2023, Lima and Novastep would have contributed $308.0 million to Comparable Sales, offset by the impact of the divestiture and discontinuance of certain non-core product lines of $23.9 million. Comparable Sales Growth for Recon was driven by approximately 8.2% increases in volume and market share gains and favorable foreign currency translation of 0.3%. Comparable Sales Growth for P&R was driven by approximately 3.0% organic growth in volumes. The weakening of the U.S. Dollar relative to other currencies resulted in $2.8 million, or 0.1%, of favorable foreign currency translation impacts on total net sales for the year ended December 31, 2024 from the prior year.

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[[GREPCENT_TABLE]]
[["","Year Ended December 31,","","Year Ended December 31,"],["","2023","","2022","","Growth Rate","","2023","","2022","","Growth Rate"],["","GAAP","","Comparable Sales (1)"],["","(In millions)"],["Prevention & Recovery:"],["U.S. Bracing & Support","$","456.1","","","$","437.3","","","4.3","%","","$","456.1","","","$","437.3","","","4.3","%"],["U.S. Other P&R","269.8","","","255.3","","","5.7","%","","260.2","","","243.0","","","7.1","%"],["International P&R","350.8","","","335.0","","","4.7","%","","345.0","","","328.7","","","4.9","%"],["Total Prevention & Recovery","1,076.8","","","1,027.6","","","4.8","%","","1,061.3","","","1,009.0","","","5.2","%"],["Reconstructive:"],["U.S. Reconstructive","$","426.4","","","$","370.2","","","15.2","%","","$","479.9","","","$","426.0","","","12.7","%"],["International Reconstructive","204.0","","","165.3","","","23.4","%","","450.0","","","377.3","","","19.3","%"],["Total Reconstructive","630.4","","","535.5","","","17.7","%","","930.0","","","803.2","","","15.8","%"],["Total","$","1,707.2","","","$","1,563.1","","","9.2","%","","$","1,991.3","","","$","1,812.3","","","9.9","%"]]
[[/GREPCENT_TABLE]]

(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. The acquired businesses include Lima, Novastep, and KiCo, which are reflected in the Recon segment, and the excluded non-core product lines 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.

2023 Compared to 2022

Net sales increased during 2023 as compared to 2022 primarily due to an increase in sales from existing businesses across both of our segments and to a lesser extent sales from acquired businesses in Recon and favorable foreign currency translation. Recon sales increased by $94.9 million, or 17.7%, of which $76.7 million was due to significantly higher sales volumes than the prior year across all product lines driven by market outperformance and new product launches. P&R sales increased $49.2 million, or 4.8%, of which $47.1 million was due to improved sales volumes and inflation-related pricing increases. Net sales from acquisitions increased during 2023 primarily due to the Novastep and 360 Med Care acquisitions in Recon that closed in 2023 and 2022, respectively. Lastly, the weakening of the U.S. dollar relative to other currencies, most notably the Swiss Franc and Euro, caused a $6.1 million favorable currency translation impact.

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Operating Results

The following table summarizes our results from continuing operations for the comparable three-year period.

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["","(Dollars in millions)"],["Gross profit","$","1,180.8","","","$","990.8","","","$","869.4"],["Gross profit margin","56.0","%","","58.0","%","","55.6","%"],["Selling, general and administrative expense","$","1,027.4","","","$","830.3","","","$","772.9"],["Research and development expense","$","91.3","","","$","75.3","","","$","60.8"],["Operating loss","$","(775.7)","","","$","(65.7)","","","$","(71.2)"],["Operating loss margin","(36.8)","%","","(3.8)","%","","(4.6)","%"],["Net loss from continuing operations","$","(827.4)","","","$","(53.8)","","","$","(38.2)"],["Net loss from continuing operations margin (GAAP)","(39.3)","%","","(3.2)","%","","(2.4)","%"],["Adjusted EBITDA (non-GAAP)","$","376.5","","","$","269.2","","","$","236.1"],["Adjusted EBITDA margin (non-GAAP)","17.9","%","","15.8","%","","15.1","%"],["Items excluded from Adjusted EBITDA:"],["Restructuring and other charges (1)","$","45.2","","","$","20.0","","","$","19.0"],["MDR and other costs","$","19.5","","","$","27.4","","","$","16.7"],["Strategic transaction costs","$","78.3","","","$","38.3","","","$","61.0"],["Stock-based compensation","$","29.7","","","$","32.1","","","$","31.5"],["Depreciation and other amortization","$","117.3","","","$","83.6","","","$","76.7"],["Amortization of acquired intangibles","$","165.5","","","$","133.5","","","$","126.3"],["Insurance settlement gain","$","\u2014","","","$","\u2014","","","$","(36.7)"],["Goodwill impairment charge","$","645.0","","","$","\u2014","","","$","\u2014"],["Inventory step-up","$","51.7","","","$","0.1","","","$","12.8"],["Interest expense, net","$","57.1","","","$","19.7","","","$","24.1"],["Debt extinguishment charges","$","\u2014","","","$","7.3","","","$","20.4"],["Other income net","$","(9.9)","","","$","(25.7)","","","$","(2.1)"],["Income tax expense (benefit)","$","4.5","","","$","(13.3)","","","$","36.1"]]
[[/GREPCENT_TABLE]]

(1) Restructuring and other charges includes $17.9 million, $2.6 million and $1.7 million of expense classified as Cost of sales on the Company’s Consolidated Statements of Operations for the years ended December 31, 2024, 2023 and 2022, respectively.

