Innovus at Goldman Sachs Conference: Strategic Transformation and Growth

On Tuesday, 10 June 2025, Innovus (NYSE:ENOV) presented at the Goldman Sachs 46th Annual Global Healthcare Conference. The company’s leadership highlighted a strategic transformation from Colfax to a standalone medtech entity, showcasing significant revenue growth and a promising future outlook. While the company emphasized its achievements in acquisitions and market positioning, it also addressed challenges such as tariff impacts and the need for further integration and synergy realization.

Key Takeaways

• Innovus reported revenue growth from $1.2 billion to over $2.1 billion since 2022.
• The EBITDA margin improved from 14% to approximately 18%.
• The company is transitioning from a "build" mode to an "enhance" mode, focusing on integration and synergy realization.
• Innovus is optimistic about achieving consistent 7%+ growth in line with its long-range plan.
• Efforts are being made to reduce debt and improve free cash flow.

Financial Results

Innovus reported a significant increase in revenue, rising from $1.2 billion to over $2.1 billion since 2022. The EBITDA margin has also improved, moving from 14% to approximately 18%. The company achieved $15 million in synergies from the Lima acquisition in the first year, with a target of over $40 million in three years. Despite initial concerns about a $20 million tariff headwind, the situation has improved, and Innovus expects a structural mix benefit of 50 basis points annually. The company aims for positive free cash flow this year, with a longer-term target of 70-80% conversion.

Operational Updates

Innovus’s Reconstructive Business has grown from $300 million to over $1 billion through strategic acquisitions. The Prevention and Recovery (PNR) business remains a $1 billion market leader. The integration of Lima is on track to achieve over $40 million in synergies within three years. Recent product launches include a new hip product and the Augmented Reverse Glenoid (ARG) for complex shoulder cases. The ARVIS system, an augmented mixed reality tool, is being used in shoulder procedures, with further developments planned.

Future Outlook

• Innovus is shifting its M&A strategy to focus on deals that drive higher growth and gross margins.
• The company is prioritizing the integration of Lima and executing remaining synergies.
• Efforts are underway to reduce debt leverage and increase cash flow.
• Innovus is developing solutions tailored to the ASC setting, where it is already over-indexed.
• The PNR strategy is being shaped to achieve higher growth and gross margins, while maintaining strong cash generation.

Q&A Highlights

The Q&A session included discussions on the shoulder replacement market, where Innovus is focusing on planning and guidance using its ARVIS system. Although robotics in shoulder replacement is still in early stages, Innovus is monitoring developments closely. The company believes flexibility and portability, as offered by solutions like ARVIS, will be key in the ASC setting.

For more details, readers are encouraged to refer to the full transcript of the conference call.

Full transcript - Goldman Sachs 46th Annual Global Healthcare Conference 2025:

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Check, check. So my name’s Phil Cooper. I’m part of David Roman’s U. Med tech team. We’re pleased to be joined by Innovus and we have with us Ben Barry, the CFO.

Thank you for coming. Thank I thought we’d start, for those less familiar with the story, a bit of an overview, the history, the spin of ESOP and Innovus separating out rebranding from Colfax would be great.

Ben Barry, CFO, Innovus: Yeah, sure. We’ve been through quite a bit of transformation over the last several years. We were a company called Colfax which was essentially a company that was founded by the Danaher brothers and really formed as an industrial company under the same playbook as Danaher to continue to build and shape the company through acquisition over time. And really went through its own transformation over a period of time and nineteen acquired a company called DJO Global and divested some air and gas handling businesses to where it became then Colfax’s two thirds of a welding business called ESOP and then 1 of a medtech business called DJO. It’s pretty clear over time that having two thirds industrial, 1 medtech was a little bit of a confusing story.

