E novis is a very interesting company, perhaps not so familiar with some of the med tech guys, but investors. Certainly an interesting story to tell. From the company, we have CEO Matt Trerotola and CFO Ben Berry. In the audience, we have Kyle Rose, who heads investor relations, and I'm Vijay Kumar, who heads med tech and life science at Evercore. With that, Matt and Ben, thanks for the time this morning.
Hey, great to be here, Vijay.
Thanks, Vijay.
Fantastic. So maybe we'll start with the big picture, Matt, just given Enovis is still—I still feel like it's, it's new. Give us some background about the company and how this came about, because it feels like all of a sudden, a new orthopedic company coming in, you know, growing above market. It feels like, where did this company come from?
Yeah. Pretty, pretty exciting, isn't it? So we actually as a company, we were founded by the Rales brothers, like about 10 years after they founded Danaher, who's been obviously massively successful in their pivot from industrial life sciences over time. And, you know, we're a diversified industrial player with a powerful business system based on lean and a focus on talent development, talent processes, and a focus on growth through innovation and acquisitions. I joined the company back in mid-2015. And then over the past five years, we've been really reshaping the company into the med tech growth company that we are today as Enovis. You know, we were a company called Colfax at that time.
You know, a number of divestitures and then a pivotal acquisition back in early 2019 of DJO Global really led us to where we are today. As we exit this year on a pro forma basis, when we bring in the Lima acquisition, we'll be about a $2 billion leading player in the orthopedic space with demonstrated high single-digit organic growth capabilities in line with our strategic plan with margins that are consistently increasing with the opportunity to get to 20%+ EBITDA margin in the medium term. I think we've demonstrated a robust capability to do acquisitions and do them well.
And that's really, you know, pivoting that history, leveraging that history that I talked about, where we're applying our business system to make these businesses better. And we're applying our well-worn acquisition capability in order to do good acquisitions that are strategically very important and to do them well, with the right impact for our shareholders.
Just, for people perhaps not as familiar, post LimaCorporate, $2 billion of revenues, what is the medium-term outlook for this business? You know, is this mid-singles plus, high singles? What should be the EPS profile of this company?
Yeah, I mean, from a growth standpoint, I think we've been consistent in saying that we're building a high single-digit organic grower by next year. And you know, our guide for this year is already in that high single-digit organic growth range. And as Lima comes in, it you know, is helpful in terms of continuing to strengthen our organic growth possibilities. And so, going forward, we expect to be able to you know, take our $2 billion company that we now are and grow at high single digits organically, with really double-digit growth on the recon side that we've demonstrated for a long, long time, and we've now got a larger recon business and more market space to drive that against.
And low- to mid-single-digit growth in the P&R side, which is something that we've used our, you know, business system and capabilities to establish over the past three to four years. And now our P&R business consistently grows in that low- to mid-single-digits range. And so that combination is how we get that high-single-digit organic growth that we expect to be able to generate on a go-forward basis. We also are, you know, climbing up the margin curve. We continue to see the opportunity for at least 50 basis points a year of margin expansion.
Lima gives us a step change, an extra, you know, over 100 basis points, on a step change basis, just based on the margin profile of what comes in there.
Fantastic. Just, you know, since you brought up recon, what do you offer within recon? Which markets do you play in? In a post Lima, how big is that segment?
Yeah. Yeah, I mean, I mean, so what's great is that, you know, we play in the, you know, roughly $20 billion hip, knee, and extremities portion of recon. So it's a huge market that, as an overall global market, you know, grows in the kind of 3%-4% normal times, more than that right now, in the post-COVID environment. You know, what's great about our business is if you look at that $20 billion recon market, most of it is hips and knees. That are a great market, but the lower growth part of recon, and then, you know, the smaller part of it is extremities, which is the fast-growing part of recon.
Our business, as we bring in Lima, will be about 50/50 between extremities and hip and knee. So a substantially better kind of weighted average market growth profile than the overall Recon market. And we'll also be evenly balanced between the U.S. and outside the U.S., and our outside the U.S. presence is in attractive markets outside the U.S. So our Recon portfolio, which will be $1 billion of the $2 billion, roughly, is something that we see as really a premium Recon profile that, you know, has a better market exposure, has got a fantastic range of technologies. And the pieces of that portfolio have a demonstrated capability to grow double digits. We've, you know, we've grown consistently double digits in our U.S. Recon business.