2024 Compared to 2023

Gross profit increased $190.0 million during 2024 in comparison to 2023 due to a $179.1 million increase in Recon and a $10.9 million increase in P&R. The Gross profit increase was attributable to increased sales from the Lima Acquisition, offset by an increase of $51.6 million in inventory fair value step-up amortization charges. Gross profit margin decreased by 200 basis points due to the aforementioned increase in inventory fair value step-up amortization charges.

Selling, general and administrative expense increased $197.1 million during 2024 in comparison to 2023, primarily due to increased commissions driven by higher sales volume and increased selling, general and administrative costs from the Lima Acquisition. Research and development costs also increased compared to the prior year period, primarily due to the Lima Acquisition and increased spend within recently acquired businesses in our Recon segment, which is investing in surgical productivity solutions and computer-assisted surgery technologies. The Goodwill impairment charge of $645.0 million was due to the sustained decrease in the Company’s publicly quoted share price and market capitalization. See Item 7. Critical Accounting Policies for further discussion. Amortization of acquired intangibles and Depreciation and other amortization also increased compared to the prior year period due to the Lima Acquisition.

46

Interest expense, net increased $37.4 million during 2024 in comparison to 2023 due to an increase in debt to finance the Lima Acquisition.

Other income, net decreased primarily due to the loss in 2024 and the gain in 2023 on the foreign currency forward contract to manage the exposure to currency exchange rate risk related to the Euro-denominated purchase price of Lima, partially offset by the gain on fair value adjustments for the Lima Acquisition Contingent Shares liability.

The effective tax rate for Loss from continuing operations before income taxes during 2024 was (0.5)%, which differed from the 2024 U.S. federal statutory tax rate of 21%, primarily due to a build in valuation allowance on interest limitation carryforwards and non-deductible goodwill impairment charges. This was offset by tax credits for research and development, the non-taxable gain on shares related to the contingent acquisition liability and non-U.S. income taxed at lower rates. The effective tax rate for Loss from continuing operations before income taxes during 2023 was 19.8%, which differed from the 2023 U.S. federal statutory tax rate of 21% mainly due to a build in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S. taxation on international operations. This was offset by a release of uncertain tax positions, tax credits for research and development and non-U.S. income taxed at lower rates.

Net loss from continuing operations increased $773.6 million during 2024 in comparison to 2023, primarily due to a Goodwill impairment charge of $645.0 million, a $65.2 million increase in strategic transactions costs from Lima integration activities, a $37.4 million increase in interest expense, net, a $32.0 million increase in amortization of acquired intangibles, and an increase in depreciation and inventory step-up charges, partially offset by an increase in Gross Profit from the Lima Acquisition. Adjusted EBITDA and Adjusted EBITDA margin increased due to the Lima Acquisition.

2023 Compared to 2022

Gross profit increased $121.4 million during 2023 in comparison to 2022 due to an $82.1 million increase in Recon and a $39.3 million increase in P&R. The Gross profit increase was attributable to increased sales in our existing businesses from volume and inflation-related pricing increases, improved operating cost leverage, and the benefit of a decrease of $12.7 million in inventory fair value step-up amortization charges, partially offset by unfavorable foreign currency translation and inflation in supply chain, logistics, and other costs. Gross profit margin increased due to the aforementioned factors.

Selling, general and administrative expense increased $57.4 million during 2023 in comparison to 2022, primarily due to increased commissions driven by higher sales, investments to support growth, spending on MDR and other costs, and cost inflation, partially offset by cost reduction initiatives and a net decrease in Strategic transactions costs. Research and development costs also increased compared to the prior year period, primarily due to increased spend within recently acquired businesses in Recon, which are 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 business acquisitions.

Interest expense, net decreased by $4.4 million, primarily due to a reduction in debt balances as a result of the Separation-related debt redemptions at the beginning of the second quarter of 2022, the extinguishment of the outstanding balance of our previous term loan in conjunction with the ESAB investment sale, and interest savings from $7.3 million interest received on the Swiss Franc cross-currency swap agreements.

The effective tax rate for Loss from continuing operations before income taxes during 2023 was 19.8%, which was different than the 2023 U.S. federal statutory tax rate of 21% primarily due to a build in valuation allowance on interest limitation carryforwards, non-deductible expenses and U.S. taxation on international operations. This was offset by a release of uncertain tax positions, tax credits for research and development and non-U.S. income taxed at lower rates. The effective tax rate for 2022 was (1,745.8)% on a loss from continuing operations before income taxes, which was lower than the 2022 U.S. federal statutory tax rate of 21% mainly due to non-taxable unrealized gain on the investment in ESAB and gain on cost basis investment, offset by non-deductible costs related to the tax-free Separation.

Net loss from continuing operations increased $15.6 million during 2023 in comparison to 2022, primarily due to one-time income items in the prior year period, including the Unrealized gain on investment in ESAB Corporation, Gain on cost basis investment, Insurance settlement gain, partially offset by the reduction of debt extinguishment charges and the aforementioned net impact of the Gross profit and Selling, general, and administrative increases as well as the decrease in Interest expense, net and the impact of unfavorable discrete tax items in 2022. Adjusted EBITDA increased due to organic growth. Adjusted

47

EBITDA margin excluding the effects of recent acquisitions and foreign currency pressures increased by approximately 130 basis points. Our recent acquisitions in Recon were dilutive to the net loss margin from continuing operations and to Adjusted EBITDA margin by approximately 20 basis points and are expected to be accretive to margins in future years.

