Enovis Corporation (ENOV) Earnings Call Transcript & Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Colfax Corporation conference call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Chris Hix, Executive Vice President and CFO. Please go ahead, sir.

Well, thank you, Josh. And good morning, everyone, and thank you for joining us. The press release that we issued earlier this morning to announce the separation of Colfax into 2 independent publicly traded companies is available in the Investors section of our website, colfaxcorp.com. We will be using a slide presentation to walk through today's call, which can also be found on the website. Both the audio and the slide presentation of this call will be archived on the website later today. During this call, we will be making some forward-looking statements about our beliefs and estimates regarding future events and results. These future-looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language in today's press release and in our filings with the SEC. Actual results might differ materially from any forward-looking statements that we make today. Our forward-looking statements speak only as of today, and we do not assume any obligation or intend to update them, except as required by law. With respect to the non-GAAP financial measures made during the call today, accompanying reconciliation information relating to those measures can be found in our announcement press release and in today's slide presentation. We will take questions after prepared remarks and ask that the questions be limited to the separation announcement. As a reminder, next Thursday's Investor Day provides another forum for broader questions about our businesses. Now let me introduce our President and CEO, Matt Trerotola, who will start on Slide 3 of the presentation materials. Matt?

Thanks, Chris. Good morning, and thank you for joining us today on short notice. I'm pleased to share that earlier this morning, we announced our intention to separate Colfax into 2 independent publicly traded companies that will consist of our specialty Medical Technology and Fabrication Technology businesses. This decision is a result of a thorough strategic review undertaken by the Board with management, and it reflects our ongoing commitment to creating long-term value for all stakeholders. This is an exciting day for Colfax and an important step to unlock the full value inherent in our MedTechCo and ESAB businesses. We believe the separation will better position each business to execute tailored strategies to deliver above-market growth and financial performance. Over the past few years, we've successfully transformed our portfolio. We divested businesses that were highly cyclical and acquired DJO, establishing a strong position in the MedTech industry with attractive growth drivers and significant opportunities for investment. We built 2 strong high-performing businesses with leadership and capabilities that thrive and compound value as independent companies. At the same time, we believe there's a gap between how our combined company is valued and the intrinsic value of both of our businesses. We're confident that the separation will position both companies for maximum flexibility for long-term growth and value creation. In short, we believe now is the right time to pursue a separation and build on the momentum in both businesses. ESAB and MedTechCo will continue to be led by the strong management teams that have helped them they get to where they are today. I will be the MedTechCo CEO and current DJO CEO, Brady Shirley, will serve as COO. ESAB will be led by current CEO, Shyam Kambeyanda. And our Chairman, Mitch Rales, will serve on the boards of both businesses to support their future growth. The separation is subject to various conditions as described in today's announcement and is targeted to be completed in the first quarter of 2022. As you can see on Slide 4, we believe this is a unique value-creation opportunity for both businesses. First, I want to acknowledge the hard work and success of our associates in creating a solid foundation of continuous improvement and industry outperformance that has positioned each business so well in their respective industries. Each operates in distinct markets with unique business opportunities and investment requirements. We believe this separation will enable each company to sharpen its strategic focus to better capitalize on its opportunities, accelerate its strategic momentum and deliver above-market growth, margin expansion and strong consistent free cash flow. Each company will have a capital structure and capital allocation strategy tailored to its business characteristics and growth strategy. The separation will also provide improved investor alignment with each company's clear value proposition and the ability to value the 2 companies based on their strategic, operational and financial characteristics. The separation is intended to be tax-free to Colfax shareholders. On Slide 