So we went through process while we were building and improving DJO through that acquisition in 2019 to thinking the best thing to do was to separate the company and spin out ESOP as its own public company back in 2022 and then rename the RemainCo as Innovus. And from that period from 2022 to where we are right now, we’ve taken the company from a little over $1,200,000,000 of revenue and 14% EBITDA margin to now over $2,100,000,000 of revenue and closer to 18 EBITDA. So we’ve been really building the business and shaping it through both organic and inorganic means. We’ve done a lot of acquisitions particularly on what we call our reconstructive business, several acquisitions to take that into a more diversified global player, about $1,000,000,000 business now of our a little over $2,000,000,000 company. And then we have another billion dollar part of our business called Prevention and Recovery where we are the market leader.

So overall, we’ve been through a lot of change in a short period of time. But overall, I feel like the company’s continued to be strengthened along the way.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: That’s great. Overview, fantastic. Maybe we can start with the strategy that underpin the acquisitions that you made and sort of the bigger picture strategy you had for Recon when going through these processes, maybe highlight Mathis. And then Lima, we can dive into a little bit more well.

Ben Barry, CFO, Innovus: Sure. We were really, I’d say, like I said, market leader on the P and R side. So we had a pretty well entrenched business there. But we had a very fast growing and I’d say emerging portfolio on the reconstructive side. So we had some really innovations that we had launched with the ALTIVATE shoulder which really was a bit of a pioneer with regards to reverse shoulders in The U.

S. Market that made a name for ourselves. We also launched a product in the knee called the Empower three d Knee which created further differentiation for us. But we were still a pretty small player and growing double digits for a long period of time. And we saw a lot of opportunity in the recon markets where there was a lot of big total addressable market, but we were still a small share player with meaningful innovation that was coming into the market.

And so we saw a lot of opportunities to really aggressively grow and accelerate that business both organically with these foundational innovations that we had launched, but also because there were a lot of assets out there for us to go acquire. So we built the business in foot and ankle through about five acquisitions. We diversified our business externally by acquiring a company called Mathis and then further additional international expansion with Lima last year. So over the course of a period of few years, we went from about a $300,000,000 business on the recon side to over $1

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: And of that $1,000,000,000 can you provide some kind of framework for where you are in terms of market share and your major markets that you play in as well as kind of the geographic mix of the business now today?

Ben Barry, CFO, Innovus: Yes, sure. So we have a foot and ankle business where we’re a little over $100,000,000 business. So we’re probably in, call it, high single to low double digit market share. On the shoulder side, we’re in the teens globally. We’re number three in shoulder, number two outside The U.

S. And then hip and knee, we’re only about a two or three market share player.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. And so M and A has been a cornerstone of the strategy and the vision. Is that still the vision moving forward? And what would be the kind of complexion of deals that you’re looking to do on the forward if that’s the case?

Ben Barry, CFO, Innovus: We’ve really worked hard to now build a portfolio that we feel has filled a lot of gaps in terms of the M and A agenda. So I think our view of we’ve been now transitioning out of the build mode to more of an enhanced mode. So as we look at M and A right now, I think our view is how do we continue to strengthen and improve the company through means that can help us drive towards higher growth, higher gross margin type attractiveness. But if I look across the portfolio today and given the heavy investments that we’ve done already with all the M and A that we’ve done, our key focal point right now is to really finish the integration of Lima, execute against those synergies that are still out in front of us and then to drive our debt leverage down and increase our cash flow as we drive this now portfolio that we’ve put together. Okay.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: I think that’s a good transition back to Lima. So maybe we can start with an overview of what that asset brought you, strategic rationale and then some of the financial targets that you talked about, how it’s gone so far? And then remind us on that $40,000,000 plus by year three target.

Ben Barry, CFO, Innovus: It’s gone really well. One of the main things that we were attracted to with Lima was their portfolio. They were about 40% extremity. So they brought a strong shoulder business for us outside The U. S.

They were also very complementary to the other acquisition that we did of Mathis. So where Lima was strong, Mathis generally wasn’t as strong from a country and geography perspective. And that was very much the same case vice versa with regards to where Mathis was strong. Lima wasn’t as strong. So we really loved the fact that we got good extremities capability with their shoulder business, strong geographic coverage that further diversified our ability to grow, and then some meaningful capabilities that they brought to bear as well, not only from a talent that we were able to retain, but from a product manufacturing capability standpoint, from a R and D development, three d printing capabilities, a lot of new things that we’re able to leverage and bring into our portfolio.