Business Segments

As discussed further above, we report results in two reportable segments: P&R and Recon. Operating loss, adjusted EBITDA and adjusted EBITDA margins at the operating segment level also include allocations of certain central function expenses not directly attributable to either operating segment. See See Item 7. “Non-GAAP Measures” for a further discussion and reconciliation of these non-GAAP measures to their most directly comparable GAAP financial measures.

P&R

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. P&R 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. Many of our medical devices and related accessories are used by athletes and other patients for injury prevention and at-home physical therapy treatments. We reach a diverse customer base through multiple distribution channels, including independent distributors, direct salespeople, and directly to patients.

The following table summarizes selected financial data for P&R:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["","(Dollars in millions)"],["Net sales","$","1,098.0","","","$","1,076.8","","","$","1,027.6"],["Gross profit","$","568.4","","","$","557.5","","","$","518.2"],["Gross profit margin","51.8","%","","51.8","%","","50.4","%"],["Selling, general and administrative expenses","$","432.2","","","$","442.7","","","$","438.9"],["Research and development expense","$","35.7","","","$","35.1","","","$","33.5"],["Amortization of acquired intangibles","$","92.3","","","$","93.6","","","$","80.1"],["Restructuring and other charges","$","15.0","","","$","10.9","","","$","7.9"],["Goodwill impairment charge","$","315.0","","","$","\u2014","","","$","\u2014"],["Operating loss (GAAP)","$","(321.8)","","","$","(24.7)","","","$","(18.2)"],["Operating loss margin (GAAP)","(29.3)","%","","(2.3)","%","","(1.8)","%"],["Adjusted EBITDA (non-GAAP)","$","159.6","","","$","152.5","","","$","141.3"],["Adjusted EBITDA margin (non-GAAP)","14.5","%","","14.2","%","","13.8","%"]]
[[/GREPCENT_TABLE]]

48

2024 Compared to 2023

Net sales in P&R increased $21.2 million, or 2.0%, compared with the prior year period, which was negatively impacted by a $11.1 million decrease from divesting a minor product line. Comparable Sales Growth for P&R was driven by approximately 3.0% organic growth in volumes and partially offset by unfavorable foreign currency translation of 0.4%. Gross profit increased $10.9 million and Gross profit margin remained flat despite a lower mix of higher margin products sales. Selling, general and administrative expense decreased $10.5 million, primarily due to reduction of strategic transaction costs and EU MDR spending. Operating loss increased due to a Goodwill impairment charge of $315.0 million and charges from divesting a minor product line, partially offset by a Selling, general and administrative expense decrease and higher gross profit. Adjusted EBITDA and Adjusted EBITDA margin increased due to improved operating scale from lower overheads, partially offset by unfavorable foreign currency impacts in a primary manufacturing facility during the year ended December 31, 2024 compared to the prior year.

2023 Compared to 2022

Net sales in P&R increased $49.2 million, or 4.8% in the year ended December 31, 2023 compared with the prior year period, driven by organic growth in existing businesses which was aided by pricing increases to mitigate inflation. Gross profit increased $39.3 million due to the improved sales, offset by inflation of supply chain, logistics, and other costs and unfavorable foreign currency effects. Gross profit margin increased 140 basis points due to improved sales mix and inflation-related customer pricing, partially offset by the effect of unfavorable foreign currency in a primary manufacturing facility. Selling, general and administrative expense increased $3.8 million which included an increase of $30.5 million, or 7%, primarily due to investment to support growth in the business, spending on MDR and other costs, largely offset by a reduction in allocated Strategic transaction costs of $26.7 million which were higher in 2022 due to the Separation. Operating loss increased due to an insurance settlement gain recorded in the second quarter of 2022, an increase of $13.5 million in amortization of acquired intangibles, and the net increase in the aforementioned selling, general and administrative expenses, partially offset by the higher gross profit. Adjusted EBITDA and Adjusted EBITDA margin increased due to improved sales mix, partially offset by unfavorable foreign currency impacts in a primary manufacturing facility during the year ended December 31, 2023 compared to the prior year.

Recon

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.

The following table summarizes selected financial data for Recon:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["","(Dollars in millions)"],["Net sales","$","1,009.7","","","$","630.4","","","$","535.5"],["Gross profit","$","612.3","","","$","433.2","","","$","351.1"],["Gross profit margin","60.6","%","","68.7","%","","65.6","%"],["Selling, general and administrative expenses","$","595.2","","","$","387.6","","","$","334.0"],["Research and development expense","$","55.6","","","$","40.3","","","$","27.4"],["Amortization of acquired intangibles","$","73.2","","","$","40.0","","","$","46.2"],["Restructuring and other charges","$","12.3","","","$","6.4","","","$","9.4"],["Goodwill impairment charge","$","330.0","","","$","\u2014","","","$","\u2014"],["Operating loss (GAAP)","$","(454.0)","","","$","(41.0)","","","$","(52.9)"],["Operating loss margin (GAAP)","(45.0)","%","","(6.5)","%","","(9.9)","%"],["Adjusted EBITDA (non-GAAP)","$","216.9","","","$","116.7","","","$","94.7"],["Adjusted EBITDA margin (non-GAAP)","21.5","%","","18.5","%","","17.7","%"]]
[[/GREPCENT_TABLE]]

