Enovis Corporation (ENOV) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining us today. My name is Mike Macek. I'm Colfax's Vice President of Finance. Let me start by noting that we'll be making some forward-looking statements about our beliefs and estimates regarding future events and results. These forward-looking statements are subject to risks and uncertainties, including those set forth in the safe harbor language, including on Slide 2 of today's materials and our filings with the SEC. Actual results might differ materially from any forward-looking statements we make today and 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 that, let's get started. We have a great agenda for you today. Our Chairman, Mitch Rales, and Matt will kick things off with a discussion around our strategic direction and our company's core capabilities. Next, Shyam, Brady and teams will do a deep dive into the businesses and talk about their exciting outlooks. And Chris will wrap things up with the financial update. Two logistical items to note before we get started: One, the materials you'll see today were also posted to our website earlier this morning within the IR section of colfaxcorp.com; and secondly, a format for today will include question-and-answer sessions after each agenda area. [Operator Instructions] With that, it's my pleasure to introduce Colfax's Co-Founder and Chairman of the Board of Directors, Mitch Rales.

Good morning, and thank you, Mike. I appreciate the introduction. It's nice to be here. I'm Mitchell Rales, Chairman of the Board of Colfax. For those of you who know me, you know I don't do this type of thing very often. But I thought it was critically important to help frame up the story of what's happened to Colfax over the last 5 years and tell you a little bit about where the future of Colfax is going to be going. We've embarked on a journey over the last 5 years. It was highly complex. And my dad used to say to me when I talk to him about stories like this, a key phrase: In order to finish first you must first finish. And Colfax has been on a journey of finishing right now. And what do I mean by all that? We can talk about the start of bringing Matt Trerotola in as our CEO in late 2015. Talent is everything, and Matt, as the leader, has helped this transformation come about in great detail. Matt and I set our sights immediately on the transformation of ESAB, and I'm happy to say that our new leader who joined in 2016, Shyam -- I'll say Shyam K because you guys will have trouble pronouncing his name. Shyam joined, and it's a great story as to how Shyam came to us. To give you a little history, Shyam was with Eaton, he wanted to leave and he was considering various opportunities. He was talking to a major multinational and was offered a job with that organization to become the President of $1 billion-plus Opco. But Shyam really set his sights on wanting to become a bigger fish in a smaller pond. He wanted to move the needle at an organization. He wanted to be involved in a turnaround of epic proportions. And Shyam decided as a result that ESAB was the place for him. An interesting story that I don't tell very often is the company that Shyam turned down is a company I know very well, Danaher Corporation. So Shyam, welcome. You've been doing a great job, and thanks for the work over the years. I want to tell you a little bit about what Shyam has accomplished during this 5-year journey. It's enough to spin heads at times, but ESAB was a very challenged business. It was broken. It needed massive fixing. Some of the things that Shyam did that brought great efforts to the company were, he introduced CBS in a meaningful way. It's now deeply rooted inside the company. It's doing as good a job with CBS as any business that I'm associated with today. He made massive investments in innovation, took a lot of money out of the P&L to invest in the future of the business. He nearly halved our global footprint of manufacturing around the world, made significant improvements in margin, kicked off a portfolio reshaping, which you're going to hear a lot more about today; and did numerous growth accretive and margin accretive M&A, which you'll also hear more about. The businesses today at ESAB, as a result, are lower cyclicality, higher growth, higher-margin potential. And happily now, with the restructuring for the most part behind us, is 100% cash flow conversion, and that's going to become standard work going forward. For those of you who are going to spend the day with us, I would encourage you to listen carefully to Shyam's presentation because if you like what you see there, you're really going to like what's going to happen at MedTechCo because this is a story that's a couple of years behind what Shyam has been able to accomplish at ESAB up until this point in time. So if it wasn't enough to transform ESAB, we also embarked on the journey of selling half the EBITDA of the company, moving out of Howden and IMO pumps, 2 highly cyclical, lumpy businesses with secular headwinds that were going to be apparent for years and years to come. And while all this was happening, we came upon a very lucky opportunity. And I say lucky because my friend, Jim Collins, the great author of Built to Last and Good to Great, always likes to ask the question to us. What's your return on luck? What do I mean by luck? We had the chance to acquire DJO. DJO has iconic brands, is in a medical technology space, particularly in orthopedics and has great iconic brands that we have an opportunity to really refurbish and replenish along the way. We got to buy this business at a multiple that just doesn't exist today. Not only did we get to buy it at a multiple, we got a second lucky break. We got Brady Shirley, one of the great statesmen of the orthopedics industry, to come over with the acquisition. Brady is a real winner. Brady knows the industry inside and out. And how many times do you get a chance to buy a business that's broken, but very fixable, where your starting point is 19% EBITDA margins. That's what DJO brought to us. And if we could continue the playbook that we know so well, DJO can become a very, very interesting business. So Matt and Brady went to work right away. The cadence picked up with DJO. They introduced Colfax Business System. They started to make significant improvements to the supply chain, increased organic growth, increased margins, made several growth and margin accretive acquisitions into new verticals. And once again, I would encourage you to pay very close attention at DJO to the Recon business. If you like what you see there -- Brady ran that business before he got all of DJO. If you like what you see there, you can understand that, that playbook will now cross the boundaries of all the other businesses within -- inside the MedTech business today. So as you can see, it's been a whirlwind of 4 to 5 years that we've been involved in trying to transform this business. In fact, I would tell you that of all the transformations I've been in, and that's a lot, every one of our businesses is constantly trying to think through how we transform, this one stands out as is complex as any that we've been through, but we've gotten to the other side of the equation. I liken it to say that we had the ball in our own territory. We've crossed the 50-yard line, we got into the red zone and we now pushed the ball across the goal line. We have finished. So the question becomes with the original analogy that I brought forth, what is finishing first look like at this stage of the game? Well, I want to give you a little bit of thoughts about the aspirational vision for where both of these businesses will go. And the best way to tell the ESAB story is to talk about my good friend and former CEO of IDEX, Andy Silvernail. I've known Andy for a long time. In fact, I hired Andy when he was with Danaher back in the old days. Take a look at what Andy did to reshape the portfolio of his industrial business and continue to move the needle forward with growth accretive M&A, good innovation and the likes. We learned a lot by looking at that story and trying to understand how all that unfolded. We've had deep conversations with Andy about what he's done at IDEX over the years. So what you can expect at ESAB on an ongoing basis is continue our innovation cadence, we're going to continue to gain market share, we're going to continue our margin expansion story, and we're going to continue to reshape the business mix by acquiring into less cyclical, higher-growth, higher-margin verticals and expand into near adjacencies. And all of this with a management team that punches significantly above its weight. Please get to know the management team at ESAB, and I hope you'll have as much confidence in what they're doing as what I do. On the MedTech, this is an interesting story. What do we aspire to at the MedTech business? You have to think Teleflex. And why do I say that? We studied Teleflex at great length. We love the story of what we saw at Teleflex. So much so that we asked Liam Kelly if he would be willing to join the Board of Colfax to help us embark on this strategy. Graciously, he said, yes, and he's been an inspiration in the boardroom, helping us think through how we want to go from a $1.4 billion enterprise to a $2.5 billion to $3 billion enterprise in the years to come and reshape the business to higher growth as well. I'd also like to say that we have an unbelievable one-two punch here. Between Matt and Brady as the leaders of this business, we are going to be able to get after so many more things that might just take time if one of these individuals was running the business. They're going to continue to build muscle, they're going to deepen the roots of the Colfax Business System, which is starting to take hold now, but has a lot more room to run; they're going to aggressively invest in innovation, especially in the bracing market to expand our organic growth rate; they're going to continue restructuring to eliminate waste and grow margins; they're going to continue to invest and be the leader in digital health care; and they're going to continue to acquire into higher growth, higher-margin verticals, like the foot and ankle space that we've embarked on today. MedTech is on the verge of becoming a very, very special business. So to summarize, your Board has been active. We've been considering this carefully for the better part of 12 months. In fact, I had the conversation with Liam before he joined the Board that there was a high probability that a separation could take place at some point. We are creating 2 separate, highly focused businesses with very distinct strategies. Each business will have a balance sheet capacity that allows it to embark on this strategy and spend resources without having to compete with one another, and we have approximately another year to continue to build muscle and to continue our strategy and preparation work for separation. So finally, I'm sure the question that you're all wondering about was what's this mean to value? Well, in the short term, and if you know anything about us, we're not short-term thinkers. But in the short term, I expect that there'll be massive value accretion as the sum of the parts narrows as we come closer and closer to separation. Yes, that's a nice lift. It's fun. But the real game here is thinking about the next 10 years and what we can do by compounding off of a very small base? To compound off of $1.4 billion at MedTech and $2.2 billion at ESAB is a dream come true for me. I just think it's a lot easier to move the needle off of these bases and double the size of the business in the years to come than it is for a larger scale company. So if you think we can do it, if you think we're up to the challenge, it's a real opportunity. Finally, I'd like to say that I'm looking forward to serving you on the Board of both of these companies in the years to come. And my brother and I will be happy long-term shareholders as we continue to embark on this journey together. Thanks for the time today. Matt, over to you.

Thank you, Mitch, for those kind words, and I have to say that it's been a tremendous experience now for almost 12 years of my career, 5.5 here and 6 at Danaher to get the opportunity to work with Mitch and Steve and to get the benefit of Mitch's counseling and coaching and guidance in our boardroom, and I'm really excited that he's going to be involved going forward in both of these great companies. Welcome, everyone, and thank you for joining us for our Colfax Investor Day. We've got a great program for you. I'm going to start on Slide 5 with a quick recap of the news that we shared last week. We intend to separate into 2 independent, publicly traded companies with a target completion date of the first quarter of 2022. This will create a global leader in fabrication technology and a specialty MedTech innovator, both companies with tremendous momentum and opportunity. We're expecting the transaction to be tax-free to Colfax shareholders. We're absolutely convinced, as Mitch shared, that this is the best path to maximize success for both platforms and to maximize long-term value for our shareholders. The purpose of our Investor Day today is really threefold. First, to remind you of the powerful Colfax corporate capabilities that we've been imparting into these platforms and that we will embed into both companies as we separate. The second is to share the tremendous opportunities, strategies and momentum in each of the platforms as they head towards being independent public companies with very exciting futures ahead. And the third is to give you a chance to get to know some of the talented leaders who will lead these 2 great companies going forward. This is a page that I've used a lot in the last few years to talk about the powerful transformation that we've had underway in our company, the tremendous momentum that we've got building in both of our platforms and the great opportunities ahead. We divested about $2 billion of highly cyclical and project-based revenue in businesses that we have driven a lot of improvement in through the years. And we had the opportunity in early '19, as Mitch talked about, to acquire DJO Global and establish an exciting MedTech platform for our company. For the last 2 years, we've been continuing to accelerate our momentum in the ESAB platform under Shyam and the team's leadership and have demonstrated tremendous results and outperformance through that period and have great momentum. We've also, in the first 2 years of having a MedTech platform, taken significant ground, accelerating the progress that Brady was already leading on transforming that business, improving the business, continuing the strong growth in the surgical part of the business, getting the P&R part of the business back into a market plus growth path and reshaping the portfolio through a number of acquisitions that we've made in the past year. Going forward, I said a number of times, and I believe it absolutely here today, we have opportunities to build each of these platforms into $3 billion-plus leaders in their respective space with room to run beyond that. Great opportunities to improve and grow and expand these businesses. And what we've shared as the separation path that we're on, I am absolutely convinced, is the best way to accomplish this in a way that maximizes the growth and success of these platforms and that maximizes shareholder value. You're going to hear a lot more later. So let me give you just a quick snapshot of these 2 great companies we're creating. On the left, you can see, ESABCo will be a global fab tech leader, playing in a $25 billion welding and cutting market and also addressing an additional $5 billion of accelerators and adjacencies that Shyam and the team will talk some more about today. It's a welding and cutting business that is a global GDP, the GDP-plus market. And the accelerators give the team the opportunity to drive consistent mid-single-digit growth in that market environment. It's a true global leader, scale in all regions, tremendous brands, a proven innovation engine and a great opportunity, automating industrial workflows through robotics but also through software solutions that are enabling productivity in an industry that has tremendous opportunities. There are 2 very respectable peers here, Lincoln Electric and the Miller business of ITW, and Shyam and our team have been outperforming these peers for the past few years and have a great opportunity ahead. On the right, you'll see that the other company will be a specialty MedTech innovator. We're calling it MedTechCo for now, and we'll develop and share a suitable name in the months to come. This business will start with a powerful core in orthopedics and expand and grow from there in the very attractive health care industry. Orthopedics is a very attractive segment of health care with long-term growth drivers in the 4% range, a whole set of attractive segments, and our business is focused in attractive segments with great opportunities and positions. We've got terrific brands, great innovation in the surgical business -- part of the business, innovation rebuilding in the other parts of the business and a tremendous position already, automating orthopedic clinic workflows as the leader in bringing that software and automation to orthopedic clinics and some great opportunities in surgical workflows, ASCs and connected medicine for the patient journey over time. This company will compete for market share and for investors with orthopedic leaders like Stryker and also with MedTech mid-caps like Ossur, who we compete with directly in the bracing business; like Conmed who participates some in the orthopedic space, but also in other places; and Mitch talked about Teleflex as a company. When you look at the vision of the company that we're creating with high single-digit growth and high margins, that's a company that will be a great peer for us over time as well. 2 big opportunities for growth and value creation going forward. I want to remind you of our proven, powerful corporate model for compounding value creation. Each of our businesses has these core capabilities to drive superior performance. I'll talk a little bit about each of these. We focus on talent, continuous improvement through our CBS, Colfax Business System, innovation and acquisitions that accelerate our strategies and accelerate and reshape our portfolios in attractive directions. As we focus on these key corporate capabilities, we drive above-market growth, strong margin expansion and improvements in cash flow that enable us to reinvest in the business organically and through acquisitions and create compounding value over time for our shareholders. Each of our businesses will have embedded these capabilities to drive compounding value. And as Mitch shared, the scale of each of these businesses as they start their journey as public companies will create a tremendous runway to drive significant compounding value over time. Let me share a little bit more about each of these, starting with talent. Our talent focus is about culture and process. Culture is about a set of values that we lead and model as leaders and drive deep into the organization with continuous improvement at the center. Continuous improvement drives all that we do, and we focus on our customers, on using talent and innovation to fuel our success and ultimately driving relative outperformance that is sustainable and builds over time. Our processes in the talent area make sure that we've got fantastic talent that is developed and supported, that we've got deep pipelines of succession and that we make sure that the organization is highly motivated and engaged and developed to be highly effective. And we've got powerful processes to achieve this as well. This culture and talent focus are critical to driving our strategy for compounding value. And ESAB, Shyam and the team have been driving for years this culture into the business, and it's deep and wide into the business, and it's supporting the great success the business has today. In the diligence, as I got to know, Brady, I got a good sense for -- that our values were well aligned and that the values that he was imparting into the DJO business for its great future ahead were very overlapping with the kind of values that we drive into our continuous improvement, CBS culture. And he and I have worked closely together over the last couple of years to shape a culture for MedTechCo going forward that is really the best of both of embedding these CBS values and retaining some of the great values that existed in DJO as we acquired the business. We've also been working together, accelerating the talent journey and making strong improvements with these talent processes. The work that we do -- we've done on talent has put us in such a great position to be able to create 2 great companies with very strong leadership teams and with strong benches. Mitch talked a little bit about Shyam's journey with us. When we hired him over 5 years ago, we were convinced that he was an executive with tremendous arc, great potential, could lead ESAB to a tremendous place over time and would also have bandwidth for growth beyond that. And it was also very clear that he was very excited to learn and apply CBS and to use it in a powerful way in that business. And that's what he's done in the years that he's been with us, and he's fully prepared and ready to be a great leader of this ESAB company as we create it. Kevin Johnson, who will be his CFO, is someone that's a long-term executive with us, has led finance and driven CBS into a number of different parts of our portfolio over time. You all got to know him in the couple of years that he spent in the IR role, partnering with Chris and I. He's, for the past 2 years, been the CFO of ESAB and is fully prepared to stand with Shyam and partner to drive that business forward. And Shyam will share more about the breadth and depth of the team that we'll have in ESABCo. Brady and I will partner to lead MedTechCo as the CEO and President and COO. And Brady and I are both joining the Board of MedTechCo, as Shyam will be on the Board of ESAB. I knew when I got to know Brady through the diligence that he was a tremendous executive that I'd be very excited to work with. He's a seasoned MedTech exec with over 25 years in the orthopedics industry. Deep experience, incredible network, extremely respected in the space. Many of his years in the industry were at Stryker, a very well-respected leader in the space. He's been at DJO since 2016, where he led the surgical business and got it on the tremendous arc that it's on, became the CEO in 2018. And it was clear during the diligence that this is a leader, Brady, with a passion for growth, strong operationally, would embrace CBS and that he and I would complement each other and work together in a very powerful way. And I'm very excited about continuing the journey forward in that partnership. Chris Hix will be our CFO. He was my first hire at Colfax over 5 years ago. He's been a tremendous partner through the transformation that we've been driving through and the improvements that we've been driving through in the businesses. He will bring drive, wisdom and stability as we drive through the separation process and launch MedTechCo as a public company, and we're very excited that Chris will be our CFO. The other Colfax functional leaders will be a part of MedTechCo to bring the bandwidth, to drive these corporate capabilities and accelerate them further into MedTechCo and also to create the bandwidth for growth and expansion and the optionality to make sure that we've got that leadership that's needed to aggressively grow and expand our specialty MedTech innovator. The second key corporate capability that we've been imparting into these businesses is our CBS operating system, a powerful differentiator. Both companies will carry this forward. Yes, it's about culture and values I've talked about, but it's also about process and tools. It's a journey in a business that starts in the supply chain and the innovation engine, the growth engine of the business, also moves into the back office and support of the business that fuels the acquisitions in the business. And it's a journey that builds and grows over time. ESAB are far into the CBS journey, and you're seeing the benefits of that in the performance and trajectory of the business, but it's a journey that continues to build momentum. So there's plenty of opportunity ahead for ESAB on this journey. We've got a great start in DJO, in MedTechCo in terms of starting this CBS journey and starting to build great momentum, and we're making sure that the company will be equipped to continue to drive in an accelerated way through that journey. The third key area that we focus is on innovation to drive our strategies and drive advantage in our industries. This comes from strategy, and it's about competitive advantage. We have a great innovation process that enables a constant stream of great products and solutions to drive share gain and support margin improvement in our businesses. The bottom of the page shows the substantial improvements in the innovation cadence in each of the businesses, and that's something that is enabling continuous share gain at ESAB, continuous share gain in the surgical business, in MedTechCo and has gotten us back above-market growth rates in the P&R part of MedTechCo as that innovation is coming back through the business. This is not just about product innovation. It's also about solutions, workflow solutions, software solutions, and you're going to hear some great examples today of the opportunities and momentum on these solutions in each of these businesses. This innovation capability in both business will enable continued share gain and growth acceleration as we go forward. The fourth key corporate capability is about acquisitions, a disciplined, strategy-driven acquisition process that is a differentiator over time, that accelerates our strategies and positively shapes our portfolios. ESAB has, in the last 5 years, had a tremendous impact from 7 acquisitions that have advanced the strategies, added bolt-ons, brought technologies to fuel the workflow strategies and in the case of GCE opened up a very attractive adjacency that you'll hear more about. All of these innovations were led by -- all of these acquisition processes were led by Scott Grisham who will be the Strategy and Business Development leader of the business under the coaching of Dan Pryor who's got a tremendous experience there, and he'll be the Strategy and Business Development leader of MedTechCo. So each of the businesses will not only have the process capabilities from the muscle that's been created from doing these acquisitions but also will have the talent required to continue on an acquisition journey. MedTechCo in the past year has been making some good progress on acquisitions as well. As you can see, we've done 6 acquisitions. 3 of them are some more significant ones that we've talked about in the last few months. But all of these acquisitions have moved the needle forward in terms of our strategies, with our channels, with key technologies, with expansion into the foot and ankle space that you'll hear more about today. Each of these businesses have plenty of opportunity ahead with these kinds of strategic acquisitions, and the capabilities are firmly established in both businesses. So these 4 capabilities have had a big impact on each of these platforms and will be fully embedded in them as they go forward as public companies. This page summarizes some of the key impacts over the past 5 years in ESAB and in the past few years in MedTechCo. And a number of these, between Mitch's comments and mine, we've already talked about, but I'll quickly highlight. Strong teams, CBS DNA, deep benches. In ESAB, a tremendous journey in the supply chain to great service levels around the world and then productivity and more and more cash flow over time from that CBS journey that continues to build. And in the supply chain in MedTechCo, we've already worked together with CBS to quickly restore strong service levels in the business and lay the foundation for a long productivity journey. Great innovation engines, great -- exciting progress and opportunities on workflow and software and, ultimately, some great portfolio reshaping already done and more opportunity ahead. Our strategy compounds value. It's about great service, high vitality and commercial excellence that leads to organic share gain in our industries. It's about margin expansion and cash conversion that lets us invest more organically and inorganically in our businesses to accelerate the growth and improve the margins that then creates more cash to invest. It's a powerful model. You'll see today the great momentum that each of these platforms have and the great opportunities that they have. This page gives you a picture of the vision for each of these businesses. Each have a bold but achievable vision and the talent, culture and capabilities to achieve it. ESAB, in the next few years, will be closing in on $2.5 billion with an opportunity to drive forward from there and have mid-single-digit core growth, continue to drive up the margins of the business and have very strong cash flow and invest most of that cash into the growth of the business but also have a balanced allocation perspective and consider some returns of shareholder -- of cash to shareholders. MedTechCo will have a clear path from here to close in on $2 billion through the organic growth trajectory, some of the recent acquisitions and some of the things that we've got in the funnel as additional adjacencies and bolt-ons. From there, we'll be focused on driving to high single-digit core growth, driving gross margins into the mid-60s and providing that opportunity to have strong operating margin, strong cash flow and invest that cash for the growth and expansion of the company. MedTechCo will clearly have the opportunity to build to $2.5 billion, $3 billion and beyond and will take the path that creates the most value for our shareholders. Both companies have exciting visions, great momentum towards those visions. You're going to hear a lot more about that today. So I'm going to wrap up just recapping. We're taking the next logical step given the transformation and momentum of each of these businesses. We've got exciting visions for where these 2 independent companies that we're creating can go as they improve and grow and expand. And the separation will enable both of the businesses to have maximum success against those visions and, ultimately, will create maximum shareholder value for our investors. Thank you. At this point, we'll take some questions on the first section, and then we'll move into the deep dive on FabTech.