So all of that was exciting and something that we could build to our further growth model we were building. Also the other benefit of Lima is they come with strong margin capture opportunity. So bringing them in you saw us improve our EBITDA margins by close to 200 basis points last year. That’s partly just because they were a higher gross margin company. But then also we were able to get after these synergies of the $40,000,000 run rate over a three year period.

We got a little over $15,000,000 in year one. We’re on pace to get more this year and then the next tranche coming in 2026, but clear line of sight to that $40,000,000 plus here within three years.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. Maybe a bigger picture question if I can on how you differentiate from your large competitors, particularly on the large joint side. You said you have an knee and hip offering. What does the PNR business afford you? How have you kind of strategically positioned yourself now to be able to go to market and compete with those much larger players in a lot of aspects?

Ben Barry, CFO, Innovus: Well PNR helped us get our name out there with regards to the credibility standpoint, being able to work on getting on contracts systems knowing who we were based on leveraging our bracing products or our rehab products. So we’ve been able to continue to leverage those relationships that we’ve had not only because we’re in a lot of the hospital settings and clinics within The United States. So that gives us a target list of where to go after in terms of certain volumes. But then as we’ve continued to build out our recon capabilities and portfolio, we’re able to leverage some of those relationships as we start to have some of that dialogue about why Innovus product could be good for those various settings. And then on the recon side, it’s really been about leveraging some of these foundational innovations that we’ve launched, building strong capabilities and advocacy around that through key opinion leaders, through data that’s published around some of the benefits and the outcomes that our products generate.

And then building around that portfolio and adding more portfolio depth over time. Because if you think about part of the expansion capabilities that we built is having a more comprehensive portfolio into different philosophies, revision capabilities, thinking about where emerging trends in the market are going, starting to think about positioning ourselves well for ASC settings where a lot of volumes are going, trying to be more modernized with some of our implants because they’re a bit younger in terms of how long they’ve been on the market. So when we go into some of these care settings, thinking about being efficient. So there’s a lot of things that go into our go to market approach. But it starts with building an innovative portfolio and then building around that with advocacy, clinical evidence and data, medical education, all those types.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. You hit on a lot of the aspects I think already, but for those that are less familiar, when you win a knee share or a new knee doctor or a new hip doctor, I know you have a new hip product that’s coming to market but how do you win? Why do you win over these entrenched competitors?

Ben Barry, CFO, Innovus: It’s still around just highlighting your capabilities and your innovation at the end of the day. I mean I think we try to leverage what our products do. If you think about the shoulder, which really helped the transformation, a shift of the market to reverse shoulders, it was really about mobility and outcomes, less impingement, better mobility, better patient outcomes at the end of the day. Same thing in knee. We’ve got a differentiated product.

We’ve got what we call a dual mobility knee which pivots in two different ways depending on if you’re squatting or walking. And that’s more mimicking how the traditional knee works. So it’s a unique advantage knee that allows us to get our foot in the door, highlight that innovation, get people to try it. And once they try it, they see that the patient satisfaction levels are really good compared to what they were doing in the past. And that just creates ability for us to create momentum over time, build a portfolio around that, leverage key differentiators to build upon that discussion and dialogue.

And then at the end of the day, once you get surgeons that are starting to embrace that innovation, you have the ability to penetrate them deeper with new product offering.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. So on the knee side, it sounds like that sort of an offering would lend itself to younger patients that are also probably more likely to be in an ASC setting. Is that a fair kind of summary of what you’re targeting or the low hanging fruit that you can go after?

Ben Barry, CFO, Innovus: We think that applies. I mean, we think this is a product that’s really attractive to a more demanding and younger patient that wants to get back out and be very mobile and active and part of their lifestyle. And that goes into the equation of being more competitive in environments like this.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. And if you had to summarize on the hip side, you have a new but what sort of the go to market, how are you differentiated on the HIP side now at this point?