5, you can see our proven and powerful model for compounding value creation that leverages our core capabilities. We've developed leadership teams in both businesses that have deep industrial -- deep industry knowledge, strategic acumen and successful operating experiences. Our leaders and associates embrace our culture of continuous improvement, which is directly connected with our Colfax Business System or CBS. This system combines strong value behaviors, processes and tools to allow us to serve customers and patients better every day and make our businesses sustainably stronger. Our ESAB business is deep into its continuous improvement journey, resulting in consistent above-market growth and margin expansion. MedTechCo has a solid CBS foundation to leverage for further growth acceleration and operating improvements. Innovation plays a major part in driving above-market growth. Each of our businesses is known as an innovation leader. ESAB has created an engine of repeatable processes to create an ever-increasing number of new products for global customers. MedTechCo has one of the fastest-growing Reconstructive product portfolios and Prevention and Recovery, or P&R innovation engine that is restoring vitality and industry-leading levels. And both businesses have created a firm foundation to accelerate growth and create strategic advantage through digital solutions. Strategic acquisitions are a key part of our model for compounding value creation, strengthening our businesses and accelerating their growth. We have successfully executed 20 acquisitions over the past 5 years across a range of industries and around the world. Every acquisition gets the full attention of our disciplined process to ensure its strategic benefits and value capture. This capability is part of the DNA that we've built into both these businesses. With these core capabilities firmly established, we believe that both businesses are ready to independently thrive and deliver their visions. Moving to Slide 6, you can see the makeup and financial profile of each company. MedTechCo is a specialty MedTech growth company, which was established with the 2019 DJO acquisition and have substantially improved with our powerful business model. It participates in about half of the $53 billion orthopedics market with top-tier positions in attractive segments across the continuum of care. MedTech has a clear path to further accelerate growth and is expected to generate revenue of approximately $1.4 billion and segment-level adjusted EBITDA approaching $300 million in 2021. ESAB is a global fabrication technology leader with an unparalleled global footprint, track record of industry-leading product innovation and strong positions in attractive emerging markets. ESAB is expected to generate revenue of approximately $2.2 billion and segment-level adjusted EBITDA of about $400 million in 2021. Slide 7 includes more details of our specialty MedTech company. Joining me on the leadership team will be DJO CEO and Colfax EVP, Brady Shirley, who will serve as Chief Operating Officer and also as a director on the MedTech Board. Brady has enjoyed a long and successful career in the orthopedic space, including leading the DJO surgical business starting in 2016 and the entire portfolio beginning in 2018. Colfax CFO, Chris Hix, will serve as the CFO of MedTechCo. The company will be headquartered in Wilmington, Delaware with a significant presence in Dallas, Texas and will be renamed before the separation is completed to reflect its strategic focus. When we bought the MedTech business in early 2019, its surgical products were on a very strong growth path, and they continued that momentum. The P&R products have a rich history as industry leaders that consistently grew above market rates. They're sold under many of the industry's strongest brands, such as DonJoy, Aircast and Chattanooga. We made investments and used CBS to improve operations, restore delivery performance to drive P&R back to market growth levels. Our work on innovation is expected to drive market outperformance as vitality levels continue to improve. The MedTechCo business has recently completed several strategic bolt-on acquisitions, strengthening and expanding its position in attractive market segments, including foot and ankle reconstruction and therapeutic laser technology for rehabilitation. We believe the separation will enable MedTech -- the MedTech company to accelerate its expansion in high-growth, high-margin, served and adjacent margin -- markets through strategic M&A and R&D investments while continuing to make operational progress on its CBS journey. This will position the company with significant opportunities to deliver above-market growth, margin improvement and increased cash flow in a large global market, as you can see on Slide 8. Today, 25% of our MedTechCo business revenues are derived from the fast-growing surgical business that includes shoulder, hips, knees and foot and ankle. Our leading innovation in this