49

2024 Compared to 2023

Net sales increased in Recon by $379.3 million, or 60%, of which $338.1 million was attributable to the Lima and Novastep acquisitions. Recon sales were negatively impacted by a $4.3 million decrease from the discontinuance of certain non-core product lines. Comparable Sales Growth for Recon was driven by approximately 8.2% increase in volume and market share gains and favorable currency translation of 0.3%. Gross profit increased $179.1 million in the year ended December 31, 2024 compared to the prior year period, primarily due to higher net sales due to the Lima Acquisition, and improved operating leverage, offset by an increase of $51.6 million in inventory fair value step-up amortization charges. The increase in inventory step-up charges led to a decrease in Gross profit margin. Selling, general and administrative expense increased by $207.6 million over the same period primarily due to increased Strategic transactions costs associated with Lima integration activities, increased commissions driven by higher sales, a general and administrative expense increase due to the Lima Acquisition, and increases in existing business investments to support growth. Research and development expense increased compared to the prior year period due to the Lima Acquisition and increased spending within other recently acquired businesses in our Recon segment, which are investing in surgical productivity solutions and computer-assisted surgery technologies. Operating loss increased, primarily due to a Goodwill impairment charge of $330.0 million, a $48.9 million increase in strategic transaction costs including the deal costs for the Lima Acquisition and integration costs, and an increase in amortization of acquired intangibles and inventory fair value step-up amortization charges, offset by the aforementioned factors driving growth. Adjusted EBITDA increased primarily due to increased gross profit from the Lima Acquisition and improved operating cost leverage.

2023 Compared to 2022

Net sales increased for Recon in the year ended December 31, 2023 compared with the prior year, by $94.9 million, or 17.7%, primarily due to higher sales volumes driven by broad market strength and market outperformance. Gross profit increased in the year ended December 31, 2023 compared to the prior year, by $82.1 million, primarily due to increased sales in our existing businesses, improved operating cost leverage, and the benefit of a decrease of $12.7 million in inventory fair value step-up amortization charges, which also led to an increase in Gross profit margin. Selling, general and administrative expense increased $53.6 million, including an increase of $43.1 million, or 15%, due to the growth in Recon from increased commissions driven by higher sales, investments to support growth, spending on MDR, and cost inflation, as well as a net increase in Strategic transactions costs of $3.9 million from an increase in deal and integration costs for the Lima and Novastep acquisitions offset by a decrease of Separation costs. Research and development expense increased compared to the prior year period, primarily due to increased spend within recently acquired businesses which are investing in surgical productivity solutions and computer-assisted surgery technologies. Operating loss decreased primarily due to the aforementioned factors driving organic growth, offset by an insurance settlement gain recorded in the second quarter of 2022 and an increase of $6.2 million in amortization of acquired intangibles. Adjusted EBITDA increased primarily due to growth in existing businesses and operating leverage, partially offset by inflation of supply chain, logistics, and other costs. Without the impact of recent acquisitions, Adjusted EBITDA increased 150 basis points compared to prior year. The recent acquisitions of Novastep and 360 Med Care were dilutive to the margin by approximately 70 basis points but are expected to be accretive to margins in future years.

50

Liquidity and Capital Resources

Overview

We finance our long-term capital and working capital requirements through a combination of cash flows from operating activities, various borrowings and the issuances of equity. We expect that our primary ongoing requirements for cash will be for working capital, funding of acquisitions, capital expenditures, restructuring cash outflows, and interest and principal repayments on our term loan and amounts drawn on our revolving credit facility. We believe we could raise additional funds in the form of debt or equity if it was determined to be appropriate for strategic acquisitions or other corporate purposes.

ESAB Separation

We completed the separation of ESAB on April 4, 2022, through a tax-free, pro-rata distribution of 90% of the outstanding common stock of ESAB to our shareholders. At the time of the Separation, we retained 10% of the shares of ESAB common stock.

In connection with the Separation, ESAB issued $1.2 billion of new debt securities, the proceeds from which were used to fund a $1.2 billion cash distribution to us upon Separation. We used the distribution proceeds in conjunction with $450 million of borrowings on a term loan under our Credit Agreement and $52.3 million of cash on hand to repay $1.4 billion of outstanding debt and accrued interest on our prior credit facility, $302.8 million of outstanding debt and accrued interest on our senior notes due February 15, 2026 (“2026 Notes”), as well as a redemption premium at 103.188% of the principal amount of our 2026 Notes, and other fees and expenses due at closing. Additionally, on April 7, 2022, we completed the redemption of our senior unsecured notes due April 2025 (“Euro Senior Notes”) representing all of our outstanding €350.0 million principal 3.25% Senior Notes due 2025 at a redemption price of 100.813% of the principal amount and accrued interest for $391.2 million. See section Enovis Term Loan and Revolving Credit Facility in Note 13, “Debt” in the accompanying Notes to Consolidated Financial Statements for more detail on the new Credit Agreement.

In the second quarter of 2023, we recorded Debt extinguishment charges of $20.1 million, including $12.7 million of redemption premiums on the retired debt instruments and $7.4 million in noncash write-offs of original issue discount and deferred financing fees.

On November 18, 2022, we divested the retained ESAB shares to a lender under the Credit Agreement in a tax-efficient exchange for extinguishing $230.5 million of our outstanding term loan under the Credit Agreement.

Equity Capital

In 2018, our Board of Directors authorized the repurchase of our common stock from time-to-time on the open market or in privately negotiated transactions. No stock repurchases have been made under this plan since the third quarter of 2018. As of December 31, 2024, the remaining stock repurchase authorization provided by our Board of Directors was $100.0 million. The timing, amount, and method of shares repurchased is determined by management based on its evaluation of market conditions and other factors. There is no term associated with the remaining repurchase authorization.

