Enovis Corporation (ENOV) Earnings Call Transcript & Summary

So it looks like we're -- most of us are live anyway, coming back online. So welcome, everybody, and good afternoon. We're very pleased to have with us Colfax, the team, and in particular the team from the new MedTech spin, Enovis. So Brady Shirley, currently President and CEO of DJO to be President and CEO of Enovis. And Chris Hix, EVP and CFO of Colfax, also to be CFO of the new organization. So the plan is we're going to turn it over to the team, particularly Mike Macek from Investor Relations, Vice President of Finance, to go through some slides. And then we'll have some time for Q&A. So with that, I'll pass it over to you all, and thanks so much for joining us.

Thanks, Matt.

Okay well, I guess I'll start off. Again, I'm Chris Hix, the CFO of the company. First, Matt, thanks for inviting us to the conference here. And thanks to all of you for your interest in Colfax. We'll start off on the first slide here. We announced the separation of Colfax into 2 independent public companies back in March, with a target of the first quarter of 2022. And the logic behind that I think is well understood by now: the opportunity to take 2 great companies and put them on their individual paths, allow them to optimize deployment of capital and make the most in their respective markets. We're making great progress on a myriad of details that go into these sorts of situations. But the good news is we've got a very experienced team, and we've been supplemented by a strong set of advisers that's helped us to remain on track for the first quarter separation. We've announced that this is going to be in the form of an expected tax-free spin of the ESAB business. That's our industrial business. And therefore, Colfax itself will stay intact and then become MedTechCo where we've recently announced the name, Enovis, which will be the company name that we'll adopt at the time of separation. We're a long way into this project, and a lot of the material points have been communicated to the investment public. So for example, we've communicated the expected capital structures of these respective businesses. That's aligned with the different capital allocation strategies. In the case of our industrial business, being a balanced allocation approach to both internal growth, external growth and occasional returns of capital to shareholders; and in the case of MedTechCo, with a more aggressive acquisition strategy. The ESAB team, the operating team has been together for quite some time now and it's highly effective. Those of you who have followed us have seen the business become really the innovation leader globally, really the only true global player, and outperforming peers and driving margins very successfully. That same team will be leading ESAB as an independent public company. And we've supplemented with some of the corporate resources you need to be a public company. And that's all completely built out, so they're ready to go. In the case of MedTechCo, we've got the Colfax team that will be joining with Brady and his team to come together to form the Enovis team heading forward. And we've got the Board of Directors, the Boards of Directors largely constructed and -- where you're going to see a great combination of talents and skills of people that [indiscernible] years with some additional perspectives and diversity they will bring to the Board and with very little overlap between the 2 Boards. So in summary, the teams are ready to go [indiscernible] your futures, and we're looking forward to the separation. So if we go to the next slide, I would say that both these businesses have exciting futures, but there's different starting points. ESAB is deeper into its journey to get to $3 billion of revenue, with significant margin expansion and peer outperformance that's been both demonstrated along the way and the gift that will keep on giving, in our view. With getting close to $2.4 billion, $2.5 billion or so of sales, there's a much smaller gap between the where they're at today and where they aspire to get to. In the case of Enovis, it's earlier in its journey to $3 billion of revenue. Pro forma revenue's closer to $1.5 billion or so. But what you'll see is we've had these ramping growth rates, organic growth rates as we're reshaping the portfolio. And we've got increasing levers for margin improvement that -- some of that's connected to growth and some of that is independent from growth. As we've made acquisitions to continue to shape MedTechCo to both help close a gap to what the size of the business that we aspire to be, but also to improve the business's growth outlook. And M&A will continue to be an important part of the strategy of the business going forward. So ESAB, a business we've owned for many years. We've got that hitting on all cylinders, ready to go. We're taking that same playbook into MedTechCo with the idea that we can create also a significant margin expansion and continuous peer outperformance, as we've been doing the last couple of years. So with that as a bit of a setup, we're going to -- I'm going to turn it over to Brady Shirley, so that Brady can take you through a deeper discussion of Enovis and our plans going forward.