Well, we have a number of interesting questions from our investors. We'll go ahead and start off. Mitch, you have been involved in a number of these separations. Can you tell us why the time is right today for Colfax to separate into 2 companies?

Well, that's a very interesting question and something that I do have quite a bit of experience with. First thing I would say is the landscape is littered with good situations on separation and poor situations on separation. We've seen many companies where they just wanted to dish off a business that they haven't considered fundamentally very attractive, they've loaded it up with debt and they passed it off to their shareholders. That's not what we're going to do here. This is 2 great businesses that will have solid balance sheets upon separation. And we've seen the benefit of that with situations like Fortive, with Invista, setting them up the right way day 1 is critical. So that's takeaway number one. Takeaway number two would be that, I've experienced a much higher degree of focus when these businesses are separated. There's things I've learned in strategic planning by being able to go deeper because it was less complex that we've learned about businesses that allowed us to move the strategy better and faster going forward. So each of these businesses will get a much deeper look as a result of the separation. And finally, you know the time is right when both businesses have acquisitions that they want to pursue, but the balance sheet of the parent is not strong enough to allow these businesses to move forward in their own way. And the last thing you want is resources competing with one another. So by the separation taking place and each company having a solid balance sheet, I think they'll be able to pursue their strategies a lot more aggressively and not have to worry about sharing resources.

Matt, can you talk about the decision to have the Colfax leadership team be a part of MedTechCo versus ESAB?

Yes. Thanks for the question. Obviously, we thought through the strategy first as a team and as a Board. But as we aligned on the strategy and the decision to separate, then there were some very important considerations to have around structure and talent and leadership. And I think because of our focus on talent, we had really a great situation where we've got an ESAB business with a leader and a very strong team that is very well equipped to move into becoming a public company. And yes, we'll need to build out some of the -- little bit of the corporate support in order to establish that public company, but we've got the talent at the top already in great shape with a few little things like putting Scott Grisham in to be the Strategy and Business Development leader on a go-forward basis, as I talked about earlier. And that created the opportunity for us to have the Colfax leaders be a part of MedTechCo and create the bandwidth that we need to aggressively move forward and to be able to expand and grow proactively up against an exciting growth agenda and growth -- set of growth opportunities for that business. And I think we also had the opportunity because Brady and I've been able to work together for a couple of years now and found we can work together really well. I think the Board has been able to observe that we work together very well and complement each other and that Brady works very well with the other Colfax functional leaders. And so I think we just had a very good situation where there was a natural solution that prepares each company for the vision and strategy that's ahead with plenty of bandwidth. As Mitch said, we'll punch above our weight in FabTech for sure with Shyam and the team there, and we'll have bandwidth for growth in MedTech that creates a lot of optionality in terms of where we can go over time.

Matt, how will you and Brady split your responsibilities as senior executives in MedTechCo?

Well, I say we're going to divide and conquer, and he says we're going to sow with our strengths. And I like both concepts, but I think we've already learned a lot about how and where we -- each can add the most value to the business. Obviously, I've got a passion for continuing to drive the Colfax Business System into the business in a powerful way, and Brady's got a real passion for making sure we do that but we also do it not only in the supply chain of the business and the innovation engine of the business, but that -- he's got a real passion for growth and for organic growth. And he's really always bringing the conversation back to how do we grow more times market, higher appetite, et cetera. And so there's a nice partnership there to figure out how we drive the Colfax Business System in, in a powerful way, a way that enables even more organic growth over time. As we work on acquisitions together, we're going to partner on that. We partnered on those so far, and it's great to have his deep industry's perspective. I've also done a lot of acquisitions in a lot of the industries over time. And then we partner with others like Chris Hix and Dan Pryor. Really a great team effort on these acquisitions that gives us a chance to make the best decisions to source the deals and do the deals in an excellent way and to make sure that we set things up on the backside for great success as well. And so I think there's -- we already have got some good ideas about how we naturally partner going forward. Obviously, he's going to be deep into all the things that we're doing in orthopedics. I'm certainly going to be supporting that in a proactive way, but also going to be thinking about logical other places that we might go over time as a company as well.

Matt, I'm getting a number of questions about whether we considered strategic options other than a separation?

Yes. So it's natural in any situation like this that when you're doing the strategic work, understanding the opportunity for each of the businesses and then talking about how it happens, that you talk about the full range of possibilities. But I can tell you that our discussions went very quickly as we worked through that to this being the logical path and the best path for value creation for our shareholders.

Mitch, can you comment on your decision to be on the Boards of both MedTechCo and ESAB while changing Board commitments elsewhere?

It's a good question. First, I'm the Chair of Colfax. So I feel a real sense of responsibility and fiduciary obligations to Colfax as a whole. I also know these businesses extremely well. And, I think, as Shyam embarks on his inaugural journey as a CEO, he'll need a little public company help and experience, and I think I can provide an outstanding opportunity to guide and counsel with him on that. And frankly, I get excited about both of these businesses compounding off of the bases that they're at today. You might also be referencing the fact that it was announced this morning that I'm stepping back from my responsibilities on the Board of Fortive. I gave a strong 5-year commitment there. They're in great hands. Jim Lico is a great leader, and I think the business will continue to excel and drive great opportunities in the years to come. But as my dad used to say, you can only ride one horse. You can't ride 2 horses with one a**. So here I am.

Matt, can you provide more color as to how the separation will help accelerate growth, both organically and inorganically? And is that changed with MedTechCo not having access to ESAB's cash flow?

Yes. So the separation is going to enable each of these companies to focus on their unique strategies and apply their balance sheets to fuel the growth against the strategies. We've got a great opportunity for the last few years to very proactively invest in the MedTech business. We've got another year before we'll make the separation, and there's still a significant amount of cash that we'll be generating and being able to continue to invest and continue to accelerate the pace of the shaping of the MedTech portfolio. And then over time, we'll make sure each of these businesses have the right balance sheets in order to drive and accelerate their growth.

Matt, do you expect these 2 businesses to acquire new platforms as Colfax did in the past or to focus on bolt-on acquisitions.

Yes. I think what's really exciting about each of these businesses is that there are a lot of very attractive opportunities that are kind of bolt-on and adjacencies. And at the scale that the businesses will be as they're created as new public companies, the bolt-ons, like the 2 great foot and ankle ones that we've done recently into MedTechCo, can really move the needle. And so I envision the next few years or so in each of these companies to be about strategic bolt-ons and attractive adjacencies. And certainly, there are plenty of opportunities over time to think about additional platforms into these businesses. I'll talk some about the possibilities in MedTech a little bit later in the day. But I -- even in that case, I would think of those as more step-by-step platforms as the best opportunities for each of these companies on a go-forward basis. There's been a great demonstrated track record of companies like some that Mitch has talked about, who have just gone step-by-step-by-step through this compounding journey, and I think we've got an opportunity in each of these companies to have a lot of optionality for how that's done.

I would add that in playing at ESAB in a $30 billion market and in playing at MedTechCo in a $50 billion market, we're going to be able to spend all the money we can come up with in the years to come just staying fairly close to home. I think bolt-ons and near adjacencies as our primary mode of operandi.

Well said. Well said, Mitch.

Okay. It looks like we've got one last question to our speakers. You mentioned Teleflex vision and playbook as you referenced MedTechCo. Where do you see the greatest opportunities to emulate their success?

Yes. So certainly, my reference to Teleflex is about, this is a business that transformed from industrial to MedTech, and ultimately has built a phenomenal organic growth engine with very high gross margins that then ultimately creates a lot of cash flow to be able to reinvest back into the business. And it's -- there's been a clear focus on driving up that organic growth rate and driving up that gross margin. And our vision for the path we're on already through some of the reshaping that's been done in our MedTech platform and the vision that we've got for MedTechCo is -- has a similar philosophy of focusing on things that we can bring in that are going to increase organic growth, increase our gross margins, having the right organic innovation as well as acquisitions that achieve that over time. And we know that if we do that, we can continue to shape and grow this specialty MedTech innovator that will be a highly valuable company.

I would add at the Board level, Liam has pounded the table on the value of growth accretive M&A at both the gross margin and organic growth level. And if you look closely at the MedTechCo presentation and you spend some time understanding the foot and ankle journey that we're on as well as the LiteCure acquisition that we made, they're dead on with the strategy that Liam has been preaching.

Okay. Very good. Well, that wraps up our Q&A. I know we'll have an opportunity for more questions at the end of the final presentation. So thank you.

Great.

Thanks for your questions.

Let me just do a quick intro before Shyam gets into the FabTech section of the discussion. Both Mitch and I talked about what we saw when we interviewed Shyam and brought him to join our company, and I want to just lead into his comments by saying that I had extremely high expectations for what I thought Shyam could accomplish as the leader of FabTech. And when you hear the story today, I think, you'll see he's exceeded the expectations that I've had for what he could accomplish in the past 4 -- the past 5 years as the leader of the business, and he and the team have accomplished tremendous things. There's great progress, great momentum, great opportunities ahead. And I think you're going to hear a great story about that. And I think that what you'll hear from Shyam and the other team members should give you great confidence that they're tremendous leaders to take this company forward. Shyam?