Ben Barry, CFO, Innovus: I think HIP was continuing to build out that portfolio offering to where you could anticipate where the market was going to And I think we had gotten a little bit behind frankly there with the direct anterior approach. We have products that compete there, but the industry trend was to have a stem and an impactor device. And we’ve had that gap in our portfolio over the last several quarters. So we’ve just launched that here at the end of first quarter.

So that gives us a more robust hip offering in The US. And therefore you can go to people to our knee that haven’t converted to our hip and go back and have those conversations now that you have a more robust portfolio. And then you can go out to new accounts with both your hip and your knee portfolio and say here’s the offering that we have to try to drive some of those competitive conversions. It’s different a little bit that I would say outside The U. S.

And one of the things that I mentioned earlier is one of the really important things that we’ve tried to do is diversify our growth. So we’re not only reliant on one geography or one anatomy. So part of our building the recon business the way that we have is to try to create these different verticals of growth, be it in the foot and ankle side or in different geographies where I’d say our hip business has been performing really well internationally ever since we acquired Mathis and put Mathis and Lima together. So OUS, we’ve got some strong products and capabilities that even lend itself to further innovation that can come into The U. S.

Market over time. So we see this as a compounding thing with regards to innovation now that we’ve put all these assets together and we’ve created these new capabilities because now we can think about innovating with not only material and mechanical innovation, but we can think about how do we attach that with enabling technology, planning systems, looking through the patient journey and workflow and how do you continue to bring offerings to the market that can give you points of differentiation that can pull that whole portfolio through.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. All right. That’s great. And then the extremity side, it’s a bit of a less concentrated market in general. And so I think more opportunity to differentiate.

ALTIVATE, huge success. And you have another product coming on reverse glenoid that was I think last year that came on. What’s sort of the state of the shoulder market at this point? Your opportunity to continue to grow into it and then maybe you can also layer in the situation with robots coming to the market and how you plan to differentiate with that setup?

Ben Barry, CFO, Innovus: Yeah, our shoulder business has done well. But one area where we got a little bit behind and where Stryker did really well was with regards to these augments. So these augments are really addressing probably about fifteen percent of cases where it’s more complex and it’s a little bit more of bone loss that you’re treating. And we didn’t have a unique solution to treat that. So we launched a product called our ARG or augmented reverse glenoid at the end of last year.

So we’re building that over the course of the year in terms of the launch velocity and momentum. It’s going well so far and will help continue to strengthen the offering that we have on the ALTIVATE side just for more complex cases that we had a gap in the portfolio. We also think that with Lima and Lima bringing in a history of innovation on shoulder with their SMR system and now launching a new product called PRIMA outside The U. S. We can bring that product into The U.

S. further add robustness to our shoulder portfolio in The US. But when you think about robotics and enabling tech, we think that the shoulder is a challenging procedure when it comes to visibility. So it’s really important to have really strong planning and navigation. So we’re taking what we already had a pretty market leading planning system.

We’re enhancing that. We’re connecting it with navigation and guidance.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: And

Ben Barry, CFO, Innovus: we’re putting that in a package with regards to our ARVIS system, which is an augmented mixed reality system that’s starting to be used in shoulder cases. We started that near the end of last year. That’s going to continue to further develop over the course of this year. We’ll add features. We’ll continue to look at how do we make that planning navigation system talk with just kind of that whole patient workflow and then create good assistance to the surgeons that are using it.

So that’s going to evolve over time. But we feel like with both the portfolio that we’ve created on shoulder and some of the things that we’re working and developing on, on the enabling tech side that that’s going to continue to give us competitiveness in this market as we see the competitors really start to come up with more offerings with regards to robotics.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. I’d be remiss if I didn’t ask an overarching recon question about volume and price. What’s sort of the nature? I think we had a pretty sizable uptick post COVID. But where are we in terms of kind of normalizing volume levels?

And then what’s the nature of price from your perspective?