Thanks, Chris, and good afternoon, everyone. I'd start by saying every once a while, if I slip in a DJO, that will just be a slip. Really excited about Enovis. It's certainly DJO is the initial component that's there. We talk about Enovis, and historically it really is 2 great franchises. As you can see by the pie chart, P&R is the largest segment of our business. That's our prevention and recovery. And then reconstructive, which has been really fast growing over time. And you've seen us talk about a few acquisitions there, which I'll mention in a moment, is now certainly greater than 25% of the business. Well positioned in this large orthopedic market of greater than 50 billion, truly the only player that plays across all 3 key aspects of the orthopedic care continuum. And to be simple about that, I would just say as we talk about there's pre, peri and post: preoperative prevention; perioperative, which means surgical intervention; and then postoperatively from a rehab perspective. The third bullet, I can't stress enough actually. It's been a fantastic opportunity for the historical company to become part of Colfax and then now Enovis to really bring the foundational aspects of continuous improvement into the business. And the impact there is certainly on the operations side of the business, but deeply into growth as well. And we have a very clear strategy that we've outlined to deliver above-market long-term growth while focusing on shaping our margins going forward. Next slide. So just walking through the 2 areas of the company. Number one is Recon. You can see on the left-hand side that today that's a $20 billion addressable space. And it's really extremities reconstruction with some components that are outside of reconstruction, and then also adult joint reconstruction, which is hip and knees. So if you put all that together, there's 20. There are a number of other segments in orthopedics that are surgical intervention that are there as well, but this is where we compete today. You can see by the chart in the middle that, that we're greater than 50% from an extremities perspective, #1 in reverse shoulder and growing quite rapidly in the larger hip and knee market multiple times at. We're doing that with a playbook that's been really proven over an extended period of time. And we've taken that playbook now and played it into our newer foot and ankle space. We have an unmatched innovation cadence, cared deeply about freshness and vitality. We've taken that in our existing business. We're moving that as we go forward into foot and ankle and to other key segments. We have a fantastic bag, but quite frankly, we still have room to finish developing that bag. And so our existing customers make up a lot of our growth as we go forward and continue to expand the bag into different segments. All of it's underpinned by superior clinical outcomes. And as someone who's been in the space for a long time, I've seen a few players come and go. And the ones that really sustain long term and are players here to be a part of this market and do really well over time were ones that deliver for the patients and from our reverse shoulder to our EMPOWR Knee. Our platform is built off of 2 big key technologies that really deliver from a data perspective and really deliver for patients. And everything that we do in these spaces, including the acquisitions that we do, you should watch for us to and be able to notice logically each time that there is truly a superior clinical outcome that's behind the strategic review that we made. And we certainly see that with MedShape. We have industry-leading KOLs. I would tell you that a big part of how we shaped our business from moving from a smaller niche player to be substantially playing into these big key markets, was with getting the brightest and the best from a key opinion leader perspective, who really helped and arm in arm with us, partnered to help develop these technologies that create better outcomes. And then finally, we've got a fantastic medical education platform that truly today when you're growing at the pace we're growing and the demand for customers to really learn and get into do something to help improve their patients there. And so these are the ways -- this is the way that we've done it. It's our proven playbook, and we'll continue to do that as we expand into other segments as well. Next slide. You can see, and we've talked about this back in March, where we're headed and what our long-term plan is. The plan is built around significantly expanding the company. And a lot of that will be in recon, and we're focused today on just building this $1 billion double-digit growing platform. We're certainly meeting those double digits. And we've done that for a long period of time, and we see a lot of opportunity. But underpinning that, each time we make one of those steps, it's really off the basis of strength that comes from some of our P&R organization. Our bracing and P&R plays across every segment in orthopedics. And so as we step into a new space like foot and ankle, we've got a large group of customers that we work with day in and day out. And it positions us to win as well as a lot of contracting power that a new player or a start-up player would not have in those spaces. So we've been able to really capitalize that as we've gone forward. Keys for us in recon, it's really vitality. We have the opportunity to launch a lot of new implant systems into the marketplace that have -- that are driven by data that sits in the background for them and really bring them into the space and change what's happening for patients out there. We've maintained above 30% vitality or freshness in our recon platform for more than the last 7 years. And then finally recently, we acquired Mathys. And that was a big play for us because predominantly, greater than 90% of our revenue, at least, it was done in the United States in our recon platform. And Mathys gave us the opportunity to really open up the aperture. Greater -- more than 30% of the shoulder market is outside the U.S., and 49% of the hip and knee market is outside the U.S. And so we were really constrained as far as the market we were serving on our own. Picking up Mathys gave us a platform to launch the products we've done here as well as create scale opportunities for us to drive both growth and margin globally from a recon perspective. So a lot of good opportunities so far, a very active funnel. And you'll continue to see us grow both organically rapidly as well as adding to that offense and creating momentum behind our strategy. Next slide. Our P&R business is one where we've been the market leader for quite some time on virtually every continent. And you can see, we're #1 globally in bracing. We're #1 globally in rehab. And we're #1 in diabetic footwear. So this is a space that we pioneered most of what's happened in these spaces for a long period of time. At the same time we -- from a modern perspective, we stepped in and provided the -- what's called MotionMD, which is a workflow solution. We have it today in 40% of the U.S. orthopedic clinics. And so from a long-term care perspective, providing these products that both manage the preventative side of health care as well as the rehab side, we're also partnering with our clinics by providing this platform. It also created an opportunity for us with the platform to start plugging in other components. When