area has allowed us to grow 3 to 5x faster than the underlying market since 2015. The other 75% is Prevention and Recovery products and solutions, and our global leadership positions in bracing and recovery technologies comprise most of P&R's revenue. And about 1/3 of the revenue is from faster-growing international regions. We've seen many attractive market opportunities to extend the leadership of these businesses. We believe that both parts of this business are uniquely advantaged in their markets and are linked to provide solutions across orthopedic continuum of care. We expect MedTechCo to grow rapidly both organically and through additional high-growth acquisitions. We believe executing this strategy will create higher organic growth and compounding value. Turning to Slide 9. Our ESAB business has made tremendous progress establishing itself as the trusted brand in the industry. Over the past 5.5 years, Shyam has built a strong team and has successfully integrated acquisitions, driven margins to new record levels and consistently gained market share. Kevin Johnson, a longtime financial executive within Colfax, has been the business CFO for the past 2 years and will transition into the public company CFO role. The company will remain headquartered in Maryland and continue to operate under its well-known brand name ESAB. ESAB has an unparalleled business model with global scale, regional leadership and a predictable recurring revenue stream for consumables. With strong positions in attractive emerging markets and higher-growth applications, we expect the company to continue to achieve above-market growth. Our ESAB business is deep into its CBS journey with strong operational and commercial execution. The company has successfully applied these tools to create repeatable processes across its supply chain, growth engines and back offices. The results are impressive. Safety is at world-class levels. Customer delivery metrics are strong, and our cost structures are competitive and continuously improving. The benefits of a continuous improvement culture are powerful. ESAB's innovation engine is a key differentiator that has been refined and continuously improved over the past few years. We're now launching significantly more products into the market, including the creation of a unique digital platform that creates tremendous value for our customers. ESAB has a disciplined M&A team and approach that has expanded its technology content, geographic reach and served applications. Acquisitions have strengthened the company and made it more predictable by positioning in new markets like health care and life sciences. And there are more opportunities to deploy capital for bolt-on acquisitions, balanced with other uses for the business' steady cash flow. Turning to Slide 10. You'll see why our FabTech business is the true global leader with scale in all regional markets. Our best-in-class innovation program continues to thrive with 84 new product introductions in 2019, up from 24 new products in 2016. In 2020, we maintained a high level of innovation despite the pandemic. Over the last few years, we've made significant operating improvements, including rationalizing our manufacturing footprint and leveraging CBS to drive productivity. As a result, our adjusted EBITA margin increased 360 basis points from 2015 to pre-COVID 2019 results, and we have line of sight for more improvements in the coming years. In the upper right-hand corner, you'll see that in 2019 and in 2020, we solidly outperformed our peer group with core sales growth and profit margin expansion performance of approximately 200 and 300 basis points higher, respectively. We're confident that our industry-leading innovation program and fast-growing digital solutions program will continue to drive strong growth and an exciting future for ESAB as an independent company. I'll wrap up on Slide 11. There's a lot of work to be done to complete the separation. I want to emphasize that we're intently focused on continuing to execute our profitable growth strategy and delivering our 2021 commitments as we plan for this future. In the coming months, we'll determine the form of separation, prepare the appropriate SEC filings, build out distinct corporate capabilities and take other steps necessary to satisfy conditions for a targeted Q1 '22 separation. We'll leverage our recent experience with significant transactions to launch these 2 companies with excellence. ESAB and MedTech are poised to accelerate growth and unlock significant shareholder value, and we're excited for their futures as independent public companies. We're confident that all Colfax stakeholders, including our customers, employees and shareholders, will benefit from this separation. And we look forward to discussing this more at our Investor Day on March 11. Thank you for your interest and support for Colfax. We remain committed to transparent communication during the process. And with that, let's open up the line to questions.