We've grown the Mathys business double digits since we acquired it, and the Lima business is growing double digits right now. So, we've got a great, great portfolio on the Recon side with a demonstrated high growth capability and lots of runway.
Yeah, a lot to unpack there, Matt. It's so when we think about these markets, Recon, you know, big companies, you play with some pretty big entrenched players, right? And a lot of them speak about robotics. So let's start with U.S. hip and knee. You guys have grown north of 20% year to date. Why is Enovis growing 2-3x above market? You know, I believe you don't have a robot in that market. So without having a robot, what's driving, what's enabling you to grow faster?
Yeah, well, look, I mean, we've got, you know, kind of a, you know, small but meaningful share, you know, 1.5-2 share positions. We're a meaningful player, but we've got enormous running room in, in terms of where we can go in, in, in the market. And we've got, you know, fantastic technologies, that the market, appreciates, very much. And, and really great, great execution, strong channel, well-respected brand, great, great execution. I think those have enabled us to consistently grow way above the market. And, and definitely at the core of that, technology-wise, is the EMPOWR Knee. That's just a better knee, you know, a, a dual pivot knee that, that feels more like your, more like your natural knee.
That is a great knee for the active patient that's going into the ASC environment, that's growing faster than the rest of the market. So there's a core technology there that definitely, you know, is driving our growth and still has a ton of legs, both in the U.S. and beyond. But then we've innovated around that. We've bought great technologies on the hip side that have let us go and sell into our knee docs in order to have them have kind of a, you know, simpler total supply offering. We've also continued to innovate in knee. We just brought a revision out, you know, that we're ramping up right now, and that's 15%-20% of the knee market that we really haven't been able to serve in any meaningful way.
So that creates additional runway within existing surgeons as well as beyond. So I think, you know, we've been able to grow great. Yes, you know, how can we do that in the face of the robot? Well, we certainly are, right? I mean, you talked about our growth year to date. Our growth this year in knee is, I think, stronger than, you know, any of the last 10 years. Maybe there's been one or two that were stronger, but our growth in knee is very, very strong.
And so there is, you know, yes, there's a lot of focus on the robot, and there is a real change going on in the industry related to Enabling Technologies, but it is not hindering our ability to get our great implant into the market and gain share with that. And then obviously, we, you know, we've brought our ARVIS technology into the marketplace, which is a terrific guidance technology that gives our surgeons an opportunity to have the latest, greatest technology for their procedures.
Gives us a great offering for the ASC environment, where something that is smaller, less expensive, and you know really provides the benefits that you get in terms of repeatability, ability to capture the data, et cetera, you know is you know something that is making ARVIS you know very well accepted quickly in the marketplace. So, you know, we're well aware of the robot trend, but also very comfortable that with our technologies, where we are today and where we can go over time, as well as how the market is evolving, we've got plenty of opportunity to continue to be very strong.
Great. Before I dive into some of those, maybe, Ben, one for you. You know, when you look at, sort of your latest guidance update, and it was tweaked up, just from a macro utilization perspective, you know, how are things tracking relative to your outlook for Q4?
Yeah, sure. We're very confident in the guidance that we've put out there. Really strong start to the year with, you know, double-digit growth on the recon side, you know, over the past eight+ quarters. If you look at P&R, we've really seen stabilization there, growing kind of in that 3%-4% range. And, you know, year to date, through the first nine months of the year, we've got 100 basis points of margin expansion. So we've seen enough of the year at this point to where we're confident to raise the guidance on our last call, and feel very confident in terms of our ability to deliver against that.
How much has backlog helped you guys this year, right? When you look at Matt's comments about the business, the aspiration to be a high single-digit grower, did backlog help you guys, you know, achieve these numbers in fiscal 2023?
Yeah, I think you, I think you have to think about it as, you know, kind of pent-up demand versus kind of backlog. In certain cases, maybe in the beginning of the year, there were specific actions in places like Germany, where, you know, there was some additional capacity created and budget funding created to clear some of the waiting lists that existed in, in that part of the market. But overall, if we look back to, you know, our performance versus, you know, 2019 and the big players and their reported growth versus 2019, you would see, you know, that there's still a couple of years' worth of growth that's, you know, kind of missing in terms of pent-up demand. We feel like we saw a little bit of tailwind last year in the underlying market from that.