you hear smart devices will -- brace is the ultimate wearable device. And we've already got a platform that's sitting in a very safe way, and a high-trust platform sitting in most of the centers that you see that are out there. There are over 6,000 orthopedic clinics in the U.S., and 40% of those have MotionMD. We're the leader in sports medicine, but there's some great opportunities for us in other spaces in bracing and supports as well as our rehab business, which is really driven by modalities. Next slide. I talked about this at the front side, but I would tell you that there's 2 reasons why this is critically important. One is the ASC. With the shift that's going on out there, you hear a lot of people talking about programs and initiatives around the ambulatory surgery center. But the real thing that happens in an ambulatory surgery is that the surgeon boots from being involved in surgical intervention to being involved across the entire platform. And they're an owner, and a meaningful owner, playing across how the patient's journey happens from start to finish. We are the leader on the left and the leader on the right and a fast grower in the middle. And so it's advantage to us and the ASC to be this player that actually is already doing business with those customers, but as they step into an ASC environment, it allows us to actually partner with them in a very deep sense all the way across the patient journey. And secondly, it really drives the digital workflow of solutions. We categorize that into 2 pieces. One is workflow, which is literally how the clinics run and how they manage patients through the process. And then, two, is with our digital strategy inside of our surgical business. We've, long term, had a great play from a shoulder perspective, providing PSI and preoperative planning. And you've recently seen us make an investment in an AR company that we believe is where the future is going from a guidance perspective, but formatted and fitted to the ASC environment, which has a stronger cost component to it. Really, really important that cost and space or footprint and it tied to their procedural time, meet a different standard than what's out there in the inpatient world. And what we are doing across this platform, and the continuum allows us to provide on both sides of that, both in the workflow and in the right platform for the surgical procedures and ASCs. Next slide. Our long-term growth, as we laid out on our Investor Day earlier in the year and you'll continue to hear us talk about it really on these 5 things. Number one is just feeding innovation. And quite frankly, a lot of times when people ask me about Colfax historically, and today, it's Enovis is where we're all joining together once we separate. The questions are usually about -- are operational in nature, which is fantastic. But I think what's been really neat to me is there's this underlying piece from both my history as well as Matt Trerotola's history around growing and really feeding innovation. So first of all, we're going to continue to accelerate innovation, both in our recon platforms, but also in our P&R platforms. We're positioned well now. We're winning in the ASC. About 20% of our total knees in 2021 will be done in an ASC. And we believe that our ASC 360 offering, which really does sell products into all the spaces there and we'll continue to advance adjust there. We'll lead in digital health care, both in our workflow solutions as well as connected medicine platforms with our wearable brace devices. And in cost solutions, computer-assisted surgery whether it be AR devices to help guide the surgeons or simply preoperative planning. Rapid growth in foot and ankle is the fastest-growing segment in orthopedics. We made a meaningful play there acquiring 3 platforms. We feel good about all 3 segments: the ankle, which is -- sits on the back side. It's a fast-growing area. We acquired the STAR Ankle for that. Then you've got hindfoot and midfoot there together. The MedShape technologies are by far the leading player there and has fantastic IP, and a really good runway for that business to even spread forward towards the front of the foot. And then the forefoot and just from a fixation perspective, we acquired Trilliant. We put those 3 together, created an oscillated BU for that. We're really excited about what that will do for us and how we can grow multiple times in that space. And then finally, a big part of our offense for us to grow in size as we've talked about, we'll be expanding through M&A. Next slide. So far, we've made a number of acquisitions, as you can see, over the last 12 months. Mathys, I've already talked about that a little bit. That was a geographical footprint play, but also brought some meaningful technologies that accrete scale in our global recon business. Foot and ankle, MedShape, Trilliant and the STAR Ankle, I spoke about those. But I'm excited about those and others that we'll talk about for that space. LiteCure, really a neat play for our rehab business, a long-term business where we're a substantial #1 player. And the modality side of that is really reshaping physical therapy. And so we were excited to see this, and this play has gone very well. And we look at our global impact from this one is one that will reshape -- help us reshape tomorrow in rehabilitation. And then finally, Insight that we've talked about. We really have 3 categories here that we're focused on, strengthening and extending our current business. And you can see some of the plays that we've already made, but there are more plays in high-growth, high-margin areas for P&R as we reshape that business to be really a mid-single-digit-plus grower that delivers the type of margins that we wanted to deliver and at the same -- while at the same time, expanding recon rapidly as we've said, building a $1 billion recon business that's a double-digit-plus grower. And you guys know that there's fantastic margins in that space. The second is further expanding in orthopedics, other high-growth segments where -- that are already adjacencies to us because of our P&R platform. And then finally, just making logical plays into the broader $450 billion MedTech, using some of the technologies that we have here in orthopedics and stepping those as well as other opportunities that are high growth and really shape the addressable market the way we wanted to see to be the type of grower that we've set forth to be. Next slide. Finally and in fact, summarizing our -- realizing our vision, you can see that today, which is a pro forma look, it's about 1.5 billion. Our expectation as we go forward, you can see how the 2 are shaping. You've got certainly P&R continuing to grow. But you see the black area and recon taking more and more of the mix of the company. And then there's opportunity to extend in these other high-growth segments. All of this will move us towards our long-term strategic goals, which is high single-digit core growth, mid-60s gross margins and 25% adjusted EBITDA margins plus. So this is not something that happens overnight. We've been very pleased with the progress that we've made, Where we're fortunate is that this underlying P&R business really opens the door for us to step into a lot of spaces. And we're excited about where we're going, both in orthopedics and with Enovis beyond orthopedics. Next slide. I think that's at the end. Matt, back over to you.