Thank you. Thank you, Matt. And thank you, Mitch and Matt, for the kind words. Good morning. I'm thrilled to be here. Let me start by saying that my name is not that difficult. It's Shyam. And some of you that are from Chicago, know the suburb of Schaumburg. So it's just like Schaumburg. And then my last name is actually the easy part of my name. It's phonetic, Kambeyanda. So let me just roll off your tongue and you'll be fine. So I've had 26 years of industrial experience, 5 of that with Colfax. And let me sort of reiterate some of the things that you've heard, the reasons I came over. The first was the fact that I got to work with Matt and Mitch. The second, Matt mentioned clearly, which was the exposure to CBS. The piece about culture, process and tools, building momentum and driving the business forward was something that I wanted to experience and build as part of my toolkit going forward. The third piece was something that Mitch mentioned, which is I wanted to run an independent Opco where I was accountable for the results of that business because I believed that's what I needed. And the last piece, which I think is as important as the top 3 that I just mentioned, is that I like the business that they were asking me to run. It was a global business. It had a great brand, a phenomenal tradition of innovation, and there was some work to do, where I felt that I could contribute positively. That's exactly what's happened. We've delivered that and more. And what I would say to all of you is that our best years are ahead of us. In meetings like this, you hope that you could have a larger part of your team present. But today, there's 3 of us that will be presenting: Myself, Olivier Biebuyck and Kevin Johnson. Matt briefly mentioned Kevin Johnson, so let me talk about Olivier. Olivier was my first hire when I joined the company. He's done a tremendous job with our marketing and products team and more recently picked on regional leadership. And I will talk about my broader team later. We are poised to be a $3 billion-plus enterprise, delivering 20% plus EBITDA and a 100% free cash flow conversion consistently. The way that we're going to do it is something that you heard Matt say. We're going to drive it through innovation, growth, CBS and continuous improvement, accretive acquisitions and the talent that we already have within our business. We have a great team and a strong bench, and we are ready for the challenges that are ahead of us. Our business has some unique characteristics. Our customers and our channel partners love people that have full solution sets, that have strong brands and the inclination of our channel is actually choose the recognized brands within the marketplace. And that plays very well into ESAB's strength. We have the best portfolio in the industry, we have the leading brands within the industry, and as a result, can provide our customers with a full solution set and our channel partners with an entire portfolio to be successful in the marketplace. We also like mix with our business. 70% of our business is what we call consumables. And by that, we mean businesses that have better predictability and lower cyclicality, and we're excited about what that does for us as we move forward. Not only do we have great products and great brands, but we also play in a $25 billion market that is diversified. Within that space, ESAB is focused and over-indexed on the segments that we believe have better growth and margin profile. And those are highlighted in green on the slide that is in front of you. In addition to that, we have secular drivers that are benefiting our industry. By that, I mean, we have welder shortages that are driving automation and ease of use, and you'll hear Olivier talk about our products addressing exactly that. Infrastructure spending and construction is expected to rise globally, which benefits us. Anytime infrastructure goes in, metal is being cut and joined together, and we love that as a business going forward. Some of you may have heard, on the renewable side, for the next couple of decades, almost 75% of the energy addition that's going to happen -- or energy production addition that's going to happen is going to be renewables. And that's going to be about $1 trillion of spend. And we believe that the wind segment within that is a voracious user of ESAB products, and we love that aspect of the business. In addition to that, we've added $5 billion of what we call accelerators that are subsegments of the segments we already participate in, but add about $5 billion worth of opportunity. So we go from serving a $25 billion market to a $30 billion market. And we pick up characteristics that drive mid-single-digit growth, 6% to 8%, and I'll be talking more about that in the upcoming slides. So I talked about products. I talked about our brands, I talked about the fact that we're in a great market segment. Now let me tell you how we're uniquely placed to take advantage of all of that. What you see on your slide today is something that separates ESAB from every one of our competitors. What we have globally is not easily replicatable. We have global scale in our functions. We have local scale and agility in our commercial and distribution teams. And that's a great way to create a ground game that cannot be copied. As a result of that, we've been able, and you'll see, deliver extraordinary results within the business. To top that, we have a great balance. We have equal amount in the emerging markets as we do in developed markets. And let me share with you something that we've not talked about before. Our EBITA percentage is equal in the developed markets as well as the emerging markets, and that's extraordinary for an industrial. Let me tell you why that is an advantage. Going forward, in the next 5 years, we believe that the developing market will grow 2.5x the developed market. That rising tide, ESAB is best equipped to capitalize on. So no matter where I get my growth from, the EBITDA percentage will be accretive and positive as we move forward. So if that then excites you, let me talk about the fact that we're in a great neighborhood. Matt mentioned this. We have good competitors. We like good competitors. We also like to have the best house in the neighborhood, and that's exactly what we're building. Our playbook, in this particular case, we are a leader, as you know, in the fabrication technology space. And the playbook that we've been running is strong organic [ growth on the back of innovation, CBS driving ] great organic margin improvement, accretive acquisitions and building out our team, and the results show it in the last 24 months. We have improved our growth versus our peer group in market by 300 basis points in the 24-month period, and we've improved our margins compared to the peer group by 200 basis points. And we believe the best is yet to come, and there's more gas in the tank to continue this journey forward. The flywheel is just getting started. Let me open up the aperture a bit and share with you a broader sense of our financials. From 2016 to 2019, this business had a CAGR of 7.7%. In that time frame, our EBITDA improved 200 basis points. And then, obviously, we had a 100-year event hit us with COVID. But CBS and the processes and tools that we had in place allowed us to react quickly to what was ahead of us. And as a result, we delivered an industry best 20% decremental. For 2021, we're going to pick up the thread where we left off in 2019. And what I can say to all of you, in the first quarter, we're off to a good start. I'm really proud of Billal and our North America team and what they've accomplished. Colfax and ESAB have invested significantly in our North American business, and we have gained momentum and are moving the ball forward and really shaping ourselves to be stronger in the North American market. Let me share with you some of the results. We grew 20% between 2016 and 2019, and we improved our gross -- our EBITDA margins by over 250 basis points. The playbook was the same. Innovative products, opening up markets, you'll hear Olivier talk about our light industrial product line in terms of Rebel and Rogue and our Sentinel helmet that we've talked about, that really opened up a market space that we did not participate in, in North America. On top of that, we have a great toolkit and a tool book related to sales, territory planning, a great ground game, value selling that was -- that is incorporated by Billal and his team, stronger channel management. And then, of course, CBS. All of that together has allowed us to deliver the results that we see in North America. And if at this moment, if I could tell you, if I would talk about Johan and his team in Europe, this slide would be similar. We continue to gain share in Europe and drive the ball forward. Michal and his team in Russia, exactly the same, so in Asia with Stanley, in India with Rohit, Isa in the Middle East and last but not least, Walter in South America. We have a phenomenally well-balanced business where all of our teams are focused on share gain and margin expansion moving forward. You've heard a lot about CBS, and I want to make this more personal with all of you as we move forward. I've been part of business systems, and I have been exposed to business systems, and one of the premier attractions for me coming here was to understand the Colfax Business System that's based off of Danaher and what differentiated us. So let me tell you what it meant to me. As part of my immersion, I was exposed to many aspects of our business. But by the second month, I was in a President's Kaizen with jeans and a T-shirt and tools in my hand helping relay out a line in one of our manufacturing facilities. I don't know of many industrial companies out there where the President of a business and the CEO, and by this, I mean, Matt, are on the shop floor, working to improve and impact their business going forward, and that is the differentiator. It's from the CEO to the shop floor associates, the embracing of CBS, the lean tools and a culture of continuous improvement. What I can tell you, that's embedded in me, that's embedded in my leadership team, that's our foundation, that's what's going to catapult us forward. Let me put something else on top of that. I see CBS in 3 layers. The first layer being the visual factory, the lean tools that we use, the daily management that we do to run our facilities. And every time that I go into one of our plants, that's exactly what I do. I participate, I look, I analyze, I sit with the team and understand what challenges they face based on their daily meetings and what they're up to. The second level of that is our commercial, our product line strategies, our leadership reviews that are consistent and standardized that allow us to react and capture moments for share gain or improvements as we move forward within our business. The last is the breakthrough piece of it. It's part of our strategic planning process, where we look at breakthrough opportunities, turn them into policy deployments and then execute it across the business. What I can say to you, the part about culture, process and tools is absolutely working at ESAB. We have built the momentum, and the best is yet to come. Talking about the strategy process that I just mentioned. We have done 7 acquisitions since I've been here. Our acquisition process starts with our strategy. We have 2 dimensions to it, one organic and the other inorganic. And all the inorganic strategies for us is what accelerates our strategic initiatives. And what you can see on this specific slide, and Matt shared it earlier, we acquired companies that got us into specialty alloys, gave us better diversification into repair and maintenance, which we like the exposure to the end markets. We bought GCE that gave us a near adjacency that you heard Mitch mention many times and also Matt, where we're excited about the growth dimension of that adjacency. We think there's opportunities to do more in that particular space. And then we strung a set of pearls that really began to differentiate us in the digital and robotics space. We acquired TBi that gave us technology in torches. We acquired HKS that gave us real-time analytics that nobody has today, WeldCloud that gave us weld processes and a catalog of that. And last but not least, most recently, we acquired OCTOPUZ, which is a software company that allows us to accelerate the adaptation of robotics in the second wave that's coming at us, and Olivier will talk more about that. We look at these acquisitions against a set of financial lenses, which is great growth characteristics, accretive gross margin, lower cyclicality and really filling out and creating a technology differentiator for us. The results are on your right. Through the cycle, we have grown and especially during the COVID period, cumulatively, these acquisitions actually delivered growth. The margins with CBS have been accretive. But also when we acquired these businesses, they were 900 basis points accretive compared to our core business. So phenomenal additions to the ESAB portfolio. Matt mentioned the person that helped us do all of these deals comes over to ESAB in Scott Grisham, and we're thrilled about that. Let me now focus a little bit more on what Mitch mentioned as a $5 billion opportunity, and Matt mentioned as well. I'll talk a little bit more deeply about the MedTech piece in my next slide. So let me focus on digital solutions and robotics. Through our strat plan cycle as we did our VOCs, voice of customers, our deep dives, what we found out that in manual welding, once you start to analyze it, you find that arc time, which is the amount of time somebody actually uses the piece of equipment to weld, is just about 10% in the worst case and in the best case somewhere between 20% and 30%, which means 90% to 70% of the time the equipment is not being used. And what I would submit to you is that people were unaware that, that was what was happening on the shop floor. What an extraordinary way to improve productivity and efficiency of our customers. That's what began the journey into WeldCloud. The team has done a lot of work organically in creating out that portfolio. Olivier is going to talk about that. On the robotics side, we will focus on creating a workflow solution. We knew we were upgrading our heavy industrial portfolio. We already have a strong suit of filler metal. We had acquired a torch company. We had built out our WeldCloud portfolio. Now we needed to create something that allowed ease of use of that particular technology. That's where OCTOPUZ came in. And all of this gives us a $5 billion opportunity with a growth rate of 6% to 8%, where gross margins are north of 50%. Today, we have $150 million in this business, and we're expecting that to grow to over $300 million over the next couple of years. GCE was a phenomenal business that we acquired in 2018. 32% of that business was squarely where we play, which is in cutting and welding. 68% of that business actually sat in what we felt was the attractive spaces that we wanted to get into, Medical, Specialty Gas Control and the Digital side, and that's what we got out of this business. This business has grown at a 7% CAGR through COVID. Through CBS, we've expanded the margins within this business by 350 basis points. And that's what we mean by continuing to do bolt-ons and near adjacencies to move our strategy forward. Our funnel is full. We absolutely expect to do a lot more of these in the years to come, and we're excited about what they are. So with that, let me hand the floor over to Olivier, and he will talk about innovation. After that, Kevin will speak about our financials, and I'll come back to summarize. Olivier, over to you.

Thank you, Shyam. Good morning. I'm excited to be here today to talk about a few things. First, our technology leadership, but also the CBS transformation journey that we led in innovation and also to talk about some of the great products that our great team of engineers and product management that I'm so proud of have been working on. But let's start first with a little bit of history. ESAB history is a story of innovation. ESAB's story starting in 1904 with the invention of the cover-up electrode, which revolutionized our industry. 117 years later, ESAB continues to shape our industry to bring new breakthrough innovations to the market. In the last few years, we have reignited this track record of innovation. COVID has not derailed us as we have been able to protect our R&D investments and protect the momentum that we have in innovation. In our core filler metal business, we are bringing new formulations to the market to capitalize on higher strengths and lightweighting trends in order to serve newer industries like electric batteries and renewables. In parallel to investing into the vitality of our core products, we have been investing in our digital offerings. We have now a suite of software which creates superior values to our customer. We also see a second wave of robotics adoption playing a critical role in our portfolio going forward, but I'll come back to that later in the presentation. So while ESAB has been shaping the industry for the last 117 years, we strongly believe that with the transformation that we have led, we are actually better placed today ever than before to continue to shape the industry in the next 100. So we talk about accelerating the pace of innovation. As I just mentioned, we have exciting new products across all our categories, healthy vitality and 3-year road maps that we are executing against. We have brought new products to the market at a much faster pace like the first multi-process 4 in 1 weld everything, go everywhere machine called Rebel 205 AC/DC or the Renegade 300i, the best power-to-weight ratio in the market. And we have done it successfully without breaking the bank. So how have we done it? Well, we have actually leveraged our size and uniqueness of our global footprint to organize ourselves in center of excellence across the world. We have shifted all our product maintenance and our light innovation to our technology centers in India and Eastern Europe. We are also making much greater use of open innovation and strategic partnership. And I'm also very proud and happy that GCE, our recent acquisition, is also a strong value of innovation and makes good use of open partnership. GCE medical valves, the MediVitop, and the [ processor ] regulators are perfect examples of innovation that defines their category. So in essence, we have deployed a very strong CBS playbook that enabled us to increase our speed and our effectiveness. So when I talk about distinctive products, let me give you a few examples. So as I said, we are transforming our portfolio. In heavy industrial equipment, for instance, the introduction of RobustFeed less than 2 years ago, which is the most portable and the most robust feeder in the market has allowed us to provide very demanding customers with a distinctive product tailored to their needs. We have gained share not only in the feeders but also in the equipment with those customers. In light industrial equipment, we have introduced a set of new products at a very sustained cadence like Rebel, Rogue, Renegade, which enabled us to gain share in a category where we used not to be very strong. These innovations are really perfect examples of products which shape their categories. So you will say, what's the secret formula? Well, I'm not going to give you the secret formula. That wouldn't be smart. But I'm going to give you a hint on our playbook and the CBS DNA that we have really put forward with the team. We really see the CBS playbook as being part of our competitive advantage. One of, of course, CBS value is innovation defines our future. Every leader at ESAB understands that the product that we produce -- that we introduce today are the brands that will generate our growth and our revenues tomorrow and ultimately create our future. There is mobilization around innovation at all levels of our company, from product management, obviously, to R&D engineers, but also to the manufacturing plants and to our commercial leadership. You might say, many companies have got great stage -- got stage gate processes, so what's different at ESAB? Well, what differentiates us is that CBS playbook is anchored into the voice of customers whilst striving for vitality and return on investment. Our product road maps are driven by product management, not by engineering. And they are based on multiple interactions with our customers while guided by our overall strategy. Once the project is initiated, we do rapid prototyping with targeted customers to really refine and define the points of differentiation. A few months prior to launch, we start to go into the preparation phase for commercial ramp-up. We have good answers between R&D and the commercial organization. And this is a part of our process that we continuously refine as we know it's one of the most critical one. This playbook, combined with our talent that I'm very proud of and our R&D centers of excellence, that's what makes us confident in our ability to position ESAB as a true innovation leader. On the previous slide, I talked about how we anchor our innovation into solving our customer issues. Our digital suite of offering is a perfect illustration of that. It's also a perfect illustration of how we are not fearful to use external partnership to bring new solutions to the market. So I suggest we run the quick video. [Presentation]

Okay. So digital solutions is really a game changer for our customers and for ESAB. It provides customers with real-time insights that, frankly, they didn't know they had before. We have been working on it for a few years, but we've started to really deploy it at large and medium-sized customers since 2019. The feedback we have been getting, in many cases, frankly, exceed our expectations on how it has created value for those customers. For instance, some customers have been able to identify what was causing them to lose production hours, which they didn't even realize they were losing. Others, like a leading supplier of suspension systems for industrial and agricultural applications has identified bottlenecks in production workflows that they we are not aware of. Another customer, a global supplier of chemical products, has been able to cut significant time in their welder certification processes across multiple of their sites and get new jobs started faster, thanks to WeldNote. For ESAB, it has always changed the conversation. We are not just selling hardware and materials to those customers, but now we are providing solutions and insights. Based on our preliminary customer success stories, we see real opportunities to add $100 million in your revenues in the next 5 years. Basically, the way we think about WeldCloud is that rather than selling, let's say, a $7,000 piece of industrial machine, now we go into a $20,000 life cycle opportunity by pulling through additional equipment, pulling through increased stickiness in share of filler metal and other consumables, and most importantly, new additional software revenues. So digital solution is something we are definitely very excited about, but that's not the only thing we are excited about. We are also excited about the second wave of robotic adoption. If you remember, the first wave of robotization in our industry was with high CapEx, high-volume applications like in automotive. Well, we see that a little bit more as the past. The future that we see is a second wave of robotization coming from higher mix, lower volume applications, thanks to the lowering cost of robots as well as the simplification of programming. We are positioning ourselves to capitalize on this new market opportunity. We have closed in January, like Shyam mentioned, on a very exciting robotic software business based in Canada called OCTOPUZ. OCTOPUZ is an offline robot programming software specialized in welding applications and working on all brands of robots. OCTOPUZ has a growing base of customers in North America, but we believe that with our global scale, we can really tremendously accelerate their growth. At the same time, we see them as a great opener for us to doors to new customers, and it's agnostic to the brand of equipment used. It gives us actually a new angle as we position ourselves to help customers' convert some of their manual processes into automated solutions. OCTOPUZ, combined with ESAB power sources, TBi torches, Purus Robotic Filler Metal, give us now the right combination of hardware, software and consumables to support our customers in their automation journey. So before giving the floor to Kevin, which will explain to you how our technology leadership translates into our financials, let me just recap the following. One, ESAB's history has been grounded in innovation leadership since 1904. Secondly, we are better positioned today than ever before to continue to shape our industry, thanks to the transformation, the CBS transformation that we started a few years ago. And lastly, we have a robust innovation pipeline, a strong global, effective and cost-efficient R&D organization that I'm quite proud of and a proven CBS playbook to continue to win. So with that said, I'm giving the floor to Kevin. Thank you.