We feel like we're seeing some this year as well. So, you know, you're talking about maybe a point of growth to the market, and then we feel like that'll continue for the next couple of years as well.
What gives you the visibility that there's still some pent-up demand that should benefit the business in, you know, when you look at fiscal 2024?
... Yeah, it's again the triangulation that I mentioned around kind of looking at performance versus, you know, kind of growth of 2023 of all the players versus 2019 is one thing that we look at. We also look at registry data, waiting lists, we talk to surgeons, you know, we kind of have our foot on the pulse of just kind of the underlying market, and we try to triangulate it in those multiple ways. So all of that would kind of indicate that there's that demand there, and we feel pretty confident that you'll still continue to see a little bit of tailwind here in the next couple of years.
Yeah, the other thing I'd add to Ben's comments is, fortunately for us, we get most of our growth, you know, beyond the market, right? So, in any given year, if there's a point or two of extra market tailwind from this, you know, kind of, you know, kind of extra pent-up demand or backlog or whatever anybody wants to call it, that's a nice plus for us, but it doesn't really make or break our year, and that's how it's playing out this year, right? So we're getting double-digit growth, well into double-digit growth in our Recon business for the year. Yeah, a point or so of that is coming from this kind of extra tailwind. That's terrific.
But most of our growth is coming from share gain and from kind of the base market growth of our attractive market exposure profile. And so we feel really good about the fact that whether there is or is not extra tailwind in the coming years, we've got the opportunity to have very strong growth. And, you know, if there is some, which we think there likely will be, we get a chance to have, you know, some extra on top of that.
Understood. And, you know, since you brought up our recent ASC, but let's start with the ASCs. What is your exposure to ASCs, and,
Yeah
... how are you able to compete in that space? Right, I think some of your peers speak about, "Look, we have an ecosystem. We can sell everything.
Yeah.
Maybe talk about your differentiation.
I mean, there's a couple things, right? So, I'll talk about knee ASC, 'cause that's really the area that there's been the most movement there. You know, the best information we have is that somewhere a little over 10% of the market is done in ASC. More is done outpatient, but ASC specifically, somewhere a little over 10% is done there. And we track how much of our business is done there, and we've shared openly that it's in about the 20% or so range. So, we do have, you know, quite a bit of confidence that we're being more successful in the ASC environment than the market is. And why is that?
Well, first, as I said, the EMPOWR Knee is great for a active patient because it's dual pivot. It pivots when you walk, it pivots when you squat, and so it's great for an active patient. And when people are selecting patients to move into the ASC, or selecting surgeons who are gonna do more of their procedures in the ASC, there's a nice fit there that the patient may likely be a good patient for EMPOWR, or even better, the surgeon that moves into the ASC is one who uses EMPOWR for everything they do. And so there's a great fit with our technology. We also have had a focus from the start, you know, we've been a you know smaller, agile player in the space.
We're pretty big now, but we've been a smaller, agile player in the space, and so we've had a lot of customer focus, a lot of agility. I think as people have opened ASCs, they've appreciated that, and things like having simplified instrument sets, we sort of had them, you know, early days from the start and made life easier for that ASC environment. We also have a great, you know, app called the OARA score; it's used by our surgeons and by surgeons who aren't our surgeons as a risk-scoring tool to kind of select patients that could make sense to go into the ASC environment. And then our ARVIS technology, as we brought it out, people can see it's a great technology for the ASC.
And then finally, you know, often we have P&R presence. You know, the ASC is, you know, under the same roof as a, as an orthopedic clinic. People know us, they're aware of us, they're using our technology on other fronts. And so, yeah, there are some players out there that are succeeding in, you know, with different kinds of breadth for an ASC environment. But we've got our own kind of breadth, that is how and why we can succeed. And still, you know, we're a two-share player in knee, roughly, which means that at 20% share in the ASC, we're probably a four-share player in the ASC.
So we're not the only one who can succeed in the ASC environment, and I think we have an opportunity to drive that four share up nicely over time in that fast-growth part of the market, and have that be a fantastic contributor to our growth. But we don't have to be the only game in town for that to happen.