Thanks. Thanks, Brady, that was super helpful, and Chris. So maybe to start, one of the questions that I had was, just at a high level, you sort of ended on this point. Chris, I think you started on this point around the spin long-term goals of 25% EBITDA. Corporate total Colfax is now about 15% or 16%. I'm not sure if that's -- you consider that to be sort of a steady state. I think most people would expect that -- I know this is going to start a little bit higher than corporate average in terms of both EBITDA margins and gross margin. Any color that you've been willing to provide on that?

Maybe I'll start off just by saying that we've talked about the core margins inside the med tech platform. So that's before we bring in corporate costs and form a moat, and that those we expect to be at 19% or higher for the year. And then our corporate costs are currently running in the kind of mid-60 millions or so range. Now we've talked about as we bring the 2 businesses together and as we form ESAB, we're actually going to shrink those Colfax corporate costs down a little bit, and we're funding the ESAB corporate costs. So you put all that together, and what it suggests is that we'll have some incremental costs that we put into Enovis to help launch it, get it started. And then we'll integrate that carefully with the DJO side of things. It's really about the margin potential here that we'll continue to go after from this point on. A good part of that is driven by the operating leverage in the business. With the sort of high gross margins that we have, every time we drive another dollar of growth, so that really flows through nicely to the P&L while -- or to the profit line, while also giving us the opportunity to continue to invest to strengthen the business further and to invest and even more growth. So that organic growth is a key contributor to the profit and the margin expansion. At the same time, we're doing M&A as Brady talked about, to reshape the portfolio for faster growth. And that also contributes to a higher margin profile over time. And then of course, you would expect as you saw us do in the industrial side, apply our proven business system to drive productivity improvements and other cost actions that will also contribute to margin expansion. So that's how we get from the -- if you look at DJO today where it's at 19-plus, that's the path to get to 25%-plus. And then of course, we'll layer in some of these corporate costs that will affect those post -- or those segment margins a little bit.