[Operator Instructions] Our first question comes from Scott Davis with Melius Research.

Wow, I'm not sure what to say. At the risk of stating the obvious, what was the catalyst to getting to this decision? Was it just the mere reality that your stock was trading at discount to the sum of the parts? Or was there kind of strategic differences or limitations to capital or disagreements around where to focus? I mean, I'll just kind of open -- leave it as an open question like that.

Yes. Sure, Scott. Well, as we completed our portfolio transformation about 2 years ago, we really focused in on how to maximize the value of our 2 great platforms and the growth strategy, the innovation opportunities, the acquisition opportunities. And in the last couple of years, we've made a ton of progress. We continue to accelerate the ESAB journey and make that platform better and better and better. And we built on the momentum that had already started in the DJO businesses, and we built that MedTech platform into something that has terrific momentum and has been significantly reshaped and have had our key capabilities embedded into it on the early part of that CBS journey. And so as we were working through that progress in each of the platforms, we have a lot of thoughtful discussion in our team and in our Board about how do we maximize the full growth and potential of each of these platforms. And in the discussion, it became clear that the best path is the one that we're talking about here today, which both have the opportunity to unlock full growth potential of the platforms over time as independent companies, but also has the opportunity to unlock quite a bit of shareholder value as well.

Okay. Good answer. And then just -- I don't think I saw it in the slides. Are there -- do you have a sense of cost or synergies yet? Or what it's going to cost to stand up to 2 entities incrementally?

Yes. Scott, it's Chris. Well, I think we'll talk a little bit more about that at Investor Day, but we're not expecting a material dissynergy at the stand of the 2 companies.

Our next question comes from Joe Giordano with Cowen.

Just curious, the debate internally, the 2 paths of doing this versus go-for-the-compounder angle of a diversified entity with several sleeves, particularly with FabTech likely benefiting from a strengthening economy here. So can you kind of talk about how you scenario analysis was kind of thought through internally, particularly with the stocks working now?

Yes. So Joe, I mean, first, I think we've been able to do some great acquisitions to kickstart the compounding model here in our MedTech platform recently. And I think we've got more opportunities to continue to work on good strategic bolt-ons to keeping that business in a great direction. And we feel like the time is right now. We've got momentum in both of our platforms. We've got great strategies in terms of how we're driving them forward. And we feel like we'll be able to continue to build momentum through this year, and we'll be in great shape in the first part of next year for each of these companies to go on their attractive growth paths.

I know you haven't split up the balance sheet yet, but how -- what are your thoughts there in terms of -- like do you position one company to have like kind of a head start on capital to spend on M&A? Do you -- how do you think about equity as capital as you kind of start that journey?

We've always had, I think, a history of a prudent use of capital and thoughtful capital structures, Joe. And our intention is to set up both companies with effective capital structures that are aligned with their different strategies. And so for MedTechCo, a strong focus on strategic growth and building out some of these exciting fast-growth areas; for FabTechCo, more of a balanced capital deployment, with the idea that there's attractive bolt-on acquisitions and other growth investments and then a consideration for return of capital to shareholders as well. So there's going to be more details to follow as we get deeper into the separation project, but it will be governed by the thought that we launched both of these companies to be successful.

And just last for me, I'm just curious, like when did the momentum towards this decision really start to pick up? I guess the commentary for a while had been we don't really see a need to do this. And I understand where the shares have traded historically and the dislocation between peer multiples and stuff. But when did this really start to gain steam internally?

Yes. It's something that we've had, obviously, a lot of discussions about over an extended period of time. And I think, frankly, we see it less of a need to do it and more of an opportunity to do it. We've got an opportunity to have each of these platforms have terrific and valuable futures and to execute the strategies -- have the right amount of strategic flexibility to execute their strategy and to be aligned with the right sets of investors for the value propositions of each of these great companies as we launch them. And so it's something that's taken multiple discussions over time, sort of a natural evolution of discussions to get to a decision on path and then ultimately the right decision on timing. And we're convinced that this is the right time that we've got the right momentum, and it's the right time.

Our next question comes from Mike Halloran with Baird.

Two quick ones. So first, what are the steps from here to get this done? Obviously, they're pretty separate companies as they sit here today. The time line isn't an unusual time line versus things we've seen in the past. But are there any tangible hurdles to getting the split done at this point? It seems like it's just pretty much blocking and tackling since they're already somewhat disparate.