Since you brought up P&R, when you look at ASCs, you know, what percentage of that ASC market is your existing P&R customer, and do those relationships matter when you think about penetrating, you know, hips and knees in that environment?
Yeah, I don't know the exact cut there. What I would say is that, you know, a lot of the ASCs, you know, have adjacent orthopedic clinics, sometimes under the same ownership, you know, sometimes they're connected in other ways. But, you know, there is, you know, certainly ones that I have been to, either visiting customers, you know, or as a patient, there tends to be, hey, one floor, you got the rehab clinic, one floor, you got the surgery going on. And so that's a pretty normal model. You know, I don't know exactly what percent of them are done that way, but it's a significant, you know, amount of the market.
Within that environment, you know, you don't have the same reps that are selling P&R and are selling surgical. That's kind of not the way the market works. And you don't necessarily have the exact same buying process for P&R surgical, just like you don't for capital equipment and Recon products. But what you do have is a halo, a brand halo in terms of, hey, we are, we're known there. They know of our company, they know of our products. You know, the contracts the ASC uses, we're on their contracts. The docs that are there are aware of us, maybe some, you know, some of them might be collaborators.
So there are ways that we have, you know, access, and credibility in ASC environments because of the participation in the P&R side and vice versa. And sometimes there are much more direct cross-sales. You know, when we made some acquisitions in the Foot & Ankle space, we immediately got some calls from clinics who use it, you know, our Aircast, you know, boots, day in, day out, all the time. They're like: "Hey, you just acquired something on the, you know, surgical side. What is it? Tell us about it." So there are those direct connects as well, but I think more significantly, there's just the broader brand awareness and, and, you know, comfort that comes with a company they know and trust.
... Understood. Helpful comments there, Matt. You also did bring up ARVIS. Can you explain what is ARVIS? How do you price this product? And how meaningful could it be for Enovis?
Yeah. So ARVIS is, you know, our Enabling Tech, you know, next generation offering. Enabling Tech, you know, we don't think about robotics, we think about Enabling Tech, right? Surgeons are trying to do something, right, which is plan a surgery, do a surgery, have a great recovery on the backside of surgery, have the best possible outcome as efficiently as possible. And I think what's, you know, what's become very clear is that Enabling Technologies have a big role to play in that whole workflow. And it used to be about the preoperative planning and patient-specific instruments, but now more and more it's about what happens during the surgery and even sometimes after the surgery.
So, you know, what we've been focusing on is making sure that we've got the right next technology for what's happening during the surgical procedure that seamlessly connects to what happens before and that enables the surgeons to, you know, have that efficient and repeatable surgical process and to capture the data as they're doing it. So ARVIS is an augmented reality technology that allows a surgeon to, you know, feed their preoperative plan in, to be able to then, you know, see in their eyepiece an overlay onto the patient so that they can line up the critical cuts. You know, in knee, Enabling Tech is all about the first few critical cuts, right?
That's the thing that everybody's been going, "How do I make sure that I make the right decisions, even sometimes using AI to generate a preoperative plan that gets converted into exactly the cut that will be recommended for my first couple critical cuts?" But in our Enabling Tech, ARVIS allows the surgeon to then apply their judgment, right? They can get the exact recommendation, they can see exactly where they should cut based on the plan, and then they can look at that in context, either make that exact cut or make a slight tweak to that, and that'll be recorded, and they'll know what they did, right?
That's really, and there's, you know, a few other key things as they work through the process, but those first few critical cuts in knee are really vital, and our Enabling Technology is gonna let them do it in a, you know, we believe, a better way than any of the guidance technologies that are out there, or at least most of them, certainly the third-party ones that are out there. And really will enable them to do it, you know, as well as you can with a robot in many cases. It's just really a surgeon preference thing of, you know, "Do I really want or need that?
You know, for all the space and cost, et cetera, do I really want or need, you know, that automatic positioning, you know, to be happening, or am I comfortable that as long as I got a great visualization technology, I can just then use the instrument to line it up and make the cut? And that, that's where we are with ARVIS. Great feedback. We launched about a year or so ago, limited launch, got a lot of great feedback, used that to do a rev on the product, in terms of usability and seamless interaction with our EMPOWR implants, our EMPOWR instrumentation. And now we're in a broader launch and getting great feedback, a lot of interest there.