Right. Sure. No, so if we think about -- so that 60% corporate cost, I guess is about 5% or 6% sort of margin. If we were to sort of try to carve out corporate costs, it'd be something in that ZIP code.

We talked about pro -- sorry to jump in. But Matt, we expect pro forma revenue, we've cut -- had it on our slides here. So I can say it's I mean $1.5 billion or more of revenue. And the corporate costs will be sliding. We would expect to slide south of $60 million as we're rationalizing as part of the separation of the company. So we do not expect anywhere near 5 or 6 points of margin impact from bringing it all together.

Okay. So under the new umbrella, it would be sort of segment margins of 19 going to 25, less, I guess, something like 5% or 6? Or is that you're saying that, that will be more efficient in the spin than it is in the total corporate because you're supporting kind of 2 businesses right now, sort of?

Yes. So just -- if I could just slow it down a minute, just the basic math of what we've talked about, would suggest something that is less than 4 points of margin impact out of the gate. Now let me just make sure this point gets made as well. As the business scales and grows, the impact of that on margins comes down as well. In other words, that's also a leverageable cost. And as you get that operating leverage, that sort of amplifies that operating leverage impact that you get, so that over time you'd see the total margin impact from that being less and less and less.

Sure. So at 25%, it's not 4% any more or less. It's something less because you've grown into that and scaled.

Sure. And Matt, a different way to think about it is this is -- bring it all together, and then there's a path to grow the margins by 6 full points, whether your starting point is 19 or something different than 19. And that's the sort of value creation opportunity that we think is exciting within the business ahead.

No, 100%. So maybe talk about the confidence in getting to that high single-digit growth rate. It's something that -- not a lot of years in musculoskeletal implants and med devices can sort of get to and hold, at least at scale. Maybe talk about what gets you there?

Yes. I'll take that one, Chris. I'll start out with med. I would like to say this, pre-COVID through the first half of -- all the way through the first half of March of 2020, we were at 7.9% growth. And so this is not a strategy that we just started. The second half of '19 looked a lot like the numbers that we've talked about. And we've certainly leaned into extremities, as you've seen with foot and ankle, as well as to some of the modalities in rehab to really do what we're talking about. We've been growing recon greater than 10% in that double-digit-plus range for quite a period of time for almost 7 years. And then picking up foot and ankle, putting that into that bucket as well, and those components are definitely growing rapidly also. So a big part of it is keeping recon growing in that double digits, and we've done it for a number of years and we feel very confident that with the plays that we've made in the parts of the market where we play in, that we will continue to see that. I mean just the underpinning of the extremities market is fantastic. So it will grow multiple times, but just the underpinning of that market is really good. And then on the P&R side, we've seen the kind of performance that we know we can do in a non-COVID window. Certainly, we saw that in '19, in the back half of '19 and we saw really, really good, solid growth coming from that business. And even in COVID, as we've launched some key launches that were -- we would -- I look at them as pivotal launches that were pointed towards really getting our P&R business [ in surgeon ]. We've taken share during this time. And we think when the markets open back up, that our P&R business will do quite well. So we feel good about high single-digit margins from our core business because of the strength that we've done in P&R and because of just the long-term double-digit that we've done in Recon and that we're very confident we'll keep going forward. And then the acquisitions are just nice pluses to put in on top of that.