Enovis Term Loan and Revolving Credit Facility

On April 4, 2022, we entered into a new credit agreement (the “Credit Agreement”), consisting of a $900 million revolving credit facility (the “Revolver”) with an April 4, 2027 maturity date and a term loan with an initial aggregate principal amount of $450.0 million (the “2022 Term Loan”) which was fully extinguished during the first quarter of 2023. The Revolver contains a $50 million swing line loan sub-facility. Certain U.S. subsidiaries of the Company guarantee the obligations under the Credit Agreement. The agreement was amended on October 23, 2023, in conjunction with the financing of the Lima Acquisition as further discussed below.

On November 18, 2022, the Company completed an exchange with a lender under the Credit Agreement of 6,003,431 shares of common stock of ESAB, representing all of the retained shares in ESAB following the Separation, for $230.5 million of the $450.0 million in Enovis Term Loan that was outstanding at that time under the Credit Agreement, net of cost to sell. On March 1, 2023, the Company extinguished the remaining outstanding balance on the Enovis Term Loan with borrowings on the Revolver.

The Credit Agreement, as amended, 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

51

dividends. In addition, the Credit Agreement contains financial covenants requiring the Company to maintain (i) a maximum senior secured leverage ratio of not more than 3.50:1.00 for the fiscal quarter ending June 30, 2024 and thereafter, and (ii) a minimum interest coverage ratio of 3.00:1:00. The Credit Agreement contains various events of default (including failure to comply with the covenants under the Credit Agreement and related agreements), and upon an event of default the lenders may, subject to various customary cure rights, require the immediate payment of all amounts outstanding under the Credit Agreement. As of December 31, 2024, the Company was in compliance with the covenants under the Credit Agreement.

On October 23, 2023 the Company entered into an amendment to the Credit Agreement (the “Amendment”). The Amendment provided for a new term loan commitment in the aggregate amount of $400 million. The Term Loan Facility extended to the Company under the Amendment was funded on January 3, 2024, the date the Lima Acquisition was consummated. The Term Loan Facility requires quarterly principal repayments, which is $5 million each quarter, and matures on April 4, 2027 (the “2024 Term Loan”).

Pursuant to the Amendment, effective as of January 3, 2024, the date of consummation of the Lima Acquisition, (i) all facilities under the Credit Agreement (including the Term Loan Facility) became secured by certain personal property of the Company and certain of its subsidiaries, subject to limitations and exclusions; (ii) the financial covenant under the Credit Agreement was adjusted from total leverage ratio to senior secured leverage ratio and requires the senior secured leverage ratio to be no more than 3.75:1.00 with a step down to 3.50:1.00 commencing with the fiscal quarter ending June 30, 2024; (iii) certain changes to the negative covenants became effective (including restrictions on repayments of junior financing and amendments to junior financing documents); and (iv) certain additional changes were implemented (including the removal of the guaranty fallaway provision).

As of December 31, 2024, the weighted-average interest rate of borrowings under the Credit Agreement was 6.22%, excluding accretion of original issue discount and deferred financing fees, and there was $397.0 million available on the Revolver.

Convertible Notes and Capped Calls

In connection with the signing of the definitive stock purchase agreement for the Lima Acquisition, we entered into several financing agreements in October 2023. On October 24, 2023, we issued $460 million aggregate principal amount of senior unsecured convertible notes in a private placement pursuant to Rule 144A (the “2028 Notes”). The 2028 Notes have an interest rate of 3.875%, payable semiannually in arrears on April 15 and October 15 of each year, beginning April 15, 2024. The 2028 Notes will mature on October 15, 2028 unless earlier repurchased, redeemed, or converted.

We also entered into privately negotiated capped call transactions with certain of the initial purchasers of the 2028 Notes. The capped call transactions are intended generally to mitigate potential dilution to our common stock upon conversion of any 2028 Notes and/or offset any cash payments we are required to make in excess of the principal amount of converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap. The $62 million capped call payment was classified as equity since it meets the derivative scope exception included in ASC 815 Derivative and Hedging.

Other Indebtedness

In addition, we are party to various bilateral credit facilities with a borrowing capacity of $30.0 million. Total letters of credit and surety bonds of $36.5 million were outstanding as of December 31, 2024.

We believe that our sources of liquidity are adequate to fund our operations for the next twelve months and the foreseeable future.

52

Cash Flows

As of December 31, 2024, we had $48.2 million of Cash and cash equivalents and restricted cash, an increase of $3.3 million from the $44.8 million of Cash and cash equivalents on hand as of December 31, 2023. The following table summarizes the change in Cash and cash equivalents during the periods indicated and includes cash flows related to discontinued operations:

[[GREPCENT_TABLE]]
[["","Year Ended December 31,"],["","2024","","2023","","2022"],["","(Dollars in millions)"],["Net cash provided by (used in) operating activities","113.5","","","135.0","","","(55.9)"],["Purchases of property, plant and equipment and intangibles","(180.7)","","","(122.2)","","","(105.5)"],["Proceeds from sale of property, plant and equipment","\u2014","","","32.6","","","2.7"],["Payments for acquisitions, net of cash received, and investments","(769.9)","","","(152.8)","","","(73.7)"],["Payment for settlement of derivative","(4.8)","","","\u2014","","","\u2014"],["Net cash used in investing activities","(955.5)","","","(242.5)","","","(176.4)"],["Proceeds from (repayments of) borrowings, net","859.2","","","217.2","","","(1,591.2)"],["Distribution from ESAB Corporation, net","\u2014","","","\u2014","","","1,143.4"],["Proceeds from issuance of common stock, net","1.9","","","1.8","","","5.8"],["Payment of debt extinguishment costs","\u2014","","","\u2014","","","(12.7)"],["Payment of capped call transactions","\u2014","","","(62.0)","","","\u2014"],["Other financing","(14.3)","","","(29.2)","","\u2014","","(10.4)"],["Net cash provided by (used in) financing activities","846.8","","","127.8","","","(465.1)"],["Effect of foreign exchange rates on Cash and cash equivalents","(1.5)","","","0.2","","","2.3"],["Increase (decrease) in Cash and cash equivalents and restricted cash","$","3.3","","","$","20.5","","","$","(695.1)"]]
[[/GREPCENT_TABLE]]

Cash used in operating activities of discontinued operations for the years ended December 31, 2024, 2023 and 2022 was $0.1 million, $2.0 million, and $27.0 million, respectively. The 2023 activity includes maintenance and legal costs associated with the sale of a facility related to our discontinued operations.and the 2022 activity relates to fabrication technology business of ESAB Corporate prior to the Separation.

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, interest, income taxes and strategic transaction costs. Changes in significant operating cash flow items are discussed below.

•Operating cash flows used in continuing operations working capital was $73.7 million, $47.7 million, and $116.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. The working capital used in 2024 is primarily associated with international business growth in Recon following the Lima Acquisition. The working capital uses in 2023 and 2022 are primarily due to business growth and increases in inventory to insulate for supply chain volatility.

•Cash paid for strategic transaction costs in our continuing operations were $78.3 million, $38.3 million and $61.0 million for the years ended December 31, 2024, 2023 and 2022, respectively. These costs were primarily related to the acquisition and integration of Lima in 2024 and the Separation in 2022, as well as other business development initiatives and integration costs of recent acquisitions.

•Cash paid for interest was $51.8 million, $16.3 million and $37.1 million for the years ended December 31, 2024, 2023 and 2022, respectively. The increase in 2024 is primary due to the financing for the Lima Acquisition which closed on January 3, 2024. The decrease in 2023 is primarily a result of the change in our capital structure due to the Separation. At the time of the Separation, the Company’s total debt of $2.1 billion was repaid and replaced with a $450.0 million term loan that was reduced by $230.5 million in November 2023 in a partial extinguishment through an exchange of ESAB shares.

•During 2024, 2023, and 2022 cash payments of $21.2 million, $16.2 million and $18.5 million, respectively, were made related to our restructuring initiatives.

53

•Cash paid for MDR and other costs were $38.0 million, $27.4 million, and $16.7 million for the years ended December 31, 2024, 2023 and 2022, respectively.

Cash flows used in investing activities for 2024, 2023 and 2022 include $769.9 million, $152.8 million, and $73.7 million, respectively, for acquisitions and investments. Refer to Note 5 “Acquisitions and Investments” in the accompanying Notes to the Consolidated Financial Statements for more information. Additionally, cash flows used in investing activities in 2024, 2023, and 2022 include $180.7 million, $122.2 million, and $105.5 million, respectively, for purchases of property, plant, equipment, and intangibles. Included in these amounts is $5.9 million and $35.6 million for 2023, and 2022, respectively, related to discontinued operations. The $32.6 million proceeds from sale of property, plant and equipment in 2023 is from the sale of a facility related to our discontinued operations.

Cash flows provided by financing activities in 2024 include net debt borrowings of $859.2 million, partially offset by amounts paid for common stock repurchases of $4.8 million and amounts paid for deferred consideration of $8.8 million. Cash flows used in financing activities in 2023 include net debt borrowings of $217.2 million, partially offset by amounts paid for the capped call transactions of $62.0 million and debt issuance costs of $25.7 million . Cash flows used in financing activities in 2022 includes $1.6 billion net repayment of borrowings, which included the outstanding debt on our prior credit facility, 2026 Notes and Euro Senior Notes, partially offset by borrowings on a term loan under our credit facility at the time. The repayments were primarily funded by a $1.2 billion cash distribution from ESAB to us on separation.

Our Cash and cash equivalents as of December 31, 2024 include $33.1 million held in jurisdictions outside the U.S. Cash repatriation of non-U.S. cash into the U.S. may be subject to taxes, other local statutory restrictions and minority owner distributions.

Contractual Obligations

Debt

As of December 31, 2024, our Revolver, Term Loan, and senior unsecured convertible notes (the “2028 Notes”) had principal amounts outstanding of $503.1 million, $377 million, and $449 million, respectively. There are no required principal payments due on the Revolver within 12 months and it matures on April 4, 2027. Our Term Loan requires quarterly principal repayments of $5 million and matures on April 4, 2027. The 2028 Notes have an interest rate of 3.875%, payable semi annually in arrears on April 15 and October 15 of each year, beginning April 15, 2024, and will mature on October 15, 2028 unless earlier repurchased, redeemed, or converted.

Interest Payments on Debt

Based on December 31, 2024 outstanding balances we estimate future interest payments associated with our Revolver, Term Loan, and senior unsecured convertible notes of $136.0 million, $51.3 million, and $59.5 million, respectively, with $31.6 million, $23.5 million. and $18.1 million payable within 12 months. Variable interest payments are estimated using a static rate of 6.22% for the Revolver, 6.22% for the Term Loan, and 3.875% for the senior unsecured convertible notes.