And so we're confident that in our existing surgeons, ARVIS is the next great technology for them and, and will be something that, you know, strengthens what they're doing, strengthens our relationships with them, and gets us recurring revenue. We'll also—you know, we're already using it to convert surgeons that find it as a more attractive way to do guidance than their existing technology, and/or, you know, want a, you know, instead of a big robot, they want a smaller footprint, like for an ASC or something that more fits what they do. So great opportunity for us with ARVIS. It's just ramping now. We're certainly very, very excited about it.
Fantastic. And Ben, how does the P&L work for ARVIS? Like, are you pricing it on a per procedure basis? What is the margins for a customer using ARVIS for a procedure?
Yeah, I mean, it's a good question, Vijay. I mean, we're very much kind of in the flexible model stage right now as we're rolling that out. I mean, we just launched it kind of commercially, broadly, a couple weeks ago at the society meeting. So we're looking at kind of the various business models to create a solution that allows us to really drive penetration, because for us, the capital cost to produce the device is relatively low. So we have a lot of optionality as we think about how do we really drive value and returns, you know, from this platform. One, through just the per procedure fees that Matt talked about. Two, trying to drive volume through it.
You know, three, trying to open it up to people that aren't using our implant to create a bit of a Trojan horse for us in certain cases, and all of those types of things, even considering capital sale in certain circumstances. So overall, we have flexibility with the model because it comes at a relatively low cost to us in terms of you know being able to put it out into the field. It has really good economics and good returns.
Margins would be accretive to corporate?
Yeah, accretive margins. Yeah, for sure.
Understood. Then maybe pivoting to extremities, Matt. You said that's gonna be half the mix. That's a pretty impressive mix, right? And this is post Lima. Is there anything differentiated within your extremities portfolio? I think you mentioned about a shoulder product-
Yeah
... in the past.
Yeah.
And, and-
Yeah, so I mean, the shoulder is the larger part of that extremities portfolio. And you know, we have the best shoulder with the most long-term data, right? The AltiVate shoulder was one of the pioneers in the reverse space, you know, from you know back when there was a debate about reverse or anatomic. And today, you know, most procedures, you know, the majority of procedures are done with reverse, and in the U.S., and you know, outside the U.S. is lower, but gonna head that way. But beyond that, there were multiple reverses, and there was a you know kind of debate for a while between the style of the ultimate you know inferiorized and lateralized style versus...
The other approach to reverse, it's called an inverse in Europe. And at this point, you know, I think it's pretty well accepted in the industry that the lateralized, inferiorized is a better way to do it. Certainly in the U.S., that's kind of fully accepted, and the U.S. is going there. And outside the U.S., sort of country by country, increasingly there are, you know, kind of waves moving towards the lateralized, inferiorized. So we've got the best design, and we've got the longest data for that best design, and that's a great place to be in this industry, right? You know, people can catch up on design, but they can't catch up on the data.
And so, we feel very confident that we've, you know, we've got that very strong position in shoulder, and now we've got a much broader market to drive it across, with the acquisitions that we've done outside the U.S. And we continue to innovate there, both within the product, you know. Yes, we have the best reverse, but it's been important to have anatomic, and so we brought out a great stemless anatomic. You know, Lima has been working on a stemless reverse. So we've got great technologies coming through, and we also see opportunity to move Enabling Tech further in beyond the upfront planning that we have today that's terrific.
We certainly see the opportunity to move, you know, move ARVIS into the shoulder space over, over time, and continue to sustain our leadership there. On the Foot & Ankle side, we've put together a set of great technologies for Foot & Ankle that is gonna be, you know, around $100 million global run rate business as we move into next year. And you know, that's a high growth market. Now, it's not... You know, ankle is less homogeneous than shoulder. There's a lot of different slices of that market, and we've got a number of great technologies for that market. You know, the biggest and strongest of which is our DynaNail family. You know, these are a family of products that are based on NiTiNOL alloy.