Thanks, Olivier, and good morning, everyone. I'm delighted to show you today how CBS is improving our business and provide some detail on the building blocks to deliver our strategic goals. So on the slide is a snapshot of how we've been using CBS to drive operational excellence within our business. The first example is around price. This is a critical area for ESAB as we use price to match inflation. And our team, over the last few years, has been doing some tremendous work leveraging CBS to improve our processes in this area. We've improved our monitoring of inflation. So we have earlier sight into when inflation is happening. We've been improving our processes around how we get to price and how we go-to-market quicker in terms of price. And all of this is helping us to protect our margins. For those of you that have followed the ESAB story, historically, we have had a large number of manufacturing sites, and our team has done a great job over the last -- since 2016 in actually driving down those sites by 14 sites. These are often pretty complex projects, but our team has gotten really good at doing these using CBS. A great example of this was a recent acquisition we did. This acquisition came with 2 smaller sites. And we were able to -- and we had to close these sites quickly after the acquisition is completed. We were able to do this quickly, really a seamless experience for our customers. But also because we moved 2 smaller sites into 2 larger sites, we got the benefit of operating leverage and our margins improved. The final example on this slide is around working capital. Since 2016, we have improved our working capital by over half a turn. How have we done this? Well, firstly, we have improved our customer collection processes. As we exited 2020, our AR overdues were at historically low level for the company. We've also been improving our inventory management processes. We've been rolling out a new PFEP process. Our supply chain has done a fantastic job in this area, which has got the balance of our inventory right, not too much and not too little. And finally, we've been working on our vendor terms. And in North America, during 2020, we rolled out a new supplier financing program to great success. This has enabled us to improve our days payable outstanding by greater than 3 days, and we're currently rolling this out in the rest of our business. These are just some of the examples we have of CBS in our operations, but I hope it's giving you a flavor that it's alive and well within our company. And we've got a lot of opportunities to continue to drive CBS here to create operational improvements for many years to come. In 2020, pre-COVID, we embarked on a transformation project. The focus of this project was to reduce our SG&A costs. I'm leading this project, Shyam is on the steering committee of this project, and our entire leadership team at ESAB are all involved, supporting the project. What really excites me about this project is that it's opened up the opportunity for us to use technology, and I love technology. We've partnered with a company called Celonis, who is a world leader in data process mining. We've been able to take their technology. We've been able to apply it to our [ NBN ] processes. We've been able to identify waste in those processes. And importantly, we've been able to eliminate that waste which has driven our margins up significantly. We also have a couple of great shared-service centers, one in China, in India and another one in Budapest in Hungary. These are fantastically run mature sites. And during 2020, we've been able to take the opportunity to take some activities from higher-cost locations and move those into these shared service sites, immediately benefiting from lower cost. We've also, in this project, been able to take CBS tools that have typically been used within the operational area of our business and transfer those across and use them within SG&A. This has allowed us to accelerate savings on the project. And I think it's a great example of the fact that CBS is not just something that's used in operations. It's something that's used in everything we do today in our business. On the chart in the left on the slide, what you can see is the benefits of the work we've done. Firstly, we've driven $11 million of savings in 2020 out of the gate, so a fantastic result. In 2021, we are -- we've got a pipeline of activities. We're going to drive $14 million or greater of savings. And we've got a great pipeline of opportunities for the future, and we'll continue to generate savings in SG&A for many years to come. I couldn't be prouder of the work that my team has done in terms of improving our cash flow performance. When I started as ESAB CFO in 2019, this was one of the first areas that I focused on. What I did with my team is we reviewed our ambient process running cash, and we identified areas for improvement. Some of these areas were improving our cash flow reporting making sure that our KPIs were focused on exactly the right thing, improving the rigor in our business around cash flow management, meeting schedules and standard work in that area. But probably the most important thing we did on cash flow was we changed the culture within the organization. Previously, cash flow had been seen as a finance thing, but it's a team sport, and we got our sales, our ops, our entire team involved. Of course, getting that balance right that cash is important, but getting that balance with growth as well. In terms of our performance, as you can see on the chart on the left on the slide, in 2019, out of the gate, we drove our cash conversion to greater than 90%. As we ended 2020, we generated well in excess of 100% of just cash conversion. And as we step into '21, even with the significant growth we're expecting, we still expect our cash flow to be well in excess of 90% of conversation. As we step into the future, ESAB is on a trajectory, we will continue to deliver higher, more consistent cash flow and a conversion in the future, consistently greater than 100%. As Shyam mentioned earlier in today's presentation, we have set ourselves some key strategic goals. The first of these goals is to drive our business to be an enterprise, delivering greater than $3 billion of revenue. How are we going to do that? Well, firstly, it's -- the first pillar of delivering that is on our markets. We really just need to keep doing what we've been doing, that's leveraging our CBS growth tools and getting our first share of the market. The CBS growth tools were one of the first tools that were rolled out in ESAB after the acquisition of ESAB by Colfax in 2012. These tools are well used in our business. We're experienced at using them. And when we go to a regional management meeting, they're normally one of the first items that we discuss on our agenda. In terms of innovation, Olivier mentioned, in 2020, we launched 80 new products. We have a fantastic pipeline of future products that we're expecting to deliver, which will continue that momentum. There's a couple of those products that I'm pretty excited about and Rogue and RobustFeed, and these are products that I've heard customers talk about and really give some fantastic feedback. And these products are already giving us significant amounts of market share. The third pillar is around accelerators, and there's no better example than the Octopus acquisition we completed last month. And this is a fantastic acquisition, and I was fortunate to be on a call last week with the team at Octopus and hearing from them what they had to say around using software and how that could be applied in the wider ESAB. This acquisition is a great example where we can buy a smaller company, a market leader in a particular niche, transfer that across into ESAB with our scale and really together creating a winning formula. In terms of acquisitions, we have got really, really good at delivering acquisitions. Since 2016, we've completed several acquisitions, one that really stands to mind is the GCE acquisition completed in 2018, which is integrated really well with our business and delivering numbers that are in excess of the white paper that we set for when we started. So we've got a proven track record of doing these and doing these really well. In terms of margins, well, we've demonstrated it over the last few years. We have been able to drive sales growth, deliver profitable growth on that sales. We've been able to do some fantastic acquisitions like GCE that are accretive to our overall margins, and we'll continue to do that. And we'll continue our CBS journey. One thing on CBS that really excites me is, well, pre-COVID when we used to be able to travel and now through video and talking to our employees, is the excitement around CBS the fact that our continuous improvement culture is alive and well in our business and the thousands of ideas that our employees have today to make some small and some big improvements that combined to significant margin improvement in the future. We've got a fantastic runway of opportunities that will continue to drive margin for many, many years to come. As we look through the future, ESAB is in a fantastic position. We're on a journey to $3 billion-plus of revenue, clear line of sight to adjusted EBITDA margins greater than 20%, strong cash conversion. But also importantly, for us, we're not in this for the short term. We're in this for the long term. So we're going to continue to make that envelope and continue to invest in our business. Finally, I'm delighted to be part of our journey into a -- to become a publicly listed company. I'm delighted to be the CFO of this company, and I'm really, really excited about our future. And with that, I'd like to hand over to Shyam, our CEO.

Thank you, Kevin. I hope what that imparted to all of you was the excitement that exists, not only with me, but with my leadership team, about what's ahead of us, about the innovation, about the exciting things that we've done as a team. Matt and Mitch both mentioned this about our team having strong bench strength and the leadership team being experienced. This slide actually has 340 years of industrial experience and with over 170 years of fabrication technology experience. I spoke about the regional leaders, so let me spend some time on the functional leaders that I haven't spoken about. Michele Campion and Tilea Coleman joined us very recently. Both of them came over from Under Armour. Michele is our CHRO, and Tilea is going to be leading Communications. The one person that I think has made the most impact and been most represented in all of our slides is Larry Coble. Larry Coble has been part of our CBS journey, driven transformation within ESAB, delivered on our manufacturing strategy and improved our supply chain organization going forward, and he will be joining the ESAB public company as we move forward. Curtis is our General Counsel. He was part of the General Counsel -- of the legal team at Colfax. He's been at ESAB for the year, very experienced, already been working with us, and he also comes around to ESAB. So what you can see here is that the team is well equipped, capable, experienced and has delivered over the last few years as Colfax has been transforming itself to be ready to take on the next challenges that are in front of us. I briefly didn't mention, Steve Molenda. Let me also say Steve has actually been a creative force between ESAB, a lot of the marketing and social media activities are on his back, and he's done a fantastic job, and he also will be joining the team that's moving. I share this slide to let you know that the processes that we have at Colfax continue in terms of talent management continues at ESAB. This is something that we're proud of. This is also part of CBS and will continue forward. Attracting the best talent, developing them and retaining them is a key part of our growth strategy. We do a survey every year as a way to engage with our associates and find out what we could do better. And what you'll find out is that in our survey, our engagement scores have been favorable at 84%. And that's a very strong result for an industrial enterprise. It's better than the median that we see within our survey group. Safety is another piece. Being an industrial company, we have a lot of manufacturing side. The one thing that I'm most proud of is our safety record. And you can see our TRIR, which is the number of incidents, is actually 0.34. And I would submit that is in the top quartile, if not the top decile of industrial companies going forward. So this leadership team walks the talk. So let me end by saying, you heard from Kevin the goals that we have set for ourselves are absolutely achievable, and we're already on our way to get there, $3 billion in sales, 20% EBITDA, consistent 100-plus conversion cash flow as we move forward. We have a strong team, a great bench as we move forward. The team has an inclination towards execution and impact. CBS is embedded within our business. It is our foundation that's going to catapult us forward. Innovation is key. Never have we had a better set of products that we're going to be launching over the next couple of years as we have today. And our funnel for acquisitions is strong. Bolt-ons and near adjacencies are absolutely out there for us to go do, and we will continue to do that. So what I would say to you is that this team is ready. We have momentum. We're fueled up. We're ready to take it up a notch, and we're ready for what's ahead of us. With that, thank you for your time, and we'll take a few questions.

Shyam, there's a number of questions that are coming in. Investors are clearly very interested in your business here. The first question is, could you please expand on the long-term vision of ESAB? Is it to be the best welding, cutting and gas control company or possibly something else, maybe adding new platforms?

Yes. You heard that from Mitch and also Matt before. Our current focus is to continue in the space that we participate in and look at near adjacencies for growth. We're going to be playing in a $30 billion market that gives us plenty of opportunities for acquisitions as well as organic growth within that space. So that's where we're going to be focused. And then once we get further along, we can then look at other opportunities.

Your growth rates imply that you intend to continue to grow faster than the market. What gives you confidence that you can achieve this?

A couple of things. And you saw that on Kevin's slide as well. One is that we think that there is truly secular trends that benefit ESAB, and I mentioned that. Let me reiterate some of those. Our exposure to emerging markets. The GDP is expected to grow 2.5x developed markets, and we are well positioned to capitalize on that tailwind. The other piece that we spoke about was innovation. We have great products coming in that adds another 100 to 200 basis points. The third piece are the accelerators, the adjacencies, the near adjacencies we spoke about, the push into software, digital and the second wave of robotics, all of those add another 100 to 200 basis points of growth. And as a result, we're very comfortable positioning ourselves as being a company that can out deliver on what the market drivers are.

Shyam, where have you been gaining share? And where do you see the greatest risks in the future?

We have worked extraordinarily hard at ESAB to create a balanced business where each of our geographies and region are focused on their markets, delivering a unique value to their customers and have strong ground games to gain share. So what I would say to you there is that we have made tremendous progress over the last 5 years to gain share in every geography. I shared with you some of our numbers in North America. And as I stated, I could have shared with you similar numbers across each of our geographies. Our teams are doing a fantastic job in terms of gaining share, focusing on their ground game and driving our CBS process in terms of commercial excellence.

Can you contrast your digital strategy with the competitions?

What I would say to you is that our digital strategy, and I'll let Olivier also come up to the podium and add to it. Our digital strategy started by being able to create opportunities that was equipment agnostic. And so the first place where we started, if you remember, when we talked about the universal connector was that we wanted to be able to connect to any machine be able to collect, provide data, create an open platform for our customers to benefit from. So that's number one. The second piece is that the tools and the analytics that we give our customers are best-in-class in terms of ease of use and the quality of data that we provide. The third piece is that we are the only ones today that can provide real-time analytics on the back of the HKS acquisition that we made. So collectively, when you look at the HKS acquisition, our progress on WeldCloud and the fact that we're equipment agnostics, we're positioned uniquely to take advantage of the digital transformation within our industrial space. I'll give it to Olivier to fill in whatever I've missed.

Well, you didn't miss anything, so it's going to be hard to fill. But I'll add something. I think one of the key difference is the portfolio that we built. So it's not just 1 or 2 full software, which are slightly better or at par with the competition. Definitely, but in addition to that, it's the breadth of the offering. So Shyam mentioned HKS, which is really dedicated to quality control. We have the WeldCloud, which is about productivity. We added a module around fleet management. We have WeldNote, which is the digitization of the WPS. And now we have Octopus, which is really kind of unique as well in robotic programming. So it's the one stop -- I mean, I don't want to use the term, it's not a great term. But it's really the fact that we have actually several tools, combined within our portfolio, which is already very extensive in welding and cutting that positions us as really then a solution provider. It's not a one-off. It's a solution to multiple issues. I think that's where we are differentiated, and it's going to be really setting up for a while.

Thank you, Olivier. Okay. The next question is a follow-on then. How much revenue comes from your software and digital strategy and offerings today?

Yes. Thank you for that question. We have not shared publicly the numbers associated with that. And I think we've given you some charts that have shown the growth rates, but we have not shared specific numbers. What I would say to you is that, at the right time, we will share those numbers, but today is not that day.

Okay. We've got a question for Kevin. Maybe we can switch on the podium there. But how much of your North America margin improvement is attributable to gross margin expansion versus SG&A leverage or reduction? And how much is attributable to net price?

No. At the moment, most of the improvement for the North America business has really come from the gross margin piece. We've done a lot of work in terms of improving our operating leverage within that business. There's been a lot of work done in terms of ensuring that we match inflation with price. So most in that area, but the area that really excites me in North America is probably the opportunities we still have in the SG&A piece. As I talked about it a little bit earlier, we are rolling out new technology support, working with a company called Celonis. And North America is actually where we've been piloting this program. And some of the opportunities that are presenting themselves to us of things that we can do is just incredible. So we're going to continue to work with that. We're going to continue to drive savings. And our North American business is going to continue to see its margins rise significantly in the future.

How high can your margins climb in this business? And are there any natural limits?

Well, let me start that, and I'll let Kevin say a few words as well. The first piece for us in the spirit of CBS and continuous improvement, I've said this multiple times, everything that we've done to date still has fuel in the tank, and we will continue to run that playbook to improve our margins going forward. So we talked about manufacturing site consolidations. We talked about efficiency gains within our SG&A. We've talked about product line rationalizations and new innovations that come in. So all of that has legs that will continue to drive margins forward. So when we set the target for 20% EBITDA, it's not a target that we set to limit ourselves. It's a target that we achieve, and then we move forward from that particular point in time. So I'm confident that, as a team, we're committed towards continuous improvement. We're committed towards driving this business forward. And that means a continual working on driving our business to drive better earnings and better margins in the future.

Shyam, are there technology risks to your business like adhesives or lasers?

We're confident in the portfolio that we have. We monitor trends within our industry. And what I can say to you the business that we have created for both the fabrication technology space, but the adjacency when it comes to gas control and then now a little bit more exposure towards the medical and laboratory side is a very strong portfolio that will drive growth regardless of what's happening in the marketplace. The second piece when you talk about adhesives and other technologies, we constantly monitor them. We participate with our integrators and our channel partners to see what's happening. But as of today, I do not see something fundamentally changing in our trajectory and our path forward.

What are your M&A priorities? And how full is the funnel of opportunities for the higher growth type targets that you highlighted earlier in your materials?

We have a really strong process when it comes to funnel reviews. It's something that is part of CBS, it's part of what we do with Colfax on a monthly basis where we have funnel reviews. So what I can say to you is that when it comes to bolt-on and adjacencies, we have several targets. The pace of execution, as you know, is dependent on cultivation and timing. So what I would say to you, there's a couple of things that I think you heard today and that I heard today that should get you excited, which is, if an opportunity appears, we're absolutely going to engage and execute. The funnel is full, which means we have the opportunities. We have our strategy defined. So we know what moves those strategies forward, and I'm confident that whenever these opportunities appear, we will absolutely be engaged in executing on them.

Do you have a mixed goal for equipment versus consumables?

We have a goal to improve our predictability in sales, improve our margins and establish ourselves into a higher growth part of our business. So those are our goals. When it comes to equipment and consumables, we like the portion of consumables that's predictable, but we also like the growth rates that are associated with equipment. So the best way to think about it we're going to be working on both those categories and find the niches that help us grow, improve margins, lower cyclicality and create technology differentiators moving forward.

And we've got time for one final question before we go to the break. Shyam, what is your differentiation in North America that will allow you to win share?