Ben Barry, CFO, Innovus: It’s one where to me you got to look at it in two different lenses. One you have to look at it on what is the underlying mixed pricing dynamic into the market and how is that going to evolve over time in terms of your market growth projections. And so when I look at those content in that context, I’d say that the market will continue to shift volume towards clinic based outpatient settings, which will come with price pressure. That will be offset by, I’d say, positive price momentum with things like revision and enabling tech. So there’ll be some offset there.

So if you’re looking at pricing in a macro sense in the market level, you would say that pricing will be slightly down and maybe not as much down as it used to be because you’ve got more revision and more enabling tech price that’s reading through. If you look on a component to component basis, pricing did get better over the course of post COVID because of all the inflation that came into the system. Will that revert back over time just due to competitiveness and trying to take market share? I think our planning assumption would be we would expect that to revert more to what historical patterns looked like over We’re not seeing it yet. But our planning assumption would be the market will generally get back to more competitive pricing, which would be kind of down year over year on a like to like basis.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. But you generally think more in a blended price mix dynamic than just pure price given the evolution of the company in the

Ben Barry, CFO, Innovus: I think it’s appropriate to look at it both ways honestly. But I think the one that matters most is kind of the macro, which is how what is the market that you’re playing in look like and how do you really capitalize on that. Right.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. I haven’t emphasized the ASC point, but you’re over indexed there. It’s a significant growth part of the market. What’s the strategy? Where are you in relation to your peers in terms of ASC exposure?

And sort of what are the what are you trying to drive in that setting moving forward?

Ben Barry, CFO, Innovus: It’s one where we want to win in that setting because we think that’s where volume continues to accelerate over time. I think it’s an area where again with the implant systems that we have that are seen to be more modernized, being able to drive efficiency in the instrumentation which we’ve been able to do on the ASC side, thinking about some of the more fit for purpose enabling tech for those types of settings like the ARVIS can be lower capital, more mobile, more efficient as we think about leveraging our PNR business which is in a lot of clinic settings and can really help with the patient journey both on the pre op side and the post op side. There are a lot of things that we’re doing to try to build out what our competitiveness looks like in the ASC setting. Only just having good products but then having good solutions for our customers. So I think there’s more for us to build out there.

But we are about 25% of our knees go through ASCs today, about 10% of our shoulders. So we’re probably a little bit more indexed than the market is when it comes to our ASC performance. But it’s an area where we want to continue to develop solutions that will be attractive to that setting because we think it’s going to be one that’s going to continue to drive growth.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay. On the P and R side, haven’t really hit on much yet, but high single digit recon growth this year, low single digit P and R growth, it kind of begs the question you’ve been mixing towards recon over time. From a capital allocation standpoint and an investment standpoint, how do what’s the big picture comment on the investments you make in P and R and deciding to put those incremental dollars to recon versus P and R?

Ben Barry, CFO, Innovus: P and R for us has been an area where we continue to what we call shape and improve. So as we think about shaping and improving P and R that’s how do we build a portfolio that has more reliable growth trajectory which I think you’ve seen us do over the last several quarters being 4% growth range in PNR. But do it in a way that is continuing to step up towards higher growth, higher gross margin areas within that business. So we’ve been shaping it in a way through small bolt on acquisitions, through new product launches to get it towards higher growth, higher gross margin. And if you look at our performance like we did in Q1, you see some of the benefits of that to where we grew more underlying mid single digit.

Now we continue to see opportunities there to lean into areas that can grow at a faster rate. But that market grows probably in that 3% range, 2% to three So I think our view is to continue to shape it towards a little bit more towards mid single digit growth. But one of the things that we really like about PNR is that it’s got opportunities both to improve its margin performance and also it’s a strong cash generator. It’s not very capital intense. One of the things that makes us a little bit unique as a mid cap player in the space is our P and R business is generating enough cash to reinvest all of this growth opportunity that we have on the recon So as you think about our strategy, aggressively grow and expand recon, which we’ve done both internally and externally, and then shape and improve PNR, which we’ve been doing, but still maintaining that strong cash performance that can reinvest in

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: the Is price a good guy or a bad guy in P and R?