We've got a set of proprietary products based on NiTiNOL alloy, where, you know, nails are put into the patient, and then the stress on it, you know, basically, there's stress created on a piece of metal that creates constant pressure to heal. You know, whereas a screw, you know, would give over time, this is constantly creating pressure, pushing the bones together, and has demonstrated better healing and fusing over time. And so that's just a tremendous product line that grows very, very strongly, our DynaNail product line. You know, in our plating system, we've brought out some really great Arsenal-branded plating technologies. The Arsenal Ankle came out last year, which is great for the ankle segment, where we also have the STAR.
You know, STAR is a great historical technology in ankle that we acquired for, you know, very low price from Stryker. We've been doing the work to get it, you know, back to being a great ankle product, and you know, with the planning technologies that we've put out now, the kind of new polymer that we've got just going through the approval process, you know, we'll start to gain share again in STAR. And then finally, bunion, right? Bunion, biggest and fastest growing part of the Foot & Ankle area. We acquired a terrific minimally invasive bunion technology there with Novastep, and we've launched Evolve34, which is a Lapidus jig, a great Lapidus jig to get after that very large, fast-growing Lapidus market.
When you put all these assets together, right, you've made a couple of acquisitions. Historically, M&A in this space has been, has had mixed results, outcomes. Is there anything about how you approach M&A that's different, why Mathys has been so successful for you guys?
Yeah. Yeah, look, you know, we've got a ton of historical capability in M&A. It was, you know, one of the fundamental capabilities that was built into Colfax before we bought DJO before we became Enovis. And so we've got a set of processes, tools, and capabilities. We've got leaders who have a ton of experience doing M&A well in other industries. And then we've got a lot of depth in orthopedics that came with the great leaders that came in with our DJO business. And so as we've looked at these acquisitions in orthopedics, we've applied all our best capabilities in how to diligence acquisitions and plan them and do the integration well, and really drive them from strategy and have discipline in how we do them.
But then we've also complemented that with the depth of experience that our team has in recon and some of the experiences people have had in successful and unsuccessful acquisitions in recon. We've put that together and applied it to the acquisitions we've done. I think you've seen, we've done, you know, well over a dozen in the space since we've entered. We're having great success there, and certainly the largest one to date, Mathys, is a, you know, very strong success, right? It's been growing double digits since we acquired the business. We've, you know, about doubled the margins of the business. We're running ahead of our plan on the top and bottom line in that business.
So, I think, you know, we've demonstrated on a number of acquisitions, but including that very visible one, that we've really got strong capabilities here to not just do acquisitions, but do the right acquisitions and do them well.
Understood. How does Lima, your most recent acquisition, fit in, right? It's an international acquisition.
Yeah.
Is that more challenging to execute an international M&A?
Yeah, I mean, that's a great question. Lima is a terrific fit. You know, we globalized our recon business back a few years back with the Mathys acquisition. And now we've had the opportunity to complement that with the Lima acquisition. And that gets us to this terrific place where we're a billion-dollar recon business, half of it outside the U.S., half of it in extremities. And a lot of complementarity between the market positions and the technologies from Enovis, Mathys, and Lima, there's a lot of complementarity and a limited amount of overlap, and that's very important. So I would say international or not international is a lot less important than how much overlap is there. And we've got more limited overlap and a lot of complementarity.
And I think that gives us tremendous opportunities in terms of being able to efficiently put the channels together with a limited amount of breakage impact, and then being able to drive very aggressive growth, both organically and through cross-selling on the backside of it. And so we're extremely excited. You know, Lima has got a great set of technologies, you know, great market positions. They're, you know, growing very, very nicely this year. And so we're very excited about the opportunities. Right in the middle of the planning now, right on track for that close early next year that we've talked about.
Right, so the close is, there's no change.
Yeah, I would say at this point, the majority of the hurdles to get the close have already been cleared, and there's just a, you know, limited amount of things that need to happen in order to get to that early next year close, and we're, you know, expecting that that's the path we're on.
Gotcha. What are these complementarities that you mentioned? Is that geographic or product?
Yeah, yeah. So it is, it is geographic and, and product, right? So, you know, from a geography standpoint, for example, Mathys was very strong in the attractive Swiss market, and Lima is very strong in the attractive Italian market. And then if, you know, you go to other... In Germany, each of them had pretty strong positions, but in the case of Mathys, it was more of a hip position, and in the case of Lima, it was more of a shoulder position, and then we're bringing great knee into that market. And so when you go market by market, even either in the whole market or when you get down to anatomy, there's this very nice complementarity that exists geographically. And then in terms of technologies, there's nice complementarity as well.