Operating Leases

The Company leases certain office space, warehouse, distribution, and production facilities, as well as vehicles and equipment. As of December 31, 2024, the Company had fixed lease payment obligations of $80.6 million, with $21.1 million payable within 12 months.

54

Purchase Obligations

As of December 31, 2024, the Company had other purchase obligations of $130.6 million, all of which was payable within 12 months. Purchase obligations herein exclude open purchase orders for goods or services that are provided on demand as the timing of which is not certain.

We have funding requirements associated with our pension plans as of December 31, 2024, which are estimated to be $3.4 million for the year ending December 31, 2025. Other long-term liabilities, such as those for other legal claims, employee benefit plan obligations, deferred income taxes and liabilities for unrecognized income tax benefits, are excluded from this disclosure since they are not contractually fixed as to timing and amount.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements that provide liquidity, capital resources, market or credit risk support that expose us to any liability that is not reflected in our Consolidated Financial Statements at December 31, 2024 other than outstanding letters of credit of $36.5 million and unconditional purchase obligations with suppliers of $130.6 million.

Critical Accounting Policies

The methods, estimates and judgments we use in applying our critical accounting policies have a significant impact on our results of operations and financial position. We evaluate our estimates and judgments on an ongoing basis. Our estimates are based upon our historical experience, our evaluation of business and macroeconomic trends and information from other outside sources, as appropriate. Our experience and assumptions form the basis for our judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. 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.

We believe the following accounting policies are the most critical in that they are important to the financial statements and they require the most difficult, subjective or complex judgments in the preparation of the financial statements. For a detailed discussion on the application of these and other accounting policies, see Note 2 “Summary of Significant Accounting Policies” in the accompanying Notes to Consolidated Financial Statements in this Form 10-K.

Goodwill and Intangible Assets

Goodwill represents the costs in excess of the fair value of net assets acquired associated with our business acquisitions. Our business acquisitions typically result in the recognition of Goodwill, developed technology, trade name or trademark, and customer relationship intangible assets, which affect the amount of future period amortization expense and possible impairment charges that we may incur. The fair values of acquired intangibles are determined using estimates and assumptions based on information available near the acquisition date. Significant assumptions include the discount rates, projected net sales and operating income metrics, royalty rates and technology obsolescence rates. These assumptions are forward looking and could be affected by future economic and market conditions. We engage third-party valuation specialists who review the critical assumptions and calculations of the fair value of acquired intangible assets in connection with our significant acquisitions. In connection with our acquisition of Novastep during the year ended December 31, 2023, we recognized Goodwill of approximately $44 million and identifiable intangible assets of approximately $52 million. In connection with our acquisition of Lima during the year ended December 31, 2024, we recognized Goodwill of approximately $320.4 million and identifiable intangible assets of approximately $363.0 million. Refer to Notes 2, 5 and 9 to the Consolidated Financial Statements for a description of the Company’s policies relating to Goodwill and Intangible Assets.

We evaluate the recoverability of Goodwill and indefinite-lived intangible assets 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. Goodwill and indefinite-lived intangible assets are considered to be impaired when the carrying value of a reporting unit or asset exceeds its value.

In the evaluation of Goodwill for impairment, we first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting entity is less than its carrying value. If we determine that it is more likely than not for a reporting unit’s fair value to be greater than its carrying value, a calculation of the fair value is not performed. If we determine that it is more likely than not for a reporting unit’s fair value to be less than its carrying value, a calculation of the fair value is performed and compared to the carrying value of that reporting unit. In certain instances, we may elect to forgo the qualitative

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assessment and proceed directly to the quantitative impairment test. If the carrying value of a reporting unit exceeds its fair value, Goodwill of that reporting unit is impaired and an impairment loss is recorded equal to the excess of the carrying value over its fair value.

Generally, we measure fair value of reporting units based on a present value of future discounted cash flows and a market valuation approach. The discounted cash flow models indicate the fair value of the reporting units based on the present value of the cash flows that the reporting units are expected to generate in the future. Significant estimates in the discounted cash flow models include the weighted average cost of capital, revenue growth rates, long-term rate of growth, profitability of our business, tax rates, and working capital effects. The market valuation approach indicates the fair value of the business based on a comparison against certain market information. Significant estimates in the market approach model include identifying appropriate market multiples and assessing earnings before interest, income taxes, depreciation and amortization.

For the year ended December 31, 2024, the Company identified an impairment indicator associated with a sustained decrease in the Company’s publicly quoted share price and market capitalization, relative to the carrying value of our reporting units. Accordingly the Company performed a quantitative assessment of Goodwill as part of our annual goodwill impairment testing on the first day of the fourth quarter of 2024. We determined the fair values of the reporting units by equally weighting a discounted cash flow approach and market valuation approach. Determining the fair value of a reporting unit requires the application of judgment and involves the use of significant estimates and assumptions which can be affected by changes in business climate, economic conditions, the competitive environment and other factors. We base these fair value estimates on assumptions our management believes to be reasonable but which are unpredictable and inherently uncertain.