Well, it's aggressive, and I'm sure there's a lot to ask about there. Because I'm sure folks, with some familiarity of the hip and knee market, are curious about how exactly -- I'm sure you get a lot of questions, how is that you're putting up those kinds of growth rates sustainably. How does that work? And maybe -- shoulders is obviously a faster-growing segment. So being a leader in reverse is -- at least that sort of makes sense, I think, with what we all think we know about that market. But growing hips and knees at that pace, where are you finding the success there to put up those kinds of growth rates?

So yes, that's a great question. And I said it in the presentation but I didn't say it explicitly, but I'm going to point you back to the presentation, and it's very true. What I'd tell you, Matt, is that the best outcomes in all of health care, in total hips. And they have 98% outcomes, and you can -- there's a lot of prostheses out there. There's a lot of things out there in total hips that are really good, and the outcomes are fantastic. But the total knee, which is the bigger of all the segments that are out there, 80% -- only 80% of patients are satisfied postoperatively. And that's a fact. I mean that plays across all the data from all the players that are there. And there's a large percentage of that population, the average age of the total knee today is -- total knee patients today is 64, which means there's a lot of those patients that want to be active and want to continue to play golf and tennis and other things. And quite frankly, as someone who has been in orthopedics for a long time, it's an area that's not been addressed well. And so what I saw, when I came to the company, was some really good data around this dual pivot knee, a knee that function like the normal knee would. So really grab -- got some great KOLs and said, "Let's go do something better. Let's make a difference." And I would tell you that the data that we have would say that the patients that are getting the EMPOWR Knee are in that low 90s range from -- happy with their knee postoperatively, which is 50% better than what's out there in the market. And that's really the driving force. People ask me all the time, "How competitive do you feel? Do you feel pressure from the robots and all that?" And I'm not anti-robot, so you won't hear anything negative from me about a robot. I would just tell you that all during this time of the robot, we've been growing multiple times market with our knee because patients just do really well with it. And it's off of that platform that we've built our recon business. And even as we step forward, with other acquisitions, I would just tell people to always ask us the question, well, what did you see there that you thought delivered superior clinical outcomes? Not just something you can kind of halfway point to, but something that really makes a difference for the patients. And that's what we've done in recon. That's why we're doing better. And that's what's underpinning the growth, is our patients are doing great.

That matters, for sure. The -- and the other thing that's jumped out as you've talked about here and in the past is the exposure to ASC, and that the volume, 20% or so that you mentioned of your procedures coming from ASC. And that -- is that in hips -- or hips and knees? Or is that hips, knees and shoulders?

Yes. So when I said 20 -- when I say 20%, that's actually specific to the knee. That's the first one that CMS really leaned into. We measure across the board, but the knee is the one where all the focus is there and what everyone wants to talk about the market. And so in the knee, we're at that 20% range and -- which is quite a bit of advantage over the players that are out there. Why? It still goes back to the same knee I was talking about for the patients that want to be more active, those are the patients that are more suited to have a surgical procedure done in an ASC. And so those 2 things have kind of come together for us. I'd love to say we did all of that on purpose. But to be honest with you, there were 2 streams at work. And then as the market kind of shifted towards outpatient and ambulatory surgery, what we did in the continuum of care as well as this fantastic EMPOWR Knee that was really built for a younger patient that want to use an uncemented prosthesis that positioned them to be really active, is just a perfect fit for the ASC. And so it's gone well.

And you mentioned [indiscernible] knees. What -- I'm sure you get this question a lot from the sell side, is what percentage of your knees are on [indiscernible] at the moment, just in the spectrum of penetration?