You know, in both Lima and Mathys had quite strong hip positions, weak knee positions. We actually have fantastic knee position and a good hip position. Good enough, you know, but getting better. So the complementarity there is, you know, very nice. And on shoulder, complementarity is quite good as well. In the Mathys case, they were strong in anatomic, didn't have the right to design in reverse. And in the Lima case, they actually have a strong anatomic and a strong reverse position, but their this product, the SMR that they have is a different kind of reverse.
It's one that has easy convertibility, and there's a certain set of surgeons that have really loved that product and are going to continue to love that product. And so, we see, you know, very nice complementarity across the product lines, and then even technologies, right? We've had, you know, great heritage in terms of our core implant designs and, you know, some of our coatings technology, like P², and our Enabling Tech moves that we've now made. Mathys came in, brought ceramics. We're the only orthopedic player that has our own captive ceramics design and manufacturing capabilities. And, you know, Lima comes in with as a leader in 3D printing, design and manufacturing, metal 3D printing with their Trabecular Titanium.
It's a, it's a, you know, IP protected capability that they have and been used in the core designs, but also have been used in custom revision products that are really, I think, a great door opener, really being able to bring a surgeon something they can't get from anyone else, which is a very complicated custom revision product for their toughest cases. And Lima's been using that very effectively to get attention, they get surgeons looking at other products. And our team here in the U.S. is excited about having those 3D printing capabilities, big time.
Understood. And Ben, given all of these complementarities, I think when you announced the deal, you did assume some disruption, assuming no growth for Lima. But should there be any disruptions given how well these businesses fit?
Yeah, you know, I think, I think it goes back to what Matt was describing around just kind of the muscle we've built around M&A in terms of how do we, you know, how do we look at diligence, how do we think about integration planning, how do we make sure that we're setting ourselves up for success in terms of, you know, kind of having the teams focused on, on the right things? We know that there's, it's a highly complementary portfolio and, you know, geographic presence, but we also know from experience of bringing other, you know, acquisitions in, where there is some channel conflict or some product overlap, that there will be some natural dyssynergies that will come about.
So as we contemplated what guidance that we put out there, we wanted to be somewhat conservative in our approach, to say: Let's learn from the past. Let's make sure that we kind of anticipate some dyssynergy before we can really turn on some of that synergy, where we need to make some calls around product lines. Let's give ourselves the ability to do some of that upfront before it becomes a growth inhibitor down the road. So it was contemplated in what we, you know, kind of looked at and gave in terms of our overall guidance.
The other thing I would say is we're still not getting credit, you know, for the value that we're going to get created from Lima, so no need for us to be overly aggressive in terms of kind of setting targets out there, when it's going to come in and kind of really drive good progress against the strategic goals that we've laid out there.
Makes sense to me. I'm just curious, when you did the Mathys deal, did you see any integration or dyssynergies, if you will?
Well, Mathys wasn't a highly disruptive because we didn't have, I mean, 97% of our business at that time in recon was U.S.-based, and Mathys had zero U.S. business. So as we thought about kind of bringing Mathys in, it was very much kind of no or very limited, I should say, overlap in terms of, you know, kind of product line, 'cause we didn't really have much exposure there. And as Matt was saying, it was more of a strong hip player, not much of a shoulder, and not much of a knee, you know, kind of business, and therefore, we were able to kind of bring that in and not really see a lot of impact.
Yeah, you know, I'd say the team has executed well, 'cause, you know, without overlap, you still have to kind of go, you know, do the work of hanging on to the customers and all that. I think the team's done a great job on Mathys in terms of... You know, we're growing as strong as we are in Mathys with really limited cross-selling so far, just, you know, because it's been a little bit tighter supply environment, and so we've had to make choices about where we send the supply and the instruments and all that. And so we've gotten after some synergy in Mathys, but it's still early days, a lot of surgeons waiting to be turned on over there. And now we'll have additional options with Lima.