Yes, Mike, I think you're right. There's a -- I think, a well-structured path to get us from here towards the separation in the first quarter of 2022. Most folks understand that these 2 businesses that have benefited from CBS and from getting our -- all of our core capabilities have operated independent of each other. So the path to separate the business is made easier by the fact that they are both ready and have these capabilities independent of each other. And then the rest of it is just the blocking and tackling steps that are well understood and will continue to -- that we'll walk through between now and in the first quarter of next year.

And then second one, does this preclude you from doing any incremental M&A on either side of the businesses? Obviously, tuck-ins on the MedTech side have been core to the strategy. You've certainly accelerated them, certainly sounded optimistic about what that pipeline looked like. So any change to your momentum on that side in the short term or until you close?

No. As we've shared previously, we've got a lot of great opportunities, a healthy pipeline. And we're really excited about the deals we've gotten done in the last 4 to 5 months here. And we've got other opportunities in the pipeline, and we're going to continue to execute against that this year. And we're going to set both companies up with the right acquisition capabilities and pipeline for their respective strategies.

Our next question comes from Jeff Hammond with KeyBanc Capital Markets.

So just on the timing, I think the goal was to kind of get both companies at $3 billion. Certainly, the MedTech still maybe is a little bit smaller from a scale perspective. So just in thinking of kind of the timing, how did you get comfortable that the MedTech business has enough scale to kind of survive -- kind of go out on its own? And then just back to the kind of -- I understand you want to set both businesses up for success and appropriate balance sheet. But it seems like the lean was we're going to do a lot more deals on MedTech. So does that portend a lower leverage profile for MedTech coming out to allow for that?

Yes. Yes, sure. So first, we continue to believe both businesses have great opportunities to grow to $3 billion and beyond. As we look at MedTech specifically, with the things that we've already done and what we can see as organic and inorganic opportunities in the next couple of years, we can see a clear path for how we close in on $2 billion. And we feel like that's going to be a great start towards that $3 billion. And so if we look at where we'll be early next year and then where we can quickly move to from there, we feel like we're going to have sort of -- certainly plenty of scale as a company, where we're certainly going to have some robust corporate bandwidth and capabilities to make sure that we can drive that path to $2 billion and then on from there to $3 billion. But we feel like we'll certainly come out of the day with the right amount of scale and the right amount of cash flow to be a robust public entity.

Jeff, maybe I'll just jump in and also say that both these businesses are going to be set up with the right and have the right capabilities both -- from an M&A perspective, they've got the team, the talent, the process to acquire and integrate successfully. And they're going to have financial capacity as well. You've seen the growing earnings in both these businesses. They both have a strong path forward to continue to grow those earnings and to expand cash flow conversion. We've got both businesses to a point where they've demonstrated really good process around cash. Last year, we had, what, 97% cash flow -- free cash flow conversion. So both businesses are going to be able to translate their growing earnings into what we think is good cash flow to support the M&A agenda. And then, of course, we always have, as we've demonstrated in the past, the thoughtful use of leverage and equity to support the growth -- the strategic growth paths of the businesses.

Yes. That was going to be my follow-on on the free cash flow. I know you guys have worked hard to kind of prove out and get on a path of $250 million plus of free cash flow. Just -- should we think about free cash flow similar in terms of conversion and maybe similar ratable to what the EBITDA profiles of the -- or mix of the business is today?

Yes. Jeff, we'll talk, I think, a little bit deeper on that as we get into Investor Day. That's probably a better forum for us to get into some of the details on that. But I'll just wrap up on that question just by saying that both these businesses now have that same cash flow capability process built into them, and we think that will lead to them being successful as independent companies.

Our next question comes from Andrew Obin with Bank of America.

Congratulations.

Thanks, Andrew.

Just a question on ESAB. Within the existing model, clearly -- well, maybe not clearly, but it seemed that MedTech assets sort of had the claim on incremental dollars for M&A. How well-developed is ESAB M&A pipeline at this point? How much work has been done over the past 6 to 12 months to establish it? And how long would it take for ESAB to establish some semblance of pipeline for these deals?