Well, the piece that I would say to you, no different than the second or third slide that I shared with you, very strong brands. We have invested heavily in North America. We have improved our commercial ground game. We've set ourselves up for success as we move forward. And as a result, what I also know, fundamentally within our space, one of the things that I've said in several meetings is that we're very comfortable leading with the channel, leading with integrators. We've created a strong relationships there. And as a result, we know that our customers look for us for workflow solutions, for WeldCloud-related solutions now. And our product line with innovation has improved our capability to compete in North America. So we've made progress. We've shown that we're gaining momentum, and I think our best is yet to come in North America.

Very good. Well, thank you. Well, we're going to go ahead and take a short break and we'll reconvene at 5 minutes after the hour. That's 11:05 Eastern Time, and then we'll pick up with the MedTech presentation. Thanks all. [Break]

Welcome back. We're going to move now into the discussion about MedTechCo, our MedTech platform and the tremendous opportunities ahead. Brady is going to lead us into the discussion. I talked earlier about the great experience I've had to work with him for the past couple of years. And my expectations for what he could achieve and what we could achieve together. And you'll hear in the story a tremendous start that he made as he led the Surgical business and then took over DJO as a CEO before we acquired them. You'll see the momentum that he started, that we've accelerated together and the great opportunities that we have ahead of us in MedTechCo as a specialty MedTech innovator. Brady?

Thanks, Matt. All right. Good morning, everyone. It's great to be with you today virtually. I would like to start out by saying that my last name is much easier to pronounce than Matt and Shyam. And so you shouldn't have any trouble with me going forward. Really excited, as I said, to be here, I -- it's been a fun journey over the last couple of years, and I'll talk about that as we go through it. But mostly excited today and looking forward to spending time talking to you about, as Matt said, MedTechCo and the momentum we have today and what our future looks like going forward. First and foremost, I'll introduce our presenters today. Matt and I will both be speaking during the MedTechCo presentations. Also Ben Berry, our Chief Financial Officer, for DJO, who joined the company about a year ago, will be going through our financials near the end. Louis Vogt, President of our Surgical business, been with the company for several years now and has done just a fantastic job, will be talking about several items in our strategy session as will Steve Ingel, who's our EVP of Healthcare Solutions, who's been with the company many, many years as he has really led our digital transition here at DJO over the last 3 years. So excited to jump in, and we'll get into the presentation. First and foremost, our focus and vision for MedTechCo is, as Matt said earlier, to be a specialty MedTech innovator, built on a strong foundation. And you can see from the slide, really 3 big bullets at the top. One, we're well positioned with the foundation in orthopedics. It's a fantastic space that I'll talk about. We have a very experienced MedTech team that has built strong momentum. Strong momentum building somewhat before Colfax, but really has accelerated under Colfax, and we'll talk about that. And we're in attractive positions across that market. As I mentioned, the acceleration under Colfax, if I were to bullet that out simply on this page, would be great operational improvement, really a strong focus on innovation, not only in investment, but also in the process of innovation as well as opening up the aperture and really creating an opportunity for bolt-on acquisitions. And then you'll see as we walk through the presentation, we have a very clear strategy to deliver our long-term goals, and you'll see those on the right. That's high single-digit core growth, mid-60s gross margins and greater than 25% EBITDA margin. We're -- to give you a quick snapshot of the company, we're a recognized global leader across orthopedics. We have a very fast-growing Reconstructive platform. If you see the pie on the right today, that's about 25% of our portfolio. If you just back up to 2015, that was less than 15%. And so it's really expanded rapidly, and it is changing in our company as we've gone forward. We also are the global leader in Prevention & Recovery. And we've been so. We've been a leader there for many, many years. And quite frankly, it's been a great growth engine for the company. As Matt said, when I came in as CEO, it was not moving at the pace we wanted to see, but we've had a great recovery, and I'll talk about that as we go through. This third bullet that you see on the left, people hear me talk about all the time, I actually put in a slide this morning, so I can help you understand that a little more. But we're the only major player that really plays meaningfully across the entire orthopedic care continuum. And then finally, as both Mitch and Matt have said, we have fantastic brands, iconic brands that are recognized. But not only the brands, we've had industry-defining products across our business, certainly, in P&R over many years, but also within our Recon business, and you'll see that, that's a big driver of our growth. We're addressing a really big market. Orthopedics is a $53 billion market. It's part of the $450 billion MedTech market. It's a very attractive, high-margin market. We play predominantly in the areas that you see as red today. So what does that mean? Well, we're in joint reconstruction. It's the largest segment, and we're a strong player in extremities, which is the fastest-growing portion of joint reconstruction. You can also see P&R, and it really plays across all the subsegments. We have a deep, deep history in sports medicine, but also with our P&R business, you'll see us in spine, in trauma, sports medicine, as I mentioned, and then across the joint reconstruction platform. So it's a really well-founded business across the space as we touch everything. And then on the right-hand side there, we certainly have some great competitors. Matt mentioned some of those before. I admire most, if not all of them, but I would also tell you that I love competing with them. I don't like to lose even a monopoly and I don't lose a monopoly. So as I look at that chart on the right-hand side, you'll see us as we continue to focus and build out on orthopedics, and as Matt said earlier, as we look towards broader MedTech, we'll move up that chart that you see on the right along the way. This is a very unique market. I think few, if any, markets are underpinned where there's many positive and quite frankly, sustainable trends. The one on the left-hand side, I could almost stop there, but it's really about an aging and an active population that unfortunately also, globally, there's a growing obesity, those things really feed orthopedics. They feed orthopedics through trauma and injury and they also feed orthopedics through osteoarthritis. That has created a 4% procedure growth for decades, and it's expected for that 4% to be there for decades to come. And then in some segments, like extremities, where we're a strong player, like in sports medicine, where we're predominantly with our P&R business those procedures are growing at high single digits. And so just some fantastic megatrends sitting underneath. There's also, as we've seen improvement, validation of many of the procedural approaches over time. We really start to see outcomes improve. And from that improvement in outcomes, it's positioned orthopedics to move further and further towards the outpatient setting. As a matter of fact, in 2018 and '19, we saw Medicare/Medicaid in the United States opened up for those total joint procedures that have predominantly been in an inpatient setting forever to start moving into ambulatory surgery center. That's a big trend. We also see hospitals acquiring orthopedic clinics and that consolidation for some -- like us, we were positioned really well across those clinics, it can be a great benefit. So that's a big trend. Innovation, the digital transformation we've seen all around us is happening in health care as well. We see it -- I would really call out 2 areas. Number one, we've seen it in the operating theater with computer-assisted surgery. Typically, it starts with preoperative planning and then moves into some sort of platform. And then we also have seen it in workflow solutions. And certainly, COVID-19 poured gas on that by really opening the aperture from the perspective of remote patient monitoring and telesurgery, not telesurgery, but telemedicine. And so it's a unique time for us. There are many things about this 100-year pandemic that were not fun. But 2 things happened that I think were very special for us and beneficial for us in this business. One is it really expanded the move to ASCs more rapidly into, it opened up digital healthcare. On our next couple of slides, I'm going to talk a little bit about our positioning. As I've already mentioned, we have a very fast-growing Recon business. And you'll see by the title on the slide, it says a proven playbook. And I would just tell you to look on the top right hand of the slide, where you see that the core sales growth of our surgical business over the last 5 years. And that's really the proof point of this playbook. We've grown 17% and -- in a market that really hip and knee has been growing 3.5%, and shoulder has been growing 7% to 8%. Yet our combined power there has really propelled us far beyond all the players around us. You can see how we've built the majority of our sales, were in extremities, and really the anchor behind that is shoulder. We pioneered the U.S. transition from anatomic to reverse. It's created a position for us. It's #1 in the reverse and #3 in overall shoulder. As a matter of fact, we surpassed one of our large -- very large competitors last year to move into the #3 position. So really excited about our progress there. At the same time, we've been growing 5x plus in the really large and profitable hip and knee space. We have a large global opportunity. You can see that the majority of our revenue has been, historically, in the U.S. But as we go forward, you'll see us expand into attractive areas there. What's our playbook. As Olivier said, I'm not going to tell you all of it, but I'll highlight a couple of pieces. First and foremost, it's about superior clinical outcomes. I've been in orthopedics for about 28 years. Sometimes, I hate to admit that, but I have. And I would just simply tell you that, that to me, I've seen enabling technologies come and go. They're popular for a while and then they go away. But at the end of the day, the technologies that have a sustaining advantage are those that really deliver superior outcomes, and we built our business around that. And you'll even see us when we talk about foot and ankle a little later in the deck today, talking about superior clinical outcomes, we've had -- we've really worked hard to build the right KOL teams. We built 2 leadership teams, one for shoulder, one for hip and knee. These are small groups. These aren't the breadth of the people that will help us in a design environment. These are leaders that help us really determine where we're going and how we're going to get there. We have unmatched innovation cadence and notice, I said cadence. The point there really is space. We're large enough to play in any space. We have a good entry there, but we're also small enough and nimble enough to really change the pace of what's happening in any of the markets around us, and that's what we've done in Surgical. We have best-in-class medical education. And quite frankly, our DonJoy brand and contracting power has really catapulted our Surgical business, where if we were a stand-alone, it would have been more difficult. Our P&R business, as I said, is a global leader, and it's a global market leader in P&R. And if you look at this business, we're #1 in bracing, we're #1 in rehab, we're #1 in U.S. diabetic foot care. We have really industry-defining products across the entire ortho continuum. MotionMD, we're going to talk about that a little later, so I won't steal all of that thunder, but I would simply say everyone's talking about workflow solutions today and things they're going to do. We've had a solution in place there for more than 5 years, that's performing well and really changing how orthopedic clinics work. And that impact is now across 40% of the clinics in the United States. We have deep penetration globally. We had 34% of our sells outside of the U.S. in P&R, a fantastic international team that has outperformed the market every year for at least a decade and then likely more. Very similar to Recon. We're focused on superior outcomes. For -- when you're putting an implant in a patient, you certainly need superior outcomes. But when you're putting a brace or you're looking at therapy, those outcomes are meaningful there as well, that's such a big part of how well a patient can recover. So we're focused in the same place. We're the leader in the fast-growing sports medicine segment and have been for a long time. We have strong contract physicians across all the GPOs and IDNs. And then finally, we're the leader in the therapies that are really reshaping how physical therapy is done. Well, this is the continuum slide, and I'll just talk about it this way. When we compete, we're really focused on the entire patient journey, the entire episode of care. If you notice how it's listed very simply across the top is prevention, its repair and recovery. If you look at the most of the companies that we compete with, a matter of fact, everyone that was on that list on the previous page, they spend all their time in this middle piece of repair. When we built our business, we actually started on the outside and been building rapidly now in the repair segment. Why is that unique? Well, today, with the ambulatory surgery center, what you find there is that 1 owner and the owner happens to be the surgeon or a group of surgeons, they're responsible for this entire journey versus the historical inpatient environment. So for us, what being a player across the continuum has done is really give us an advantage. One is, we move into a new space. And I said this on surgical, and I'll say this about foot and ankle. As soon as the acquisitions were announced on foot and ankle, my phone started ringing, our P&R team's phones started ringing and saying, "Hey, we love what you've done with your Surgical business, how can we get involved in foot and ankle?" Tell us where you're going? We're excited about what you're going to do. And it will be in advance of us as we move into other segments going forward. Number two, as we know the patient journey, because we're part of that journey with our customer all the way across, these aren't programs that we're just talking about, we're part of the journey. And our MotionMD, which sits across that platform today, really is the anchor to power the other workflow solutions that we bring into place. And look, the workflow solutions that are in the OR, that are in the surgical theater, they start with preoperative planning, which is part of the prevention side and part of the recovery side when you get out there. So the continuum is very meaningful to us. There are great successful companies in this space that historically have not been part of this continuum as we are. But I can tell you going forward, it really changes our competitive advantage. Next, I'll start by saying this. Matt mentioned this a moment ago, and more than a moment ago, I did become the CEO a little bit before Colfax acquired the business. And so I would say part of this journey really began before Colfax. But I can also say that the very first meeting that Matt and I had was during due diligence, actually is the first day we met, it was out of management presentation, we spent about an hour together. We were talking about really how I saw the business, what I was thinking about for the business going forward. And I told Matt there that we were really focused on reshaping our portfolio that I felt strongly that we had an engine that could really build out across the Recon space. Number two, about really returning the broader portion of our business to that mid- single-digit growth where it had been for a long period of time, and I can see a pathway to do that and then building the foundation. And I can tell you that from the very first meeting that we were convinced, and I don't know that we told each other that then, but we were convinced later that we could do something special together. So I'm excited about MedTechCo and what we're doing because you can see just from this chart that we've made progress. The journey started just a bit before Colfax, but it has been greatly accelerated. You can see that pre-Colfax, we were a 2% CAGR for a couple of years there, stepped up to mid-single digits in 2019. And quite frankly, if you look at '19, Ben will show you that chart later, it really accelerated to high single digits in the back part of '19 in the first couple of months of '20 pre-COVID. Our future there will be high single digit, as we said. From a margin perspective, we moved up about 200 basis points there, and there's tremendous opportunity for us going forward. As our portfolio continues to reshape, which you can see on the next group, that will drive a lot of change in margin for us and gross margin as well as net margin. And then as we -- the further we penetrate with CBS into outward, we'll really be positioned to do great things. People ask me often how is CBS, how are you liking it, does CBS work in MedTech? And how is the business responding? I'll pause here and just say a couple of things. Number one, I truly couldn't be more excited to be here today. And what we're doing here by design is certainly Mitch and Matt and the Board and many others have been involved in this. But from a MedTechCo perspective, Matt and I spent considerable time thinking about how we do this together. And Matt said it earlier, I can tell you that the last 2 years have been the best of my career. I have probably shared more values with Matt than anyone I've worked with truly throughout my entire career. And so I couldn't be more excited about what we're doing together today already in what we're now calling MedTechCo and what we can do together going forward. So how has Colfax helped? How has CBS helped this MedTech company? Well, number one, you can see on the top left there, we really have changed what's happening underneath the company. We still have work to do, no doubt about it. But it was a journey that is initiated right before Colfax, we poured gas on it, and you can see a 56% improvement in our back orders in P&R, which is our largest segment today as well as the 29% improvement in held orders, and that's in our revenue cycle management, those 2 are critical to our business. You can also see that we significantly increased our investment in innovation. 300% change in 2020 number of products launched as compared to 2017. And we've worked really hard together as a partnership to build out the type of team that we knew that we would need to go from where we are today at $1.4 billion to be a really large player that performs the way that our standards are pointed towards. And quite frankly, I thoroughly enjoyed working with Matt, but also with Chris and Dan and Patty and Brad Tandy I worked with him before and it will be fun to be back buckle beside him a little more as we go forward. So really excited there. Shyam, I couldn't admire a company more and a team more than ESAB. It's been great for me the last couple of years to see what that fantastic team has accomplished and I'll be their biggest fan sometime 12 or 14 months or whenever we're separated going forward. And -- but I was so proud of our team. I didn't expect us to beat ESAB this year from an engagement perspective. We got real close. They were at 84%, and we were at 83%, which was a 20% improvement over where we were last year. And you know what, Shyam, we're coming for you this year, I really think we're going to be at the top. And then last, as Matt said, we've had a neat opportunity to really kind of open the aperture here, something we couldn't do before. And we completed 6 bolt-on acquisitions in the last 12 months. And Matt will get to spend some time talking about the impact of those, but there's a lot of exciting things happening here, and I couldn't be happier, and our teams couldn't be happier with what's going on with Colfax. The first time I met with Mitch, we had dinner in Washington, D.C. It was in December, and it was cold, and it was before they owned the company, but it was a fantastic dinner. And in that meeting, Mitch said, the best team wins. And I was certain that, at some point, that would end up on a title slide in this deck and very appropriately has done so. Mitch has just an energy about him that's pretty special. And then at very first meeting, he said Brady the best team wins, and we've got to put the best team on the field, and he said, you'll see what we'll do. When CBS becomes a part of your business, you will grow faster, you'll go to places that you haven't seen. And I believe that, that's true. And so I'm excited to be a part of this also with Mitch and to have Mitch continue to be working with the MedTechCo as we go forward. Matt said our values were similar and they were, and it was really pretty easy for us to take where we were headed and where Colfax was and put those together and it made a lot of sense to our teams. We're really focused, no different than ESAB about attracting the best talent. We've got a great team, and when we combine the Colfax team and our MedTech teams together, that combination is going to be powerful. We're already set up for the future with the right group structure. We're doing the right things to develop our talent, not only our leaders, but also the folks that we're bringing in and growing them up through the company. And then quite frankly, engagement is really driven by what we do and by our actions and whether or not we live the values across our company. And we're seeing that. And I think that, as we go forward, that what we'll see and what you'll see from MedTechCo is that we're a destination, a talent destination for engaged and diverse talent and engaged and diverse professional. So I'm very excited about what we're doing under the hood. Speaking of talent, I really don't want to try to go through this entire slide. Too many names, but some wonderful talent here. A good mix, the right blend of MedTech experience of Danaher and Colfax experience as well as just really broad, deep experiences in where they are. I'll mention a couple of names that are relatively new. One is Kevin Cordell. He's our Group President, Prevention & Recovery. And he recently -- he joined us from Wright Medical. He's got a great track record of growth and margin expansion in his history across MedTech as well as in orthopedics. So it's great to have Kevin here. Look forward to you guys meeting him as we go forward. And then you can see another new name, which is Tony Stallings, he's a senior VP of Supply Chain, and he joined us recently from Honeywell. So as we're building this engine, we're building it with the right talent. To really add into the talent we have to make us better as we go forward. From a strategy perspective, you can see by the title, and I really like this title, though I haven't read every takeaway perfectly. I would tell you this is my favorite title. We do have a very clear strategy to deliver this long-term high single-digit growth. You can see there are 5 pillars. The first is accelerating innovation. I'm going to start out and talk about that a little bit. You know we're already on our journey there, but I'll give you a little more specifics about where we're pointed. Then we'll talk about winning in the ASC, and Louis Vogt going to jump in and talk about that some as well as kick off our third pillar, which is leading in digital health care. We'll talk about that from a surgical intervention perspective. And then Steve Ingel will talk about that from a workflow solution across the entire environment. Then, we will talk about his new foot and ankle business. Mitch mentioned that, Matt mentioned that, and you've already heard me say it. We're really excited there. We know how to grow extremities businesses, and we certainly know how to grow a Recon business, and you'll see us really supercharge this business as it goes forward. And then finally, we have a lot of opportunity to expand. It's a $53 billion market. Today, we're only really legitimately competing in about $25 million of it, as you can see. And as we step further, giving us an extra $30 million to work in a market that's already growing in. We're just positioned really well with the right playbook, I think, going forward. So on innovation, I've mentioned a couple of these so far. So I won't rehash them. On the left-hand side, you heard me mention really the change in new product introductions, 300% change in 2020 as compared to '17. But if you'll see the bottom left, the bottom left really speaks to something that I think is critically important. And that's vitality. Now I call it freshness, Matt calls it vitality. As a result, as we've done on a number of things here, we decided to just combine it. And so we call it freshtality now. It's really about of the products that we sold in the last 12 months, how many of them were launched in the prior 36 months. And that's something that's very common across our businesses even if it has a different name. And I would tell you, in my 28 years in MedTech, that growth companies, meaning companies that are growing at least at market or a little bit beyond that, they're going to be double digits always. But if you're really going to be a performer in the MedTech space, you're going to be high teens to 20% in vitality or in freshness. You'll notice that our Recon business, it was on the previous chart, that business was 37%. Last year, it's been greater than 30% for a number of years, and it will continue to be so going forward. In our P&R business, which was 7% just a couple of years ago, we've got that at 11% in 2020, and you'll see us really expand that into the mid-teens and then into the high teens and 20% and focus to hold it there as we go forward. So where will we innovate? Really listed 4 categories here. Number one is continuing to grow our Surgical business. We've got about 75% market coverage across the products that -- the product areas where we're focused in shoulder, hip and knee as well as elbow. That's where we are today. We've built that over time -- over about a 5-year window of time. So we've still got work to do to really complete our bag, and that feeds our growth. Every time we launch one of these great new products in Surgical, it expands what our customers -- our loyal customers can use as well as open the aperture for us to convert more customers to us. So I continue to be excited about that engine and really how we keep that above 30% over time. We're going to expand our bracing business. As I said, we're the leader in sports medicine. So we have an opportunity really to change the category with smart braces. And it not only changed the category from a growth perspective and us taking share, but also changed the margin within some of those long-term categories. At the same time, we have such a deep selling organization for bracing that we're going to step further into a couple of the fast-growing areas that have high margins like spine and OA using the engine we have -- using the innovation engine and the deep field experience to expand bracing even beyond sports medicine. I mentioned earlier that we're leading in this transition to modalities and physical therapy. We're deep there across the world. And recently, we acquired LiteCure, which just adds to that lead, continues to build the margin in that business and create more velocity on the growth. And then finally, we've got a good playbook, an internal new NPI plan all ready for our foot and ankle business. Combining those 2 really gives us a lot of strength, and you'll see us do a number of launches in the very near period of time. So I'm going to pause here. And at this point, I'm going to pass the mic over to Louis Vogt. And he's going to get up and talk about a couple of the excitement innovations that we launched in 2020 in our Surgical business as well as talk about how we're going to win in the ASC and kick off the leading in digital discussion. Louis?