Ben Barry, CFO, Innovus: It’s been a good guy. I mean, we’re the market leader there. So we are the price leader as we went through the post COVID inflationary period. We were a little bit more aggressive with regards recapturing some of that inflation through pricing action. We have softened on that through, I’d say, the last twelve months.

But now that tariffs are coming into frame, now it’s back to leveraging some of those capabilities that we built in that post COVID inflationary period to help offset some of that We’ll come back

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: to tariffs in a But I wanted to touch on the software side of PNR and the investments you made, Motion MD, the Motion IQ, what does that afford you? What is it financially beneficial? How do you think about software integration into that side of the business?

Ben Barry, CFO, Innovus: It’s been a leading platform for us over several years now with regards to making think about workflow improvement and making clinics more efficient. It’s about in half of The US clinics now in some capacity. In certain settings, we are the ones that are helping on the clinic’s behalf run the business for them through MotionMD. And it’s just, I’d say it’s another solution that is giving a good customer experience through the ability to manage that life cycle of the patient, not only from managing through their insurance and payments and all of that, but then the fitting of the brace, thing of what to do from a rehab standpoint. So there’s a lot of things that go into that platform.

But it’s one of the areas where we’ve been the leader and it creates a bit of a moat around our business to protect our market share as a market leader.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: All right. That’s great. I was going to transition into financials, but I want to see if anybody in the audience has anything before we go that route. Thanks.

Unidentified speaker: I know Phil touched a little bit on the dynamics with respect to the shoulder replacement market and the robotic launches from the two larger players. But both of them are really slow playing it quite a bit when you compare it to the rollout in large joints. So maybe just could you go maybe expand a little bit more detail on how you kind of see the shoulder replacement market unfolding both from could robotics actually have an impact in accelerating market growth? And then secondly, given the extent to which shoulder continues to move into the ASC, how the interplay between robotics and manual approaches might influence performance? And then like thirdly, how you kind of, how you see yourself further differentiating yourself?

Ben Barry, CFO, Innovus: It’s one where I think if you look at the enabling technology work flow, I think robotics can mean different things to different people. So I think our view on the shoulder is giving given that it’s a ball and socket joint and given that you’re navigating with low visibility through lots of different muscle groupings to make sure that you get precision with regards to finding the glenoid vault where you’re making the implant position. It’s one where we feel like you have to have a really good plan that can be navigated intraoperatively. And then when you think about robotics, a lot of people think about the actual physical replacement of a shoulder or of surgeon’s manual incision or performance of that surgery. There could be various types of mechanisms that are used for that.

So our focus in the near term has been on making sure that our planning, navigation and guidance applicable there. And so we’ve been leveraging our machine or augmented and mixed reality product of ARVIS to do that. And again, that doesn’t have to be on a headset. That can be through a tablet. But it’s really taking that preoperative plan, thinking about navigation, thinking about guidance so you can get that repeatability and precision.

Now when it comes to robotic performance, be it a burr or some sort of cutting that’s used from an assistance standpoint, we think that will develop over time. It might be like what’s done in the hip with like impactor type devices. It could be something that could be more like what’s done traditionally in the knee. We think that’s gonna take some time to develop because it is a more complex procedure but it’s something that we can’t be naive to with regards to how that market will develop over time. We also know that the care settings both in The US and OUS are shifting.

So to answer your question about how that evolves through outpatient procedures in the ASC, small footprints, flexibility and portability. Again, we think having a device like we are currently developing within Arvest can play well there. But we also think there’s other tools that can be developed over time that can help across that workflow of enabling technology, which we’re working on internal development programs around. So overall, we think that market will continue to evolve. I’d say it’s early days.

Once we find solutions that really work and help generate outcomes, again, don’t add a bunch of time and cost to the procedure, but actually help assist with strong outcomes, I think you’ll see more movement there.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Great. On the financial side, really strong 1Q. I know there’s a little bit of a day rate dynamic that everyone’s talked about. But big picture, 6% to 6.5% this year, I believe, bouncing currency. And can you help us understand what’s happening this year versus your LRP and kind of walk us and bridge us to that?