Yes, Andrew. So first, you're right, it's inevitable in a company like ours that there are going to be trade-offs that need to be made in terms of where you put dollars and take -- where you put M&A dollars. And we've made a conscious decision in the recent time period to put most of our capital into getting a fast start on the MedTech growth agenda here and shaping that portfolio in a very positive direction. Now if you go back further than that, though, we put quite a bit of capital into ESAB and in a number of different acquisitions that brought new product technologies, new markets on the health care and life sciences front for gas control, new software technologies for WeldCloud. So we've made a number of acquisitions. So there is a very well-owned capability set there in ESAB from front end in terms of the strategic creation of the pipeline to the cultivation, the actual doing of deals. And so they've got a robust pipeline, and we're going to make sure that some of the Colfax corporate M&A capabilities are going to be also -- some of our Colfax corporate team capabilities will get embedded in the ESAB team. We'll put a larger share of that in the MedTechCo team, but we're going to make sure the ESAB team is also equipped with a strong and experienced M&A leader who's got the experience in our model.

And just to follow up to sort of in the same direction. My perception at least was that FabTech was partially funding the M&A for the MedTech cash for the MedTech business. And from that perspective, are you guys going to change your approach to M&A on the Colfax side post the split? Or does the split represent the fact that the kind of deals that you were targeting can absolutely be done with Colfax as a stand-alone MedTech entity?

Yes. Andrew, we're confident that both of the businesses, ESAB and MedTechCo will be in a great position to execute the M&A strategies that they have. Again, they both have got a growing earnings stream. They've got improved cash flow conversion. They're going to have -- and frankly, separating the businesses really gives both of them a chance to, if anything, to accelerate the M&A opportunities without having to ration capital between the 2 businesses. So each business has a distinct and unique pipeline of activity of M&A targets that they'll be able to pursue more aggressively as independent companies.

But it certainly sounds like the existing Colfax M&A pipeline is completely compatible within your corporate structure. That's a fair statement, right?

If I understand the question, we've got a -- we continue to have a robust pipeline of activity in the -- on the MedTechCo side of the portfolio. And we would expect -- just as we've demonstrated recently with some of these high-growth, high-margin acquisitions, we would expect that we'll continue to pursue those between now and separation and post separation. So there's a lot of opportunity that we feel is compatible with the earnings growth, the cash flow growth and the capital structures that we'll establish with this business. And certainly, ESAB will be well positioned to pursue acquisitions as well.

Our next question comes from Chris Snyder with UBS.

So there's clearly line of sight into extremely strong 2021 MedTechCo EBITA growth. But can you provide some color on how the company views that EBITA growth post 2021 to help us and the market think about valuing MedTech as an independent company?

On this call, we're going to really focus on talking about the separation. But we've got the Investor Day just coming next week, and that will be a great opportunity to get a full appreciation for the strategic opportunities, not just this year, but in particular, more of a longer-term view of the opportunity and path and momentum in both businesses, but to your question in MedTechCo.

Okay. Fair enough. And then I guess maybe for a follow-up, can you maybe talk about the strategy for MedTech to fund M&A on a stand-alone basis? Because my perception has been that the strategy was that you have FabTech, which is a strong cash flow generator, and that cash will be used to both delever overall Colfax and then fund MedTech M&A. I guess, is the assumption that MedTech will start with a clean, maybe even underlevered, balance sheet to support growth there?

Yes. So as we've been talking a little bit throughout the call here, we've got a little bit of time between now and separation to make sure that we set up both of these businesses with the right kind of capital structures that are aligned with these sort of different capital deployment strategies. We do want to make sure MedTechCo can focus on its strategic growth, but make sure FabTechCo has the ability to fund its balanced capital deployment, which is some combination of M&A and other growth opportunities. And so we'll make sure there's prudent capital structures for both businesses that support that. But I do want to come back again to the point that the MedTechCo has made terrific strides over the last 2 years of establishing a really good path toward improved cash flow conversion and the earnings growth. And we think those are 2 primary pillars that will enable a lot of the growth that we see in that business. And then as I mentioned before, both of these businesses will have a thoughtful use of leveraging from time to time equity to support the growth.