Thank you, Brady. Real value-added innovation has been the cornerstone to our competitive advantage in Surgical. Several years ago, we set out to shape our innovation focus and portfolio expansion on what is truly needed in the future. And today, we're well positioned for tomorrow's market dynamics, and specifically, outpatient total joint arthroplasty in the ASC. If you look at the 2 newest additions to our portfolio, these are great examples. The AltiVate CS Edge, which stands for canal sparing, it's more commonly known as a stemless shoulder arthroplasty, is a great addition. DJO has dominated and revolutionized the total shoulder market forever since 2005 with the original introduction of the reverse shoulder arthroplasty system in the United States. A key strategy for our business is to attack the other 40% of the market where our share position is smaller. And that's called anatomic shoulder arthroplasty. The CS Edge or the stemless shoulder is the fastest-growing trend and driver of market share in that space. We believe that with the design features that we've leveraged from our current AltiVate shoulder system and the fact that we can do the procedure with 1 tray of instruments in a very simple manner that this system is perfectly designed for the ASC and is poised to take market share in the future. Along the same lines is the EMPOWR Partial Knee system. Partial knees, just like stemless shoulders, are a smaller procedure. They only reproduce or replicate 1 compartment of the knee, whereas the total knee reconstructs 3 compartments of the knee. Because of that, it's a smaller procedure with the potential for less rehab. In other words, the younger, healthier patient, who also is interested in outpatient joint arthroplasty, is very interested in this procedure. Like many of our new product launches, this introduces DJO into new categories, and this is no exception. With the launch of the EMPOWR Partial Knee, we now compete in about 10% of the knee market that we never competed in before. This is a tremendous advantage for DJO as we look to the future. Our main differentiator is that we optimize the design of the EMPOWR Partial Knee to look more and feel more like the EMPOWR primary total knee. And what I mean by that is that the kinematics have been optimized so that they feel more normal and patients function more normally. And ultimately, that's the secret sauce why surgeons fall in love with the EMPOWR Primary Knee system. And ultimately, why we've been able to grow 10x the market in knees for so long. The system is fully encompassed in 1 instrument tray, which is so critical for procedures in the ASC. I very much look forward to seeing these 2 products that have a healthy impact on our growth in 2021. Winning in the ASC is a must. It's the biggest procedure transition to ever happen in orthopedic reconstruction. Put simply, most of the procedure growth that's going to happen in the next 10 years will likely be from the ASC. Medicare recognized the safety and potential health care economic advantages of outpatient joint arthroplasty in the ASC, and they improved Medicare reimbursement in 2018 and 2019 for knees and hips. It's about 40% less expensive than the same procedure done in the hospital. And because of that, we believe we're going to see a significant progress in transition towards this point of service. We're uniquely advantaged to take more than our fair share while this transition happens. For one, our bracing business is already in 40% of the ambulatory surgery centers across the United States. So we're in the door, and we have established deep surgeon relationships. We've been shaping our portfolio transition for many years now. The stemless shoulder and partial knees are great examples. Another great example is the fact that we're expanding our EMPOWR Primary Knee line with the intelli tray system, which will allow us to do a total knee in the ASC with only 2 trays of instruments, again, very critical for what the ASC needs. In the digital workflow and workflow solutions front, we've partnered with the largest outpatient arthroplasty academic institution and surgeon with Indiana University and Dr. Michael Meneghini on a patient screening tool that makes outpatient joint arthroplasty selection easier. Put simply, the health care professional enters the patient information into an app. And the program spits out a score, which correlates with a risk stratification for how successful this particular patient could be in the outpatient setting. It's the only peer-reviewed and published score ever for risk stratification for outpatient joint arthroplasty in the ASC. We're in discussions now with many health care institutions and even insurance companies who want to leverage this new technology and the software solution and implement it across their networks. We believe this has a lot of runway, and will open a lot of doors for DJO. We have a unique CAS and robotic solution, which I'll touch upon in a couple of slides. But put simply, it's tailored for the ASC more than anything that exists in the market today. And finally, because the ASC is a relatively new point of service for ortho recon, our big 4 competitors don't have the same incumbent advantages that they do in established hospital systems and GPOs. ASC is a new open playing field, and surgeons ultimately have the control with who they want to do business with. This is a huge advantage for us, and this dynamic works in our favor tremendously. To bring it all together, our DJO businesses combined are the only true company that competes across the entire continuum of care. We have the freshest portfolio built for tomorrow's market dynamics, and we're expanding that portfolio rapidly, and we expect our vitality index to remain above 30% for the next 5 years. As value propositions evolve with this transition, we're already established market leaders in the digital workflow and practice management solutions and bracing, and we can leverage the same solutions in our Surgical business. This is how we will improve health care together with our customers. In our clear strategy to deliver long-term growth and value, technology and digital health care is imperative. Robotics are the hottest trend right now, but technology to supplement the surgeon intraoperatively have been around for at least 20 years. It's no surprise that they continue to expand and become more sophisticated in various forms. Looking at our solutions and our strategy, we currently have a fantastic PSI solution and preoperative planning framework, which we've branded Match Point. Match Point is utilizing about 30% of our shoulder procedures. And in shoulder reconstruction, for now, this is currently the gold standard. The STAR acquisition from Stryker also expanded our PSI capabilities into the total ankle. PSI is perhaps the biggest driver of market share in the total ankle space right now, and we're poised to launch this in the middle of the summer and gain incremental share with our new ankle business. Where robotics and cast has had the biggest impact in the market is in knee reconstruction, but there's limiters to current robotic technology. For one, they're very capital-intensive. They require a lot of space in the OR. And the question whether or not that's scalable in the new ASC environment. The disposables are very expensive. And they take about 15 to 30 minutes more per procedure than what exists today. Like we always have been, we're focused on where the market is going next. And we believe there's a solution in the cast and robotics space that has significantly less capital investment required. It could be scaled into the ASC very easily with a much smaller OR footprint. The disposables can be minimal and significantly less expensive. And we believe the procedure can be done with no more than 5 minutes added to the procedure. And finally, we also believe that there's no one size that fits all for cast and technology solutions across all anatomies. We think that by tailoring our cast solutions to each anatomy, the shoulder, the knee, the hip and the ankle, we'll create a competitive advantage that nobody has in the market today. Without disclosing too much confidential information, we believe the combination of imageless augmented reality with next-generation microrobotic technology is the solution. It has the potential to change the game so that surgeons have the same confidence in their hands intraoperatively, but also improves upon the efficiency and the economic disadvantages of current robotic solutions in the market. In conclusion, our surgical business has outperformed the market by a 5x margin for the last 6 years. We're different by design with our strategies and our innovations. And our desire to improve patient lives and power motion will continue to propel our momentum and our exponentially above-market growth for many years to come. And with that, I'd like to pass it over to Steve Ingel, our Executive Vice President of Health Care Solutions.

Thank you, Louie. I appreciate the opportunity here. I think as you've heard from both Louie and Brady, we have a rich history of product innovation. But as you've seen, we're more than a product company now. We're on the forefront of digitizing orthopedics. And you see on the slide, MotionMD is our -- is DJO's workflow automation software solution. As one of the largest players in billers of durable medical equipment, we built it over the last 5 years to digitize and transform the billing of patient claims. Today, it's a robust SaaS platform that delivers tremendous operational efficiencies, not only for DJO as a biller, but also for our customers. And you can see some of those highlighted in the slide where really you get a reduction in inventory and working capital of 24% and net collections of 8%. And in addition to those efficiencies, we also have a true competitive advantage in our ability to connect to our customers' operating system. And what's that led to? To date, we've transacted 4 million patient claims on the system across 30,000 medical professionals, and we're seeing just a meteoric adoption of the platform. You can see the chart up there. We added 700 accounts in a COVID-challenged 2020 year with a 74% CAGR over time. And in one note, I'm so proud of the team. We installed in the year over 1/3 of those remotely. So we developed this very unique competitive skill at a time of tough access to clinics to install this software remotely. And in addition, and most importantly, what you're seeing is tremendous scale in the product revenue on the platform. And we expect that to continue to grow aggressively. Of the 6,000-plus orthopedic clinics roughly in the U.S. that can use a system like DJO, we've captured nearly 40% to date. And what I'm really excited about is that we're seeing large adoption in the hospitals and ASCs. And the hospitals are usually a more complex environment just from their IT infrastructure rules. And a great example of that is a recent win that we had in 2020 of a large -- in one of the top 10 largest health systems in the U.S., which is Baylor Scott & White, who was really struggling with the service line, and MotionMD really won us the account. And to give you an impact of that, over the next 12 months, that conversion is going to be worth $5 million of product revenue, which is about 1% growth for bracing and supports, and clearly, something that would not have happened without the system. So really, for me, the reality is we're bringing real solutions to a difficult service line for orthopedic practices. And at a time when cash is absolutely king and they cannot sit around and manage their practices with inefficient paper-based systems, it's just not going to work. So in the end, it's the strength of our brands and products that get us in the door. But what has me so excited after 30-plus years in the business, I'm a little younger than Brady, but -- just kidding. But I've been in this business for a long time, and I've never had an opportunity to have something this powerful. MotionMD is tipping the scales in our customer conversations and conversions. And it's simply simultaneously improving our cash flow. You can see the impact here on our margins. We're gaining more stickiness with our customers, same-store sales growth and clearly, a greater share of wallet. So it's just delivering on all fronts. And we're going to continue to see that scale. So MotionMD is the backbone of our digital strategy. And I think unique to anybody else in the space, we've achieved this unprecedented momentum in orthopedics by focusing on a difficult business transaction in the practice. And really, that's enabled us to just scale this thing better than anybody in the space. But now the opportunity in front of us is to take this installed base from a business transaction and transcend that into engaging our customers around clinical applications to improve patient outcomes at a time when the market and appetite in health care and specifically orthopedics is so strong for telemedicine, remote patient monitoring, and at-home physical therapy. So enter Motion iQ, which is our digital solution that seamlessly connects the patient, the product and the provider through wearable technologies and easy-to-use applications. And really, as you see on the slide, this allows the clinicians to walk hand in hand and side by side with the patients, engage the patients in their own care pathway, really with the goal of delivering better outcomes, which is a true benefit for the patient, for the provider and for the payer in the market. Our emphasis today is on our bracing and supports product portfolio. And we're really focused on kind of key categories of knee, spine and lower extremity where we're going to transform these products and deliver both margin accretion and ASP to the business and really separate ourselves. And if you look to the areas that we're most intimately focused on today is, one, the X4 smart brace, which addresses, as Louie talked about, with this whole ASC strategy and this move out of the hospital into the ASC and those patients who now need to rehab at home, our ability to engage those patients through their clinician from the moment they leave the ASC or the hospital and in a procedure set that's almost 1 million procedures annually. So we launched this right about the time that COVID hit. So we're still kind of early days in that, but we're seeing good uptake there. And now we're going to go to the bread and butter of what's built DonJoy and the DonJoy brand, which is sports medicine and the ACL procedure and expanding the portfolio into sports medicine with the intent to truly transform this portfolio, leverage that DonJoy brand and that sales force that Brady spoke about and transform this rehab and really move from -- just return -- but return to performance and mobility. So what's really exciting is that the combination of these technologies are truly unique, and it's a disruptive platform for DJO that we see an ability to drive improved margins, increased ASP and market share while delivering improved cash flow and efficiencies to the bottom line. And our MotionMD installed base provides just a tremendous competitive head start against any competitor in the space, whether it's recon or rehab. And now that opportunity is to leverage this transactional platform to go after clinical engagement with our providers. So what I'd like to say in summary is that I'm really proud of the efforts of our team and the team across the -- working with the BUs to drive us to where we are. But we are well positioned to continue to scale and lead in digital health and really deliver true value for our customers, for DJO and for our investors. So I thank you for your time. And with that, I'm going to hand the podium back to Brady. Thank you.