So we haven't put that number out there yet. The -- within the marketplace, that number is about 14%. And what I would tell you is we are significantly higher than that number. We're not in the teens.

Got it. Okay. So yes, there's a couple of companies, I guess you being one of them, that seem to have found the product or performed [indiscernible] or the -- whatever it is to sort of drive that penetration. I mean it's working, which I can understand how it's attractive to the ASC channel.

And if I may, Matt, I'll tell you. There are 2 aspects to that from a long-term orthopedic guy. One, one of those is just the patient subset. Like I said, it's that younger, more active patients. They also have better bone, and so they're positioned to do them Pressfit. So if your knee is really for that population, then that's going to be a natural fit. And the second side of that is really about the porous coating. And our porous, our P2 is really fantastic. And as a result, it's been a big driver behind our ability to move to Pressfit, maybe with a stronger push than some.

Okay, so a couple of other questions here in the few minutes that we have left. I mean one, you talked about Mathys. Maybe -- it was obviously an important deal for the company and opened up to a greater extent, it sounds like, your international footprint. Maybe just talk about where you are in the innings of leveraging that asset, and maybe specifically what you think it brought to the business.

Yes. So we just closed in just a couple of months ago, I'm actually headed over there again on Tuesday. Very excited about we see. Our thesis in the background was, one, it gives us this footprint to really take a lot of the great products that we've developed that are predominantly in the U.S. Two, Mathys is a really strong player. I mean their strength in hip and in the anatomic shoulder in Europe and Australia and a number of continents is just fantastic. And oddly enough with us, there was this perfect fit. I got to know Hugo Mathys a few years ago, and it took us some time to work this thing through. But it looked like a great fit because where we were strong, which is in the reverse shoulder as well as in the knee, were areas where they were not as strong. But they were very strong in the hip and very strong in anatomic shoulder. And so we felt that the synergy between those two would be fantastic because we could really supercharge a couple of the areas for them. And then there are some technologies that they bring to bear that are really meaningful, that we think will impact our U.S. market, both from a growth opportunity but also from a margin perspective and just scale. I mean that if you put these two together, you really change the scale of our recon business, which creates a lot of manufacturing opportunities and just other synergies. So it's going well. I'm going back over to meet with the team for the third time in the last quarter, next week. And we're very excited about where we are and how we're doing and rolling those pieces out.

That's great. And the opportunity for -- obviously, it's additive and complementary, but for sort of cross-launching some of their products, U.S., OUS, where they may or may not be registered. Is that a -- not to pin you down on time lines, but is that something that begins to happen in '22? Is that aspect of the synergy and sort of complementary product part of the strategy? Is that '23? Or what's that look like?

Yes. Well, the great thing is that the two key products that I've talked about, the EMPOWR Knee and the AltiVate Reverse, those are CE marked. And so there's definitely opportunities that we will execute on in '22. And then we have a number of other products, like our new dual mobility hip that we just launched this year. Of course, there's an MDR process to go through there. And we've got good teams working on that most -- on both sides. And it will be very capable for us to have a nice flow of more these products going there. But the 2 key products, the 2 big key products are CE marked. And so it's a matter of us ramping up and getting ready to go and getting those move in those markets.

Excellent. All right well, we're just about at time here, I think. So maybe just end with -- I'm sure you've talked about it on the call, but time line and next steps and meetings and related to the spin that we should look for in the coming weeks and months.

So we've kept everyone advised of the rapid progress that we've made on the separation. We still are targeting the first quarter of 2022. We've got the management teams. We've got the Boards. We've got the capital structure, the new name for the company and behind the scenes, lots of work and filings and things that are well underway. So we'll continue to give updates where we have them, but we don't see any impediments to getting the separation completed in the first quarter.

Excellent. Well, listen, thank you, gentlemen, for joining us. Appreciate your time, appreciating -- and everyone else for joining us as well. I look forward to keeping in touch.

Very good.

Thanks, Matt. Thanks, everyone.