Based upon the results of the quantitative impairment test, the Company determined the carrying values of each of the Reconstructive and Prevention & Recovery reporting units exceeded their fair values as of the date of our annual impairment test. In order to align each reporting unit’s fair value model with the Company’s overall market capitalization, the Company reduced long-term cash flow projections and reduced market multiples to the low end of acceptable ranges. As a result, the Company recognized a non-cash goodwill impairment charge of $645 million ($330 million for the Reconstructive reporting unit and $315 million for the Prevention & Recovery reporting unit).

A further sustained decline in our share price and market capitalization, future cash flows, end-markets and/or geographic markets could result in additional impairment charges that could materially affect our financial statements in any given year. Actual results could differ from our estimates and projections, which would also affect the assessment of impairment. As of December 31, 2024, after recognition of the $645 million impairment charge, we have Goodwill of $1.7 billion ($925 million for the Reconstructive reporting unit and $768 million for the Prevention and Recovery reporting unit) that is subject to at least annual review for impairment. See Note 9 “Goodwill and Intangible Assets” in the accompanying Notes to Consolidated Financial Statements for further information.

For the years ended December 31, 2023 and 2022, the Company performed a quantitative assessment of Goodwill for each of the Reconstructive and Prevention & Recovery reporting units as part of our annual impairment testing on the first day of the fourth quarter, both of which indicated no impairment existed.

Income Taxes

We account for income taxes under the asset and liability method, which requires that deferred tax assets and liabilities be recognized using enacted tax rates for the effect of temporary differences between the book and tax bases of recorded assets and liabilities. Deferred tax assets are reduced by a valuation allowance if it is more likely than not that some portion of the deferred tax asset will not be realized. In evaluating the need for a valuation allowance, we consider various factors, including the expected level of future taxable income and available tax planning strategies. If actual results differ from the assumptions made in the evaluation of our valuation allowance, we record a change in valuation allowance through income tax expense in the period such determination is made.

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Accounting Standards Codification 740, “Income Taxes” prescribes a recognition threshold and measurement attribute for a position taken in a tax return. Under this standard, we must presume the income tax position will be examined by a relevant tax authority and determine whether it is more likely than not that the income tax position will be sustained upon examination based on its technical merits. An income tax position that meets the more-likely-than-not recognition threshold is then measured to determine the amount of the benefit to be recognized in the financial statements. Liabilities for unrecognized income tax benefits are reviewed periodically and are adjusted as events occur that affect our estimates, such as the availability of new information, the lapsing of applicable statutes of limitations, the conclusion of tax audits and, if applicable, the conclusion of any court proceedings. To the extent we prevail in matters for which liabilities for unrecognized tax benefits have been established or are required to pay amounts in excess of our liabilities for unrecognized tax benefits, our effective income tax rate in a given period could be materially affected. We recognize interest and penalties related to unrecognized tax benefits in the Consolidated Statements of Operations as part of Income tax expense. Net liabilities for unrecognized income tax benefits, including accrued interest and penalties, were $33.4 million as of December 31, 2024 and are included in Other liabilities or as a reduction to deferred tax assets in the accompanying Consolidated Balance Sheet.

Revenue Recognition

We account for revenue in accordance with Topic 606, “Revenue from Contracts with Customers”. We recognize revenue when control of promised goods or services is transferred to the customer. The amount of revenue recognized reflects the consideration to which we expect to be entitled in exchange for transferring the goods or services. The nature of our contracts gives rise to certain types of variable consideration, including rebates and other discounts. We include estimated amounts of variable consideration in the transaction price to the extent that it is probable there will not be a significant reversal of revenue. Estimates are based on historical or anticipated performance and represent our best judgment at the time. Any estimates are evaluated on a quarterly basis until the uncertainty is resolved. Additionally, related to sales of our medical device products and services, we maintain provisions for estimated contractual allowances for reimbursement amounts from certain third-party payors based on negotiated contracts, historical experience for non-contracted payors, and the impact of new contract terms or modifications of existing arrangements with these customers. We report these allowances as a reduction to Net sales.

We provide a variety of products and services to our customers. Most of our contracts consist of a single, distinct performance obligation or promise to transfer goods or services to a customer. For contracts that include multiple performance obligations, we allocate the total transaction price to each performance obligation using our best estimate of the standalone selling price of each identified performance obligation.

A majority of the revenue we recognize relates to contracts with customers for standard or off-the-shelf products. As control typically transfers to the customer upon shipment of the product in these circumstances, revenue is generally recognized at that point in time. For service contracts, we recognize revenue ratably over the period of performance as the customer simultaneously receives and consumes the benefits of the services provided.

Any recognized revenues in excess of customer billings are recorded as a component of Trade receivables. Billings to customers in excess of recognized revenues are recorded as a component of Accrued liabilities. Each contract is evaluated individually to determine the net asset or net liability position. Substantially all of our revenue is recognized at a point in time, and revenue recognition and billing typically occur simultaneously.

The period of benefit for our incremental costs of obtaining a contract would generally have less than a one-year duration; therefore, we apply the practical expedient available and expense costs to obtain a contract when incurred.

Trade receivables are presented net of an allowance for credit losses under ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The estimate of current expected credit losses on trade receivables considers historical credit loss information that is adjusted for current conditions and reasonable and supportable forecasts. The allowance for credit losses was $24.5 million and $9.7 million as of December 31, 2024 and 2023, respectively.

Recently Issued Accounting Pronouncements

For detailed information regarding recently issued accounting pronouncements and the expected impact on our financial statements, see Note 3 “Recently Issued Accounting Pronouncements” in the accompanying Notes to Consolidated Financial Statements included in this Form 10-K.

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