All right. Thanks, Steve. I get to jump back in from one slide, and then I'm going to hand it over to Matt. Recently, as you've heard, we made a couple of acquisitions in foot and ankle. And certainly, these were not by accident. As we've looked at the different areas in recon that we thought would be really accretive to us from a growth perspective as well as a margin profile, foot and ankle really was an easy choice. It's the fastest-growing area in orthopedics. It's actually highly fragmented, and yet at the same time, has fantastic gross margin. So we acquired, you might say, on the backside of the foot and the front side of the foot, and then we'll work to converge those in, meaning, if you look at the chart that's in front of you, the ankles at the very back of the foot, and then it works from there to the hindfoot, mid-foot and forefoot. The ankle business, the STAR Ankle we acquired from Stryker, is a fantastic product in ankle recon, has great coverage across the primaries. As Louie mentioned, as we launch PSI there, it will position us differently, even in that space with -- it's such a needed and -- technology that we think will be a best-in-class offering. And then as we build that out, we can move into revision and other spaces in ankle recon then start moving to the right. And then with Trilliant, we really bought a growth engine, a fantastic growth engine in foot and ankle that we believe we can even accelerate. So by putting the 2 together, we have a clear strategy, and a clear strategy is simply this: one is we'll capitalize on the 90% of noncommon customers, meaning, as we put it together, the great customers that use STAR today will certainly be benefited by using Trilliant and vice versa, that's number one; number two, we will expand in freshen STAR. The reason we acquired STAR is we liked exactly the thing that we like in the shoulder and in the hip and knee, and that's the superior clinical outcomes. And it has unmatched clinical outcome. So we'll take that, build from that base, freshen it and expand it and move down the line from that perspective. We will indeed expand into the rest of the space. As we've talked about, plenty of opportunity to put our surgical offense in there, build an innovation cadence and really do a stream of multiple NPI launches per year over the next several years, but it's also fragmented enough that we can see some clear verticals we can acquire further and really boost this business as we go forward. And then lastly, as I said earlier, the opportunity here in every stage when we step into a new area of repair or recon, we have an opportunity to use the breadth of customers and the contracting strength that we have from our P&R organization. So you'll see us do all of those things. This will be a very fast-growing area for us over the next couple of years. Now I'm going to pass this along -- next several years, not just a couple. I'm going to pass this along to Matt, and he's going to talk about some of the recent investments that we've made as well as our M&A strategy. Matt?

Thanks, Brady. You've heard from Brady and Louie's comments of how our acquisitions have accelerated our strategies and have an impact in the business. And this page summarizes some of the great things that have been done in the last year or so here in the MedTech business. Brady talked about the entry into foot and ankle, big deal, $1 billion market, very attractive for us to address. We've done the strategy work there together. We knew of the interest and the opportunity in that adjacency. And the opportunity to acquire the STAR Ankle when Stryker needed to make the divestiture was just a great opportunity to step in. And so between Brady's relationships, our BD leader, Dan Pryor, and his capability set, we were able to not only get that first step done, but also push through and acquire Trilliant, a more private cultivation of a great company. And together, those were the great foot -- foot and ankle that Brady talked about that we can grow from. Louie talked about some of the key technologies related to our ASC offense and to our surgical workflow in terms of [ KCAS. ] And there, we've already made some investments in small acquisitions that are helping to fuel that. In the picture we showed of the ASC, there was a picture of the ADAPTABLE arm, a great workflow mechanization product that just simplifies what's going on in the OR and can, at times, have one less person in there, which is a space saver. That's something that we had a chance to -- we developed with a company, had a chance to make a small acquisition, acquire the technology, now develop it for other procedures as well. Related to visualization, Louie talked about our strength in planning, talked about the importance of guidance and visualization. And there, after some careful market research, help from our KOLs, strategy work in our team, we wound up partnering with a company there that's got a great technology. You'll hear more about that as we go forward. And then Brady talked a little bit about LiteCure. This is a classic sort of down-the-fairway bolt-on for us. Terry Ross, who many of you know, he used to be our Head of IR, he's now the President of one of the businesses in our MedTech platform. And he came to us in his first strat review and said, "If I'm going to grow this business to mid-single digits plus and improve the margins, I need to improve modalities. I need to get after some of these higher-growth modalities, particularly high-powered laser. And I can do it organically, but there's some acquisition opportunities that could be nice bolt-ons that could accelerate the path there." And we said great. We went out, we cultivated the logical opportunities, found the one that was the right one for us to acquire, and we're able to acquire LiteCure in a private process, a great deal, a great opportunity for that team to join our company. We not only got the high-powered laser technology with some special IP around the applicator that's extremely a valuable differentiator, we've got an important direct sales channel in the U.S. human rehab area that was complementary to the channel that we had there and was an important strategic priority as well and a foot in the door in animal health rehab, an interesting adjacency that has attractive growth dynamics as well. So great strategic progress and reshaping of the portfolio through this fifth pillar of acquisitions that advance our strategy and expand the portfolio. And you can see on the right the tremendous financial impact that these will have in the years to come. On the next page, you can see how we go from here forward with a great pipeline of acquisitions in our MedTechCo. In the core, we still have plenty of opportunities. Brady referenced geographic expansion. In all of the businesses, we've got geographic expansion. But in particular, in surgical, we don't play in about half of the market that is outside the U.S. We have specific positions, but we don't play in a lot of that market. There's great opportunities to look at geographic expansions into attractive parts of that market. Brady talked about some of the opportunities -- other opportunities in foot and ankle and extremities in terms of bolt-on possibilities, technologies that we can bring. Within our core bracing and recovery sciences products, there are still other attractive bolt-ons that can enhance the growth rates and can improve the margin profile and shape that business in a positive direction. And then as we drive the digital strategies that both Louie and Steve shared about, there are opportunities for specific technology adds that can accelerate our progress, like the ones that Shyam talked about that have fueled and accelerated our WeldCloud solution development journey. Beyond that first wave, there's a second wave. Brady talked about a $50 billion, $53 billion orthopedics market. We only play in half of it, but we touch it all through our P&R presence. So we have deep knowledge about all those other surgical parts of the orthopedics industry. We've got great insights into the most attractive segments that might make sense for us to move into organically or through acquisitions, and moves into those segments would have synergy with our existing surgical business in some ways and would have synergy with our P&R positions as well. So some great opportunities in the broader orthopedics market over time as well. And then beyond the $50 billion, there's another $400 billion of MedTech adjacency space to consider. That's not our focus right now, but it's clearly an opportunity that's out there in the future. And there are natural paths in, whether it's our laser-based technologies that could eventually carry us into specific areas in the broader MedTech space or whether it's our surgical capability and playbook and experience base that could move us into other attractive areas of surgery that are relevant and attractive for us to address or whether it's that clinical workflow and automation software capability that can be applied into other parts to MedTech, where there is that kind of an opportunity to create strategic advantage with workflow and software in clinics. All of our moves on this fifth pillar will be guided by the criteria at the bottom. It will be about advancing strategy. It will about shaping ourselves into more and more attractive markets in terms of the growth dynamics and the gross margins. And ultimately, it will be about making our MedTech specialty innovator stronger and stronger over time and creating scale in all different aspects of the business that enable strong profitability and cash flow to reinvest in more of these kinds of acquisitions. So on the next page, you can see how it all comes together. The 4 organic parts of the strategy that Brady talked about, the operational momentum and the improvements that we're driving with CBS and then the fifth pillar of acquisitions to accelerate and expand our strategy. And through this combination, we've got clear line of sight in the coming years to close in on $2 billion by expanding our core businesses and driving into some of the adjacencies that we've targeted. From there, we'll be really focused on the goals at the right, building a high single-digit core growth capability that is sustainable over time, driving the mid-60s gross margins that provides the strong operating margin and cash flow to fuel the compounding investment engine. There's clearly opportunity to drive the $3 billion and beyond in our industry. But we'll be focused on taking a step-by-step at the right pace to create maximum value for our shareholders. With that, I want to pass it to Ben to wrap up with some financial details.

Thank you, Matt. I appreciate the opportunity to be able to present to you all today. This is a business that has experienced market to above-market growth for a long time, historically. As Brady came into the organization and he really focused his efforts on really turning the Reconstructive business into a high-growth engine, delivering double-digit growth consistently, we saw a lag on the P&R side of the business, really from challenges that we experienced on the operational and supply chain side and also from diminished new product introductions. So we had some fulfillment challenges and also some reduction in vitality percentages or freshness levels, as you've heard today, on the P&R side. So when Brady took over as CEO in 2018 and as the organization was also acquired by Colfax, the attention was really focused on how do we get P&R back to growth, accelerating, refueling that engine while maintaining the Reconstructive consistent playbook and formula that was working on the recon side of the business. So we leveraged CBS. We leveraged the toolkit and the processes to really focus on the supply chain, and we invested into the portfolio to continue to add new products that could be launched in a recent period of time. We saw back orders reduce, we saw fulfillment levels increase, and we saw the vitality numbers climb as you've seen earlier in the presentation. This really stabilized growth and helped us get back to mid-single-digit growth in 2019. And as you can see by the [indiscernible] on the slide, we accelerated into the back half into the high single-digit range, and that really continued into 2020 pre-COVID. We've recently invested in high-growth, high-margin bolt-on acquisitions, really on both sides of the business. These acquisitions are going to help us to really capitalize on fast-growing segments but then also provide us great opportunities to lean into white spaces that will provide incremental growth opportunities and really the ability to take market share with our growing portfolio. We've continued to invest in organizational capabilities, bringing on talent, bringing on experience and bringing on capabilities that will give us depth and horsepower to really lead us into the next phase of growth. Our solid foundation, our clear strategies that we've laid out to you today will lead us into consistent mid-single-digit growth on the top line, and acquisitions will help us to further accelerate that growth over time. We have a track record of driving margin improvement. From 2016 to 2019, we improved our EBITDA margins by 300 basis points. While we experienced some margin pressure from COVID-19, as the business recovers and as the volume rebounds and we integrate the acquisitions, margins will continue to expand. We have an advantaged mix going on in the business, really helping us with our fastest-growing businesses in our segments that are carrying near 80% gross margins. And really, if you look across the company and you look at the business units that we have, all of our businesses carry gross margins ranging from 50% to, in some cases, greater than 90% gross margin. So what that means is as our business continues to grow on the top line, we get natural operating leverage in this business that really help us to expand those margins. We're still early in our CBS journey, but we will leverage the same set of tools and processes that CBS allowed us -- has allowed us to turn around, in some cases, the P&R business. And we can apply those tools and processes across the business to really drive increasing productivity across the board. We still see opportunities on the cost structure, especially as we scale acquisitions and we identify natural synergies in SG&A. These levers provide us a clear path to drive margin expansion to 25% plus in the future. We've made tremendous strides in cash flow. I joined the organization on March 17, 2020. And actually, it was the first day that we announced that we were going to send everyone home and work virtually through the experience of COVID. So we had to quickly get focused on cash flow, given the market was going into a downturn. While 2019 had some impacts related to integration costs, we delivered a step-change improvement in cash flow in 2020 in the midst of COVID, and by Q4, we were operating in conversion levels of 70%. We did this through 3 primary things: we improved predictability and targeting for our collections process; we increased our payment terms through better management of our vendors; and we improved our focus and our rigor around our forecasting, so we had better visibility of how we needed to react and move during that time. Our high-growth recovery plan in 2021 is going to require us to invest in working capital. And we are confident that as we continue to grow revenue, expand our margins and normalize working capital, we have a clear line of sight to 90% plus free cash flow conversion. We have strong financial momentum, we have a great business, and we have exciting opportunities to create a lot of value ahead of us. Thank you for your time, and back to you, Matt.

Thanks a lot, Ben. I'll wrap up on the last page with some quick comments, especially MedTechCo will be an innovator, uniquely positioned for significant value creation. We've got a foundation in the attractive orthopedics market with favorable long-term megatrends, great opportunities in that market, opportunities beyond that market. We got a strong team that's been leading, accelerating growth and evolution of the portfolio and a clear strategy and exciting pipeline of both in innovation and acquisitions and digital solutions to fuel our growth. We've got CBS off to a great start within the business and a great journey ahead that will build momentum stronger and stronger over time. This is a great opportunity with great momentum and great opportunities ahead. With that, we'll take your questions.

We have a number of good questions coming in from investors. We're going to start with the first one that came in, which is when DJO was acquired, the goal was mid-single-digit organic growth. What has changed that enables the mid-single-digit plus to high single-digit vision?

Certainly. First, I would just point to the change in mix. If you look at recon today, it's 25% of our portfolio. You've seen us invest in foot and ankle, which is a really fast-growing segment, as I said, 7% to 8% growth in that segment, fast-growing businesses that we've acquired there. And we've also seen a more rapid recovery in our P&R business than what we had anticipated. And so we want to be careful coming out of the box, but we feel very comfortable with where we are today.

You talked a lot about the shift in the market to ASCs in the U.S. What is the market share of ASCs in the U.S.? And what percent of your business is in ASCs versus hospitals?

So today, Chris -- today -- it's a great question. I would simply say this. In 2020 -- actually don't have the latest report on TJA or arthroplasty within the ambulatory surgery environment. Prior to 2020 and 2019, it was approximately 12%, plus or minus. We actually believe that, that more than doubled and at least that's -- most would say that it more than doubled in 2020. And we certainly saw that as we got through COVID in Q2 and started moving into Q3 and Q4. So for us, what we can see is the mix of our business in certain product lines like our [indiscernible] knee, which is suited for the younger patient, which is that group that's really there. If you look at our mix, our mix there is about double market. So we see a lot of that feeding into the ambulatory surgery environment. And certainly, the demand, I was actually on a call earlier this week with one of the prominent gentlemen that lead our KOL teams, one of our hip and knee leaders. He's actually now running at 75% in the ASC. I don't expect across the business. The patient mix alone would -- will probably move it into the 20s this year and then near 50% over the next couple of years. But likely near 20% in it for us, a little better share because of our active portfolio.

A follow-on question to that. Do you have an advantage versus competitors in the ASC segment?

We certainly do. As Louie spent some time describing that, I would kind of narrow it to just 2 or 3 quick bullet points. Number one is the breadth that we already have as we've talked about how P&R has helped us grow that business. Well, if you looked at the surgeon mix that we have, many of the surgeons that we're connected to and have built our business with over time do both sports and arthroplasty, so they're already in that environment. That's one advantage. Number two, both our shoulder platform as well as our hip and knee platform, particularly our EMPOWR Knee, was really designed for the active patient. And so we see more of that going into the under 64 patient, which is going to really push hard into the ambulatory surgery environment. And then finally, because of the -- our coverage across that continuum and our deep relationship in that entire process, not just talking about it, not just a program, but actually delivering there, we feel very strongly advantaged, and we'll be able to, I think, take a lot of share from the larger competitors above us.

Has the move to telemedicine during COVID permanently changed the industry? And how is MedTechCo positioned for this?

I would say that it has, in particular, just the telemedicine pointing towards home rehab. We see it in the environment when it came to patient visits, which are sometimes related to us, certainly on the preventative side, but what we see most is that real shift in the postoperative environment. So absolutely, yes. And the real -- the thing that changed really was both in patients and in physicians. Prior to COVID-19, I would say there was a lot of physician resistance to remote -- telemedicine. And I think the patient environment was more comfortable going into the office. That change alone will really change how the workflow happens just across the spectrum, but particularly in the postsurgical rehabilitation environment.

How do you expect to continue your fast growth in your Reconstructive business without a robot in your offering?

I love that question. So thank you. First of all, I would say this, over the last 5 years is when one of the larger players has been growing somewhat faster than the other larger players. Typically, they've been 1.5 to close to 2x growth in the knee with a robot. At that same time, we've been growing 4x faster than that player. And the majority of the share, the larger slice of the share that we've taken has actually been from them. So certainly, we admire what has been done there by Stryker, I'll just say it by name. But at the same time, our growth has been significantly rapid because of our superior outcomes. And from our perspective, our focus has been on the ASC. Since 2015, we've been building our product line towards the ASC, knowing that guidance and computer-assisted surgery are meaningful. They're great enablers in the space, but it's going to be about how you deliver the implant in that environment and then which cast solutions you bring that work really well with that environment. So we've grown multiple times in the market. We'll continue to do so. And you'll see us, as Louie described and Matt, step forward with some new platforms there like AR that I think will be really suitable to this ASC environment going forward.

Okay. There's a follow-up question about -- can you talk about the interest and uptake of computer-aided surgery in surgical in extremities? It seems to be an area that's more receptive than in maybe some of the traditional hip markets...

Yes. And I think the question was phrased really well, which is computer-aided surgery. Because what you see in extremities, and Louie said this earlier, our experience has been that the different anatomies need to be served differently. We launched Match Point just a few years ago. And in the shoulder space, it's really about positioning the main screw as it's going -- a singular screw, believe it or not, as it's going into the glenoid to anchor for the implant. That's the most important thing in the positioning of a shoulder procedure. So that guidance from a preoperative plan led by PSI has been literally the driving technology there, whether you hear -- whether you've heard us talk about it or you've heard [ right ] and [ Tony A. ] talk about it. For that anatomy, that has been the play. We also have seen a really rapid growth in foot and ankle from PSI as we acquired the STAR Ankle from Stryker. Our focus immediately became how rapidly can we get PSI into that extremity. The extremities are different because you can't anchor them the same way. I do believe that cast solutions are meaningful. And I believe also that some of the newer cast solutions, like AR, can eliminate some of the preoperative scans and all that are required to really operate in the extremity space. But it will be a different design than what you've seen around the knee.

So shifting over to P&R. You've noted operational investments in P&R over the past 2 years. Are these behind you? And do you believe you can drive operating leverage and other improvements in this business?