Ben Barry, CFO, Innovus: It’s one where I think we’re trying to be a bit cautious and conservative with our outlook. I think if you look at the start that we get off to in the first quarter, really solid start for the company. We did get the benefit of some additional selling days in the first quarter, but our underlying performance adjusted for that was still a high single digit start to the year. We’re building a portfolio that’s capable of consistent 7% plus growth. We feel like we’re still in the midst of building that mix and portfolio with some of the new products that are going to be building over the course of the year.

So our guidance outlook as we started the year was trying to be more conservative thinking that some of that’s going to take some time to scale up. But based on the start of the year, I think we’re pretty optimistic that we’re on a good trajectory with regards to our LRP.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay, great. The tariff side, maybe open it up to you to update your comments. I believe it was a $20,000,000 headwind in the back half of the year spread across. Do you have any update with the current environment?

Ben Barry, CFO, Innovus: Yes. When we gave the update on call, we said we had $40,000,000 of exposure, 20,000,000 of impact and that that would be less than $20,000,000 of impact as we roll into 2026. So improving versus getting worse. That was with assumptions that were based on China 145 tariff and then all of the reciprocal tariffs having a ninety day pause but then going back to the stated rates which were a little bit more elevated than where they are from a pause standpoint. Things have gotten better since then.

Mexico is under a ninety day, 30% delay, I would say, in terms of what we’re seeing there. If that continues, that’s good for us because 75% of our total exposure was China. So as long as China gets settled in a way that is more productive than that 145, which so far so good, we would see upside to the guidance that we gave. Given that there have been no agreements in place, we think it’s still a very volatile situation. So there’s no need for us to give an update right now.

Hopefully, some things will get settled. So on our Q2 call, we can give some updated guidance there. But overall, things have gotten better for us, not worse.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: Okay, great. And gross margin longer term, have a structural mix benefit over time. You’ve signaled 50 basis points annually. Are there other elements that are embedded in that besides just your structural mix towards recon over time?

Ben Barry, CFO, Innovus: I think from our standpoint there are several things that we’re doing to drive profitable growth mix within each business unit as I described a little bit. The corporate mix will improve. You’ve got additional synergies from Lima that we’re still able to execute against over the course of the next few years. And then you’ve got pure leverage and productivity that you can lean on by growing high single digits, driving some improvements in your cost structure. There are some opportunities to drive more efficiency through now broader set of capabilities that we have through all these acquisitions that we’ve done.

So we see a nice runway in front of us in terms of margin expansion both in both of our business segments, but then even as we think about additional things at the corporate level that can drive efficiency over time. So we were pretty excited about our margin expansion capability. And I believe you called for positive free cash flow this year. That’s right.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: But that’s a pretty considerable ramp throughout the year. Can you maybe walk us through that and then talk about it in terms of your longer term comment about the 70 to 80% free cash flow conversion?

Ben Barry, CFO, Innovus: Yes. Knowing that we were bringing Lima in which was a transformational acquisition for us at the beginning of last year, it was an area where we knew that we’d be taking a step back when it came to our cash flow generation. So prior to the Lima acquisition, we had started up our journey in terms of that 70% to 80%. I think we were 40% to 50% in the prior year of free cash flow conversion before we did the Lima acquisition. We’re spending heavily right now on integration costs.

Last year was extremely heavy. It’s another heavy year there. We are in the last year of heavy investments around the European Medical Device Regulation remediation. So that’s going to go away as we step into 2026. We’re in heavy investment mode to get after the operational synergies that come with Lima from a CapEx standpoint.

Those step down as we get into 2026. So if you think about reasons to believe our ability to step up towards that 70 to 80%, we get a lot of things that soften quite considerably as we step into 2026. And then it’s about driving efficiency and working capital, CapEx, paying down debt which reduces interest. All of that creates that compounding value towards that 7080%.

Phil Cooper, Part of David Roman’s U. Med tech team, David Roman’s U. Med tech team: A lot of very visible levers. That’s right. Okay. All right. Well, maybe we can leave it there.

Thanks everybody for your interest. Thank you for being here. Thank you. Appreciate it. Appreciate it.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.