Our next question comes from Joe Ritchie with Goldman Sachs.

Congratulations, everybody.

Thanks, Joe.

So I really just have one question since we're really kind of focused on the transaction here. I'm just wondering, did you guys consider or try to sell the ESAB business to delever the MedTech business? Or obviously, make -- I understand why you guys are going down this path, but I'm just curious whether you've looked at that alternative.

Yes. Well, obviously, when you go through a strategic process like that, you always certainly think through all of the possible paths that might make sense for each of the businesses to reach its full potential and to reach your full potential for shareholders. And so we went through a robust strategic review and concluded that the best path to maximize the growth and success of each of businesses and to realize the full value potential for our shareholder is to create 2 public companies. And the businesses are -- they're ready. Shyam and the team are strong, on a great path, have got robust capabilities embedded in the business. And so that company is set up for a great journey. And the MedTechCo businesses working with our Colfax corporate teams and capabilities have made substantial progress the last couple of years, accelerating on what Brady and the team had already started, making strong operational progress, positively shaping the portfolio in a significant way. And so we feel like the MedTechCo is very much set up to be a highly successful specialty MedTech innovator as well. And we've really -- we've gotten to get a great head start here. We put quite a bit of capital in the business already. We'll be able to to make some more acquisitions potentially through the balance of this year here. And so we feel like there's going to be a great head start in terms of that journey to $2 billion and from there, to $3 billion. And obviously, that's a journey that picks up steam over time. And a high-growth business that's sharing a lot of cash flow can compound that by investing it in the right strategic acquisitions.

Our next question comes from Josh Pokrzywinski with Morgan Stanley.

Congrats on the transformation here. So I guess a couple of things. Matt, you used the word equity, I think, twice now, not that I'm counting too closely. But what is the appetite for a more creative kind of split up, where maybe part of the business is IPO-ed and sort of cleans up balance sheet all at once versus kind of just a straight split down the middle? I guess, any thought around what that could look like and if equity is something that would be contemplated as part of the separation?

Yes. So I think we've shared what we can share today. We've got a path and intent around creating these 2 public companies and segments both up for success executing their strategies. You can hear at our Investor Day next week more about those strategies and some of the more details around the transaction as well. And I think that's all we can share today. But for sure, we're going to make sure we execute that -- through that path and set both companies up to successfully execute their strategies.

Got it. That's helpful. And then I guess, just stepping back more broadly. Obviously, MedTech casts a pretty wide net in terms of the product set beyond kind of the core initial DJO, P&R assets. The -- is there any ambition to kind of widen the aperture for what ESAB would look at? I mean, I guess like the roots of Colfax have been probably a bit more diverse than just welding over time. Is that something where we should expect that addressable market to expand? Or do you anticipate still sort of stays kind of welding- and cutting-focused?

Yes. I think the business has already started to expand boundaries some in logical ways. Fabrication Technology business, I think, is already involved in some of the key components of software related to robotics, is involved in gas flow, not just gas flow for welding, but the gas flow apparatus for hospitals and life science labs and things like that. So there's already been some good proactive work moving into adjacencies that are strategically logical for the business, but enhance and shape the growth profile and the margin profile of the portfolio in a positive direction. And I think there's, for sure, more opportunity to do that. You'll hear some more about it from Shyam next week in terms of some of the exciting things going on in that business. And it's a clear global leader in FabTech, and that's kind of the core of that company and a tremendous valuable position. But there are certainly a number of different adjacencies to run down to compound value in that company as well.

And that concludes our Q&A session. I would now like to turn the call back over to Chris Hix for any closing remarks.

Great. Well, listen, thanks, everyone, for your continued interest and support of our company. And we look forward to talking with you again at Investor Day next week. And you can register for that on our website, colfaxcorp.com. Thanks again.

Thank you. Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.