Absolutely do. As a matter of fact, I wouldn't call them -- I wouldn't call CBS completely perfectly in place. As we've said, we're on a journey. One of the big moves that we made was to in-source our distribution and really build the right platform there for our business going forward. We did that successfully in 2020 with COVID-19 as a backdrop. I've been very proud of how the team has executed there. So as we go forward, even our working capital, there are tremendous opportunities in working capital as we go forward because of that changeover as we build how we supply to the customer and how we really distribute. At the same time, we've had great teams really stepping into the entire supply chain, how we buy products, how we plan and how we manufacture. So good impacts today. I think we've got a 3- to 4-year run to just really see nice step change each year as we go forward.

The only thing I'd just add, Brady, in addition to the P&R, we're making some investments right now in the surgical supply chain, in-sourcing in the surgical supply chain, which is going to create some nice growth and productivity opportunities for us over time. So I think it was a nice complement between the bracing and recovery sciences being back to good service with nice productivity journeys ahead and then having now the surgical investments giving us headroom for growth, but also opportunity to drive productivity there as well.

That's a great point, Matt.

So sticking with the P&R business. So what gives you confidence that you can restore P&R growth to exceed market growth rates?

We really -- so I'll tell you the confidence is just based in the 3 quarters prior to COVID, really spent a lot of focus in 2018 and really, as we turned the corner into '19, across critical areas where we wanted to innovate and really start to change the vitality or the freshness. And as Matt said actually earlier, as we opened up and really started to improve our operational performance, it created -- it unlocked growth for us there as well. So what we saw is in 2019 is we went from 2% growth to 4% growth to 6% growth to 8% growth. And all of that was our P&R business. Surgical was very steady growing high teens all across that. But the change across the business was really from P&R, and we saw that in the first couple of months of 2020 pre-COVID. So we've already seen it. Not only -- we've watched it move into mid-single digits and above-market growth already, and we'll see that again as we get -- as the market really opens up for the rest of the way this year.

How does MotionMD compare with your competitors' offerings?

I would say there are -- pardon me, there are 2 offerings that are out there that are somewhat similar to MotionMD. For us, our focus there was to build a platform that was really capable to bolt on other components. So one, MotionMD has a competitor in one aspect, which is a workflow software solution related to managing inventory and DME billing. There are a couple of solutions that are similar to that. What MotionMD has, though, that's additional would be the Oara that we've talked about, the workflow component with MotionIntelligence, which is driving connected bracing, as well as some of the other bolt-ons like VeriPro that we've added into the system that really change how the customer can interact with the patient in a moment in time, which is absolutely critical because otherwise, the patient is walking out with a product and you don't have the insurance approval before you do so. So that's really unique for us. That's why we've got 40% coverage, and our closest competitor would be significantly below that.

Yes. I just want to make a quick add on comment there. This is one of the things that we found really exciting about the business, right? The bracing part of this business has been an iconic leader that grew at above-market rates historically. And we knew it could be restored back to above-market rates just through service and through innovation. But this added component of MotionMD and having a substantial amount of the orthopedic clinics in the United States use that as the way that they run their operations, we saw that as a strategic advantage that as the leading scale player in the industry, provided we were willing to lean in and continually to drive that solution forward, as Brady said, add other pieces to it, make it better, make it easier to integrate, be able to make it a seamless solution and a powerful solution. We were confident that can be a strategic advantage in addition to the other advantage that this bracing business has had in the past that creates a strategic advantage into the future for bracing, better stickiness, better margins, better growth and then has the continued care benefits that the team has talked about as well.

We've got time for just one last question. Matt, do you expect to make other foot and ankle acquisitions? And what are your other acquisition priorities in this business?

Yes. As Brady described very well, the space has a lot of procedure fragmentation. You have different pieces of the foot and then different procedures within the different pieces of the foot, and that creates a great opportunity for a combination of organic and inorganic path through the space. Brady talked about, we got a nice pipeline of products to be able to develop and launch that move us into other procedures and give us additional coverage in the space. But then there's a lot of players out there, some quite small, some kind of medium sized who have either focused on 1 procedure and done it really well or they focused on 1 slice of the market and done it very well. And so there's also some very interesting opportunities to think about, acquiring additional businesses, additional product lines that will accelerate our growth and give us broader coverage to be able to build a bigger and bigger position in that great market.

Okay. That wraps up our MedTech presentation.

Great. Thanks. We're going to wrap up with the questions there and move into our final section.

Okay. Chris is going to finish up for us with a few more details on the separation as well as an update on our view of how the year is going to play out, and I'll let him go ahead and jump in.

Great. Matt, thank you very much. If you've seen today, all of our businesses have our core capabilities built into them, the talent, the teams, CBS, continuous improvement, innovation and acquisitions, that position both of these businesses to be independent public companies. Now you've seen that ESAB is deeper into its journey, and that's evidenced by the share gain, the consistent margin improvement and the cash flow generation. Now DJO has got a strong foundation with a fast-growing recon business and a P&R business that's well positioned to grow faster than the market. And the business has benefited from some recent acquisitions that we've done with high gross margins and even faster growth. So both businesses have exciting paths to compound value with growth, profit and cash flow expansion and acquisitions that accelerate the execution of their growth strategies. Now these paths start with -- let's see here, if we advance the slide there, there we go. Now these paths start with exciting 2021 performance. And last month, we issued guidance with strong recovery and growth in the year. Both businesses are prepared to deliver strong performance on the top line and with margins and with cash flow. Overall, we're reaffirming our earnings growth of over 40% in the year. Now we started the first quarter in a very good position and believe that we're tracking toward the upper end of our range with the possibility of exceeding it if current trends continue. And we're also expecting a robust year of cash flow, over $250 million of free cash flow that will be used to support our strategic growth and deleveraging in 2021. Now you've known for years that we've got great financial discipline at Colfax. And it was on full display recently when both of our businesses, despite COVID, flexed their cost to deliver good decremental margins and overall margin performance. And you've heard that each of them have strong operating margin, improving opportunities in front of them from operating leverage, leveraging the high growth that we're seeing and expect to see, from improvements that we can drive with CBS and with acquisitions that continue to shape the portfolio. We're confident in our team's abilities to drive segment level margins that are greater than 25% in MedTechCo and greater than 20% in ESAB. Looking ahead, we're expecting just a modest $15 million of incremental corporate costs as we stand up a new public company. And as you think about the total corporate cost bucket, we expect that will be weighted a little bit more toward MedTechCo to help accelerate its journeys of growth and margin improvement. Okay. We got a little sporty with the slide there, see if we can get back on track. Hey, listen, you've heard the journeys that we've been on with cash flow. You heard Ben talk about it, and you heard Kevin talk about it. It's really been a transformation for us for the last couple of years. We're really proud of the work that's been done, especially in these last couple of years. And even after getting DJO integrated and despite the pandemic, you've seen the performance that we could put together, nearly 100% cash flow conversion. And looking ahead for 2021, we're expecting very good performance. It's a little bit masked by some working capital investments that we're making in the business that are masking a true run rate that's in the mid-90s or higher. But again, still planning to deliver more than $250 million of free cash flow. Now looking ahead, both these businesses have strong cash conversion paths. MedTechCo, a little less so because it's going to be supporting that even higher level of growth. Coming back to Colfax for 2021. Our profit improvement in cash flow this year have us aiming toward about 3.2 turns of leverage by year-end, which gives us ample flexibility to make additional acquisitions, principally in the MedTech business. As discussed last week, we expect our growing profits and cash flows to enable greater financial capacity for growth in 2022 and beyond. Now moving ahead, as you would expect, you know Colfax, we're prudent folks with a lot of financial discipline, and you would expect that we'll be setting up both of these businesses with smart capital structures that enable and support their priorities and their strategies post separation. So speaking of the separation here, we have our teams really focused mostly on, as you could imagine, servicing our customers and meeting our plans for strong growth in 2021. But we are also well executed or well positioned to execute this separation. We've already validated the tax-free path for this transaction, for the separation. And we've launched many of the work streams that will enable us to complete this project in the first quarter of next year. As we saw today, ESAB has a strong and successful team, and we're complementing them with additional corporate resources and capabilities to stand them up to be an independent public company. And we'll provide other updates as we work our way through the project. So I want to wrap up just by saying that it's been a real pleasure to be a part of such a successful team. We've -- in the past few years, we've made great strides in upgrading our portfolio of businesses for better growth. We've created 2 strong businesses that have our full suite of capabilities and are really ready to take the next step. What you've seen here today are those capabilities and those visions on full display. And with these exciting futures ahead, we believe the separation into 2 public companies will unlock significant value for our shareholders. So I thank you. And at this point, we'll go ahead and open it up for final questions.

Great. We have a number of questions coming in. We'll start with Matt. Both businesses described future sales and margin goals. Over what time do you expect these to be achieved?

Yes. Thanks for the question. What's great is we've got great organic momentum and some good acquisitions fueling our growth in the short term. And so we try to be pretty clear about the -- what the next couple of years have in store here. And then clearly, we've got plenty of opportunity beyond that to continue to grow and expand the businesses. And the pace at which that happens is going to be the right pace based on what are the acquisitions that might come our way. The organic part of that is pretty clear obviously, but the acquisition part of it is something that we can't perfectly plan. And so I wouldn't want to put a pacing on that, but we've tried to make clear that we've got a clear vision for how to drive to those visions.

Great. This one would be for both of you as well. Can you give us a sense of ESAB's priorities for its balanced allocation of capital? Do you have specific targets for return on capital?

Well, maybe I'll start with that one. As you've seen, ESAB has a tremendous amount of cash that it generates in this business, solid cash flow conversion that expects to continue to drive to be well over 100%. So it is well positioned, has a high-class problem about what to do with all that capital. And as you can imagine, the first priority is always going to be supporting the organic growth and productivity improvements in the business with a strong lens also toward these accretive acquisitions that help accelerate the execution of the strategy, those that can help drive further differentiation, that can accelerate the digital journey that the business is on. And -- but it also puts the business in a terrific position of considering returns of capital, and we'll have certainly more to say about that as we get closer to the separation.

For both of you again. How do you expect to fund the MedTech growth? Well, you have to have -- will you have enough cash? Or you need to tap the capital markets?

Well, maybe I'll jump in with that one just to start. I think, also, as you've seen here with Ben's leadership and really the full team's commitment, the MedTechCo is in a terrific position to generate strong cash flow. This year, it's a little bit masked by the working capital investments to support that significant recovery growth that's underway, but it has a clear path to generate and convert more than 90% of its cash flow. So we think that, that gives it a firm path going forward. In addition, this year, between now and separation, we have an entire year this year to generate more than $250 million of cash that puts us in a great position to continue to invest in that business even before separation. And then finally, we'll continue to make great decisions, we think, about the capital structure of our business and how best to deploy that for growth, just as you've seen us do for the past 5 years.

Okay. Next question for Matt. How important is gross margin to the M&A strategy of both companies post separation?

Yes. I think, in both companies, there's a focus on enhancing gross margin. And I think our experience has been that if we can get to more elevated gross margin levels, that just creates more opportunity to invest in the growth of the business. It creates more runway for the productivity and continuous improvement vision and journey. And so I think, in both the businesses, it's going to be a key priority to keep going up step-by-step on that gross margin curve.

Next question for Chris. How would the corporate costs be split post separation? And on that split, do you have an idea for the NOLs that you acquired as part of the DJO acquisition, if those will continue on with the MedTechCo?

So the first question is in regards to corporate costs. So just to sort of go back on that, it's -- we said that this year, we expect about $65 million of corporate costs for Colfax. For the separation, we think it will add about $15 million. So you've got that new total bucket there. And then that will be allocated a little bit more heavily to the MedTechCo. You've heard the Colfax team. Today's leadership team is largely going with MedTechCo, just to help, again, accelerate the journey and capture that growth and margin opportunity that we feel is ahead of us. On the NOL question, it's a great question. Those that recall that we acquired DJO with significant NOLs, we believe that those NOLs will still remain available to the company. And as we work through the separation details, we'll find the best path forward to make sure that those are utilized and available to our businesses post separation. But the net result of that is much lower cash taxes in the U.S., which helps the cash flow conversion going forward.

Great. The next question for Chris. It's a bit of a clarification and then a follow-up question on it. You said you expect to reach the upper end of or exceed your guidance. Was that for Q1 or for the year? And can you just share a little bit with what you're seeing that gives you this confidence?

So the comments I made were with respect to the first quarter and where we've -- we started off the quarter very nicely. We had some of the dynamics that we talked about in our first quarter earnings call. We started off with a view that the industrial businesses continue to perform strong with good recovery and limited reaction to the COVID reemergence that happened. In addition to that, on the MedTechCo side, we outlined that the view that in the first quarter of this year would be a little bit of the reverse image of what happened in the fourth quarter, that is as the fourth quarter proceeded, we had COVID impacting the business more. And then as we come into the first quarter of this year, we would expect it to subside. So it's really those factors that are the biggest drivers toward the view that we have today on our ability to be at the high end of the guidance where if the trends continue, then we might even be positioned to exceed the guidance.

Okay. We have a number of capital structure questions coming in. I know a lot of people are interested in hearing more about the capital structure of each company. But would you be able to talk a little bit more about what you expect from a timing -- just if you could give updates to the market on what you're expecting.

Of course. People that know Colfax and have followed us for a long time and know those of us on the team with our backgrounds know that we're very disciplined folks. We're very prudent about how we think about capital structures that support the long-term growth and success of our businesses. And it's that same approach that we'll take as we stand up these 2 companies to be independent. We'll make sure that they've got the right capital structures to support their individual and distinct strategies they have going forward with smart capital strategies and structures, those that don't put a business in harm's way but enable the strategic execution. I think it's important to realize that heading forward.

And one quick follow-up on capital structures. Not in the near term, but maybe longer-term thinking, how would you think about the leverage targets for each of the businesses down the road, maybe 5 years from now?

Well, I'll say one of the things that attracted me to Colfax is just how -- what a dynamic company we are and how we're not dogmatic. We're governed by certain principles about driving value and supporting the long-term future of our businesses and taking the right steps at the right times to enable that. And so I think you'll continue to see us take those -- make those same moves. We're not in a position today to indicate what the specific leverage targets will be for these businesses. But what you have seen us demonstrate time and again is a very prudent way of deploying our balance sheet and thinking about our capital structures to drive that growth and think about long-term value creation always.

Yes. I think it's fair to say, Chris, that as the months play out towards the separation, we'll have more information to share on various fronts. We shared some initial news about the Board composition today, but there's more to be done there. And when we can share more, we will. On the capital structures, we've tried to share some concepts. But we'll -- we've got a little bit of background noise in the room here so I was just -- okay, maybe that was a welder going back there. But Shyam, did you have something going on in the back that we didn't know about?

[indiscernible]

So clearly, there's an appetite for more information. We're not at all surprised. And whether it's on the Board, the capital structures, other topics, we'll certainly -- in the months to come, as those become clear and we get closer to separation, we'll share information as it becomes something that we can share. What we've tried to do here in the first week, between last week's announcement and then today's session, is to give you a lot -- enough perspective on the separation to be able to understand it, understand the logic and understand enough of the broad strokes and then give you a real appreciation for the 2 great companies that we're creating and the kind of momentum and opportunity and capabilities that each will have.

Great. We have one last question before we wrap things up here. Thinking about from an R&D and innovation spending, you talked a lot today about the -- outgrowing the market and increasing the overall growth rates of each company. How do you balance additional investments in innovation while also expanding margins?

Yes. That's -- our business system really enables us to do. Olivier talked through how the innovation process was rebuilt in ESAB and how powerful it is. And one of the things that he mentioned in passing, but maybe I'll amplify, is that we added a little bit more investment into the ESAB business in innovation but most of what we did is just multiply the impact from that investment by the efficiency of the process, by centers of excellence with some of the work being done in low-cost places, some in higher by using third-party partners, by making thoughtful calls about what we develop versus what we acquire. And so I think we've got a good track record of being able to greatly increase the R&D productivity without substantially increasing the amount of investment. And MedTechCo, the DJO businesses came to us already investing in a good, robust way in the surgical business. And that's something that we're going to continue. And then we're complementing it with acquisitions and other investments as well that help to accelerate the pace. And Brady had already started to put a little bit of investment back into the P&R engine, and we've worked with him to put the rest of the right amount of investment into that engine. But that's one that's going to work a lot like how the ESAB one does, that there's a lot of velocity that can be driven through that bracing and recovery sciences innovation pipeline really through process, through smart decisions about what gets developed where, through partnerships. There's a lot of opportunity for velocity up against a good healthy level of investment for that industry as well as the [indiscernible] investment in digital technologies. Thanks for your questions. We really appreciate you joining us today. Hopefully, you've got a great appreciation for the announcement we made last week and the great value that it's going to unlock to enable these 2 great platforms that we've got to become independent public companies with tremendous opportunities, capabilities and momentum ahead. We'll keep you posted as we have more to share. Thanks for joining us.