I think what's really great is we've created a ton of optionality for how we create that double-digit growth in Recon, right? I think when we, you know, sitting three or four years back and looking, "Okay, how do we make sure we can grow this company high single digits?" And to do that, we're growing the Recon part in the double digits range. I think one of the real priorities there was around exposure to high growth markets, running room, and technology, right? So if you look at what we've done with acquisitions and organically, is we've increased our exposure to high growth markets, we've created plenty of running room, and we've expanded our technology set to make sure that we can, you know, have the technology that it needs.
And what that does is it creates plenty of optionality to now make choices about how we get to that double-digit growth every year, versus to find ourselves limited in how many places we could go to get at the growth. And that, I think, that's a tremendous. If you look at the value of where we were three or four years ago from where we are today, it's a huge step change in terms of the possibilities going forward.
Fantastic. And with those comments, Matt, when you think about fiscal 2024, what are the pluses and minuses for fiscal 2024? And I think, you know, when I look at fiscal 2023, the business has done phenomenal top line, right? I think you had some below the line sort of interest expense, you know, which hit you. Should that be a concern for next year? Any below the line items we need to be aware of?
I'll let Ben hit the below the line items. Not going to give guidance on 2024, but certainly we'll answer the question. I mean, if you think about 2023, you know, again, we're in the kind of mid-7s % growth based on our latest guide organically. And you know, that you know, 2023 has got a little bit of tailwind on the recon markets in the first half of the year in particular. And a little bit of extra price on the P&R side than what we might expect on a normal basis going forward. And so there are you know, sort of a couple things that are a little bit of a help in 2023.
You know, we've been working hard to, you know, drive additional innovation through both parts of the company to, you know, to help over the next year or two to be offsetting, you know, some of those tailwinds that'll be falling off. And also the Recon part that grows faster is getting larger, right? So there's some kind of puts and takes there as to how we're working hard to make sure that we can kind of stay in this high single digit growth range. You know, I think it's likely a year that'll have a little different shape in this year, right?
There was that kind of extra growth in the first couple quarters of the year that was in, in part based on, kind of easier comps and a little bit based on some, you know, some extra demand this year. And so I think the shaping of next year is likely to be a little more of a mirror image, of this year in terms of how the growth plays out for us and others. And obviously, Lima, you know, I put Lima on the side. So, you know, what I just described is-
Yeah
... how to think about the core business. We, you know, we've, you know, given a clear guide for what we expect Lima to do. Certainly, they're doing, you know, right in line with what we expected this year, and so, we're very comfortable, with that expectation at this point in time. But we'll, you know, we'll give an update, you know, once we've completed the acquisition there and when we give guidance. And, we'll be doing everything we can to outperform, but, very importantly, making sure we do the right things in the first year to set ourselves up for the, the following years. So, that's kind of a little bit of a, a walkthrough. And Ben, you want to add to that?
Yeah. Yeah, no, I mean, I think we're not quite two full years kind of post-separation of spinning out ESAB and becoming an Enovis. So as you think about your comment about kind of some of the below the line items, heavily separation related, where we're getting some favorable tax benefit, and we came out basically with no debt. So kind of the interest as you've kind of done some acquisitions and some of the market dynamics have changed, have been a bit of a headwind as we came into this year. But if you look at our underlying operational performance, you're seeing our earnings kind of underlying operational growth 2x of what kind of our revenue growth is. So pretty solid performance there.
And then what I'd say is, as we think about next year, is going to be a bit of a transformational year for us in a way, with bringing in Lima, because you're bringing in $290 million-$300 million of revenue and $70 million-$75 million of EBITDA. And what we have said is, we've kind of finalized the funding of that, that, you know, we were originally anticipating kind of neutral to slightly positive accretion from an earnings perspective next year. Now we're, you know, going to be accretive next year as we kind of bring in Lima with kind of getting all the financing settled. So overall, we're excited about next year.
It's going to be a step change for us, from a margin standpoint, because you bring Lima in, it gets 100+ basis points before you get after any synergies from an EBITDA perspective, and it's going to be accretive from an earnings perspective. So overall, we're excited about what 2024 brings.
Fantastic. If the macro is stable, with base business margin expansion and Lima being accretive, it looks like it should be a double-digit EPS growth, right? Nothing crazy, but-
No guidance today, Ben.
Yeah. No, no, no guidance, no, no guidance today, for sure.
Fantastic. I think with that, we're at the end of time. Matt and Ben, thank you for the time.